1 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 Syst ems and Quality Reporting Programs; Hospital Value-Based Purchasing Progra m; Organ Procurement Organizations; Quality Improvement Organizations; Elect ronic Health Records (EHR) Incentive Program; Provider Reimbursement Determinations and Appeals AGENCY: Centers for Medicare & Me dicaid Services (CMS), HHS. ACTION: Final rule with commen t period and final rules. SUMMARY: This final rule with comment period revises the Medicare hospital outpatient prospective payment system (O PPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2014 to implement applicable statutory requirements and changes arising from our cont inuing 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 Medi care services paid under the OPPS and those paid under the ASC payment system. In addi tion, this final rule with comment period updates and refines the requirements for th e Hospital Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting (A SCQR) Program, and the Hospital ValueBased Purchasing (VBP) Program.2 In the final rules in this document, we are finalizing changes to the conditions for coverage (CfCs) for organ procurement orga nizations (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 fina l rule with comment period relating to comprehensive Ambulatory Payment Classificati on (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 applic ations for a new class of ne w technology intraocular lenses must be received by 5 p.m. EST on March 3, 2014.3 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 encour age 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 co mments to be received before the close of the comment period. 3. By express or overnight mail . You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1601-FC, Mail Stop C4-26-05,4 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 H ubert H. Humphrey Building is not readily available to persons without Federal G overnment identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available fo r persons wishing to re tain a proof of filing by stamping in and retaining an 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 21244-1850.5 If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-7195 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses indicat ed as appropriate for hand or courier delivery may be delayed and rece ived after the comment period. For information on viewing public comments, we refer readers to the beginning of the “ SUPPLEMENTARY INFORMATION ” section. Applications for a new class of new t echnology 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 & Medi caid Services, 7500 SecurityBoulevard, Baltimore, MD
21244-1850. FOR FURTHER INFORMATION CONTACT: Marjorie Baldo, (401) 786-4617, for issu es 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) Pr ogram – Program Administration and Reconsideration Issues. Chuck Braver, (410) 786-9379, for issues related to the Advisory Panel on Hospital Outpatient Payment (HOP Panel).6 Erick Chuang, (410) 786-1816, for issues related to OPPS APC weights, mean calculation, copayments, wage index, outlier pa yments, 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) 78 6-6856, or Dorothy Myrick, (410) 786-9671, for issues related to partial hospitalization and commun ity mental health center (CMHC) issues. Roxanne Dupert-Frank, (410) 786-4827, fo r 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 Ce nter Quality Reporting (ASCQR) Program – Measures Issues and Publica tion 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 re lated 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-onl y procedures, and no cost/full credit and partial credit devices.7 Marina Kushnirova, (410) 786-2682, for i ssues related to OPPS status indicators and comment indicators. Barry Levi, (410) 786-4529, for issues related to OPPS pass-through devices, brachytherapy sources, intraope rative radiation therapy (I ORT), 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 th erapy, therapy caps in CAHs, incident to physician or nonphysician practitioner se rvices, and provide r-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 rela ted to the Hospital Outpatient Quality Reporting - Program Admini stration, Validation, and Reconsideration Issues. Char Thompson, (410) 786-2300, for issues related to OPPS drugs, radiopharmaceuticals, biologicals, blood clot ting factors, new technology intraocular lenses (NTIOLs), and ambulatory surgical center (ASC) payments. Marjorie Baldo, (410) 786-4617, for all othe r issues related to hospital outpatient and ambulatory surgical center paym ents not previously identified. SUPPLEMENTARY INFORMATION: Inspection of Public Comments : All comments received before the close of the comment period are available for viewi ng by the public, including any personally identifiable or confidential business informa tion that is included in a comment. We post8 all comments received before the close of the comment period on the following Web site as soon as possible after th ey have been received: http://www.regulations.gov. Follow the search instructions on that We b site to view public comments. Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publicati on of the rule, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To schedule an appoint ment to view public comments, phone
1-800-743-3951. Electronic Access This Federal Register document is also available from the Federal Register online database through Federal Digital System (FDsys) , a service of the U.S. Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/

. Addenda Available Only Through th e Internet on the CMS Web Site In the past, a majority of the Addenda referred to 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/AS C proposed rule, all of the Addenda no longer appear in the Federal Register as part of the annua l OPPS/ASC proposed and final rules to decrease admi nistrative burden and reduce cost s 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:9http://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 Appearin g 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 [S tate Children's Health Insurance Program] Balanced Budget Refi nement Act of 1999, Pub. L. 106-113 BIPA Medicare, Medicai d, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 106-554 BLS Bureau of Labor Statistics CAH Critical access hospital CAP Competitive Acquisition Program CASPER Certification and Survey Provider Enhanced Reporting CAUTI Catheter associated urinary tract infection10 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] Conditi on of participation CPI-U Consumer Price Inde x for All Urban Consumers CPT Current Procedural Terminology (c opyrighted 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. 109-17111 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 R econciliation 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 Portabi lity and Accountability Act of 1996, Pub. L. 104-19112 HITECH Health Information Technology for Economic and Clinical Health [Act] (found in the American Recovery an d 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 Partnership13 MedPAC Medicare Payment Advisory Commission MEI Medicare Economic Index MFP Multifactor productivity MGCRB Medicare Geographic Cl assification 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, Impr ovement, and Modernization Act of 2003, Pub. L. 108-173 MMEA Medicare and Medicaid Ex tenders Act of 2010, Pub. L. 111-309 MMSEA Medicare, Medicaid, and SCHI P Extension Act of 2007, Pub. L. 110-173 MPFS Medicare Physician Fee Schedule 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 Actuary14 OBRA Omnibus Budget Reconcili ation 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 Act15 RTI Research Triangle In stitute, 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 Provisions16 3. Summary of Costs and Benefits B. Legislative and Regulator y 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 th e 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 Preparation17 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 an d Geometric Mean Cost Calculations (1) General Process (2) Recommendations of the Pa nel Regarding Data Development d. Calculation of Single Pro cedure 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 Compos ite APC Criteria-Based Costs (1) Extended Assessment and Manage ment Composite APCs (APCs 8002 and 8003) (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) (3) Cardiac Electrophysiologic Ev aluation and Ablation Composite APC (APC 8000) (4) Mental Health Services Composite APC (APC 0034) (5) Multiple Imaging Compos ite APCs (APCs 8004, 8005, 8006, 8007, and 8008)18 (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 Radiophar maceuticals 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 Dia gnostic 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 Supp lies 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 Changes19 D. Statewide Average Default CCRs E. Adjustment for Rural SCHs and EA CHs under Section 1833(t)(13)(B) of the
Act F. OPPS Payment to Certain Can cer 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 Rule20 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 Solici ting 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 a nd Vascular Services a. Non-Ophthalmic Fluorescen t Vascular Angiography (APC 0263) b. Subcutaneous Defibrillator (APC 0107) c. Thrombolytic Therapy (APC 0621) d. Vascular Liga tion (APCs 0091 and 0092) 2. Gastrointestinal Services a. Fecal Microbiota Transplantation (APC 0340) b. Transoral Incisionless Fundoplication (APC 0422) 3. Genitourinary Services
a. Percutaneous Rena l Cryoablation (APC 0423) b. Anoscopy with Directed S ubmucosal Injection (APC 0150) 4. Musculoskeletal Services a. Arthroplasty (APC 0425) b. Joint Stabilization (APC 0052)21 5. Nervous System Services a. Chemodenervation (APCs 0161 and 0204) b. Nerve Conduction Studies (APCs 0216 and 0218) c. Parasympathetic Function a nd 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 Thera py (IORT) Related Serv ices (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 Services22 a. Balloon Sinus Dilation (APCs 0074 and 0075) b. Radiofrequency Ablation of Uterine Fibroids (APC 0174) c. Magnetic Resonance Image Gu ided Focused Ultrasound (APC 0065) d. Flow Cytometry (APC 0443) e. Hormone Pellet Implant (APC 0420) f. Peyronie Disease Inje ction Procedure (APC 0164) g. Negative Pressure Wound Therapy (NPWT) (APC 0016) h. Platelet Rich Plasma (PRP) (APC 0186) i. Payment for Radioisotopes Deri ved 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 Criteri a: Integral and Subordinate Criterion B. Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit Devices23 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 E xpiring Pass-Through Status in CY 2013 3. Drugs, Biologicals, and Radiopharm aceuticals with New or Continuing Pass-Through Status in CY 2014 4. Provisions for Reducing Transitiona l Pass-Through Payments for Diagnostic Radiopharmaceuticals; Contrast Agents; Dr ugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Di agnostic 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 Radiopharmaceu ticals That Function as Supplies When Used in a Diagnostic Test or Procedure a nd Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure24 B. OPPS Payment for Drugs, Biologi cals, and Radiopharmaceuticals without Pass-Through Status 1. Background 2. Criteria for Packaging Paym ent for Drugs, Biologicals, and Radiopharmaceuticals a. Background b. Cost Threshold for Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Certain Biol ogicals, 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 St atus That Are Not Packaged a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and Biologicals b. CY 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 withoutOPPS Hospital Claims Data C. Nuclear Medicine Proce dure-to-Radiolabeled Product Edits25 VI. Estimate of OPPS Transitional Pass- Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Background B. Estimate of Pass-Through Spending VII. OPPS Payment for Ho spital Outpatient Visits A. Background B. Payment for Hospital Outpatient C linic 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 Ou tpatient Therapeutic Services 1. Enforcement Instruction for the S upervision of Outpatient Therapeutic Services in CAHs and Certain Small Rural Hospitals 2. Supervision Requirements for Observation Services26 B. Application of Therapy Caps in CAHs C. Requirements for Payment of Outpatie nt Therapeutic (“Incident to”) Hospital or CAH Services 1. Overview 2. Background 3. Proposed and Final Policy 4. Technical Correction D. Collecting Data on Services Fu rnished 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 Surg ical 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 Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services B. Treatment of New Codes 1. Process for Recognizing New Cate gory I and Category III CPT Codes and Level II HCPCS Codes27 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 C overed Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Additions to the List of ASC Covered Surgical Procedures b. Covered Surgical Procedur es Designated as Office-Based (1) Background (2) Changes for CY 2014 to Covere d Surgical Procedures Designated as Office-Based c. ASC Covered Surgical Proce dures Designated as Device-Intensive (1) Background (2) Changes to List of Covered AS C 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 Procedur es Removed from the OPPS Inpatient List for CY 201428 2. Covered Ancillary Services D. ASC Payment for Covered Surgi cal 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 (L DR) 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 Deadlin e 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 Convers ion Factor and the ASC Payment Rates29 1. Background 2. Calculation of the ASC Payment Rates a. Updating the ASC Relative Paymen t 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 Ou tpatient 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 Hosp ital 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 Reco rd with Specified Elements Received by Discharged ED Patients30 b. Removal of OP-24: Cardiac Rehabil itation 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: Appr opriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658) 4. Endoscopy/Polyp Surveillance: Col onoscopy Interval for Patients with a History of Adenomatous Polyps – Avoi dance of Inappropriate Use (NQF #0659) 5. Cataracts – Improvement in Patie nt’s Visual Function Within 90 Days Following Cataract Surgery (NQF #1536) F. Possible Hospital OQR Program Meas ure 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 A ssociated Adjustment Policy for CY 2014 H. Requirements for Reporting of Hospital OQR Data for the CY 2015 Payment Determination and Subsequent Years31 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 S ubmission for CY 2015 and CY 2016 Payment Determinations and Subsequent Years c. General Requirements d. Chart-Abstracted Measure Re quirements 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 fo r 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 Years32 b. Targeting Criteria for Data Vali dation Selection for the CY 2015 Payment Determination and Subsequent Years c. Methodology for Encounter Selecti on for the CY 2015 Payment Determination and Subsequent Years d. Medical Record Documentation Reque sts for Validation and Validation Score Calculation for the CY 2015 Payment Determination and Subsequent Years I. Hospital OQR Recons ideration and Appeals Pr ocedures for the CY 2015 Payment Determination and Subsequent Years J. Extraordinary Circumstances Exte nsion 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 fo r Certain Outcome Measures for the FY 2016 Hospital VBP Program XV. Requirements for the Ambulatory Surg ical Centers Quality Reporting (ASCQR) Program A. Background 1. Overview 2. Statutory History of the ASC Quality Reporting (ASCQR) Program33 3. Regulatory History of the ASCQR Program B. ASCQR Program Quality Measures 1. Considerations in the Selecti on of ASCQR Program Quality Measures 2. ASCQR Program Qual ity 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: Co lonoscopy Interval for Patients with a History of Adenomatous Polyps—Avoida nce of Inappropriate Use (NQF #0659) d. Cataracts: Improvement in Patie nt’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536) 4. ASCQR Program Measure Topi cs for Future Consideration 5. Technical Specification U pdates 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 Requirements34 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 Pr ocessing and Collection Periods for Claims-Based Measures for the CY 2014 Paym ent 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 Subm ission 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 Determination35 7. ASCQR Program Validation of Clai ms-Based and CMS Web-Based Measures 8. Extraordinary Circumstances Extens ions 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 Cond itions 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 Awa rded 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 Pr ofessionals (EPs) Reassigning Benefits to Method II CAHs 1. Background for Definition of EPs and EHR Incentive Payments to EPs 2. Special Circumstances of EPs Re assigning Benefits to Method II CAHs B. Cost Reporting Periods for Inter im and Final EHR Incentive Payments to Hospitals 1. Background 2. Special Circumstances XIX. Medicare Program: Provider Reimburse ment Determinations and Appeals: Final Rule A. Matters Not Subject to Admini strative or Judicial Review (§ 405.1804) 1. Background 2. Technical Conforming Change B. Clarification of Reopening of Predi cate 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 Requirement s 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 Requi rements 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 Di rectly 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 Validatio n Requirements for the CY 2015 Payment Determination and Subsequent Years f. Hospital OQR Program Recons ideration and Appeals Procedures 2. ASCQR Program Requirements a. Claims-Based Measures for the CY 2014 Payment Determination38 b. Claims-Based and Web-Based Measures for the CY 2015 and CY 2016 Payment Determinations c. Program Administrative Requi rements 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 Ch anges 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 Change s on the Medicare an d Medicaid Programs (7) Alternative O PPS Policies Considered39 b. Estimated Effects of CY2014 AS C Payment System Final Policies (1) Limitations of Our Analysis (2) Estimated Effects of CY2014ASC Pa yment 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 Rega rding 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. Purpose40 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 Ambulat ory Surgical Center s (ASCs) beginning January 1, 2014. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the relative paym ent weights and the conversion factor for services payable under the Outpatient Pros pective Payment System (OPPS). Under section 1833(i) of the Act, we annually revi ew and update the ASC payment rates. We describe these and various other statutory authorities in the rele vant sections of this final rule with comment period. In addition, the final rule w ith comment period updates and refines the requirements for the Hospital Ou tpatient Quality Re porting (OQR) Program, the ASC Quality Reporting (ASCQR) Progr am, 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 orga nizations (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 met hodologies to develop the CY 2014 proposed OPPS and ASC payment rates, specific cost estimation errors occurred in the OPPS modeling process. The errors resulting fr om the cost modeling used to develop the CY 2014 proposed OPPS payment rates were isolated to a few specific ambulatory41 payment classifications (APCs). Howeve r, 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 paymen t 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 correctio ns 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 increasi ng 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 inpa tient market basket pe rcentage increase of 2.5 percent for inpatient servic es paid under the hospital in patient prospective payment system (IPPS), minus the multifactor productiv ity (MFP) adjustment of 0.5 percentage points, and minus a 0.3 percentage point adjustme nt required by the Affordable Care Act. Under this final rule with comment period, we estimate that total payments for CY 2014, including beneficiary cost-s haring, 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, an42 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 stat utory 2.0 percentage point reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a reporting fact or of 0.980 to the OPPS payments and copayments for all applicable services.

● Rural Adjustment: We are continuing the adjust ment of 7.1 percent to the OPPS payments to certain rural sole commun ity hospitals (SCHs), including essential access community hospitals (EACHs). This adju stment 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 paymen t 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 and43 biologicals that do not have pass-through status will be set at the statutory default of average sales price (A SP) plus 6 percent.

● Packaging Policies: Beginning in CY 2014, we are unconditionally or conditionally packaging the following five cat egories 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 radiopharmaceu ticals used in a diagnostic test or procedure; (2) Drugs and biologicals when used as supplies in a surgical procedure; (3) Certain clinical di agnostic 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-depend ent services, but we are dela ying implementation of this policy until CY 2015. We have defined a comprehensive APC as a classification for the provision of a primary service a nd all adjunct services providedto 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, re sulting in a single prospective payment based on the cost of all individually reported codes on the claim. We will make a single44 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 representi ng 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 visi t codes obtained from CY 2012 OPPS claims data. For CY 2014, we are not finalizing our pro posal to replace the curr ent 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 therap eutic services furnished in CAHs and small rural hospitals will expire at the end of CY 2013. In a ddition, we are amending the conditions of45 payment for “incident to” hospi tal or CAH outpatient services (sometimes referred to as hospital or CAH “therapeutic” se rvices) to explicitly require that individuals furnishing these services be in complia nce with State law. In the CY 2014 OPPS/ASC proposed rule, we solicited public comments regarding a po tential 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 Me dicare Physician Fee Schedule (MPFS) final rule (CMS-1600-F) to review Medi care’s policies on applicati on of the therapy caps and related provisions under section 1833(g) of the Act to physical therapy (PT), speechlanguage pathology (SLP) and occupational ther apy (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 benefi ciary cost-sharing and estimated changes in enrollment, utili zation, 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: th ree 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 meas ures and are codifying administrative procedures.

● Ambulatory Surgical Center Qual ity 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, denomin ators, and exclusions ) on all ASC patients for these four chart-abstracted measures vi a 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, fac ility participation, a minimum threshold and minimum volume for claims-based measures, and data collec tion and submission for new measures and for certain previously finalized measures.

● Changes to Organ Procurement Or ganization ( 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 anOPO must meet two out of the three outcome measures. This change to the outcome measures require ment will allow those OPOs that fail only one outcome measure to avoid automatic decer tification 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 enacted47 Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Pub. L. 112-40, Section 261) whereby Congress authori zed numerous changes to th e original legislation and included additional flexibility for the Secretar y 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 revi sion of the regulations under 42 CFR Parts 475 and 476, which relate to the QIO progra m, 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 S ubpart 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-Serv ice Electronic Health Record (EHR) Incentive Program . We are revising the regulation s 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 EP s for their CAH II claims, or to take those claims into consideration in making hospita l-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 ear lier than we would be able to do under existing regulations. We also are adopting a minor clarification to the regulations48 concerning the cost reporting period to be us ed in determining final EHR payments for hospitals. 3. Summary of Costs and Benefits In sections XXIII. and XXIV. of this fi nal 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. Ke y estimated impacts are described below. a. Impacts of the OPPS Update (1) Impacts of All OPPS Changes Table 55 in section XXIII. of this fina l rule with comment period displays the distributional impact of all the OPPS changes on various grou ps 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 resu lt 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 approxima tely $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 expenditure s, including benefi ciary cost-sharing, for CY 2014 compared to CY 2013 OPPS expend itures. We estimate that total OPPS payments, including beneficiary cost-s haring, 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 partia l hospitalization services under the OPPS. Continuing the provider-specific structure that we adopt ed beginning in CY 2011 and basing payment49 fully on the type of provider furnishing the se rvice, 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 othe r than packaging outpatient laboratory tests will have a less significant impact than we proposed for CY 2014, as several proposed policies were not finalized. Thes e final policies incl ude packaging drugs, biologicals, and radiopharmaceuticals that functi on as supplies when used in a diagnostic test or procedure (stress ag ents and Cysview), drugs and biologicals that function as supplies when used in a surgical procedur e (skin substitutes), certain procedures described by add-on codes, and device remova l procedures; new cost report data for estimating CT and MRI relative weights; a nd 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 Stat e wage adjustment will not significantly affect most hospita ls 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 Adjustment50 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 fo r determining the rural and cancer hospital payment adjustments, and the adjustment am ounts do not significantly impact the budget neutrality adjustment s for these policies. (6) Impacts of the OPD F ee Schedule Increase Factor We estimate that, for many hospitals, the application of the OPD fee schedule increase factor of 1.7 percen t to the conversion factor fo r CY 2014 will mitigate the small negative impacts of the budget ne utrality adjustments. Whil e 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 adju stments, 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 paymen ts by specialty groups under the CY 2014 payment rates compared to estimated CY 2013 payment rates ranges between -11 percent for ancillary items a nd services and 14 percent for respiratory system procedures. c. Impacts of the Hospital OQR Program We do not expect our CY 2014 final policie s to significantly aff ect the number of hospitals that do not receiv e a full annual payment update.51 d. Impacts of the ASCQR Program We do not expect our CY 2014 final policie s to significantly aff ect 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 Estim ate of the Trade Bill (H.R. 2832) which included a reduction in spending of $330 m illion over the 2012-2021 period. According to the CBO Estimate and subsequently th e regulatory changes “would modify the provisions under which CMS contracts with independent entities called [“]Quality Improvement Organizations (QIOs)[”] in Medi care. QIOs, generally staffed by health care professionals, review medical care, help beneficiaries with complaints about the quality of care, and implement care improve ments. H.R. 2832 would make several changes to the composition and operation of QIOs, and would harmonize QIO contracts with requirements of the Federal Acquisi tion 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 t hose 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-specif ic costs. In an effort to ensure that Medicare and its beneficiaries pay appropr iately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable52 cost-based payment methodology with a pros pective 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 hospita l 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 O PPS: the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement , and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvement s 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 Me dicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enac ted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Pr otection and Affordable Care Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (These two public laws are co llectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (T PTCCA, Pub. L. 112-78), enacted on53 December 23, 2011; the Middle Class Ta x Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on Febr uary 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 out patient services on a rate-per-service basis that varies acco rding 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 iden tify and group the services within each APC. The OPPS includes payment for most hospital outpatient se rvices, 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 fo r hospital outpatient services designated by the Secretary (which includes partial hos pitalization services furnished by CMHCs), and certain inpatient hos pital services that ar e 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-relat ed amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located. All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2 )(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, it ems and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service in54 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 servi ce within the same APC group (referred to as the “2 times rule”). In implementing this prov ision, we generally use the cost of the item or service assigned to an APC group. For new technology items and services, sp ecial payments under the OPPS may be made in one of two ways. Section 1833( t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-thr ough payments,” for at least 2 but not more than 3 years for certa in drugs, biological agents, brachytherapy devices used for the treatment of cancer, and categories of other medical devices. For new technology services that ar e not eligible for transiti onal pass-through payments, and for which we lack sufficient clinical inform ation and cost data to appropriately assign them to a clinical APC group, we have esta blished 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 te mporary; that is, we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinical ly appropriate APC group. C. Excluded OPPS Services and Hospitals Section 1833(t)(1)(B)(i) of the Act aut horizes the Secretary to designate the hospital outpatient services th at are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, sect ion 1833(t)(1)(B)(iv) of the Act excludes55 payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, dia gnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized pr evention plan services. The Secretary originally exercised the author ity granted under the statute to also exclude from the OPPS those services that are paid under fee sche dules or other payment systems. Such excluded services include, for example, th e professional services of physicians and nonphysician practitioners paid under the M PFS; laboratory services paid under the Clinical Laboratory Fee Schedule (CLFS); serv ices for beneficiaries with end-stage renal disease (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that require aninpatient stay that are paidunder 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 co mment period modifies 42 CFR 419.22 and includes in the OPPS some of thes e 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 Rulemaking56 On April 7, 2000, we published in the Federal Register a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was fi rst implemented for services furnished on or after August 1, 2000. Secti on 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, not less ofte n than annually, and to revise the groups, relative payment weights, and other adjust ments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors. Since initially implementing the OPPS, we have published final rules in the Federal Register annually to implement statutory re quirements and changes arising from our continuing experience with this system. These rules can be viewed on the CMS Web site at: http://www.cms.gov/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 discreti onary authority to the Secr etary to convene advisory councils and committees, the Secretary expanded the panel’s scope to include the supervision of hospital outpatient therapeuti c services in addition to the APC groups and weights. To reflect th is new role of the panel, the Secr etary changed the panel’s name to the Advisory Panel on Hospital Outpatient Paym ent (the HOP Panel, or the Panel). The Panel is not restricted to using data compiled by CMS, a nd 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 Pa nel. This expert panel, which may be composed of up to 19 appropriate representa tives of providers (c urrently employed fulltime, not as consultants, in their respective ar eas of expertise), revi ews 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 Secretar y on the appropriate level of supervision for indivi dual 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 tec hnical in nature; is governed by the provisions of the FACA; may convene up to three meetings per year; ha s a Designated Federal Official (DFO); and is chaired by a Federal Official designated by the Secretary. The current charter was58 amended on November 15, 2011 and the Panel was renamed to reflect expanding the Panel’s authority to include supervision of hospital outpatie nt therapeutic services and therefore to add CAHs to its membership. The current Panel membership and othe r 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_AdvisoryPanel onAmbulatoryPaymentClassificationGrou 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 st ructure that, in part, currently includes the use of three subcommittees to facilitate it s required review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups a nd Status Indicator (SI) Assignments. The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for reso lving them. The Visits and Observation Subcommittee reviews and makes recommendations to the Panel on all technical issues pertaining to observation servic es and hospital outpatient vis its paid under the OPPS (for example, APC configurations and APC rela tive payment weights). The Subcommittee59 for APC Groups and SI Assignments advise s the Panel on the following issues: the appropriate SIs to be assigne d 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, a nd the Panel recommended at the August 2013 meeting that the subcommittees conti nue. We accepted this recommendation. Discussions of the other recommendati ons made by the Panel at the March 2013 and August 2013 Panel meetings are included in th e sections of this final rule that are specific to each recommendation. For disc ussions of earlier Panel meetings and recommendations, we refer readers to pr eviously published OPPS/ASC proposed and final rules, the CMS Web site mentioned earlie r in this section, and the FACA database

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

. F. Public Comments Received in Res ponse 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 corre cting 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 to60 the proposed rule and the corr ecting document that are within the scope of the proposed rule and our responses are set fo rth 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 Ru le with Comment Period We received approximately 27 timely pieces of correspondence on the CY 2013 OPPS/ASC final rule with commen t period that appeared in the Federal Register on November 15, 2012 (77 FR 68210), some of wh ich 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 re view not less often than annually and revise the relative paym ent weights for APCs. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we calculated the relativ e payment weights that were implemented on August 1, 2000 for each APC group. 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 recalibra te the relative payment weights for each APC based on claims and cost report data for hosp ital outpatient departme nt (HOPD) services, using the most recent available data to construct a database for calculating APC group weights. Therefore, for the purpose of r ecalibrating the proposed APC relative payment weights for CY 2014, we used approximately 146 million final action claims (claims for which all disputes and adjustments have beenresolved and payment has been made) for hospital outpatient department services furn ished 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 million62 final action claims (claims for which all disput es 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 clai ms 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 ac tion claims for services provided in hospital outpatient settings us ed to calculate the CY 2014 OPPS payment rates for this final rule with comment period, approximately125 million claims were the type of bill potentially appropriate for use in setting rate s 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 exampl e, erroneous cost-to-ch arge 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 de viations from the geometric mean, yielding approximately 124 million single bills for ratesetting. As descri bed in section II.A.2. of this final rule with comment period, our data development pr ocess is designed w ith the goal of using63 appropriate cost information in setting th e APC relative payment weights. The bypass process is described in sec tion II.A.1.b. of this final rule with comment period. This section discusses how we develop “pseudo” si ngle procedure claims (as defined below), with the intention of using mo re appropriate data from the available claims. In some cases, the bypass process allows us to use some portion of the submitted claim for cost estimation purposes, while the remaining in formation on the claim continues to be unusable. Consistent with the goal of us ing appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes. The final APC relative weights and payments for CY 2014 in Addenda A and B to this final rule with comment period (whi ch 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 th e APC groups, beginning with the CY 2013 OPPS, we established the cost-based relative pa yment 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 geometri c 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 hospi tals represented in our claims data. We continue to believe that it is appropriate to use the most current full calendar year claims64 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 prop osed, we are continuing to use single procedure claims to set the costs on which th e 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 un it 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 da ta from as many claims as possible to recalibrate the APC relative payment wei ghts, including those claims for multiple procedures. As we have for several years, we are continuing to use date of service stratification and a list of c odes to be bypassed to convert mu ltiple procedure claims to “pseudo” single procedure claims. Through bypa ssing specified codes that we believe do not have significant packaged costs, we are able to use more data from multiple procedure claims. In many cases, this 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” singl e procedure claims is well do cumented, most recently in65 the CY 2013 OPPS/ASC final rule with comment period (77 FR 68227 through 68229). In addition, for CY 2008 (72 FR 66614 thr ough 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 m odel to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the number of bills we were able to use 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 propos ed, we are continuing this policy for CY 2014. In addition, as we proposed, we ar e 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 m odeling 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 ratesett ing 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 mu ltiple imaging composite “single session” bills (we refer readers to sect ion II.A.2.f.(5) of this final rule with comment period for66 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 pr ocedure claims to “pseudo” single procedure claims, we have calculated the percent of “nat ural” 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 code s on the previous year ’s bypass list and use the updated year’s data (for CY 2014, data available for the Marc h 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 a dditional codes to the previ ous year’s bypass list. For CY 2014, we proposed to continue to bypa ss all of the HCPCS codes on the CY 2013 OPPS bypass list, with the exception of HCPC S codes that we proposed to delete for CY 2014, which were listed in Table 1 of th e 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 fo r 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, di scussed in section II.A.3. of this final rule with comment period. In addition, we proposed to add to the bypass list for67 CY 2014 HCPCS codes not on the CY 2013 bypa ss list that, using either the CY 2013 final rule data (CY 2011 claims) or the Ma rch 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 geomet ric 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 code s 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 pack aging 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” singl e 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 “n atural” single procedure clai ms for the code. This number of single procedure claims ensure s that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.

● Five percent or fewer of the “natur al” single procedure claims for the code have packaged costs on that single procedure cl aim for the code. This criterion results in limiting the amount of packaging being redistribu ted to the separately payable procedures remaining on the claim after the bypass code is removed and ensures that the costs associated with the bypass code repres ent the cost of th e bypassed service.68

● The geometric mean cost of packag ing 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 asse ssment of claims against the bypass criteria, we do not know the dollar value of the pack aged cost that shoul d be appropriately attributed to the other proce dures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount a nd volume protects the validity of cost estimates for low cost servic es 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 identify ing cost patterns, we proposed to use the geometric mean cost of packaging to identi fy 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 consid ered whether it would be appropriate to update the $50 packaged cost threshold fo r inflation when examining potential bypass list additions. As discu ssed in the CY 2010 OPPS/ ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the pack aged cost threshold more restrictive over time when considering additions to the bypass li st. Therefore, adjusting the threshold by the market basket increase would prevent contin uing decline in the threshold’s real value. Based on the same rationale described fo r 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 bask et increase. By applying the final CY 201369 market basket increase of 1.8 percent to the prior nonrounded do llar 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). Th erefore, we proposed to set the geometric mean packaged cost threshold on the CY 2012 cl aims 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 th eir costs would not be appropr iate for bypass list purposes. In addition, we proposed to continue to include on the bypass list HCPCS codes that CMS medical advisors believe have mi nimal associated packaging based on their clinical assessment of the co mplete CY 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 di rect the assignment of packaged costs to a companion code where services always appear together a nd where there would ot herwise 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 b ypass list (73 FR 68513). As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “pse udo” single procedure claims from bypassed codes that are also members of multiple imaging composite APCs changed. When creating the set of “pse udo” single procedure claims, clai ms that contain “overlap bypass70 codes” (those HCPCS codes th at are both on the bypass list and are members of the multiple imaging composite APCs) were identif ied first. These HCPCS codes were then processed to create multiple imaging composite “single session” bills, that is, claims containing HCPCS codes from only one imagi ng family, thus suppressing the initial use of these codes as bypass codes. However, th ese “overlap bypass codes” were retained on the bypass list because, at the end of the “pse udo” single processing logic, we reassessed the claims without suppression of the “ overlap bypass codes” under our longstanding “pseudo” single process to determine whethe r we could convert additional claims to “pseudo” single procedure claims. (We refer read ers 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 co mposite “single session” bills that could be used for calculating composite APC costs. “O verlap bypass codes” that are members of the multiple imaging composite APCs are iden tified 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 supp ort. The bypass list process is used to extract more data from claims th at would otherwise be unusable. We use a71 variety of information in identifying codes that could be potentially added to the bypass list each year, including codes selected base d on the empirical criteria, CMS medical advisor recommendations, and co mmenter requests. In doing so, we attempt to ensure that the amount of packaged cost being redist ributed 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 prosp ective year, whether because of prospective packaging policies or deletions prior to th e claims year, would not be appropriately applied to the bypass process. Bypassing p ackaged 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 variet y of other factors, including updated data, APC recalibration, and increased packaging.
Comment : Several commenters believed thatan inconsistency existed in the application of the bypass policy and the E&M co des. 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 pr oposed new visit APC 0634 (Hospital Clinic Visits), which also would be used in calcul ating 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 we72 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 prev iously described. Applying those empirical crite ria would continue to exclude the remaining E&M codes from the bypass list. Therefore, we do not beli eve that those exclusi ons are an error. While we recognize that there are interacti ons 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 po licy interpretations based on the individual rules and goals being applie d. In developing the proposed CY 2014 OPPS bypass list, we tried to retain the principles and guide lines 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 appreci ate 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 thei r appropriateness, especially in the context of the packaging policies described in secti on 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 weight s would be calculated, it was selected as a baseline because clinic visits are one of th e 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 propos ed relative payment weights for all other APCs does not affect the payments made unde r the OPPS because the weights are scaled for budget neutrality. Therefore, any potential miscalculations or policy issues related to73 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 scal er is discussed in section II.A.4. of this fina l 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 singl e 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 a nd its interaction with our pr oposed CY 2014 policies. In prior years, we generally continued bypassing codes that were on the previous year’s bypass list under the assumption that packag ing, 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 ad ded or removed from the bypass list. After consideration of th e public comments we receive d, 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 a nd various other OPPS payment policies. As a result of modifications to th e packaging policies described in section III. of this final rule with comment period, we are a dding codes that we had originally proposed to remove from the CY 2014 bypass list b ack on the CY 2014 final OPPS bypass list.74 Addendum N to this final rule with comment period (which is availa ble via the Internet on the CMS Web site) includes th e list of bypass codes for CY 2014. The list of bypass codes contains codes th at 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 ex isted 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 fo r 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 fr om 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 de scribed in section II.A.3. of this final rule with comment period.75 TABLE 1.—HCPCS CO DES 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 ru le (78 FR 43547), we proposed to continue to use the hospital-specific overall ancillary and departme ntal cost-to-charge ratios (CCRs) to convert charges to estimat ed costs through application of a revenue code-to-cost center crosswalk. To calc ulate the APC costs on which the proposed CY 2014 APC payment rates were based, we calcu lated 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 avai lable 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 leve l 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 re venue code-to-cost center crosswalk, we reviewed changes to the list of revenue code s for CY 2012 (the year of claims data we used to calculate the propos ed 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 elec tronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OP PS/ASC final rule with comment period (71 FR 67983 through 67985). One longstanding exception to this general methodology for calculation of CCRs used for converting char ges to costs on each claim, as detailed in the CY 2007 OPPS/ASC final rule with comm ent period, is the cal culation 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 th e same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCR calculation that excluded the costs of parame dical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We refer readers to the CY 2007 OPPS/ASC fina l rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost77 reports to only those hospitals that filed out patient claims in CY 2012 before determining whether the CCRs for suchhospitals were valid. We then calculated the CCRs for each co st center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information Sy stem (HCRIS). We used the most recent available cost report data, which, in most cases, were from cost reports with cost reporting periods beginning in CY 2011. Fo r 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 th e 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 co st 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-basedweights 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-co st items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of78 widely varying costs in the same cost center. This issue was evaluated in a report by the Research Triangle Institute, International (RTI). The RT I final report can be found on RTI’s Web site at: http://www.rti.org/re ports/cms/HHSM-500-2005- 0029I/PDF/Refining_Cost_to_C harge_ratios_200807_Final.pdf . For a complete discussion of the RTI recommendations, public comments, and our responses, we refer readers to the CY 2009 OPPS/ ASC final rule with comm ent period (73 FR 68519 through 68527). We addressed the RTI finding that ther e 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 Pati ents” 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 “Med ical 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 r eceived, 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 beginni ng on or after May 1, 2009. In the CY 2013 OPPS/ASC final rule with comm ent period, we determined th at a significant volume of hospitals were utilizing the “Implantable De vices Charged to Patients” cost center. Because a sufficient amount of data from whic h to generate a mean ingful 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 “Imp lantable 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 crea te new standard cost cente rs for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI), ” and “Cardiac Cathet erization,” and to require that hospitals report the costs and ch arges 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 car diac catheterization di ffer significantly from the costs and charges of other services include d 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 or der for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs to80 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 co st centers for CT scans, MRIs, and cardiac catheterization. The new standard cost centers for CT scan s, MRIs, and cardiac catheterization were effective for cost re port 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 di scussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43549), we were able to calcu late a valid implantable device CCR for 2,936 hospitals, a valid MRI CCR for 1,853 hospita ls, a valid CT scan CCR for 1,956 hospitals, and a valid Cardiac Catheter ization 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 analys is of the impact on CCRs a ssociated with using the new MRI, CT, and cardiac catheteriz ation cost centers. We provi ded the data analyses in Tables 2 and 3 of the proposed rule (and are republishing them belo w) demonstrating the changes as a result of including the distinct CCRs calculated from the new standard cost centers into the CY 2014 O PPS 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 0.159081

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 Co ntrast 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 di scussion, 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 consis tent with RTI’s analysis of cost report and claims data in the July 2008 final report (pag es 5 and 6). RTI concl udes that “in hospitals that aggregate data for CT scanning, MRI, or nuclear medicine services with the standard line for Diagnostic Radiology, costs for these se rvices all appear s ubstantially overstated, while the costs for plain films, ultr asound 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 form83 CMS 2552-10 because we had used data from the standard cost center for implantable medical devices in CY 2013 OPPS ra tesetting, as discussed above. As we have indicated in prior ru lemaking (77 FR 68223 through 68225), once we have determined that cost report data for th e 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 abov e in the calculation of the OPPS relative payment weights. As stat ed 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 ra tesetting. Therefore, beginning in the CY 2014 OPPS, we proposed to calculate the OPPS relative payment weights using distinct CCRs for cardiac ca theterization, 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 calcula ting the CY 2014 OPPS relative payment weights using th ese new standard cost centers.
Comment : Commenters generally supporte d the proposals to implement the standard cost center CCRs for implantable de vices and cardiac catheterization. However, many commenters requested that CMS reconsid er the impact of di stinct CCRs for MRI and CT scan cost centers before adop ting them. Various commenters opposed the implementation of distinct MRI and CT s can CCRs, expressing concern that doing so would result in very low CCRs for these servic es because of gross hospital cost reporting practices that allocate capita l costs for MRIs and CT scan s across the entire hospital, rather than to the appropriate CT scan a nd MRI cost centers. Sp ecifically, commenters84 reported that some hospitals currently us e 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 alternativ e allocation methods, “direct assignment” or “dollar value,” as a more accurate methodology for directly assigning equipment costs, industry analysis suggests that ap proximately only half of the reported cost centers for CT scans and MRIs rely on these preferred methodologies. The commenters expressed concern th at “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 radi ology, inaccurately re flecting the higher resources used for MRIs and CT scans relativ e 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 woul d be similar to that of CT imaging services, despite their belief that CT services would cost significantl y more to perform. Other commenters suggested th at if CMS were to fina lize the new CCRs, CMS should only use cost report data that meet minimu m data quality standards, such as only including: (1) cost report data based on dolla r value or direct assi gnment cost allocation methods; (2) “plausible” costs for CT and MRI cost centers; and (3) data when there is evidence of reclassified costs from diagnos tic 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 asserted85 that more time is needed by hospitals to m odify their cost reporti ng practices, while other commenters suggested that it was unrealistic to expect hos pitals 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 bene fit to each individual hospital. Commenters also noted that the Defi cit Reduction Act (DRA) of 2005 sets the technical component (TC) of advanced imag ing 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 st ated 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 cu ts could affect benefi ciary 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 regardi ng the use of standard cost center CCRs for implantable devices, MRIs, CT s cans, and cardiac cath eterization. We appreciate the support for our proposal to us e distinct CCRs for implantable devices and cardiac catheterization. We have reviewed the comment s objecting to implementation of distinct CCRs for MRIs and CT scans. We not e that the new standard cost centers for CT scans, MRIs, and cardiac catheterization have be en in effect since cost reporting periods beginning on or after May 1, 2010, on th e revised Medicare cost report Form CMS-2552-10. Therefore, the cost repo rts that we are using to develop the CY 2014 OPPS relative payment weights were ei ther the first or the second opportunity for hospitals to submit cost reports with the new CT scan and MRI co st centers (lines 5786 and 58 of Worksheets A and C, Part I of the Form CMS–2552–10), depending on the hospital’s cost report ing period. Simultaneous with im plementing the new CT scan and MRI cost centers, in the FY 2011 IPPS/LTC H 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 th ese cost centers are allocated to all the hospital’s cost centers that use major m oveable equipment (including CT and MRI), using “dollar value” (which is the “reco mmended” or default statistical basis, in accordance with the cost reporting instructi ons contained in Section 4095 of CMS Pub. 15–2, for the Form CMS-2552–10). Alternativel y, 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 th at 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” allo cation method, and direc tly assign the cost87 of moveable equipment to all of the hospital’ s cost centers that use moveable equipment, including CT scans and MRIs, using the prov ider’s routine accounting process. This would ensure that the cost of the CT sca nning 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, hospita ls 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- Re lated Costs—Moveable Equipment or by requesting contractor approva l in accordance with Secti on 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 ad ded 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 re flect the costs associ ated 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 betw een our estimations and the RTI report results not only to demonstrate that they were genera lly consistent with each other, but to again note that any concerns and cr iticisms 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 further88 note that some of the concerns that commen ters 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 bypa ss list packaging proposals ar e 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 servic e costs. We also believe that because approximately half of hospitals reporting eith er the new CT scan or MRI standard cost center thus far have adopted one of the mo re 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 a ssignment” or “dollar value” as the cost allocation method. Sim ilarly, of the 1,871 hospitals reporting a new MRI standard cost center, approximately 985 hospitals report us ing either “direct assignment” or “dollar value” as the co st allocation method. Commenters have previously recognized the signi ficant impact that the CT scan and MRI standard cost center data would have on multiple payment syst ems, and we believe that the significant effects of these data on payment should i nherently 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 the89 costs associated with providi ng 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 pur pose and our goal to develop OPPS relative payment weights that accurately reflect service costs. We have considered the public co mments 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 dire ct assignment or the dollar va lue statistical allocation method, have at least $250,000 of cost in the CT scan or MRI cost ce nter, and have reclassified overhead costs from the diagnostic radiology costcenter to the CT scan and/or MRI cost centers. We appreciate the commenters’ sh ared concern surrounding the goal of using the best available information to estimated co sts 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 alloca tion 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 ad ministratively feasible for CMS to determine, using HCRIS data, whether hospitals have reclassified overhead costs from th e 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 negative90 impact would be manifested in the IPPS MS-DRGs, the OPPS relative payment weights would be more significantly affected by th e adoption of the new standard cost center CCRs (78 FR 50521). We took note of the many comments rega rding the ramifications of developing distinct CT scan and MRI CCRs on benefi ciary access to care and other payment systems. We understand that any such cha nge 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 effect s based on adoption of the new CT scan and MRI standard cost center CCRs further undersco re the need for accurate cost reporting for ratesetting purposes. Although these pa yment effects are significant, we do not believe that they would likely significantly affect beneficiary access to imaging because imaging is readily available at different site s of service and the ma gnitude 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 furn ish, certain services. However, we are not convinced that further delay or further trimmi ng 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 alloca tion (that is, “square feet”) under Section 2313 of CMS Pub. 15–1, this methodology does not ensure prec ise CCRs for CT scans and MRIs. Therefore, we encouraged hospitals over the past several years to use the most precise91 cost reporting methods in response to the new cost report lines . Specifically, the longstanding cost report instru ctions 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 al location of the cost center indicated which must be used by all providers completi ng this form (Form CMS–2552–10), even if a basis of allocation other than the recomme nded basis of allocati on was used in the previous iteration of the cost report (Form CMS–2552–96).” Unde r Table 1 of the Medicare cost report, which lists the Record Specificati ons for the cost centers on Worksheet B–1, “dollar value” is specified as the recommended st atistical allocation method for Column 2, Capital-Related Costs—Moveable Equipment. While the “dollar value” statistical alloca tion method is more precise than “square feet,” to ensure even more precise CCRs for CT scans and MRIs, 90 da ys prior to the begi nning of their next cost reporting period, hospitals may request permission fr om their Medicare contractors in accordance with Section 2307 of CMS P ub. 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 met hod, 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” statis tical allocation method. (We not e that, under Sect ion 2313 of CMS Pub. 15–1, hospitals not currently using “dollar value” should notify their contractor of their intention to switch their st atistical allocation basis to “dollar value” at least 90 days prior to the end of a cost reporting period.) We also in tend to communicate with the Medicare contractors to faci litate approval of hospitals’ requests to switch from the92 square feet statistical allo cation 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 mo re careful cost report ing. Therefore, we generally do not believe that the concerns expressed by th e commenters warrant further delay in implementing the proposed CCRs fo r 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 standa rd cost center CCRs and their use in OPPS ratesetting. As compared to the IPPS, there is increased se nsitivity to the cost allocation method being used on the cost report forms for these ne w standard imaging cost centers under the OPPS due to the limited size of the O PPS payment bundles and because the OPPS applies the CCRs at the departmental level fo r 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 identifi ed providers using “square feet” as the cost a llocation 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 repor t CT and MRI standard cost centers using “square feet” as the cost allocation method. Table 5 below provide s statistical values based on the CT and MRI standard cost cente r CCRs using the different cost allocation methods.93 TABLE 4.—PERCENTAGE CHANGE IN ESTIMATED COST FOR CT AND MRI APCs WHEN EXCLUDING CL AIMS FROM PROVIDERS USING “SQUARE FEET” AS THE CO ST 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 Co ntrast 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 su fficient amount of cost report data were available from which to generate a meaningf ul analysis, we would propose, and finalize if appropriate, the use of th e distinct CCRs described above in the calculation of the OPPS relative payment weights. We believe that the analytic findi ngs described in the proposed rule, and the volume of hospitals that have “valid” CCRs described above, computed using the July 2013 HCRIS update, suppor t 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 fu rther delay implementation of the CCRs of each of these cost centers for the OPPS. Th erefore, we are finalizing a policy for the CY 2014 OPPS to remove claims from provide rs that use a cost allocation method of “square feet” to calculate CCRs used to esti mate costs associated with the CT and MRI APCs identified in Table 4. This change a llows hospitals additional time to use one of the more accurate cost allocation methods, and thereby improve the accuracy of the95 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 upda ted 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. Ther efore, in CY 2018, we will estimate the CT and MRI APC relative payment weights using co st data from all pr oviders, regardless of the cost allocation statistic employed. After consideration of the public comments we rece ived, we are finalizing, without modification, our proposal to use data from the “Implantable Devices Charged to Patients” and “Cardiac Catheter ization” cost centers to cr eate 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 secti on, 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 fi nal 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/M edicare-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 th at 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 include s the additional variables previously available only in the OPPS Id entifiable Data Set, includi ng 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 rate s 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 ru le 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 po licy changed the cost metric on which the relative payments are based, the data proce ss in general remained the same, under the methodologies that we used to obtain appr opriate claims data and accurate cost information in determining estimated service cost. For CY 2014, as we proposed, we are97 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 s ections II.A.2.a. throu gh 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 re aders to section II.A.4. of th is 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. On e commenter suggested a “dampening policy” that would limit declines in paym ent service from year to year. Response : As previously discussed in th e CY 2013 OPPS/ASC final rule with comment period (77 FR 68225), there are a numbe r of factors that contribute to cost fluctuations from one year to the next, including (but not lim ited to) hospital behavior in adjusting mix of services, changes in hospita l costs and charges each year resulting in changes to the CCRs, reassignments of HCPC S codes, changes to OPPS payment policy (for example, changes to packaging policie s), 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. Specifical ly, we continue to seek ways to use more claims data so that we have fewer APCs fo r which there are small numbers of single bills used to set the APC costs. Moreover, we ha ve tried to eliminate APCs with very small98 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 suppor tive services and the implementation of composite APCs, may contribut e 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 en abling 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 th at implementing the policy suggested by the commenters would make payments less reflectiv e 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 th e 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 peri od, we used the CY 2012 hospital outpatient claims processed through June 30, 2013, to calcu late the geometric mean costs of APCs that underpin the relative payment weights fo r CY 2014. (For the proposed rule, we used CY 2012 hospital outpatient claims processe d through December 31, 2012.) To begin the calculation of the re lative payment weights for CY 2014, we pulled all claims for outpatient services furnished in CY 2012 from th e 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 inpati ents 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 Me dicare knowing that no payment would be made. For example, providers submit claims w ith a condition code 21 to elicit an official denial notice from Medicare and document th at a service is not covered. We then excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mari ana Islands because hospitals in those geographic areas are not paid under the OPPS, and, therefore, we do not use claims for services furnished in these areas in ratesetting. We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 125 million claims that contain hosp ital bill types paid under the OPPS. 1. Claims that were not bill types 12 X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (H ospital--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 w ith bill type 14X are laboratory specimen claims, of which we use a subset for the limite d number of services in these claims that are paid under the OPPS. 3. Claims that were bill type 76X (CMHC). To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hos pital-specific CCR associated with the revenue code for100 the charge as discussed in section II.A.1.c. of this final rule with comment period. We then flagged and excluded CAH claims (which are not paid under the OPPS) and claims from hospitals with invalid CCRs. The latter included claims from hospitals without a CCR; those from hospitals paid an all-inclus ive rate; those from hos pitals with obviously erroneous CCRs (greater than 90 or less th an 0.0001); and those fr om hospitals with overall ancillary CCRs that we re identified as outliers (tha t exceeded +/-3 standard deviations from the geometric mean after removing error CCRs). In addition, we trimmed the CCRs at the cost center (that is, departmental) level by removing the CCRs for each cost center as outlier s if they exceeded +/- 3 st andard deviations from the geometric mean. We used a four-tiered hi erarchy of cost center CCRs, which is the revenue code-to-cost center cr osswalk, to match a cost center to every possible revenue code appearing in the outpatient claims that is relevant to OPPS serv ices, with the top tier being the most common cost center and the last tier being the default CCR. If a hospital’s cost center CCR was deleted by trimming, we set the CCR for that cost center to “missing” so that another cost center CCR in the revenue center hi erarchy could apply. If no other cost center CCR could apply to th e revenue code on the claim, we used the hospital’s overall ancillary CCR for the revenue code in question as the default CCR. For example, if a visit was reported under the c linic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code. The revenue code-to- cost center crosswalk is available for inspection on the CMS Web site at: http://www.cms.gov/Medicar e/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/index.html . Revenue codes that we do not use101 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 hospi tals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Ma riana Islands and claims from all hospitals for which CCRs were flagged as invalid. We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as discussed above. We then excluded claims without a HC PCS code. We moved to another file claims that contained only influenza a nd pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasona ble 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 ont o another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit arithmetic and geometri c mean and median cost and a per day arithmetic and geometric mean and medi an cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment ra tes, such as a unit-to-day ratio for drugs.102 Prior to CY 2013, our payment policy fo r nonpass-through separately paid drugs and biologicals was based on a redistribut ion 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 O PPS 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 th e 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 sepa rately payable drugs and biologicals. We refer readers to section V.B.3. of this fi nal 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 we re not paid during claim processing, presumably for a line-item rejection or de nial. The number of edits for valid OPPS payment in the Integrated Outpatient C ode Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Codi ng Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payabl e services to set payment rates, we removed line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” “V,” or “X,” in the prospective year’s payment system. This logic preserve s charges for services that would not have been paid in the claim year but for which some estimate of cost is needed for the103 prospective year, such as services newly rem oved 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 incl uded in the cost of th e services with which they are reported, even if the CPT codes for the packaged services were not paid because the service is part of anothe r service that was reported on the same claim or the code otherwise violates claims processing edits. For CY 2014, as we proposed, we are c ontinuing the policy we implemented for CY 2013 to exclude line-item data for pa ss-through drugs and biologicals (status indicator “G” for CY 2012) and nonpass-thr ough drugs and biological s (status indicator “K” for CY 2012) where the charges reported on th e claim for the line were either denied or rejected during claims processing. Removi ng lines that were eligible for payment but were not paid ensures that we are using appropr iate data. The trim a voids using cost data on lines that we believe were defective or i nvalid because those rej ected or denied lines did not meet the Medicare requirements for pa yment. For example, edits may reject a line for a separately paid drug because the num ber of units billed exceeded the number of units that would be reasonable and, therefore, is likely a bil ling 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, th erefore, should not be used for ratesetting. We believe th at removing lines with valid st atus indicators that were104 edited and not paid during claims processing in creases the accuracy of the data used for ratesetting purposes. For the CY 2014 OPPS, as part of our p ackaging 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 thes e lines ensures that, in establishing the CY 2014 OPPS relative payments weights, we a ppropriately allocate the costs associated with packaging these services. For a more detailed discussion of the final policy to package certain clinical di agnostic laboratory tests, we refer readers to section II.A.3.b.(3) of this final ru le 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 pres ented 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 descripti on of status indicator “Q1” to reflect that deletion, as discussed in sections II.A.3. and XI. of th is final rule with comment period. For CY 2014, as we proposed, we are continui ng 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” proce dures as any code having a status indicator other than one that we have classified as major or minor. For CY 2014, we had originally105 proposed to delete status indicator “X” as part of our proposal to package ancillary services under that status indi cator. However, as discussed in section II.A.3. of this final rule with comment period, we are not es tablishing that policy in CY 2014 and may reexamine that policy in the future. Th erefore, for CY 2014, we are defining HCPCS codes having a status indicator of “X” as ma jor procedure, due to the retention of the status indicator. For CY 2014, we are continui ng to assign status in dicator “R” to blood and blood products; status indicator “U” to br achytherapy sources; stat us indicator “Q1” to all “STVX-packaged codes”; status indi cator “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 separatelythrough single code APCs when the criteria

are not met. As discussed in the CY 2009 OPPS/AS C final rule with comment period (73 FR 68709), we established status indicato rs “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 ev aluate 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. Code s with status indicato r “Q1” or “Q2” are carried through the data either w ith status indicator “N” as p ackaged 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” si ngle procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in106 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 duri ng both the split and “p seudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in secti on 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 incl udes codes with status indicator “Q3”); claims with one uni t 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, stat us indicator “S,” “T,” “V,” or “X” which includes codes with status indicator “Q3”), or multiple units of one payable procedure. These claims include those codes with a stat us indicator “Q2” code (“T- packaged”) where there was no procedure with a status indicator “T” on the same claim on the same date of service but where there was another separately paid proc edure on the same claim with the same date of service (that is, another code with status indicator “S,” “V ,” or “X”). We also include in this set claims that cont ained one unit of one code when the bilateral modifier was107 appended to the code and the code was conditiona lly or independently b ilateral. In these cases, the claims represented more than one unit of the service described by the code, notwithstanding that only one unit was billed. 3. Single Procedure Minor Claims : Claims with a single HCPCS code that was assigned status indicator “F,” “G,” “H,” “K ,” “L,” “R,” “U,” or “N” and not status indicator “Q1” (“STVX-packaged”) or 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 indi cator “Q1” (“STVX-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” “V,” or “X” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q1,” or more than one unit of a code with status indicator “Q2” but no code with status indicator “T” on the same date of service. 5. Non-OPPS Claims : Claims that contain no se rvices payable under the OPPS (that is, all status indicators other than thos e listed for major or minor status). These claims were excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment, 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 code s 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. Clai ms that contain codes to which we have assigned status indicators “Q1” (“STVX-packag ed”) and “Q2” (“T-packaged”) appear in the data for the single major file, the multiple major file, and the multiple minor file used for ratesetting. Claims that contain codes to which we have assi gned status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major files used in this final rule with comm ent period, depending on the specific composite calculation. (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 se rvice, 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 li sted 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 fina l rule with comment period to remove separately payable procedures which we determined contained lim ited or no packaged costs or that were otherwise suitable for inclusion on the bypass li st from a multiple procedure bill. As109 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 “p seudo” single procedure claims. The final CY 2014 “overlap bypass codes” are listed in Adde ndum 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 pack aged services. The single procedure claim record that contained the other separate ly 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 com posite APCs were met, we created a “single session” claim for the applicable imaging co mposite service and determined whether we could use the claim in ratesetting. For HCPCS codes that are both conditionally110 packaged and are members of a multiple imaging composite APC, we first assessed whether the code would be pack aged 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 fo r 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 singl e separately payable code remained on the claim. If so, we attributed the packaged co sts on the claim to the si ngle unit of the single remaining separately payable code other thanthe bypass code to create a “pseudo” single procedure claim. We also identified line -items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to us e more claims data for ratesetting purposes. 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 withstatus 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 indi cator “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 w ith a status indicator of “Q1.” We then packaged all costs for the following into a sing le cost for the “Q1” HCPCS code that had the highest CY 2013 relative payment weight to create a “pseudo” si ngle procedure claim for that code: additional units of the status indicator “Q1” HCPCS code with the highest111 CY 2013 relative payment weight; other codes wi th 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 st atus indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for furthe r data processing and considered this claim as a major procedure clai m. We used this claim in the calculation of the APC geometric mean cost for th e status indicator “Q1” HCPCS code. Similarly, if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or mu ltiple units of a single code with status indicator “Q2,” we selected the status indi cator “Q2” HCPCS code that had the highest CY 2013 relative payment weight and set the uni ts to one on that HCPCS code to reflect our policy of paying only one unit of a code w ith a status indicator of “Q2.” We then packaged all costs for the following into a sing le cost for the “Q2” HCPCS code that had the highest CY 2013 relative payment weight to create a “pseudo” si ngle 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 st atus indicator of “N” to the status indicator of the APC to which the selected code was a ssigned, and we consider ed this claim as a major procedure claim. If a multiple procedure minor claim contai ned 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 re lative payment112 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 proce dure claim for that code: ad ditional units of the status indicator “Q2” HCPCS code with the highe st CY 2013 relative pa yment weight; other codes with status indicator “Q2”; codes with status indicator “Q 1” (“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 wei ghts. If a status indicator “Q1” HCPCS code had a higher CY 2013 relative payment we ight, it became the primary code for the simulated single bill process. We changed th e status indicator for the selected status indicator “Q2” (“T-packaged”) code from a da ta 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 creati ng “pseudo” single procedure claims to the conditionally packaged codes that do not meet the criteria for packaging, which enabled us to create single procedure claims from them, if they met the criteria for single procedure claims. Conditionally packaged c odes are identified using status indicators “Q1” and “Q2,” and are described in secti on XI.A. 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” single113 procedure claims to multiple procedure majo r claims and to multiple procedure minor claims. As has been our practice in recent ye ars, we also excluded claims that contained codes that were viewed as independently or conditionally bilateral a nd that contained the bilateral modifier (Modifier 50 (Bilateral pr ocedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that hospitals billed the code w ith a unit of one. We proposed to continue to apply the methodology described above for the purpose of creating “pseudo” single pro cedure claims for the CY 2014 OPPS. We did not receive any public comme nts on this proposal, and therefore are finalizing our proposal to c ontinue to apply the methodol ogy described above for the purpose of creating ‘‘pseudo’’ single pr ocedure 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 pack aged HCPCS codes (codes with status indicator “N” listed in Addendum B to this fi nal rule with comment period (which is available via the Internet on the CMS Web s ite) 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 p ackaged revenue codes in Tabl e 6 below that appeared on the claim without a HCPCS code into the costof the single major procedure remaining on the claim. For a more complete discussi on 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 adopt ed an APC Panel recommendation that CMS should review the final lis t of packaged revenue codes for consistency with OPPS policy and ensure that future versions of th e I/OCE edit accordingly. As we have in the past, and as we proposed, we ar e continuing to compare the fina l list of packaged revenue codes that we adopt for CY 2014 to the reve nue 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 liste d in Table 2 of the CY 2009 OPPS/ASC proposed rule with the mo st current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the 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 thatwe proposed to package for CY 2014. We believe that the charges reported under th e 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 re ported without HCPCS codes under the revenue115 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 lis t 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 cro sswalk and the revenue codes which are considered for use in OPPS ratesetting. Although th ere 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, comment ers’ specific concerns have typically been isolated to the adoption of the new standard cost cente r CCRs in the Medicare cost report Form CMS-2552-10. However, we recognize the co mmenter’s concern and believe that an examination of both the current packaged re venue code list and potential addition or removal of revenue codes in the future may be worth performing. After consideration of th e 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 re venue codes include only revenue codes that116 were in effect in CY 2012, the year of th e claims data on which the final CY 2014 OPPS payment rates are based. TABLE 6.—CY 2014 PACKAG ED 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 a nd Devices; Non-sterile Supply 0272 Medical/Surgical Supplies and Devices; Sterile Supply 0275 Medical/Surgical Supplies and Devices; Pacemaker 0276 Medical/Surgical Supplies a nd Devices; Intraocular Lens 0278 Medical/Surgical Supplies and Devices; Other Implants 0279 Medical/Surgical Supplies and Devices; Other Supplies/Devices 0280 Oncology; General Classification 0289 Oncology; Other Oncology 0343 Nuclear Medicine; Diagnostic Radiopharmaceuticals 0344 Nuclear Medicine; Therapeutic Radiopharmaceuticals 0370 Anesthesia; General Classification 0371 Anesthesia; Anesthesia Incident to Radiology 0372 Anesthesia; Anesthesia Inci dent to Other DX Services 0379 Anesthesia; Other Anesthesia117
Revenue

Code Description

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

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

0399 Administration, Processing and Stor age for Blood and Blood Components; Other Blood Handling

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

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

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

0804 Inpatient Renal Dialysis; Inpatient C ontinuous Cycling Peritoneal Dialysis (CCPD) 0809 Inpatient Renal Dialysis; Other Inpatient Dialysis 0810 Acquisition of Body Component s; General Classification 0819 Acquisition of Body Co mponents; Other Donor118
Revenue

Code Description 0821 Hemodialysis-Outpatient or Home; He modialysis Composite or Other Rate 0824 Hemodialysis-Outpatient orHome; 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 summi ng all costs on the claim; and (2) claims containing packaging flag number 3. Eff ective 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 serv ice with status indicator “S” or “T” (a major separately payable service under the O PPS) for which the fiscal intermediary or Medicare administrative contra ctor (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 paym ent (that is, the Medi care payment) on the assumption that, where the charge equaled th e payment, to apply a CCR to the charge119 would not yield a valid estimate of relative pr ovider cost. We proposed to continue these processes for the CY 2014 OPPS. For the remaining claims, we proposed to then standardize 60 pe rcent of the costs of the claim (which we have previously dete rmined 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 propo sed and final rule contains the formula we use to standardize the total cost for the effect s 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 th e most accurate unadjusted geometric mean

costs. In accordance with our longstanding practi ce, we also proposed to exclude single and “pseudo” single procedure claims for whic h 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 m illion claims were left. Using these120 approximately 119 million claims, we crea ted approximately 125 million single and “pseudo” single procedure claims, of which we used approximately 124 million single bills (after trimming out approximately 1 milli on 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 histor ically developed th e relative weights on which APC payments are based using APC me dian 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 di scussion 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 secti on II.A.2.f. of this fina l rule with comment period. We proposed to use these claims to cal culate the CY 2014 geometric mean costs for each separately payable HCPCS code a nd each APC. The comparison of HCPCS code-specific and APC geometric mean costs de termines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides th at, subject to certai n 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 (o r mean cost, if elected by the Secretary) for an item or service within the group is more th an 2 times greater than the lowest median cost (or mean cost, if so elec ted) for an item or service within the same group (the 2 times rule). While we have histori cally applied the 2 times rule based on median costs, in the121 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 ba sed on geometric mean costs. For the CY 2014 OPPS, we are continuing to develop th e 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 consid er codes that have more than 1,000 single major claims or codes that ha ve both greater th an 99 single major claims and contribute at least 2 percent of the singl e major claims used to establish the APC geometric mean cost to be significant. This longstanding de finition of when a HCPC S 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 si ngle 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 me thod 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 geometri c mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent w ith their use in the median-based cost methodology. Unlisted codes are not used in establis hing the percent of claims cont ributing to the APC, nor are122 their costs used in the calculation of the AP C geometric mean. Finally, we reviewed the geometric mean costs for the services for wh ich we pay separately under this final rule with comment period, and we reassigned HC PCS codes to different APCs where it was necessary to ensure clini cal and resource homogeneity within the APCs. The APC geometric means were recalculated after we r eassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means a nd the APC geometric means were weighted to account for the inclusion of multiple units of the bypa ss 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 er rors caused modeling problems throughout the rest of the system. These commenters believed that CM S did not provide ade quate data to allow hospitals to assess the impact of the majo r revisions. Commenter s 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 mean ingful input. Based on the assertions about a lack of transparency, impact analysis, guidance on how rates were developed, policy details, technical errors, etc., comment ers suggested that those propos als be delayed until more accurate and detailed information was availabl e. Other commenters stated that CMS had ignored previous HOP Panel suggestions on an alyzing the impact of expanded packaging policies, and believed that the potential fo r 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 methodol ogies 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 eff ects throughout the system, any policy change or data update has the potent ial to do the same. Therefor e, the technical corrections described in the correcting document were ma de to address issues where the calculated payment rates were not appropriately reflect ive 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 exclud ed 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 distor t the relativity of124 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 availa ble 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. Speci fically, 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 ru les. In addition, we make available the public use files of claims, including, for CY 2008 and later, supplemental line item cost data for ever y 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 analys es. Therefore, we believe commenters are able to examine and analyze thes e 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 paymen t for a packaged service or other issues. We understand that the OPPS is a complex paymen t 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 se rvice-specific level base d on the claims data we make available. We routinely rece ive complex and detailed public comments,125 including extensive code-specific data analys is 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 O PPS/ASC proposed rule, we received many detailed public comments that included data analysis. We disagree that the CY 2014 OPPS polic y 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 constrai nts. In general, we have tried to limit the changes beyond the current year OPPS with re gards 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 th e meaningful comments that stakeholders provide regarding ways that the cost m odeling 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 th e correcting document published in the Federal Register on September 6, 2013 (78 FR 54842) were generally isolated to specific policy areas and did not substantivel y affect the proposed policies described in the CY 2014 OPPS/ASC proposed rule. The co rrecting document merely corrected the underlying data errors to conform to the proposed policies clea rly intended in the preamble of the proposed rule.126 As commenters have described, modeli ng the OPPS payment rates can sometimes be a complex undertaking. We have tried to alleviate some of thos e concerns about the complexity and transparency of the OPPS co st modeling process by having an extensive discussion of the data process in the pream ble 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 CM S has not provided data regarding packaging policies to the Advisory Panel on Hospital Ou tpatient 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/AS C final rule with comment period (74 FR 60409 through 60412), the CY 2011 OPPS/A SC final rule with comment period (75 FR 71682 through 71868), the CY 2012 OPPS/A SC final rule with comment period (76 FR 74184 through 74185), and the CY 2013 O PPS/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 th e public comments we receive d, 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 geomet ric mean costs are calculated using variations of the process outlined above. Sp ecifically, section II.A.2.d. of this final rule with comment period addresses the calculati on of single APC criteria-based geometric127 mean costs. Section II.A.2.f . of this final rule with comment period discusses the calculation of composite APC criteria-based ge ometric mean costs. Section VIII.B. of this final rule with comment period a ddresses the methodology for calculating the geometric mean costs for part ial hospitalization services. (2) Recommendations of the Pa nel Regarding Data Development At the August 2013 meeting of the Panel, we discussed the claims accounting process for the CY 2014 OPPS proposed rule, th e proposed adoption of the new standard cost centers for CT, MRI, and cardiac cathe terization 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 propos als at the 2014 spring meeting. Depending upon the CY 2014 final policy decisions, we w ill consider providing additional relevant128 information to the Panel at the Spring 2014 Panel meeting.129 d. Calculation of Single Pro cedure 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 implan ted or used to perform the procedure. The standard methodology for calculating device-dep endent APC costs utilizes claims data that generally reflect the full cost of the required device by us ing only the subset of single procedure claims that pass th e procedure-to-device and devi ce-to-procedure edits; do not contain token charges (less th an $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 signif ying 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 de tailed discussion of how we developed the standard device-dep endent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ ASC final rule with comm ent period (72 FR 66739 through 66742). Overviews of the procedure-to-devic e edits and device-to-p rocedure edits used in ratesetting for device-dependent APCs ar e 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 de fine 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 this130 policy as a further step to improve the accur acy 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 se rvice. Table 5 of the proposed rule provided a list of the 39 APCs currently recognized as device-depende nt APCs and identified those 29 APCs that we proposed to include in the comprehe nsive APCs proposal (78 FR 43557). We proposed to treat the remaining 10 device- dependent APCs by applying our standard APC ratesetting methodology to calculate thei r CY 2014 payment rates. We initially adopted a specific device-d ependent APC ratesetting me thodology because commenters had previously expressed concerns that the co sts associated with certain high-cost devices were not always being accurately reported a nd 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 i nvolving implantable de vices and have grown accustomed to ensuring that they code and repo rt 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 pr ocedure-to-device edits and device-to-procedure edits for any APCs. We e xplained that, under this131 proposal, hospitals would still be expected to adhere to the guidelines of correct coding and append the correct device code to the cl aim when applicable. However, claims would no longer be returned to providers when specific procedure and device code pairings do not appear on a clai m. We stated that we beli eve 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 devi ces, the proposed compre hensive APCs would reliably reflect the cost of th e device if it is included anywhere on the claim. Therefore, we do not believe that the burden on hospita ls of adhering to th e procedure-to-device edits and device-to-procedur e edits, and the burden on th e Medicare program of maintaining those edits, continue to be warrant ed. As with all other items and services recognized under the OPPS, we expect hosp itals to code and report their costs appropriately, regardless of whether ther e 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 hospita ls. 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 th at CMS remove APC 0648 from the list of device-dependent APCs.132 Response : We continue to believe that th e elimination of device-to-procedure edits and procedure-to-device edits is appropr iate 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 reliablyreflect the cost of the device if it is included anywhere on the claim. We re mind commenters that, under our proposed policy, hospitals would still be expected to ad here to the guidelines of correct coding and append the correct device code to the claim wh en applicable. As with all other items and services recognized under the OPPS, we expect hospitals to code a nd 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 reporti ng. 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 co sts for the 39 APCs currently recognized as device-dependent APCs are appropriately incl uded in the claims that CMS will use for ratesetting. In light of thos e concerns, we are further assessing whether we need to continue claims processing ed its requiring a device code to be on the claim under the comprehensive APCs in CY 2015. We believe that APC 0648 is appropriat ely included in the current list of device-dependent APCs, as APC 0648 is popul ated by HCPCS codes th at usually, but not always, require that a device be implante d or used to perform the procedure. After consideration of th e public comments we receive d, and in conjunction with our finalized comprehensive APC policy, which is fully discussed insection II.A.2.e. of133 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 cu rrently recognized device-dependent APCs not included in th e comprehensive APC proposal and apply our standard APC ratesetting methodology to calcu late their payment ra tes, 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 identi fies those 29 APCs that we are including in the finalized comprehensive APCs policy for CY 2015. TABLE 7.—APCs CURRENTLY RECOGN IZED AS DEVICE-DEPENDENT APCs APC APC Title 0039* Level I Implantation of Neurostimulator Generator 0040* Level I Implantation/Revision/Replac ement of Neurostimulator Electrodes 0061* Level II Implantation/Revision/Repla cement of Neurostimulator Electrodes 0082* Coronary or Non-Coronary Atherectomy 0083* Coronary Angioplasty, Valvulopl asty, 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 Card ioverter-Defibrillators (ICDs) 0108* Level II Implantation of Card ioverter-Defibrillators (ICDs) 0115 Cannula/Access Device Procedures 0202* Level VII Female Reproductive Procedures 0227* Implantation of Drug Infusion Device 0229* Level II Endovascular Revascular ization of the Lower Extremity 0259* Level VII ENT Procedures134 APC APC Title 0293* Level VI Anterior Segment Eye Procedures 0315* Level II Implantation of Neurostimulator Generator 0318* Implantation of Neurostimulato r Pulse Generator and Electrode 0319* Level III Endovascular Revascular ization 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 Intraperiton eal and Pleural Catheters 0653 Vascular Reconstruction/Fi stula 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 Ne urostimulator 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 pr oducts through APCs rather th an packaging payment for them into payments for the procedures with which they are administered. Hospital payments for the costs of blood and blood product s, as well as for the costs of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs. In the CY 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 our135 blood-specific CCR methodology, which utilizes act ual or simulated CCRs from the most recently available hospital cost reports to convert hospital charges for blood and blood products to costs. This methodology has b een our standard ratesetting methodology for blood and blood products since CY 2005. It was developed in response to data analysis indicating that there was a si gnificant difference in CCRs for those hospitals with and without blood-specific cost cen ters, and past public comments indicating that the former OPPS policy of defaulting to the overall hospital CCR for hospitals not reporting a blood-specific cost center often resulted in an underestimati on of the true hospital costs for blood and blood products. Specifically, inorder to address the differences in CCRs and to better reflect hospitals ’ costs, we proposed to conti nue to simulate blood CCRs for each hospital that does not report a blood cost center by calculati ng the ratio of the blood-specific CCRs to hospitals’ overall CCRs for those hospitals th at do report costs and charges for blood cost centers. We would then apply this mean ratio to the overall CCRs of hospitals not reporting costs and char ges for blood cost centers on their cost reports in order to simulate blood-specific CCRs for those hospitals. We 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-spec ific CCR for hospitals that reported costs and charges for a blood cost center and a hospital-specific simulated blood-specific CCR for hospitals that did not report cost s and charges for a blood cost center. We continue to believe the hospita l-specific, blood-specific CCR methodology best responds to the absen ce of a blood-specific CCR for a hospital than alternative methodologies, such as defaulting to the overall hospital CCR or applying an average136 blood-specific CCR across hospitals. Because this methodology takes into account the unique charging and cost accounting structure of each hospital, we be lieve that it yields more accurate estimated costs for these produc ts. We continue to believe that this methodology in CY 2014 would result in co sts for blood and blood products that appropriately reflect the relative estimated co sts of these products for hospitals without blood cost centers and, th erefore, for these blood products in general. We did not receive any public comment s on this proposal. Therefore, we are finalizing our proposed policy, without modifi cation, to continue to establish payment rates for blood and blood products usi ng our blood-specifi c 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 cen ters 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 th e 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 comprehensive137 APCs (and, as a result, in the payment rate s 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 s ite) for the CY 2014 payment rates for blood and blood products (which are identified with st atus indicator “R”). For a more detailed discussion of the blood-speci fic 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 reader s to the CY 2008 OPPS/AS C 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 classi fy devices of brachyt herapy consisting of a seed or seeds (or radioactive source) (“brachytherapy sources”) separately from other services or groups of services, in a manne r that reflects the nu mber, isotope, and radioactive intensity of the brachytherapy s ources furnished and mu st include separate groups for palladium-103 and iodine-125 s ources, 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 br achytherapy sources, consistent with section 1833(t)(2)(C) of the Ac t, with payment rates base d on source-specific costs, which has been utilized for each year’s brachytherapy source payment since CY 2010138 (74 FR 60537; 75 FR 71980; 76 FR 74162; 77 FR 68242) . As we have previously stated, we believe that adoption of the genera l OPPS prospective payment methodology for brachytherapy sources is appropriate (77 FR 68240).
Comment : Commenters expressed concer n regarding CMS’ brachytherapy source data and stated that there are longs tanding 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 dos e 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 brachythera py 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 be lieved 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 sour ce 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 thes e 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 radioisoto pe, radioactive intensity, and stranded or non-stranded configuration, supplemented by pa yment based on the number of sources used in a specific clinical case, adequatelyaccounts for the major expected sources of139 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 estimatedcost of providing a service for a particular patient, and with th e 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 pack aging, the costs of th ese individual items could be expected to show greater vari ation 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 irir dium-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 sour ce would be dependent on the number of treatments furnished per source. The source co st must be amortized over the life of the source. Therefore, when establishing th eir 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 s ource 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 paymen t rates based on the costs determined from140 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 hos pitals’ relative costs for the hi gh-activity source as reported on hospital claims and in cost report data ar e 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 co mmenters pointed out. As we have stated in the past, we do not have any information about the exp ected cost differential between high-activity and low-activity sources of vari ous 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 hos pitals reported this service in CY 2012, compared to 118 and 171 hospitals for the lo w-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 hi gh-activity palladium-103 source than the low-activity palladium-103 sources, and we expe ct 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 palla dium-103 sources (74 FR 60535; 75 FR 71979; 76 FR 74162; and 77 FR 68242). After consideration of th e public comments we receive d, we are finalizing our proposal to continue to set the payment rates for brachytherapy sources using our established prospective payment methodology, wh ich is based on geometric mean costs.141 The CY 2014 final payment rates for brachyt herapy 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 develo pment 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 ou tpatient 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 toward s 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 comprehens ive APC as a classification for the provision of a primary service and all adjunctive serv ices provided to support the delivery of the primary service. Because a comprehensive APC would treat all individually reported codes as representing components of the comp rehensive service, our proposal was to make a single prospective payment based on th e cost of all indivi dually reported codes that represent the provision of a primary serv ice and all adjunctive se rvices provided to support that delivery of the primary service. Specifically, we proposed to create comprehensive APCs for the 29 most costly de vice-dependent services, where the cost of142 the device is more expensive than the other cost s that contribute to the cost of delivering the primary service. We stated in the proposed rule that we believe that, under the au thority of sections 1833(t)(1) and (t)(2) of the Act, the S ecretary has the discretion to establish comprehensive APCs as part of developing th e 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 flexibili ty 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 admi nistrative burden whenever possible; and increasing flexibility for hospitals to de velop increased efficiencies inthe delivery of quality care. We stated that we believe that this pr oposal to establish comprehensive APCs will improve our ability to accurate ly set payment rates. In the normal process of setting payment rates, costs in certain cost center s (“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 associ ated with a single comprehensive service so all costs reported on the claim may be reliably assigned to that service. This increases the accuracy of th e payment for the comprehensive service and also increases the stability of the payment from year to year. We also stated that we believe th at our policy will enhance beneficiary understanding and transparency. Typicallybeneficiaries understand the primary143 procedure to be the OPPS serv ice 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 certa in services within th e OPPS in terms of a single comprehensive service delivered to th e 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 usi ng the comprehensive se rvice concept that already identifies these same services when they are performed in an inpatient environment. Finally, we believe that la rger bundles that contain a wider mix of related services in the prospectively paid bundles increase the opportunitie s for providers to tailor services to the specific needs of indivi dual beneficiaries, thereby increasing the opportunities for efficiencies and impr oving the delivery of medical care.
Comment : Overall, commenters were gene rally 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 CM S’ efforts to expand the size of payment units in the OPPS and supported this proposal , as well as other packaging proposals in144 this final rule with comment period. MedPAC stated that the comprehensive APC groups have similarities to the dia gnosis related groups (DRGs) used in the inpatient prospective payment system (IPPS) and that this payment structure encourages hos pitals to identify the most efficient and efficacious methods to provide care for each patient, which will help contain Medicare spending. Anothe r commenter believed that the proposed device-dependent APCs were particularly appropriate for comprehensive APCs because the independent services that require these devices are generally cl early defined and the other services furnished during the encounter are generally furn ished in order to facilitate the independent service. The commenter support ed the ability of this proposal to use all claims data in establishing a payment rate for the comprehensive APC. Several commenters recommended a mo re expansive policy. One commenter recommended that CMS identify other procedur es that would be suitable for the creation of comprehensive APCs. Other commenters suggested that CMS re quire hospitals to report charges for all items and services fo r which comprehensive APC payment is being made as covered charges and specify that hosp itals 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 complic ations or comorbidities. Response : We appreciate the support of the commenters for our proposal to create comprehensive packages. We agree wi th the commenters that this would improve145 our ability to more accurately establish paymen t 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 crea tion of comprehensive APCs, as well as ways to consider setting payment relative to th e 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 b een a longstanding requirement as stated in the Claims Processing Manual IOM 100-4, Chap ter 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 prov iders may not separately bill beneficiaries for services thatare covered under Medicare.
Comment : The majority of commenters recommended that CMS delay implementation of the comprehensive APCs un til 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 in creasingly difficult for stakehol ders 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’ calcula tions, preventing independent analyses and affecting their ability to de velop comments and alternative proposals. Some commenters requested that CMS provide stakeholders with additional information about how146 estimated costs for these APCs are being cal culated for CY 2014, and give stakeholders an opportunity to comment on the additional information provided. Some commenters requested that CM S provide individual impacts of each proposed policy when proposing se veral policies that have an interactive effect. Several commenters stated that CMS’ packaging proposals discusse d 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 dela yed 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 n eed to adjust organizational processes. Commenters also suggested that we might n eed more time to implement revisions to our claims processing systems. Response : We agree with the commenters th at we should delay implementation of the proposed comprehensive APCs. As we discuss later in th is section, we are finalizing our proposal to crea te 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 a147 delay in implementation will allow us more time to operationalize changes necessary to process comprehensive payments. In response to public commenters’ reque sting additional deta il on our calculation of the comprehensive APC relative payment wei ghts, we provide a granular discussion of our methodology for constructing the comprehe nsive APC payment rates later in this section, as well as the specifi c 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 reso urce differences in complex and simple versions of the same primary service. We are taking a dvantage 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 as sist interested parties in replicating our methodology. We will recalibrate all of the comprehensive APC relative payment weights for CY 2015 using CY 2013 claims dataconsistent with our annual recalibration of APC relative payment weight s to reflect the most recentlyavailable claims and cost report information in next year’s rule making 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 deta iled 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 request ed time to model this final policy and assess the impact on their organization. We will in corporate 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 concerne d that this propo sal would impose a significant administrative burden on providers and that there is not sufficient time for information system technology vendors and ope rational processes to adjust to the new regulations or to allow hospitals eno ugh time to fully understand how the proposals would affect their outpatient finances, ma king hospital budgeting for the upcoming year nearly impossible. Moreover, several commenters were co ncerned 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 ha s used the new billi ng instructions long enough to have claims data that identify re lated services for the purpose of defining a comprehensive APC.149 Response : This proposal does not require a ny changes in provider coding and billing practices, nor would we expect prov iders to change thei r 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 organiza tional processes. As previously stated, we are finalizing the co mprehensive 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 co mprehensive APCs and to test those new protocols prior to implementation.
Comment : Many commenters were concerne d that a comprehensive DRG-like payment would provide a single payment for a wide range of cases characterized by widely varying complexity and widely varyi ng costs. Such a system could potentially disadvantage hospitals willing to take on th e treatment of sicker, more complex and costly cases while rewarding those that ha ndle less complex and le ss costly cases. One commenter was specifically concerned that th e level of payment was not sufficient to support the higher level of diagnos tic testing and ancillary serv ices that occur at academic medical centers. Another commenter stated th at 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 comp lex procedures and recommended that CMS incorporate a “severity level” APC similar to the Medicare Severity Diagnosis Related150 Group (MS-DRG) system where there is a ba se DRG, a complication or comorbidity DRG (CC DRG), and a major complication or comorbitity DRG (MCC DRG). In adapting the concept to the APC classificati on system, the commenter recommended that complexity could be based on the included co mponents, for example, an ICD insertion comprehensive APC and another higher-weigh ted 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 believe d that there are currently no outcome programs or measures in place, similar to inpatient quality measures, readmission reduction programs and value base d purchasing incentives, to m onitor the quality of care provided under an encounter-based payment th at creates an incentive for hospitals to improve delivery efficiency. The commenter s believed that inappropriate attempts to garner additional profit could lead to reduced access and lo wer 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 becau se CMS had not proposed mechanisms to retrospectively assess the rami fications of these proposed policy changes on patients.151 Finally, one commenter opined that the propos al does not conform the requirement under section 1833(t)(2) of the Act th at items and services shall not be treated as comparable with respect to the use of resources if the highe st 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 beneficiar ies who require more complex and costly procedures. We also understand that complex be neficiaries may require more diagnostic tests. We agree with the commenters that there are constraint s on individual hospita ls’ 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 sever ity levels used in the IPPS. Therefore, we are modifying our proposed policy for creating comprehens ive 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 issu e with 2 times rule violations in the proposed rule or in this fina l rule with comment period. Th e statute directs the Secretary to establish groups of covered OPD services th at are comparable both clinically and with respect to use of resources. In doing so, th e 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 re spect to each proposed comprehensive APC, no152 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 recogni zes differences in complexity and resource costs of complex forms of the primary se rvice 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 bene ficiaries if the expected costs for complex cases would greatly exceed the comprehensiv e 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 hospital s understand that there will be considerable variation in the costs of providing a comprehensive prim ary service to individual beneficiaries relative to the comprehensive payment amount. We disagree with the commenters on th e need for greater outcomes measures prior to implementation of the comprehensiv e APC payment policy. As noted, in this final rule with comment period, we are rec ognizing the resource differential for complex forms of primary procedures. Further, we be lieve that outpatient procedures, such as these device-intensive procedures, that are al so performed on an inpatient basis benefit from hospital protocols established for inpatie nt hospital quality programs such as quality measures, readmission reduction programs, a nd value-based purchasing incentives. Therefore, we do not agree with the commente rs who were concerned that patient care153 might suffer or that quality measures need to be strengthened before implementation of the comprehensive APC policy. We are concerned by some of the comment s that imply that some providers might change their practice of providing a comprehe nsive service and instead perform split or staged procedures in order to maximize payment. Although we do not believe that practitioners or facil ities would voluntarily expose benefici aries to an increased risk of additional surgery and anesthesia, we recogn ize 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’ requ est for evaluation under a demonstration project before full implementation, we do not believe that comprehensive APCs are sufficiently different from our historical hospital paym ent practices to warrant a demonstration project. Further, we are adopting the proposed policy with modification and are delaying implementation of the comp rehensive 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-Cos t Device-Dependent Procedures As we discussed in the CY 2014 OPPS/AS C proposed rule, in order to identify those services for which comprehensive p ackaging would have th e greatest impact on154 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 a dditional information on the criteria utilized by CMS to create the comprehe nsive APCs and how CMS would evaluate services and procedures to qualify fo r comprehensive APCs going forward. One commenter asked why the other 10 device-dep endent APCs were not included, and why no other nondevice-dependent APCs were cla ssified 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 recomme nded that additional APCs be paid as comprehensive APCs, including recommendations for a broader application of the comprehensive APC crite ria to all claims dominated by a single procedure and specifically recommended proced ures 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 co mprehensive APCs because we believed that these procedures represented a cohesive subgroup with which to introduce a broader packaging initiative. We stated that comp rehensive APCs are appropriate when they reflect a single global service that the benefi ciary would be receiving from the hospital. In this case, we have identified procedur es where the beneficiary would reasonably consider the encounter to be for the implant ation of a device, and we limited our proposal155 to the most costly procedures where the geometric mean cost of the comprehensive procedure was approximately five times the current beneficiary i npatient deductible or greater. This created a consistent group of se rvices with similar cl inical and resource characteristics, which were archetypal for our definition of a comprehensive service. However, we agree with the commen ters 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 commente rs that we should limit the comprehensive APCs to a small trial of four or five AP Cs. 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 peri od 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 cohesi ve and similar in resource construction. We will consider possibly adding a comprehensive APC for single session cranial stereotactic radiosurgery (procedures a ssigned to APC 0067) in CY 2015. (b) Creation of Comprehensive APCs fo r 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 cove red by Medicare Part B or that are not payable under the OPPS. This comprehensive APC payment woul d include: (1) packaged payment for all packaged services and supplies in CY 2014 a nd as discussed in section II.A.3. of this156 final rule with comment period; and (2) pack aged payment for all adjunctive services, which are those services and s upplies that typically would re ceive separate payment when appearing on any claim that does not cont ain a HCPCS code reported as a primary service assigned to a comprehensive APC, in cluding certain items and services currently paid through other fee schedules. We pr esent these two categories for ease of presentation, but generally cons ider 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 serv ices 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 paya ble as hospital outpa tient 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 P ackaged 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 co mments 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 ar e typically integral, ancillary, supportive, dependent, or adjunctive to a primary serv ice. We proposed to package into the comprehensive APCs all of these integr al, ancillary, supportive, dependent, and adjunctive services, hereinafter collectively re ferred to as “adjuncti ve 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 a nd evaluations performed in association with the procedure; uncoded services and supplie s 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 ot her components reported by HCPCS codes that are provided during the comprehensive serv ice, 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 co ncerns 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 cl aims to differentiate between adjunct services that are related to the primary pro cedure and other services that are ordered by158 other physicians and/or are unrelated to the primary procedure. These commenters were concerned that if CMS assumed that all serv ices reported on the claim are related, it could lead to incorrect ratesetting. Alternativ ely, these commenters r easoned 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 si gnificant administrativ e burden separating unrelated from related items and services. Response : We do not agree with the commente rs’ 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 a bout 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, Ch apter 1, Section 50.2.2 th at 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 subm it a separate claim for the acute service. We also do not expect that these claims fo r comprehensive servic es in the outpatient setting would extend beyond a few days. Additionally, we have noted that occasi onally beneficiaries may, for reasons of convenience or coincidence, receive laboratory services at the hospita l that are unrelated to the primary service. When beneficiar ies are at the hospital for the non-trivial procedures in comprehensive APCs, we do not expect that unrelated laboratory services159 would be a common occurrence, but we have nonetheless instructed hospitals that laboratory tests ordered by unr elated 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 disc ussion of this final policy. Beyond these two sets of circumstances, we believe that other services performed at the time of these major procedures can reas onably be considered to be related to the primary service or procedure. We proposed th at we would consider all services reported on the claim to be related to the primary serv ice. Under such a pr esumption, all services delivered to a beneficiary dur ing an encounter for a compre hensive 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 se rvices 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 facil ity 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 commente r that laboratory and the facility component of anatomic pathology pro cedures should be excluded from the160 comprehensive APC payment. We are fina lizing our other proposed policy to package laboratory tests, as described in section II.A.3.c.(3) of th is final rule with comment period. We note that laboratory and anat omic pathology tests are almost always performed as part of the provision of th e primary service in the case of these comprehensive services and are, therefore, appropriately considered ancillary and supportive. In summary, we believe that these device-depe ndent procedur es represent archetypal cases of a single comprehensive service and that laboratory and anatomic pathology services are classic ex amples of adjunctive services that are supportive of the primary procedure. (5) Inclusion of Devices, Durable Medica l Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) As part of the comprehensive servic e packaging policy described above, we proposed to package all devices; implanta ble durable medical equipment (DME); implantable prosthetics; DME, prosthetics, and orthotics when used as supplies in the delivery of the comprehensive service; and s upplies used in support of these items when these items or supplies are provided as part of the delivery of a comp rehensive 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)(ii i) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). Under this proposal, DME, prosthetic s, 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 this161 proposal, we believe that when such items and services are provided as adjunctive components in the delivery of a comprehensiv e 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 comprehens ive service would not constitu te covered OPD services, and such items would be appropriately provi ded by suppliers and paid for under the DMEPOS benefit. More specifically, we do notbelieve that this proposed policy limits a hospital’s ability to functi on 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 adj unctive 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 othe rwise 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 provide d during the delivery of a comprehensive service, we proposed that th ey 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 unde r the OPPS, as described above.162 We did not receive any public comme nts on our proposal to include these DMEPOS items in the comprehensive APC pa yment. 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 greate r 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 th erapy services from the OPPS. We have previously not ed that therapy services ar e those provided by therapists under a plan of care, and are pa id under section 1834(k) of th e Act subject to an annual therapy cap, when applied. However, certain other activities similar to therapy services are considered and paid as outpatient serv ices. Although some ad junctive 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 ar e described by codes that would, under other circumstances, be indicative of therapy servic es, we note that there are a nu mber of factors that would more appropriately identify them as OPD serv ices. 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; th ey 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 cont ribute to a rehabilita tive process. For example, we note that therapists might be asked to provide a detailed documentation of patient weaknesses to be used by the physicia n to help identify or quantify a possible163 procedure-associated stroke or help with th e mobilization of the pa tient after surgery in order to prevent blood clots. We note th at these nontherapy services furnished by a therapist are limited to the imme diate perioperative period, cons istent with their inclusion as part of the larger service to deliver the de vice, and are distinct fr om subsequent therapy services furnished under a therapy plan of car e, which serve to establish rehabilitative needs and begin the process of rehabilitation. For that reason, when provided with in this very limited context of a comprehensive service such as the implantat ion of an expensive device, in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we proposed that se rvices reported by therapy HCPCS codes, including costs associated with revenue codes 042X, 043X and 044X would be considered to be adjunctive OPD se rvices in support of the primary service when those services occur within the periopera tive period; that is, during the delivery of this comprehensive service that is bracket ed by the OPD registration to initiate the service and the OPD discharge at the conclusi on of the service. These services do not constitute therapy services pr ovided under a plan of care, are not subject to a therapy cap, if applied, and are not paid se parately as therapy services.
Comment : Physical therapy stakeholders co mmented 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 are164 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 serv ices designated as “sometimes th erapy” 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 cr itical 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 benef it, and some services provided during the perioperative period, such as a physical thera py evaluation to establish a plan of care, could still be considered to be therapy serv ices. The commenter wa s also concerned that the comprehensive APC payment would not be adequate to cover the services provided by therapists during this periope rative period, that rehabilita tion could be prolonged if the therapist is unable to interv ene “to increase the patient’s m obility, function and endurance prior to surgery,” and that itcould be difficult to reliably and reproducibly differentiate those perioperative services that are not thera py 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 wi th 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 cons ideration of the public comments we received, we continue to be lieve that services provided during the perioperative period are adjunc tive services and not thera py services as described in section 1834(k) of the Act regardless of whether the services are delivered by therapists165 or other nontherapist health care workers. We note that adjunctive services are those services provided in support of another service, that is, th ey are typically performed to facilitate the primary service and are unnece ssary or serve a diffe rent function if the primary service is not provided. Adjunctiv e 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 ex ist in the absence of the pro cedure 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 se ction 1835(a)(2)(C) and section 1835(a)(2)(D) of the Act and are paid under se ction 1834(k) of the Act subject to an annual therapy cap, when applied. However, certain other activitie s similar to therapy services are considered and paid as outpatient services. Specificall y, we have said in the Claims Processing Manual IOM 100-4, Chapter 5, Section 20.1 that so me 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 ab sence of a plan of care. We stated in the proposed rule that we believe services repor ted with therapy codes, but th at 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 se rvices 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 procedure166 includes only the perioperativ e period, a brief period of time immediately before and immediately following the procedure. We woul d not expect that an evaluation performed immediately following the surgery would establish the beneficiary’s needs for rehabilitation because the beneficiary is stil l under the influence of the completed primary surgical procedure. Rather, services repor ted with therapy codes during that brief time period may represent interventions to promot e breathing and ambulati on, traditional postoperative nursing services, or may represen t assessments to provide the surgeon with specific clinical information relative to the immediate effects of th e surgery. We would not expect therapy assessments or rehabi litative therapy until af ter the patient has recovered from the immediate e ffects of the procedure and associated anesthesia. With respect to the statement that it may be bene ficial 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 th erapists 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 diffe rentiate separately paid therapy services from appropriately pack aged 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 compre hensive 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, for167 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 a nd billed on a separate claim. We have stated that the re lative 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 include s a payment for the se rvices reported with therapy codes that is proportional to the fr equency 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 th at there is no provision in this final rule with comment period that prohibits a hospita l 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 serv ices reported with therapy codes are outpatient department servic es 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 nursing168 services, and the cost of any necessary flui d 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 belie ve 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 associ ated with the costs of room, nutrition, and nursing care provided during th ese comprehensive services.
Comment : One commenter supported the spec ific 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. Comm enters 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 cen ter source for converting those charges to costs in the CY 2014 OPPS Revenue Code to Co st Center Crosswalk released with the proposed rule. Another commenter was concer ned that additional f unds 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 a nd board as being covered costs in certain outpatient stays. We understand the other commenters’ confusion as to why room and169 board revenue codes would appear on an out patient claim because our claims processing instructions do not allow payment for these re venue codes on Part B claims as they are reserved exclusively for inpatient use. (For example, we refer readers to our recent contractor instruc tions 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 reve nue 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 igno red 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 comprehens ive APC payment calcu lation. We discuss the role of the revenue code-to- cost center crosswalk in secti on II.A.1.c. of this final rule with comment period. We now believe that the appearance of th ese 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 r oom and nursing labor costs. Further, we would expect that hospitals w ould allocate these costs, and if appropriate, board costs for services furnished to outpatients, to ancillary cost centers on their Medicare hospital cost170 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 st aying 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 inpatien t 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 th e use of intravenous pain medications, or prevents possible complications, such as the use of intravenous blood pressure medications to temporarily replace oral blood pr essure medications a nd 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 existi ng definition of drugs as supplies to the situation where the OPD service is a comprehensive service. We proposed that all medications provi ded by the hospital for delivery during a comprehensive service pursuant to a physic ian order, regardless of the route of administration, would be considered to be ad junctive supplies and, therefore, packaged as part of the comprehensive APC payment. We stated that we belie ve that the physician171 order demonstrates that the delivery of the medication by th e hospital is necessary to avoid possible complications during the delivery of the comprehensive service, to ensure patient safety, and to ensure that the comp rehensive service delivery is not compromised and, therefore, the medication should be considered an adjunctive supply. Therefore, we proposed to consider a ll 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 fo r 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 hos pital. Several commenters stated that CMS’ reasoning was sound and the concept shou ld be expanded to all self-administered drugs incident to practitioners ’ therapeutic services, not ju st in comprehensive APCs because the commenters believed that the concep t that drugs are integral and adjunctive to the furnishing of a therapeutic service app lies to observation and other procedures. For example, one commenter stated that self-adm inistered 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 the172 comprehensive APCs will not accurately accoun t for the significant cost variation in required drugs from beneficiary to bene ficiary based on indi vidual beneficiary requirements and that, as a result, the paym ent rate for a comprehensive APC might not provide adequate payment for the specific drug s and biologicals an individual beneficiary needs, and that hospitals would be discourag ed from providing appr opriate drugs during a comprehensive service. Response : We appreciate the commenters’ s upport for our proposal to consider drugs, regardless of their route of administ ration, 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 th at are integral to a procedure are considered to be supplies used in the deliver y of covered hospital out patient services, and not part of the Part B drug benefit as desc ribed under section 1861( s)(2)(B) of the Act and 42 CFR 410.27. We do not view this proposa l to include all medications provided by the hospital for delivery during a comprehensiv e 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 ra ther that covered outpatient services include supplies and ot her ancillary items needed to deliver these comprehensive services. As stated in our di scussion above, we have historic ally instructed hospitals to173 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 rath er as the application of an existing policy to a broader payment bundle. Although some cost of drugs that are usedas 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 co mments about how costs for newly included adjunctive items will be consider ed under budget neutrality below. We do not believe that including these dr ugs and biologicals in the comprehensive APC payment greatly increases a hospital’s fi nancial risk for providing a comprehensive service. Further, we expect that a payment based on geometric mean estimated cost would reflect the relative res ources of drugs used as suppl ies included on comprehensive service claims, along with all ot her ancillary supplies and servic es, 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-admi nistered drugs de livered during the comprehensive service would be inadequate to cover the cost of pr oviding the service, and we do not believe that the comprehensiv e APC payment would discourage hospitals from providing appropriate drugs during de livery of these comprehensive services. Finally, we agree with the commenters th at all covered costs related to a service should be included on the claim per our manua l instruction in the Claims Processing174 Manual IOM 100-4, Chapter 4, Section 10.4.A and as discussed in section II.3.a. (Packaging) of this final rule with comme nt period and that those costs should be reported as precisely as possi ble 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, ar e 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 di agnostic procedures, laboratory tests and other diagnostic tests, and treatments th at assist in the delivery of the primary procedure; visits and evaluations pe rformed in association with the procedure; coded and uncoded services and supplies used during the service; outpatient department services delivered by th erapists as part of the compre hensive service; durable medical equipment, as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other out patient components re ported by HCPCS codes that are provided during the comprehensive se rvice, 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 thes e services through the OPPS comprehensive APC payment. We are not finalizing our proposal to include costs reported with room, board, and nursi ng 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 COMPREHENS IVE 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 In sertion/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 0106AICDP 0107 Level I Implantation of CardioverterDefibrillators (ICDs) $25,557.38 0107AICDP 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 Pr ocedures 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 0425176

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 paymen t weights for these device-dependent comprehensive APCs by using relative cost s 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 cost s on the claims, we identified all claims containing 1 of the 136 HCPCS c odes that define procedures specified as constituting a177 comprehensive service. These claims were , by definition, classified as single major procedure claims. Any claims that containe d more than one of these HCPCS codes were identified, but were not include d in calculating the cost of the procedure that had the greatest cost when traditional HCPCS level a ccounting was applied. All other costs were summed to calculate the total cost of the co mprehensive service, a nd statistics for those services were calculated in the usual manne r. Comprehensive claims for each primary service reported by a HCPCS code were excl uded 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 pr oposed payments following our standard methodology. The proposed payments for the HCPCS codes assigned to these proposed comprehensive APCs were included in Adde ndum B of the proposed rule (which is available via the Internet on the CMS Web s ite). We proposed to assign a new status indicator, “J1” (OPD servi ces paid through a comprehens ive APC), to these devicedependent procedures. The claims processi ng system would be configured to make a single payment for the device-dependent comprehensive service whenever a HCPCS code reporting one of these primary procedur es appears on the claim. From a processing system perspective, all ot her adjunctive services excep t mammography, ambulance, and pass-through services would be conditionally packaged when a comprehensive service is178 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 calculati ons of the relative payment weights for the comprehensive service, so th e prospective payment includes payment for these occurrences.
Comment : Some commenters suggest ed 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 res pond informatively to the comprehensive APC proposal. One commenter was concerned that CM S stated in the preamb le text that there are 136 HCPCS codes that define the device-d ependent services to be included in the proposed comprehensive APCs whereas, in A ddendum B to the proposed rule, there are 148 HCPCS codes listed. Other commenters identified occasional instances in the proposed rule APC cost statistics data file s where the number of single procedures was reported as more than the number of total pr ocedures, and they also identified several inconsistencies in Addendum B where the HC PCS 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 pro cedure codes in our proposal for comprehensive APCs (78 FR 43534). Commenters are correct that we also identified 148179 primary procedure codes in Addendum B to th e 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 st atus 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 ar e using to model CY 2014 geometric mean costs to illustrate the comprehensive AP C methodology. We generally discuss our modeling of the CY 2012 claims data to es tablish CY 2014 payment rates in section II.A.1.c. of this final rule with comment pe riod. However, consider ing 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-de pendent HCPCS codes appropriately assigned to comprehensive APCs increased to 148. Upon adoption of the new coding scheme for CY 2014, the number of HCPCS code s assigned to a comprehensive APC for payment in this final rule with comment pe riod 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 pro cedure to status indicator “J1,” as appropriate.180 We believe that the corrections to the st atus 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 res pond to our comprehensive APC proposal. We note that some commenters were able to correc tly identify the claims that we used to model the proposed CY 2014 payment rates fo r comprehensive APCs by identifying the device-related HCPCS codes associated with the 29 comprehensive APCs for CY 2012. Some commenters also were able to corre ctly identify the HCPCS codes that we proposed would trigger a comprehensive paym ent 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 incl usion of all services reported on the claim except mammography, ambulance, a nd pass-through services, and were able to determine the impact of the proposal based on our publi cation of proposed payment rates for those 29 comprehensive APCs. Our proposed paymen t rate for these comprehensive APCs did not change appreciably with the correcting document. In addition, we are delaying implementation of the finalized comprehe nsive APC policy until CY 2015, and we are providing a detailed discussi on of our final methodology for establishing comprehensive APC relative payment weights through th is final rule with comment period. TABLE 9.—APC ASSIGNMENTS FOR HCPCS CODES PROPOSED TO BE ASSIGNED TO STATUS INDICATO R “JI” FOR CY 2014 AND DISPLAYED HERE FOR ILLUSTRATION181

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 $10,272182

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 $26,715183

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/A184

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 TBD185

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 $12,167186

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 $6,231187

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 $3,959188

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 TBD189

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 $6,420190

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 Coronaryatherectomy 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 $9,578191

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 TBD192

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 co st information fo r 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 c ould not independently replicate the proposed comprehensive AP C methodology. Commenters believed that there was ambiguity in whether the prim ary 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 rule193 with comment period. One commenter believ ed that using a ra nking based on CY 2012 payments would be inconsistent with sett ing 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 wa y that assigned some procedures reporting claims with single units to one APC and othe r procedures reporting claims with multiple units to a different APC. This latter issu e was particularly concerning to commenters because the commenters believed that some clai ms 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 di fferent criteria to assign procedures to co mprehensive APCs for modeling payments and to assign procedures to comprehensive APCs for payment in the claims processing system. However, we recognize that the wordi ng 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 th e treatment of claims reporting multiple device-related procedures. While we are fi nalizing 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 calcula ting 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 claims194 reporting multiple HCPCS codes assigned to status indicator “J1” by identifying the HCPCS code assigned to stat us 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 th e most significant or core service that is being provided to the beneficiar y. To facilitate claims pro cessing and to ensure that we identified the most costly device-related pr ocedure 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 absen ce of a proposal for comprehensive APCs to identify the most co stly procedure descri bed 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 stat us indicator “J1”with the highest devicedependent APC line-item payment, considering the entire payment when multiple units are billed, as the primary pr ocedure and to make paymen t for the claim through the associated comprehensive APC. We note that the device-dependent APC payment rates have the same relativity as device-depende nt geometric mean costs, as those costs underpin final budget neutral payment rates. We agree with the commenters that th e methodology by which a claim that has at least one procedure described by a HCPCS code th at is assigned to status indicator “J1” is assigned to a comprehensive APC is funda mental 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”re ported on the claim, the comprehensive APC assignment is straightforward; the clai m is paid through the comprehensive APC195 associated with that procedure. This is true under the proposed methodology as well as under the revised methodology we ar e finalizing in this final ru le 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 comprehens ive 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” repor ted on a claim to an appropriate comprehensive APC when more than one procedure described by a HCPCS code assigned to status indi cator “J1” is reported. Firs t, we will only use current ratesetting estimated cost information and not device-dependent APC payment rates to identify the primary procedure described by th e 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 w ill use estimated costs on CY 2013 claims to calibrate comprehensive APC payment amounts. Second, we will recognize the greater reso urces attributable to more complex cases. Commenters suggested addressing vari ations in cost of comprehensive APCs by recognizing the greater resources attributab le to more complex cases with multiple device-dependent procedures in some ma nner similar to the severity adjustment incorporated into the IPPS MS-DRG system. We agree with the commenters that196 instituting a higher comprehe nsive 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 di fferences associated with multiple device-dependent procedures. In this response, we discuss the first step in this process of identifying a primary HCPCS serv ice assigned to status indicato r 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 th e 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 as sist 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 weight s, to reflect the most recent ly available claims and cost information. To arrive at the illustrative CY 2014 co mprehensive 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 indica tor “J1,” we considered that procedure to197 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 “J 1” 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 indi cator “J1” (Table 9) to identify the most costly procedure reported on each claim. Specifically, we selected the primary HCPCS code by determining the comprehensive proced ure that is assigned to the APC with the highest geometric mean comprehensive cost ba sed on claims with a single service with status indicator “J1.” We undertook a second step when a comprehensive service claim contained two or more procedur es 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 costof claims that cont ain a single procedure with status indicator “J1,” to be the primary HCPCS code on the claim.198 In the event that a HCPCS-level geomet ric 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 estim ated comprehensive HCPCS code geometric mean cost in each proposed or final rule, as appropriate, using the best information we have available about each code. Howeve r, we will not use modeled HCPCS-level comprehensive geometric mean costs to set comprehensive APC payment rates. We will only use modeled HCPCS-level comprehensiv e geometric mean costs in our claims processing systems to identify a primary HCPCS code reported on a claim with multiple procedures described by HCPC S codes assigned to status indicator “J1” in the same comprehensive APC. Our goal in modeling su ch a HCPCS-specific geometric mean cost is to identify a primary HCPCS code on a cl aim 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 co des that will be valid for payment in CY 2014, but were not present in the CY 2012 claims data. The comprehensive APC199 assignment that we proposed for each HCPCS c ode 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 w ould 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 geomet ric 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 ini tial APC assignment for any claims with a combination of HCPCS codes repo rted 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 adequate ly 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 AP Cs, 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 grea ter number of compre hensive HCPCS codes and more ancillary services. Commenters beli eved 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 procedur es. 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 co uld create an incentive for hospitals to use inappropriately less expensive de vices, 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 procedur e 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. Wh ile we stated that we believed that the comprehensive APC proposal would encourage hospitals to negotiate better rates on supplies and increase the efficiency of indi vidual procedures, comment ers 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 notalways, 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 an cillary and adjunctive servi ces to the primary procedure assigned to status indicator “J1,” including the costs of a dditional procedures identified with status indicator “J1.” A comprehe nsive approach increases opportunities for hospitals to garner efficiencies in the deliv ery of these services, but also increases the variation in estimated total claim costs c ontributing to the comp rehensive APC relative payment weight calculation. We agree with the commenters that, in certain instances, cost variation could be too large and coul d 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’ abilit y 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 cha nging payment models and rapidly implement the practices that they use to handle co st 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 combina tions of procedures that are reported together which indicate a more complex a nd resource-intensive version of the primary procedure to higher level comprehensive AP Cs, not unlike the IPPS policy of assigning procedures with certain conditions to higher paying MS-DRGs. After reviewing significant public comments poin ting out common clini cal scenarios for combinations of device insertion procedures assigned to stat us indicator “J1,” we decided to recognize202 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 polic y 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 late r in this section. We took several steps to moderate res ource cost variation in comprehensive APC payments. First, we undertook a standard AP C recalibration. We specifically evaluated the APC assignment of some primary procedures and moved those procedures from one APC to another to better ali gn resource and clinical homoge neity. In considering the APC assignment of these procedures, we l ooked at the traditional parameters of geometric mean cost for the primary service a nd clinical characteristics of the APC. We created, consolidated, or redefined the primar y procedures in the comprehensive APCs as necessary to better group serv ices with clinical and res ource homogeneity. Second, we identified complex subsets of primary pro cedures, which consist of the primary HCPCS code reported in combination with other HC PCS 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 comp rehensive APC in the same clinical family through this methodology. We define a clinical family of comprehensive APCs to be a203 set of clinically related comprehensive APCs that represent different resource levels of clinically comparable services. Reassignment of claims with complex s ubsets 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 th e 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 fre quently performed together during a single clinical encounter as a single service and iden tify 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 di stinct 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 identifyi ng one of the proce dures described by a HCPCS code assigned to status indicator “J1”reported on the claim as being the primary service, we recognized a combination of pr ocedure codes as complex and appropriately204 reassigned to a higher level APC in the same c linical 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 comp rehensive geometric mean cost of claims reporting only a single comprehensive proced ure described by a HCPCS code assigned to status indicator “J1.”

● There were greater than 100 claims w ith the specific combination of procedure codes.

● The number of claims reporting the sp ecific combination of procedure codes exceeded 5 percent of the tota l volume of claims reporting that procedure as the primary service described by a HCPCS code assigned to status indicator “J 1”, 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 combinati ons of procedures reported on claims that did not meet all of these criter ia if clinical consis tency 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 ev aluated alternate APC assignments for those claims reporting a combination of procedure codes. We assessed resource variation for205 reassigned claims within the receiving APC using the geometric mean cost for all reassigned claims for the primary service relativ e to other services assigned to that APC using the 2 times rule criteria. We ma intained 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 rela tive to the cost of the primary procedure established with simple, singl e 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 con cerns regarding complexity of cases contributing to wide variation in costs. Af ter both reassigning some procedure codes to different comprehensive APCs and reassign ing 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 comprehensiv e 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” a nd, 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 co st information becomes available. This is206 comparable to our policy for assigning new c odes 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 homoge neity of that APC assignment when claims data become available. Table 10 shows the combinations of proce dure 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 reas signed, as well as combinations of CY 2013 and CY 2014 procedure codes that are not re presented in our mode ling 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 assignment s in the comprehensive APCs and our identification and reassignment of comple x cases represented by combinations of procedure codes using updated claims and co st 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 estab lishing 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 indicat or “J1” are used to establis h an initial APC assignment for each procedure described by that HCPCS c ode. The geometric mean of the total estimated costs on each claim is used to esta blish 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 indi cator “J1” that are reported on the same claim have the same APC geomet ric mean estimated cost, as would be the case when two different procedures descri bed by HCPCS codes assigned to status indicator “J1” are assigned to the same AP C, identification of th e primary HCPCS code is then based on the procedure described by th e 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 stat us 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 so le purpose of appropr iately assigning the primary HCPCS code reported on a claim. Th e comprehensive APC assignment of each208 procedure described by HCPCS code s assigned to status indicat or “J1” is then confirmed by verifying that the APC assignment remains appropriate when cons idering the clinical similarity, as well as the estimated cost of all claims reporting each procedure described by HCPCS codes assigned to st atus indicator “J1,” includi ng 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 pr ocedures, and the HCPCS geometric mean estimated cost based on the claims reporting si ngle procedures that we used to identify primary HCPCS codes and to assign the proc edure to an appropriate comprehensive APC. If we were implementing this polic y in CY 2014, Table 9 w ould 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” reporte d on claims prior to any reassignment of certain costly claims fo r 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 comple x subsets of claims for each primary service HCPCS code. All claims reporti ng more than one procedure described by HCPCS codes assigned to status indicator “J1” are eval uated for the existence of commonly occurring combinations of procedur e codes reported on claims that exhibit a materially greater comprehensive geometric m ean cost relative to the geometric mean209 cost of the claims reporting that primary HCPC S code. This indicates that the subset of procedures identified by the s econdary HCPCS code has incr eased resource requirements relative to less complex subsets of that proced ure. If a combination of procedure codes reported on claims is identified that meet s these requirements, that is, commonly occurring and exhibiting materially greater re source 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 identi fied 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 combinati on of procedure codes ar e not reassigned. All combinations of procedures described by HCPC S 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, a ll 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 initi ally assigned comprehensive APC and with appropriate clinical homogeneit y. We assessed resource vari ation for reassigned claims within the receiving APC using the geometric m ean cost for all reassigned claims for the primary service relative to other services as signed 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 represen t 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 comb inations of procedures described by HCPCS codes assigned to status indicator “J1” that we used to set payment rates and the additional combinations of procedures desc ribed by new HCPCS code s assigned to status indicator “J1” that would be identified for r eassignment as a complex form of the primary procedure in CY 2014. If we were implem enting 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 proce dure described by HCPCS codes assigned to status indicator “J1” reported on an individual claims. Ta ble 10 is configured for CY 2104. We will update this table for implementation in CY 2015.211 TABLE 10.—CY 2014 COMP LEXITY 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 Yes212

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 Yes213

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 Yes214

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 Yes215

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 Yes216

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 Yes217

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 Yes218

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 Yes219

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 Yes220

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 Yes221

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 Yes222

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 No223 ** 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 co st information fo r 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 th at because these device-dependent comprehensive APCs are entirely derived fr om existing services currently reported on Medicare claims, the policy is effectivel y budget neutral in its impact on Medicare payments. We noted that room, board, and nur sing services have been covered costs in the delivery of outpatient services that requ ire the patient to receive nursing services, occupy a bed for outpatient care, and mainta in a controlled metabol ic intake during a prolonged outpatient stay. Although we proposedto include new revenue center costs for room and board when reported on these clai ms, 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 woul d be packaged under the proposal for CY 2014; all adjunctive services, in cluding laboratory tests, di agnostic tests and evaluation and management services; DMEPOS for which payment would be made under the OPPS; services reported by therapy codes that w ould be payable under the OPPS; room and board as reported in room and boardrevenue cost centers; and cost of hospital-administered drugs (regardless of the route of administration) to ensure that the geometric mean cost upon which the paymen t for these comprehensive APCs would be224 based would include all necessa ry costs of the services. However, several commenters were concerned that CMS did not account fo r the payments for services proposed to contribute to the comprehensive APC geomet ric mean costs into the CY 2013 current year payment estimates in budget neutrality cal culations, 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 la boratory services pr oposed for packaging in the OPPS current year (CY 2013) total payment amount when calculating budget neutrality adjustments for the prospec tive 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 ne wly 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 addi tional services that would be newly paid under the OPPS to include durable medical equi pment, therapy services, inpatient nursing services, and inpatient room and board for ove rnight outpatient stays. The commenters further stated that the proposed rule pr ovides no information concerning how this calculation was made and data was not provided to allow the public to review and validate the determinatio n 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 i npatient revenue codes, including room and board revenue codes. We agree with the commenters that we should have included225 payments for adjunctive services proposed for payment through the OPPS for the first time in the current year budget neutrality calcu lations as well as inthe relative payment weights for the proposed year calculation. Incalculating budget ne utrality adjustments for CY 2015 we will incorporate modeled paym ents 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 th at, although they recognized that changes in assignments in a prospective (ave rage) payment system cause some payments to increase and others to decrease, the comm enters 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 paym ent amounts have been set appropriately to include the additional packaged services. Response : We agree with commenters th at, 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 fo r this variation. Firs t, services varied considerably with respect to the number and es timated cost of adjunctive services that were typically provided during the same en counter. Some services were almost226 completely described by the primary HCPCS c ode with status indicator “J1” with few additional adjunctive services reported inthe claims data. Proposed comprehensive payment for these services did not change si gnificantly. Other serv ices, however, appear with many adjunctive services reported in th e 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 procedur es. We believe that this methodology provides much more accurate cost estimates for these comprehensive services, including incorporating the cost of a ll adjunctive services proportiona l to their presence on claims reporting comprehensive services into our fina l APC relative payment weight calculation. Our adoption of the geometric mean-based methodology rather than the median-based methodology to establish relative payment we ights 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 assi gned 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 serv ices 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 instan ces, the relative geometric mean cost of the entire comprehensive service was less than the geometric mean cost of the primary227 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 fr om 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 rela tive 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 indicato r “J1” to different comprehensive APCs based on public comments that we received. Also in respons e to public comments that we received, we are finalizing a methodology for identifying co mplex 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 impr oves 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 th e IPPS outlier payments are set at 5.1 percent of total payments, compared to 1 percent under the OPPS, and costs reported228 above the outlier threshold unde r 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 outlie r 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 ch ange 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 es timated 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 th e 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 th rough MS-DRGs, for example. Further, we are not sure an expansion to our outlier pa yment 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 associ ated 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 treatall individually reported codes as representing components of the comprehensiv e service, all of the elements of the composite service are included in the new co mprehensive service. Therefore, cardiac229 resynchronization therapy will no longer be iden tified as a composite service, but will be identified as a comprehensive service. All services currentl y assigned to APC 0108, including cardiac resynchr onization 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 Electrophysiologi c Procedures) a comprehensiv e APC, we did not discuss composite APC 8000 (Cardiac Electrophysiologi c 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 resynchroni zation therapy services (assigned to APC 0108 Cardiac Resychronization Therapy) would no longer be identified as a composite service because it would be incorp orated 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 assigne d 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 m odification 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 ge ometric 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 CY230 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 pr ocess 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 im pact on other APCs because most of these services currently cannot be isol ated as the “single services” th at can be used in the cost calculation process. The exceptions are servic es such as EKGs and chest x-rays that occur in very high frequency across all types of encounters, and la boratory 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 lo ss 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 se ction 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 te sts contributing approximatel y $18 per claim (a 0.1 percent increase) and other ad junctive covered outpatient services (not currently paid under the231 OPPS) contributing an additional $18 per clai m. There is significant variation across comprehensive APCs, however, not only becau se the distribution of adjunctive services varies, but also because the larger bundles allow a more complete incorporation of packaged costs. Finally, the use of comp rehensive APCs would allow the number of claims used to estimate costs for these se rvices 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 cost ly. The commenters expressed concern that this proposal would impact device pa ss-through payment, New Technology APC provisions, and payments for device-depe ndent APCs. The commenters also were concerned that packaging is likely to limit the da ta 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 re liability of the data provide d for payment calculations for the same reason. The commenters also were co ncerned that future potential pass-through device categories may be disadvantaged because pass-through eligibility includes demonstrating costliness relative to seve ral thresholds base d on APC payment. Specifically, the commenters were concerne d that fewer device categories would be eligible for pass-though payment because fe wer device categories would exceed a new higher threshold as a percen t of the APC payment amount as payment increases with expanded packaging. Some commenters reque sted that CMS continue to apply the procedure-to-device and devi ce-to-procedure edits. One commenter asserted that232 hospitals do not find these edits to be burdens ome, 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 commenter s 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 pa yment provisions and we discuss these payment policies in sections II. A.2.d.(1) and I.B. of this fina l 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 tran sitional 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, an d our determination of new technology eligibility is not dependent on a particular cost threshold. With regard to pass-through payment el igibility, we agree with the commenters that comprehensive APCs will create expa nded bundles and generally higher payment from which the dollar value of the various cost threshol ds that are part of the pass-through eligibility process will be determin ed. 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 de vice-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 cons truction of the OPPS envisions the relative cost of services233 to vary over time as services are redefine d, recoded, and reassigned among APCs, and as new claims and cost report data become ava ilable, which would raise or lower the cost threshold for pass-through paym ent eligibility unde r 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 approxi mately 11 percent of the cost of these device-intensive serv ices. Relative payment weights fo r device-related procedures can change by this amount each year due to a nnual 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 th e current cost threshold criteria. We also believe that that expanded pa yment bundles encourage adoption of new technologies by giving hospitals more flexib ility over how they deliver a particular service and creating more opportunities for hospita ls to make tradeoffs to absorb the cost of improved devices. As we discuss in s ection II.A.2.d.(1) of th is final rule with comment period, we plan to continue our hi storical 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, individua lly subject to the copayment liability cap at section 1833(t) (8)(C)(i) of the Act, benefici aries can expect to only pay a234 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, ne t beneficiary coinsurance would decrease under the proposed change. One commenter was concerned that beneficiary out-ofpocket costs may still be higher for any indi vidual beneficiary. The commenter was particularly concerned that new cost-sharing with benefici aries for laboratory services would be contrary to statue and congressi onal intent. The co mmenter objected to a proposal that would impose new beneficiary cost-sharing requirements in order to cut total projected Medicare spe nding for outpatient services. Response : We believe that this proposal decreases the liability for almost all beneficiaries receiving primary procedures as signed 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, a nd for these device-related procedures in particular, beneficiaries will no longer make c opayments for individual ancillary services. Because the device insertion procedures th at we have proposed as comprehensive services are universally very expensive, th e cap will apply to the majority of claims reporting services assigned to comprehensiv e APC. We received many public comments on our proposal to package labo ratory services and address those comments and concerns235 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 ru le, 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 code s 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 co mmenters 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 summar ize and respond to the public comments on individual services in th is 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 re calibration of APC relative payment weights, to reflect the most recently available claims and cost info rmation in next year’s rulemaking cycle.
Comment : With reference to the neurostim ulator family of APCs, APCs 0039, 0041, 0061, and 0318, one commenter was concerned that the CY 2014 proposal would236 broadly decrease payments for neurostimulator insertions. Other commenters believed that total payments would remain approximate ly 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 differe nce in supply (device) costs between a battery or generator replacemen t 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 si ngle 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 si ngle 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 l ead 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 placemen ts at a later time, which would result in an increase in readmissions and possible incr ease in adverse events and complications. Additionally, commenters beli eved that this proposal could create incentives to use shorter life devices such as non-rechar geable 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 paymen t 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 sp ending and beneficiar y cost sharing. Commenters proposed a number of m odifications to address these issues, including the creation of composite APCs to pay appropriately for the combination of devices provided to an individual patie nt. The commenters recommended that CMS retain the existing single co mponent APCs for use when only one component (that is, a generator or an array) is imp lanted or replaced, and create two new composite APCs that reflect different combinations of component s – pulse generator and one array and pulse generator and two or more arrays. A lternatively, the commenters recommended Comprehensive APC 0318 (Implantation of Neurostimulator Pulse Generator and Electrode) as the appropriate assignment fo r most complete neurostimulator systems procedures because it is already used to desc ribe 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 commente rs 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 s ubsets 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 relati ve resources required for the primary service238 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 contribut e to the cost estimation for th e neurostimulator procedure. Our methodology for identifying single claims, which is designed to isolate the unique costs associated with a sp ecific service, makes some assumptions about assigning packaged costs to individual services. Ho wever, we agree with the commenters who were concerned that complex procedures su ch 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 s ubsets is often materially greater than the geometric mean cost of all claims that incl ude both simple and complex versions of the procedure. We agree with the commenters th at delivery of these complex services could potentially be impacted under our proposed comprehensive APC payment policy. Specifically, we agree with the comme nters that procedures that implant individual elements of device systems, suchas a generator without leads, may have significantly different costs than procedures th at implant entire systems. We also agree with the commenters that there may be significant resource differences between individual elements of neurostimulator sy stems, such as transcutaneous leads and implanted paddles, and between different system s, such as epidural systems and sacral systems. These differences may then be re flected in the variation in the estimated geometric mean costs of the comprehensive service due to different combinations of component services. Therefore, we are ac cepting the commenters’ suggestions and we would reconfigure these APCs to better separate procedures for individual elements of239 neurostimulator systems from procedures in which the entire system is implanted, and to more closely align relative resource requireme nts 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 pr imary 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 ther efore, we do not believe that we should not consider these procedures for a comprehensive APC assignmen t 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 th e 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 vari ance we see in estimated hospital costs for traditional, discrete, nonc omprehensive services. To implement the commenters’ suggesti ons we would use the four techniques described above to reassign claims for comple x 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 pr esent and have divided individual services into simple and complex services, with complex services characterized by complete systems, multiple components or other associa tions that correlate with high resource requirements (high cost). We are adopti ng the basic suggestion of differentiating between partial systems and comp lete systems, and we plan to use the claims data to240 group clinically similar, high-volume, complex procedures into APCs with similar costs in CY 2015. In this final rule with comment period, we invite co mmenters to apply the analysis, methodology, and the payment estimation techniques presented here to specific neurostimulator services and to prov ide 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 e liminate 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 fr om 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 serv ice. We summarize all of the codes that we would reassign as complex forms of their pr imary 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 th e 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 a nd cost report data and any relevant new CY 2015 codes through next ye ar’s rulemaking cycle.
Comment : With reference to the endovasc ular family of APCs, APCs 0082, 0083, 0104, 0229, 0319, and 0656, one commenter was supportive of th e approach to further integrate the payment methodologies for the inpatient and outpatient systems in this case and agreed that patients who receiv e the major services contained within the 29 comprehensive APCs are unlikely to be rece iving 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 c oncerned 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 year s old, as they believe the data is not yet reliable.242 Several commenters noted that the exis ting OPPS payment structure for coronary and peripheral revasculari zation 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 requir ed resources varying significantly from patient to patient. Given this complexit y, one commenter opined that coronary and peripheral revascularization pr ocedures 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 revascular ization services offered to patients. A few commenters believed that the proposal will inev itably 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 card iac 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 a ppropriate imaging modalities, and result in cost as the driving factor in patient a ccess to needed medical imaging services. Finally, another commenter believed that comprehensive APCs for stent placement procedures would allow a few patie nts receiving all the possible components of the bundle to experience a lesser hospital outpatient c opayment amount, but would cause many beneficiaries to pay for services th at they have not received and do not need.243 Response : We appreciate the commenters’ support for our conclusion that beneficiaries receiving these major servi ces are unlikely to be receiving unrelated services on the same day, and we appreciat e 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 c odes 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 establis h 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 commen ts concerning APC 0083, for example, we note that the estimated hospital costs for the pr ocedure alone did not change significantly between CY 2011 and CY 2012, and that the pr oposed comprehensive service geometric mean cost was approximately 10 percent hi gher than the single procedure geometric mean cost, a ratio that is comparable to th e average aggregate increase in cost for the additional ancillary services observed acr oss all proposed comprehensive services, indicating continued stability in the relativ e 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 ge neral, 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 the244 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 co mmenters 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 re sources are reflected in our claims data. To model commenters’ suggestions for il lustration purposes in CY 2014, we have used the techniques described above to reassign claims fo r 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,” incl uding the primary service, are present. We divided individual services into simple a nd complex services, with complex services characterized by multiple components, multiple vessels, or other associations that correlate with high resource requirements (h igh 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 cl aims 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 to245 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 fo r 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 ne w APC, APC 0445 (Level III Endovascular Procedures). We would re name 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 fr om 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 comprehens ive 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 r eassign 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 applica tion of this policy to this endovascular services family of APCs w ith 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 objec t to the creation of comprehensive APCs for cardiac electrophysiology (EP) studies and one commenter specifically supported the proposal. Howeve r, commenters were confused and concerned about the impact of comprehensive APCs on paymen t 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 disc ussed, reported on the claim are packaged into the payment for th e primary service, which is based on the average comprehensive cost of those claims. However, we also inadvertently included a discussion of the continued existenc e of composite APC 8000 (Cardiac Electrophysiologic Evaluation and Ablati on), 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 w ould, therefore, meet the criteria for the composite, but would also meet the criter ia for comprehensive APC 0085 (Level II247 Electrophysiologic Procedures), understandabl y 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 co mprehensive APC 0085. We also believe that we added to this confusion by initially includ ing some claims and estimated costs in the cost calculation of both APC 8000 and APC 008 5, duplicating the repo rting 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 co mposites that for CY 2013 were reported with new CPT codes. Commenters proposed several alternativ es to our proposed treatment of EP studies and ablations but all of the alternatives involved differentially paying for ablation procedures when those procedures were perf ormed 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 conditiona lly packaged. Noting that a status indicator of “Q3” would have the same packaging effect as including it in the comprehensive package as proposed, we belie ve this commenter intended to recommend a higher payment for EP procedures performe d 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 ev aluation) was also listed with a status indicator of “Q3” but assigned to compre hensive APC 0085. Commenters requested that we clarify the intended treatmen t of EP and ablation se rvices, differentially248 pay for the lower costs of EP studies performe d alone relative to the higher costs of EPablation procedures, and create a consistent tr eatment of services within these sets of codes. Response : We agree with the commenters thatour proposed rule provisions were not consistent in regard to our treatment of the electrophysiology-ab lation procedures as composite services and as comprehensive serv ices. 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 servi ces 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 in tend to delete composite APC 8000 as we move payment for these services unde r the comprehensive APC payment policy. In this final rule with comment period, we invite comme nters to apply the an alysis, methodology, and the payment estimation techniques presented here to specific EP serv ices and to provide comment on these illustrative CY 2014 reassignme nts 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 reas sign 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 ap plication of this policy to this set of electrophysiologic evaluation a nd 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 ye ar’s rulemaking cycle.
Comment : In addition to the general comme nt that CMS should ensure that complex (multiple device) procedures are not inappropriately grouped with single device insertions, there were several public comme nts 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 re synchronization therapy (CRT), these comments dealt with general issues such as the difficulty in m odeling the impacts of250 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 (Lev el II Implantation of CardioverterDefibrillators (ICDs)) based on the geometri c 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. On e commenter requested that CRT services continue to be paid based on th e geometric mean cost of the composite service rather than based on the geometric mean cost of all serv ices 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 comb inations 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 estima tes of the primary serv ice calculated through our traditional single bill methodology and these new cost estimates suggested reassigning codes among the family of pacemak er APCs in order to increase resource251 homogeneity. These reassignments also sugge sted renaming or restructuring APCs as necessary. We found these re assignments would reduce much of the cost to payment variance. Therefore, in response to public comme nts 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 comple x subsets of the primary service, and we would reassign those claims to a higher level AP C. We note that our decision to finalize this proposed comprehensive APC policy with modification in this final rule with comment period, but to delay implementati on of the policy until CY 2015 creates the opportunity for the public to further review the illustrative re configurations 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’ sugges tions and concerns for CY 2014, if we were implementing this policy for CY 2014, fo r this pacemaker-defib rillator family of APCs are as follows:252

● APC Redesignations: We w ould 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 r eassign 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 woul d 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 claimreassignments. 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 da ta 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 desc ription of comprehensive APCs, APC 0202 does not contain a single major procedure with re latively small cost contributions from253 adjunctive services but contai ns 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 th at 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 so me hospitals to delay or stage procedures inappropriately, increasing ove rall Medicare costs and pot entially threatening patient access to certain devices. One commenter believed that APCs 0385 (Level I Prosthetic Urological Procedures) and 0386 (Level II Prosthetic Ur ological Procedures) similarly would have sizable reductions in Medicare payments that could crea te significant disincentives for hospitals to perform certain procedures that utilize medical devices. Another commenter believed that this result also applie d to APC 0674 (Prost ate Cryoablation). Response : We do not agree with the commen ters that these APCs represent a different class of services. All of the se rvices 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 w ould view the encounter globally. What commenters are describing as unrelated proced ures 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 report ing of variation in phys ician work and, as a254 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 se rvice. For example, during a procedure to repair the urogenital tract th e surgeon may report CPT code 57265 (Extensive repair of vagina) along with CPT code 57288 (Repair bladder defect), butthese individual physician services are both part of the compre hensive surgical repair procedure. In the proposed rule, we proposed defining the most costly component of a comprehensive service as the primary servi ce that determines the APC assignment and final payment of the service, and we believe that this met hodology remains appropriate for these services. We agree with the commenters generally and that, with respect to these reproductive surgery APCs specifically, th ere 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 subset s of these primary services eligible for reassignment to a higher level APC if we we re implementing this policy in CY 2014. We would have applied this methodology along w ith other techniques described above for CY 2014 in order to facilitate the transition from discrete incremental payments to a single comprehensive payment for the enti re service. For APCs 0385, 0386, and 0674, as well as APC 0202, we also identified seve ral combinations of HCPCS codes that represented common, costly s ubsets of services and we would reassign several HCPCS codes to different APCs to reduce the vari ance between the geometric mean estimated cost of the complex services and geometric m ean cost of the APC to which the services255 would be assigned. In this final rule w ith comment period, we are inviting commenters to apply the analysis, methodology, and the payment estimation techniques presented here to specific reproductive se rvices and to provide comm ent on these illustrative CY 2014 reassignment of complex re productive services claims. Changes to implement the commenters’ suggestions and concerns for CY 2014, if we were implementing the policy for CY 2014, fo r this urogenital procedures family of APCs are as follows:

● APC Redesignations: We would rename APC 0385 “Level I Urogenital Procedures”; APC 0386 “Level II Urogenita l Procedures”; and APC 0674 “Level III Urogenital Procedures”.

● APC Reassignments: We would r eassign 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 woul d reassign certain combinations of CPT codes 54405, 57265, 57282, and 57285 as complex form s of the primary service. We summarize all of the codes that we would r eassign 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 da ta 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 w ith 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) sh all be classified separatelyunder the OPPS from other services. Because brachythe rapy devices could be used during some encounters to deliver comprehensive services, we will modi fy our proposal to state that brachytherapy devices, like mammography and ambulance se rvices, 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 reservoi r 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 sepa rate and apart from the implantation of the primary (pump) service. This commenter be lieved that therapeutic drugs in general should be excluded from a comprehensive APC payment and expressed concern that packaging may decrease hospital use of cos tly drugs, such as PRIALT, which is a non-narcotic alternative. A nother commenter stated that CMS should provide greater data transparency if it decides to move ahead with the inclusion of DME items within a257 comprehensive APC. The commenter was concer ned 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 co st of the services in question. Response : We do not agree with the commente rs 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 proporti onally into the cost estimation for the primary services through our ability to use al most 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 th e 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 appl y in this case upon implementation of the comprehensive APC policy in CY 2015. Finall y, 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 se rvices 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 co nsidered to be anci llary and supportive to the primary procedure and packaged as part of the comprehensive APC payment258 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 Comprehensiv e APCs for High-Cost Device Dependent Procedures for Implementation in CY 2015 In summary, in response to public comme nts we received, we have decided to finalize the comprehensive APCs with modifi cation and to delay the implementation or effective date of the policy until CY 2015. We acknowledge commenter s’ 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 implementa tion will allow us (and them) more time to operationalize changes necessary to process comprehensive payments. In response to public commenters’ requestfor additional detail on our calculation of the comprehensive APC relative paymen t 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 w ould 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 a nd simple versions of the same primary service. We are taking advantage of th e 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 includ e all integral, ancillary, supportive, dependent, and adjunctive outpatient servic es into the comprehensive APC payment, excluding certain services such as am bulance services; mammography services; brachytherapy sources; and drugs, biologi cals, and devices receiving pass-through payment. We will not include charges reporte d with inpatient room and board revenue codes as we do not believe outpa tient costs are correctly reported in those revenue codes. Adjunctive items and services that wi ll be unconditionally packaged into the comprehensive APC payment for CY 2015 include the following.

● All packaged services th at were packaged in CY 2013.

● All services finalized for unconditi onal or conditional packaging for CY 2014.

● All adjunctive services and supplie s provided during the delivery of the comprehensive service, which includes al l other cover OPPS items and services appearing on a claim, including those witha HCPCS with status indicator “J1”; implantable DMEPOS supplies provided dur ing the comprehensive OPPS service; services performed by therapists provided dur ing 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 require d to be separately paid by statute. We are finalizing a modification to our proposed methodology for identifying a primary service, assigned to status indi cator “J1” on a claim reporting multiple procedures described by HCPC S 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 st atus indicator “J1” re ported on claims. We also have determined that there are certai n subsets of outpatient cases for a primary service that should be more appropriatel y paid when stratified according to the complexity of the service. Therefore, we have identified a number of complexity reassignments for certain high-volume, costl y, complex versions of a primary service, and we have reassigned these subsets of pro cedures representing a co mplex 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 aspect s 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 de tail earlier in this se ction. 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 display261 final HCPCS assignments in Table 9 and comp lexity reassignments in Table 10 that we would make if we were impleme nting this policy for CY 2014. We have reconciled the inconsistency in our proposal to pay for cardiac electrophysiology-ablation procedures unde r both composite and comprehensive methodologies. For CY 2015, we are reassigni ng the codes assigned to composite APC 8000 into a new composite APC 0444, along with complex services from APC 0085 that are characterized by compos ite 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 represen t 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 indivi dually reported procedures that are assigned to status indicator “J1,” which w ill 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 pa yment for the comprehensive service. We will be making a single all-inclusive paymen t 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 Compos ite APC Criteria-Based Costs262 As discussed in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide 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 enable s hospitals to manage their resources with maximum flexibility by monitoring and adjustin g the volume and efficiency of services themselves. An additional advantage to the co mposite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, ratherthan relying upon single procedure claims which may be low in volume and/or incorr ectly coded. Under th e OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac el ectrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to the CY 2008 OPPS/AS C final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 thr ough 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 servic es, cardiac electrophysiologic evaluation and263 ablation services, mental health services, and multiple imaging services, as discussed below. We proposed to discontinue and supe rsede the cardiac resynchronization therapy composite APC with our proposed comprehe nsive 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 di scussed in section II. A.2.e. of this final rule with comment period. (1) Extended Assessment and Manageme nt Composite APCs (APCs 8002 and 8003) (a) Background Beginning in CY 2008, we included composite APC 8002 (Level I Extended Assessment and Management Composite) a nd composite APC 8003 (Level II Extended Assessment and Management Composite) in the OPPS to provide payment to hospitals in certain circumstances when extended assessmen t and management of a patient occur (an extended visit). In most of these circumstances, observati on 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 pr ovided 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 741 65) 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 longstandi ng policy to provide payment to hospitals264 in certain circumstances when extended asse ssment 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 encounter s rather than recognize two levels of EAM composite APCs. We proposed to al low any visit furnished by a hospital in conjunction with observation services of s ubstantial 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 de partment visits base d 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 repres ented 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 vis it codes (HCPCS codes 99205, 99215, 99284, 99285 and G0304) would no longer be recognized under the OPPS, it would no longer be feasib le to continue with our cu rrent payment criteria for the EAM composite APCs 8002 and 8003 for CY 2 014. Therefore, to ensure that we continue to provide payment to hospitals in certain circumstances when extended265 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 provide d 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 HCPC S codes proposed in section VII. of the proposed rule, is accompanied by observation care of substa ntial duration on a claim. We would no longer recognize composite APC 8002 or APC 8003. The specific cr iteria 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 se lecting 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 un its of HCPCS code G0378 (Observation services, per hour); and266

● The claim contains one of the fo llowing codes: HCPCS code G0379 (Direct referral of patient for hospital observation care) on the same da te of service as G0378; or CPT code 99201 (Office or other outpatient vi sit for the evaluation and management of a new patient (Level 1)); CP T 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 manageme nt 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 mana gement 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 establishe d 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 othe r outpatient visit for the evaluation and management of an established patient (Level 5)); CPT code 99281 (Emergency department visit for the evaluation and manage ment 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 de partment 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 manage ment of a patient (Level 5)); or HCPCS267 code G0380 (Type B emergency departmentvisit (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 emerge ncy department visit (Level 5)); or CPT code 99291 (Critical care, evaluation and manageme nt 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 co st 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 a nd “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 se lecting 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 un its of HCPCS code G0378 (Observation services, per hour); and

● The claims contain one of the follo wing 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 car e, evaluation and management of the critically ill or cr itically injured patient; first 30–74 minutes); or newly proposed alphanumeric Level II HCPCS code GXX XA (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 (Cli nic 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 assessm ent and management services through newly created composite APC 8009. Anot her commenter, who did not support the proposal, stated that the proposed policy di d not accurately account for the cost of providing an extended assessment and manageme nt 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 supp ort of our proposal. We disagree with the one commenter’s argument that our proposal does not accu rately account for the cost of providing an extended assessment and ma nagement service. We believe that this proposal accurately accounts for the cost of providing an extended assessment and269 management service and that this proposal does not have any substantial impact on any particular type of facility or patient type. After consideration of th e public comments we receive d, 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 encounter s 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 th is final rule with comment period, we are modifying our proposal to allow any clinic a nd certain high level ED visits furnished by a hospital in conjunction with observation servic es of substantial duration to qualify for payment through the newly created Exte nded Assessment and Management (EAM) Composite APC (APC 8009). Spec ifically, we are allowing a clinic visit (for CY 2014, there will be one code to descri be 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 qua lify 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 c odes 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 cost270 for procedures assigned to APC 8009 fo r CY 2014 using CY 2012 single and “pseudo” single procedure claims that me t 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 se lecting 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 un its of HCPCS code G0378 (Observation services, per hour); and

● The claim contains one of the follo wing 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 othe r outpatient visit fo r 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 ev aluation and management of a new patient (Level 3)); CPT code 99204 (Office or othe r 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 eval uation 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 (L evel 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and manageme nt of an established patient (Level 3));271 CPT code 99214 (Office or other outpatient vi sit 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 establ ished patient (Level 5)); CPT code 99284 (Emergency department visit for the evaluati on 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 (T ype B emergency department visit (Level 5)); or CPT code 99291 (Critical care, evaluatio n and management of th e 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 treatm ent 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/ca theters. At least two CPT codes are used to report the composite treatme nt service because ther e are separate codes that describe placement of the needles/cathete rs and the application of the brachytherapy sources: CPT code 55875 (Transperineal placemen t of needles or catheters into prostate for interstitial radioelement application, w ith or without cystos copy) and CPT code 77778 (Interstitial radiation source application; co mplex), which are genera lly 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 clinic al scenario, and to further our goal of272 providing payment under the OPPS for a larger b undle 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 co mposite service, reported as CPT codes 55875 and 77778, is furnished in a single hospita l encounter. We based the payment for composite APC 8001 (LDR Prostate Brachyt herapy 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 separate ly 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 histor y of OPPS payment for LDR prostate brachytherapy services and a detailed descrip tion 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 implemente d 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 ot her 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 geom etric mean costs of procedures or services assigned to APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (C omplex Interstitial Radiation Source Application), the APCs to which CPT c odes 55875 and 77778 are assigned, respectively.273 We proposed to continue to calculate the geom etric mean costs of procedures or services assigned to APCs 0163 and 0651 us ing single and “pseudo” singl e procedure claims. We stated that we believe that this composite APC contributes to our goal of creating hospital incentives for efficiency and cost containmen t, while providing hospitals with the most flexibility to manage their reso urces. We also continue to be lieve that data from claims reporting both services requi red for LDR prostate brach ytherapy provide the most accurate geometric mean cost upon which to base the composite APC payment rate. Using a partial year of CY 2012 cl aims data available for the CY 2014 OPPS/ASC proposed rule, we we re able to use 1,487 claims that contained both CPT codes 55875 and 77778 to calculate the geometri c 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 calcul ate adequate payment rates for APC 8001, APC 0312 (Radioelement Applicati ons), 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 calc ulate the geometric mean cost of these procedures upon which the final CY 2013 pa yment rate for composite APC 8001 was based. For CY 2014, we have 52 single clai ms available for geometric mean cost274 calculation for APC 0312, compared to 74 cl aims 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 availa ble for CY 2013. Therefore, there is approximately the same number of “pseudo” single claims available for APCs 8001 and 0313 geometric mean cost calculation compar ed 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 rateset ting methodologies in order to maximize our use of claims data. In addition, we will c ontinue to study means by which we can use a larger volume of claims data to establis h the payment rate fo r APC 0312 specifically.
Comment : One commenter supported CMS’ propos al to continue paying for LDR prostate brachytherapy services usi ng composite APC 8001 and noted recognition of the proposed increase in payment. Response : We appreciate the commente r’s support for this proposal. After consideration of th e public comments we receive d, we are finalizing our policy to continue paying for LDR prosta te 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 Evaluati on and Ablation Composite APC (APC 8000) Effective January 1, 2008, we establis hed APC 8000 (Cardiac Electrophysiologic275 Evaluation and Ablation Composite) to pay for a composite service made up of at least one specified electrophysiologic evaluation se rvice and one specified electrophysiologic ablation service. 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 thr ough different APCs (specifically, APC 0085 (Level II Electrophysiologic Evaluation), APC 0086 (Ablat e Heart Dysrhythm Focus), and APC 0087 (Cardiac Elect rophysiologic Recording/Mapping)). Calculating a composite APC for these services allowed us to utilize many more claims than were available to establish the i ndividual APC geometric mean costs for these services, and advanced our stated goal of promoting hos pital efficiency through larger payment bundles. In order to calculate the geometri c 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 se rvices 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 co mment 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 pro cedures 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 comm ent period (72 FR 66655 through 66659). Where a service in Group A is furnishe d on a date of service that is different from the date of service for a CPT code in Group B for the same beneficiary, payments276 are made under the appropriate single pro cedure APCs and the composite APC does not apply. Subsequent to the publication of th e CY 2013 OPPS/ASC proposed rule, the AMA’s CPT Editorial Panel created fi ve new CPT codes describing cardiac electrophysiologic evaluation and ablation services, effective January 1, 2013. These five new codes are:

● CPT code 93653 (Comprehensive el ectrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and reco rding, right vent ricular pacing and recording, His recording w ith intracardiac catheter ablatio n of arrhythmogenic focus; with treatment of supraventricul ar tachycardia by ablation of fast or slow atrioventricular pathway, accessory atrioventricular connec tion, cavo-tricuspid isthmus or other single atrial focus or source of atrial re-entry);

● CPT code 93654 (Comprehensive el ectrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or attempted induction of an arrhythmia with right atrial pacing and reco rding, right vent ricular pacing and recording, His recording w ith intracardiac catheter ablatio n of arrhythmogenic focus; with treatment of ventricular tachycardi a 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 ab lation of a discrete mechanism of arrhythmia which is distinct from the pr imary ablated mechanism, including repeat277 diagnostic maneuvers, to treat a spontaneous or induced arrhythmia (List separately in addition to code for primary procedure));

● CPT code 93656 (Comprehensive el ectrophysiologic evaluation including transseptal catheterizations, insertion and repositioning of multiple electrode catheters with induction or attempted i nduction of an arrhythmia with atrial recording and pacing, when possible, right ventricular pacing and recording, His bun dle recording with intracardiac catheter ablati on of arrhythmogenic focus, with treatment of atrial fibrillation by ablation by pulmonary vein isolation); and

● CPT code 93657 (Additional linear or fo cal intracardiac cathet er ablation of the left or right atrium for treat ment of atrial fibrillation remaining after completion of pulmonary vein isolation (List separately inaddition to code for primary procedure)). The CPT Editorial Panel also deleted tw o 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 connectio ns or other atrial foci, sing ly 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, a nd 93656 are primary electrophysiologic services that encompass ev aluation 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 servic es, we assigned them to composite APC278 8000 with no further requirement to have anot her electrophysiologic se rvice from either Group A or Group B furnished on the same date of service, and we assigned them interim status indicator “Q3” (pai d through a composite APC) in Addendum B to the CY 2013 OPPS/ASC final rule with comm ent 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 CP T codes 93655 and 93657 with the primary procedures is appropriate, and we assigned th em interim status indicator “N.” Because the CPT Editorial Panel deleted CPT c odes 93651 and 93652, effective January 1, 2013, we deleted them from the Group B code lis t, leaving only CPT code 93650 (Intracardiac catheter ablation of atrioven tricular node function, at rioventricular conduction for creation of complete heart block, with or without temporary pacemaker placement) in Group B. As is our usual practice for new CPT code s 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 ru le 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 methodol ogy proposed and implemented for CY 2008 through CY 2013. We also proposed to cont inue 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 fo r cardiac electrophysiologic evaluation and ablation services calculated from a high volume of correctly coded multiple procedure claims would result in an accurate and appr opriate proposed payment for these services when at least one evaluation service is furnis hed during the same clin ical encounter as at least one ablation service. Consistent w ith our practice since CY 2008, we proposed not to use the claims that met the composite pa yment 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 calcu lated 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 we re 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 co st 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 O PPS/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 pr imary 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 tr eat 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 at rial fibrillation (AF). The co mmenter 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 CP T code 93656. The commenter asserted that CMS’ treatment of CPT code 93462 had severa l ratesetting consequences. According to the commenter, when CPT code 93462 appeared on any electrophysiology (EP) claim, it prevented that claim from becoming a “sin gle 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 c ode 93462 from becoming “single procedure” claims disproportionately excludes AF claims from composite APC 8000 cost calculation. In addition, the co mmenter stated, because those claims are more expensive than the average EP claim, this result also reduces both the frequenc y and average cost of281 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 w ith 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 calcu lating 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, incl uding CPT code 93462. As a result of our packaging proposal, the geometric mean co st and frequency for composite APC 8000 have increased. Based on CY 2014 final cost da ta, 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 packag ing 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, 2013282 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 re sult 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 fr om APC 0085 cost calc ulation will lower the geometric mean cost of APC 0085 significan tly, and urged CMS to correct this error. Response : We acknowledge that the proposed payment rate for APC 0085 was incorrectly initially published as approxima tely $11,517, as well as the corrected payment rate (which was posted on the CMS Web s ite) 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 fi nal geometric mean cost for APC 0085 is approximately $4,248, based on 6,362 claims available for ratesetting. After consideration of th e public comments we receive d, we are finalizing our proposal to continue payment for compos ite APC 8000 for CY 2014. Based on a full year of CY 2012 claims data, the final geom etric mean cost of composite APC 8000 is approximately $13,162, based on 16,935 claims ava ilable 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 pro cedures upon which we based composite APC 8000 for CY 2014283

TABLE 11.—GROUPS OF CAR DIAC 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 righ t 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 at tempted induction of arrhythmia; with righ t atrial pacing and recording, right ventricular pacing and recording, His bundle recording 93620 0085 Q3 Group B Intracardiac cathe ter ablation of atrioventricular node function, atrioventricular conduct ion for creation of complete heart block, with or without temporary pacemaker placement 93650 0085 Q3284 Group C Comprehensive electrophysiologic evaluation including insertion and repositioning of multiple electrode catheters with induction or atte mpted induction of an arrhythmia with righ t atrial pacing and recording, right ventricular pacing and recording, His recordi ng with intracardiac catheter ablation of arrhythmogenic focus; with treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular pathway, accessory atrioventricular conn ection, 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 atte mpted induction of an arrhythmia with righ t atrial pacing and recording, right ventricular pacing and recording, His recordi ng 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 cathete r ablation of arrhythmogenic focus, with treatment of atrial fibrillation by ablation by pulmonary vein isolation 93656 8000 Q3285 (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 polic y 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 servic es provided by a hospital, which we consider to be the most resour ce-intensive of all outpatient me ntal health treatments. We refer readers to the April 7, 2000 OPPS fi nal 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 AP Cs for the individual services exceeds the maximum per diem payment rate for partia l hospitalization services provided by a hospital, those specified mental health se rvices 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 on286 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 comment s on this proposal. Therefore, we are finalizing our CY 2014 proposal, without m odification, to continue our longstanding policy of limiting the aggregat e payment for specified less resource-intensive mental health services furnished on the same da te by a hospital to th e 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 si ngle payment each time a hospital bills more than one imaging procedure within an im aging family on the same date of service, in order to reflect and promote the efficien cies hospitals can ac hieve when performing multiple imaging procedures during a singl e 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 co mment 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 unde r section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging servi ces provided with and without contrast. While the ultrasound procedures included in the policy do not involve contrast, both CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five multiple imaging composite APCs established in CY 2009 are:

● APC 8004 (Ultrasound Composite);

● APC 8005 (CT and CTA without Contrast Composite);

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

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

● APC 8008 (MRI and MRA with Contrast Composite). We define the single imaging session fo r the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with contrast on the same date of service. Fo r example, if the hosp ital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment for APC 8008, the “with contrast” composite APC. We make a single payment for those imaging procedures that qualify for composite APC payment, as well as any packag ed services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging pro cedures performed across families. For a full discussion of the development of th e multiple imaging composite APC methodology,288 we refer readers to the CY 2009 OPPS/A SC 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 im aging 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 woul d 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, AP C 8005, APC 8006, APC 8007, and APC 8008) were based on geometric mean costs calculate d from a partial year of CY 2012 claims available for the CY 2014 OPPS/ASC proposed ru le 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 imagi ng composite APC geometric mean costs, pursuant to our established methodology (76 FR 74169), were id entified 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 ha lf 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 th e 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 pr oposed 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, regardle ss of the date of service because of the decreases in payment for imaging services over several years, wh ich according to the commenters may create disincentives to pe rforming multiple imaging services on the same date. Some commenter s stated that other CMS pr oposals 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 th e new cost centers is directly responsible for the substantial decreases in payment for multiple imaging APCs, including composite290 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 conti nue to believe that our multiple imaging composite policies reflect a nd promote the efficiencies hospitals can achieve when performing multiple imaging pr ocedures 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 c oncern 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 th e 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 percen t 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 wi th 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/dye292 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+ regns293 * If a “without contrast” CT or CTA procedur e is performed during the same session as a “with contrast” CT or CTA procedure, th e I/OCE will assign APC 8006 rather than APC 8005. Family 3 - MRI and MRA with and without Contrast

CY 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/dye294 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 ext295 C8914 MRA w/o fol w/cont, lwr ext C8918 MRA w/cont, pelvis C8920 MRA w/o fol w/cont, pelvis C8931 MRA, w/dye, spinal canal C8933 MRA, w/o&w/dye, spinal canal C8934 MRA, w/dye, upper extremity C8936 MRA, w/o&w/dye, upper extr * If a “without contrast” MRI or MRA procedure is performe d during the same session as a “with contrast” MRI or MRA procedure, the I/OCE will assign APC 8008 rather than APC 8007.

(6) Cardiac Resynchronization Th erapy Composite APC (APC 0108) Cardiac resynchronization therapy (CRT) us es 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 commonl y report the implantation of a CRT-D system using CPT codes 33225 (Insertion of pacing electrode, ca rdiac venous system, for left ventricular pacing, at time of insertion of pacing cardi overter-defibrillator or pacemaker pulse generator (including upgrade to dual chamber sy stem) (List separately in addition to code for primary procedure)) and 33249 (Insertion or repositioning of electrode lead(s) for single or dual chamber pacing ca rdioverter-defibrillator and in sertion of pulse generator). As described in the CY 2012 OPPS/ASC fina l 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 electr ode is inserted at the same time as an ICD or pacemaker, CMS would not have many valid claims upon whic h to calculate an accurate cost. In response to these concerns, we established a policy beginning in CY 2012 to recognize296 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/AS C final rule with comment period (76 FR 74182), hospitals continue to us e 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 perf ormed 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/Conversi on 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 re turn 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 pe rmanent pacemaker with transvenous electrode(s); atrial);

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

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

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

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

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

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

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

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

● 33233 (Removal of permanent pacemaker pulse generator);

● 33234 (Removal of transvenous pacemaker electrode(s); single lead system, atrial or ventricular);298

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

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

● 33249 (Insertion or repositioning of el ectrode lead(s) for single or dual chamber pacing cardioverter-defibrillator and insertion of pulse generator). 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 th ese 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 po licy is consistent with the principles of a prospective payment system, specifically to place similar services that utilize technologies with varying cost s in the same APC in order to promote efficiency and decision-making based on indivi dual 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 We b 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 correcti on 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 c ode 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 pul se generator; dual lead system), 33229 (Removal of permanent pacemaker pulse genera tor with replacement of pacemaker pulse generator; multiple lead system), 33263 (Rem oval of pacing cardioverter-defibrillator pulse generator with replacemen t of pacing cardiove rter-defibrillator pulse generator; dual lead system), and 33264 (Removal of pacing cardioverter-defibrillator pulse generator with replacement of pacing cardiover ter-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 proce ssing 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 disc ontinue 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 resynchr onization therapy that relate to proposed300 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 co sts upon which the final payment rate for APC 0108 is based for CY 2014, for this final rule with co mment period, we included single procedure claims for the individual services assigne d to APC 0108, as well as single procedure claims that contain the composite CRT-D se rvice, defined as the combination of CPT codes 33225 and 33249 with the same date of service. We were able to use 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. B ecause CPT codes 33225 and 33249 may be treated as a composite servic e for payment purposes, we ar e 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 radiopharmaceu ticals that function as supplies when used in a diagnostic test or procedure; (2) Drugs and biologicals that functi on as supplies when used in a surgical procedure; (3) Certain clinical di agnostic laboratory tests; (4) Certain procedures de scribed by add-on codes; and (5) Device removal procedures. The HCPCS codes that we are packag ing 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 in cluding comments and responses on the particular packag ing proposals are discussed below. b. Background Like other prospective payment syst ems, the OPPS relies on the concept of averaging to establish a payment rate for se rvices. The payment may be more or less302 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 strategi c 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, s upplies, 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 th e patient’s needs, rather than to routinely use a more expensive item, which often result s 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 it ems and services or to explore alternative group purchasing arrangements, thereby encour aging the most economical health care delivery. Similarly, packaging encourages hospi tals 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 accura cy of payment for services over time. Finally, packagi ng may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and serv ices and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency303 and is an essential component of a prosp ective payment system, packaging payment for items and services that are typically inte gral, 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 th e 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 refi ned 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 th ey 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 ch arges 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 sepa rately payable services and any associated packaged services. We emphasize that hos pitals should report all HCPCS codes for304 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 comme nt period (72 FR 66610 through 66659), we adopted the packaging of paym ent 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 s upportive. The seven categories are: (1) guidance services; (2) image processing services; (3) intraopera tive 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 ancill ary and supportive to a primar y diagnostic or therapeutic modality and, in those cases, are an integral pa rt of the primary service they support. In addition, in the CY 2009 OPPS/ ASC final rule with comm ent 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, and305 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 prospect ive payment system. It is not intended to be a fee schedule, in which separate pa yment 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 f ee schedule. Our overarching goal is to make OPPS payments for all services paid under th e 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 advanci ng 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 categor ies 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 de scriptors) to see whether there were categories of codes for which packaging would be appropriate306 according to existing OPPS pack aging 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 cost s of selected HCPCS codes into payment for services reported with other HCPCS codes where we be lieve that one code reported an item or service that was integral, anci llary, 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 pr oposed to package beginning in CY 2014. In several cases, we proposed that services be conditionally pack aged 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 exp ect to continue to review the OPPS and consider additional pa ckaging 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 radiopharmaceu ticals that function as supplies when used in a diagnostic test or procedure; (2) Drugs and biologicals that functi on as supplies when used in a surgical procedure; (3) Certain clinical di agnostic laboratory tests; (4) Procedures described by add-on codes; (5) Ancillary services (status indicator “X”); (6) Diagnostic tests on the bypass list; and307 (7) Device removal procedures. Category (2) listed above was described in the proposed rule as “drugs and biologicals that function as suppl ies or devices when used in a surgical procedure.” In this final rule with comment period, we ar e 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 commen ters’ inability to replicate the CY 2014 proposed OPPS payment rates, which the comme nters asserted limite d their ability to fully evaluate and, therefore, meaningfullycomment on the packaging proposals. Many commenters also stated that , given the significance and scope of the proposals, CMS should delay implementation of these policie s 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 revi ewed by the Panel at its spring 2014 meeting regarding interactions betw een the proposals and their pot ential cumulative impact. Response : We appreciate that it requires time and effort to examine proposed policies. We discovered some limited methodolog ical errors concentrat ed in a handful of APCs during the comment period. In response, we issued correcteddata 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 er rors. We also afforded the public a 10-308 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 co mment 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 de scriptions publicly ava ilable, in addition to proposed payment rates, in an effort to assist commenters in their review. Furthermore, the isolated technical errors that were co rrected in the correcting document had limited interaction with the packaging proposals, and we believe the relativity (the relative magnitude of the difference between paymen t 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 pu blic 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 p ackaging 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 Radiopharmaceutic als 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 packag e the following six categories of drugs, biologicals, and radiopharmaceuticals (unless te mporary pass-through status applies): (1)309 those with per day costs at or below the pack aging threshold (discusse d 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 radiopha rmaceuticals administered in the hospital outpatient setting to identi fy categories or classes of drugs, biologicals, and radiopharmaceuticals that either should be packaged according to existing packaging policies or should be packaged as a logi cal expansion of existing OPPS packaging policies for drugs, biologicals, and radiopharmaceuticals. Currently, two of the categories of dr ugs, biologicals, and radiopharmaceuticals that are packaged in the OPPS (contrast agents and diagnostic radiopharmaceuticals) have a common characteristic--th ey both describe products that function as supplies when used in a diagnostic test or pr ocedure. Although in the past we identified these specific categories of drugs, biologicals, and radi opharmaceuticals as packaged unless passthrough status applied, we rec ognize that they actually represent subcategories of a broader category of drugs, biologicals, and ra diopharmaceuticals that should be packaged in the OPPS according to OPPS packaging principles: drugs, biologicals, and radiopharmaceuticals that func tion 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 la rger, more encompassing service or procedure, namely, the diagnostic test or proced ure in which the drug, biological, or radiopharmaceutical is employed. Because di agnostic radiopharmaceuticals and contrast310 agents represent specific examples of a broader category of drugs, biologicals, or radiopharmaceuticals that func tion as supplies that are in tegral and supportive to a diagnostic test or procedure, we proposed to unconditionally package drugs, biologicals, and radiopharmaceuticals that function as suppl ies 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 defi ned as any kind of test or procedure performed to aid in the diagnosis, detecti on, monitoring, or evaluation of a disease or condition. A diagnostic te st or procedure also includes te sts 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 sp ecify that any drugs , biologicals, and radiopharmaceuticals that function as supp lies when used in diagnostic tests or procedures will be packaged as supplies inthe OPPS, except when pass-through status applies. This proposed broader categor y of packaged drugs, biologicals, and radiopharmaceuticals includes the currently pack aged 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, biological s, and radiopharmaceuticals th at function as supplies when used in a diagnostic test or pr ocedure. We discuss the applic ation of this policy to these specific drugs and the associated comments below.311 (a) Stress Agents Our review of OPPS drugs identifi ed pharmacologic stress agents (“stress agents”) as a class of drugs that is descri bed by the proposed packaged category of drugs, biologicals, and radiopharmaceuticals that functi on 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 diag nostic test in which these agents are used is myocardial perfusion imaging (MPI), wh ich is primarily reported with CPT code 78452 and is the highest cost nuclear medici ne procedure in the OPPS, with total payments exceeding $800 million in CY 2012. In the proposed rule, we reported that approximately 96 percent of MP I is billed with CPT code 78452. Stress agents include the following drugs described by these HC PCS 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 an d 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 ru le (78 FR 43570), we proposed to package all stress agents that function as s upplies into the diagnostic tests or procedures in which they are employed, consistent w ith the policy proposed above. The primary service in which stress agents are employed is MPI. MPI with stress encompasses the312 imaging service, the stress test, and either ex ercise to induce stress or the administration of a pharmacologic stress agent. In th e proposed rule, we included Table 8 which showed the CY 2013 separate payment vers us 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 pack aging 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 packag ing to any new categories of drugs, biologicals, and radiopharmaceuticals, includi ng 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 aff ect patient access to stress agents;

● Because a stress agent is not used w ith 100 percent of MPI tests, CMS should only package drugs that are used at leas t 80 percent of the time with the primary procedure, to ensure that the packaged pa yment reflects the full cost of the packaged drug;313

● Hospitals would have a financial incen tive not to use a stress agent with MPI, because stress can be induced with exercise instead of a stress agent;

● To avoid incurring the co st 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 prope r 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 thr ough exercise. Rather, as we discuss below, we believe that a single payment for MPI estab lishes better incentives to ensure clinically appropriate patient care. We are not adopting the commenter’s r ecommendation that we adopt a minimum utilization requirement of 80 percent for drug packaging. We package services that are typically integral, ancillary, supportive, dependent, or adjunc tive 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 a nd in other cases a packaged item may be314 rarely used with the procedure or service with which it is packaged. Using the geometric mean cost for an APC ensures that minor cha nges 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 servic e 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 ad junctive 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 mo re 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 pa yment for the MPI, with or without the stress agent, will allow the hospital to make th e most efficient decision that is clinically appropriate. As we state a bove, 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 serv ice or bundle of specific services for a particular patient.315 Finally, the recent availability of certain generic stress agen ts should further mitigate any financial incentive not to us e a stress agent with MPI. With regard to clinical concerns that hospitals may encourage physicians to order exercise rather than an MPI with stress agen t, 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 te st would not provide the physician with sufficient information to arri ve 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 re quire 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 sugges tion that we assign MPI tests with and without the use of a stress ag ent to different APCs. As with the minimum utilization threshold, we believe that establishing separate APCs would result in unnecessary differentiation between stress MPI with st ress induced through exer cise and stress MPI with stress induced through a stre ss agent, and that such a di fference could discourage the efficient delivery of MPI. Further, the MPI CPT code descriptors in clude stress or rest, and stress can be induced either throu gh exercise or use of a stress agent. After consideration of th e public comments we receive d, we are finalizing our proposed policy to package stress agents under our policy that packages all drugs,316 biologicals, and radiopharmaceuticals that functi on as supplies when used in a diagnostic test or procedure. We ar e assigning HCPCS codes J0151 (w hich replaces HCPCS code J0152 in CY 2014) and J2785 the status indi cator 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-thr ough 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 detect ion of non-muscle invasive pa pillary cancer of the bladder among patients suspected or known to have lesi on(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 bl ue 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 fiel ds, 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, co mputed tomography (CT), ultrasound, and magnetic resonance imaging (MRI), for purpos es of diagnostic tes ting or treatment.”317 Upon reexamining this description of c ontrast agents and co nsidering 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, magne tic resonance imaging (MRI), and other related modalities that could represent adva ncements of these modalities. Based on the indications and usage describe d 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 proc edure 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 pro cedure. Cysview is a drug that functions as a supply when used in a diagnostic test or pr ocedure for the purpose of the “detection of non-muscle invasive papillary can cer 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). Cysv iew is currently a ssigned to status indicator “N” for CY 2013, and under this propo sal, 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 bla dder cancer patients and who expressed concern that CMS’ proposed p ackaging 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 Cysv iew 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 di agnostic 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 aver aging, where the payment may be more or less than the estimated cost of providing a specific serv ice 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 th e average. This is a fundame ntal aspect of a prospective payment system. Overall, we believe that OPPS payments reflect average estimated costs319 for both situations and encourage the hospita l to assess the appropr iate use of those additional items and services in diagnos ing 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 stru cture of the APCs that include the various cystoscopy procedures sufficiently reflects c linical 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 othe r urological endoscopy procedur es that, like cystoscopy, employ an endoscope. We also do not believ e that packaging Cysview in the OPPS is inequitable. We package all drugs that functi on 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 otherwis e integral, ancillary, and supportive to a diagnostic test or procedure, and therefore appropriately pa ckaged 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 cont rast 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 that320 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 us e than equipment. A supply in the OPPS can be anything that is not equipment, and supp lies can be either expe nsive 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 devi ces have been considered supplies in the OPPS (65 FR 18443). Many implantable medi cal devices are very technologically sophisticated, costly, and tailored to speci fic 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 func tions as a supply in a di agnostic 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 el iminate bladder cancer cells. It enables better localization of the bla dder cancer cells as compared to white light cystoscopy alone, which then requires a therap eutic procedure such as resection.321 Finally, we disagree with the comment er’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 functi on as supplies when used in a diagnostic test or procedure, which also currently in cludes diagnostic radiopharmaceuticals, contrast agents, and stress agents.
Comment : One commenter requested clarific ation 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 im aging 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 f unction 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 packagi ng 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 pa ckaging category of drugs, biologicals, and322 radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure, and this packag ing category is being codi fied at 42 CFR 419.2(b)(15). After consideration of th e public comments we receive d, we are finalizing our proposed policy to package Cysview as a dr ug under our policy that packages drugs, biologicals, and radiopharmaceuticals that functi on as supplies when used in a diagnostic test or procedure. Therefore, HCPCS c ode 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 ra diopharmaceuticals but instead be treated as therapeutic radiopharmaceuticals. Response : Radiopharmaceuticals used for dosimet ry 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 determ ine which treatment option is optimal.” Therefore, because dosimetry is performed to determine the optimal treatment dose of a therapeutic radiopharmaceutical, we believe, acc ording to our definition of a diagnostic item, test, or procedure, that it is di agnostic 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 in to the related proce dure under § 419.2(b)(4).323 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 us e 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 furthe r discussion, we refer readers to the CY 2000 OPPS final rule (65 FR 18443). Packaged supplie s can include certain drugs, biologicals, and radiopharmaceuticals. Packaged supplie s in the OPPS also include implantable biologicals, which are packaged because theyfunction 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 exam ple of a broader category of drugs and biologicals that should be packaged in th e OPPS according to longs tanding regulations and existing policies: drugs and biologicals that function as supplies when used in a surgical procedure. Therefore, in th e 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 func tion as supplies in a324 surgical procedure. The term “skin substitute s” 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 subs titute” 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 a pplied 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 Chr onic 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 th e FDA as either medical devices (and classified as wound dressings) or as human cell, tissue, and cellular and tissue-base d products (HCT/Ps) under section 361 of the Public Health Service Ac t. Most of the various skin substitutes are applied to a wound during a surgical procedure desc ribed by CPT codes under the heading in the 2013 CPT codebook “Skin Repl acement 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 su turing or various other techniques. Currently skin s ubstitutes are separately paid in the OPPS as if they are biologicals according to the ASP methodology an d are subject to the drug and biological packaging threshold.325 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 produc ts 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, implan table biological products are very similar to (and in some instances the same as) skin substitute products, excep t 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 s ubstitutes and implantable biologicals, which underscores the similarity of these overlapping classes of products. Some products that function as skin substitutes can also functi on as implantable biol ogicals. Implantable biologicals and skin substitutes both function as supplies that are used in surgical procedures and, therefore, we believe that th ey should be packaged with the surgical procedure in which the products are us ed. Since CY 2009, we have packaged implantable biologicals. We see no reason to distinguish skin substitutes from implantable biologicals for OPPS packaging purpo ses based on the clinical application of individual products. Therefore, in the CY 2014 OPPS/AS C 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 proce dures would result in a total prospective326 payment that is more reflective of the aver age resource costs of th e procedures because prices for these products varysignificantly 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 CM S’ proposal to package skin substitutes, and believed that packaging will result in great er access to the full range of skin substitute products, that patients will benefit, and th at 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 sp ecified covered outpatient drugs (SCODs) under section 1833(t)(14)(B ) of the Act, CMS cannot packag e 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 specifi cally are SCODs. Sec tion 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 secti on 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, including327 Apligraf and Dermagraft, are not within any of these categories of products because they were approved by the FDA as either medical de vices or as human cell, tissue, and cellular and tissue-based products (HCT/Ps) under sectio n 361 of the Public Health Service Act. Therefore, none of these products are cove red 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 fina lizing 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 additi onal 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 comparab le to implantable biological s, nor wound dressings, and because they have a therapeutic purpose. Some commenters requested that CMS begin referring to these products as “cellular and/or ti ssue based products for wounds (CTPs)” instead of using the term “skin substitutes” to describe the products th at are applied in the procedures described by the CPT c odes 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 surgic al procedure. As expl ained 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 equipm ent. Supplies can be anything that is not equipment and include not only minor, inexpe nsive, 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 implanta ble 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 inte rnal structures, which makes them integral to, dependent on, and suppor tive 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 biologi cals, skin substitute s are integral to, dependent on, and supportive to the surgical procedures in which they are used. Therefore, we believe it is a ppropriate to describe skin subs titutes 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 st ated that skin substitutes are unlike packaged implantable biologicals and therefor e should not be packaged. Our proposal to package skin substitutes reli es on our determination that these products act as supplies329 that are integral to, depende nt on, and supportive to a surgic al 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 heal ing and repair such that packaging skin substitutes represents a logical expansion of our current p ackaging policy that packages implantable biologicals as surg ical supplies. For example, implantable biologicals are used in internal surgeries for healing and to im prove the structural integrity of joints, soft tissues and nerves, among others, and skin subs titutes do the same for external surgical repairs of the integumentary system. In fact, several of the skin s ubstitute products that are described by HCPCS Q-codes in the Q 4100 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 surg ical dressings in the proposed rule as an example of packaged surgical supplies that ha ve some similarities to skin substitutes, many of which FDA classifies as “wound dre ssings.” We believe that commenters may have misunderstood our descrip tion of skin substitutes in the proposed rule as wound dressings and assumed that we were conflati ng 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 cl assified 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 HCPC S 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 b een 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 propose d for CY 2014 the packaging of drugs and biologicals that function as s upplies when used in a surgical procedure, and surgical procedures typically have a therapeutic pur pose. This CY 2014 packaging proposal for drugs and biologicals that function as supplie s does not exclude items with a therapeutic
purpose. We use the term “skin substitute” to desc ribe 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 “s kin substitute graft” for the products that are applied in these procedures. For exam ple, 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 surf ace 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 fo r 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 surg ical 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 de scribe skin substitutes,” because “CTP” is331 too close to the abbreviation HCT/P that the F DA 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 pa thway for only some skin substitutes. We acknowledge that there are differen ces in composition among the various skin substitute products and that is why each is assigned a distinct HC PCS Q-code (or HCPCS C-code in some cases). If all of the produc ts 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 stat us applies). We understand that some of the products descri bed by HCPCS Q-codes in the HCPCS code Q4100 series function both as skin s ubstitutes and implantable biologicals.
Comment : Many commenters opposed packaging skin substitutes, but also requested that, if CMS does package skin s ubstitutes, CMS exclude from the packaging policy any products that are approved by the FDA through the premarket approval (PMA) process, the biologic license app lication (BLA) process, or the new drug application (NDA) process. Some comment ers believed that pr oducts that achieve marketability through one of these processes ar e clinically superior to the other skin substitutes that are regulated by FDA as eith er 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-a pproved 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 not332 necessarily establish the clinical utility of the product. Other co mmenters argued that the various skin substitutes should not be packaged because they are different products each with different characteristics; for example, so me skin substitutes ar e constructed of living cells while others are not. Commenters also stated that among the ra nge of skin substitutes, some products, including those approved through the PMA pro cess, have higher costs than other skin substitutes that are used in the skin substitu te 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 w ould have a financial incentive to use the least expensive skin substitute. Other commenters suggested different approaches to payment based on differential skin substitute co st or other skin substitute properties. Response : Payment under the OPPS is established based on an assessment of resource and clinical hom ogeneity. We disagree that certain products with FDA regulatory approval should be exempt from packaging. With notable regulatory and statutory exceptions, clinical superiority, uti lity, 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 th at there is a significant difference in resource costs among the numerous skin s ubstitute products and that multiple codes based on resource differences may be more appropriate. We do not believe that the FDA approva l process should exempt products from this packaging proposal or factor into the le vel of Medicare payment. While some skin333 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 regulate d as either 510(k) medical de vices 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 ma ke an exception to packaging for these products (or any products approve d through a PMA, NDA, or BLA) . We believe that this request is based on the presumption that, b ecause 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 eviden ce of clinical superi ority relative to non-PMA-approved skin substitutes. However, we consider factors such as clinical and resource homogeneity for OPPS payment. As pr eviously stated in re gard to implantable biologicals, “We do not believe that it is necessary to ma ke our OPPS payment policies regarding implantable biological s 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 clinic al and resource homogeneity. Ther efore, as in the case of implantable biologicals, we also believe that the FDA regulatory pathway should not determine OPPS skin substitute payment polic y. Generally, once a service is covered, clinical and resource homoge neity, as well as other cons iderations, determines APC placement and packaging status. Determinati ons 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 heter ogeneity such that all of the skin substitutes should not be packaged into the same application procedur es 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 de scribed 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 assign ments, in this final rule with comment period, we are dividing the skin substitutes in to two groups for packaging purposes: high cost skin substitutes and low cost skin substi tutes. Assignments to the high cost or low cost groups depended upon a comparison of th e July 2013 payment amount for the skin substitute in OPPS Addendum B to the weight ed average payment per unit of all skin substitutes using the skin subs titute 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 cl assified in the high cost group and those at or be low $32 are classified in the low cost group. Table 13 below lists the skin substitutes and their assignmen t as either a high cost or low cost skin substitute. We also note that a few skin subs titute 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 surgic al procedure in which they are used. These335 products are not listed below in Table 13 but appear in Addendum B to this final rule with comment period (which is availabl e via Internet on th e CMS Web site).. TABLE 13.—SKIN SUBSTITUTE A SSIGNMENTS 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/a336

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 sk in 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 hi gh 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 cate gory. We expect manufacturers to continue reporting ASP to facilitate cost category a ssignment. Any new skin substitutes without pricing information will be assigned to the lo w 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 thr ough 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 th at 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 serv ices 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 cl aims for HCPCS codes C5271, C5273, C5275, and C5277, including only low cost skin substitutes, were used to calcu late 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 (HCP CS 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 C 5277 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 (Lev el II Skin Repair); APC 0328 (Level III Skin Repair); and APC 0329 (Level IV Skin Repair). These procedure codes and the338 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 sep arately 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 0328339

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 substitu te 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 substitu te 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 substitu te 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 0327340

CY 2014 HCPCS

Code CY 2014 Long Descriptor CY 2014

SI CY 2014 APC

C5278 Application of low cost skin substitu te 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 paym ent 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 substitute s used in the HOPD. They suggested that inaccurate coding and reporting by hospitals, an d 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 ha ve stated previously that: “[b]eyond our standard OPPS trimming methodology . . . that we apply to those claims that have passed various types of claims proces sing edits, it is not our genera l policy to judge the accuracy of hospital coding and charging for purposes of ratesetting” (75 FR 71838). We do not341 believe that a problem exists with skin subs titute reporting or with the associated data used in modeling the packaged payments for th e procedures that includes the cost of the skin substitute. Currently, there is an incentive to code properly for skin substitute application services as the si gnificant 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 accura tely report the amount of skin substitute used. We do not have any evidence of sy stemic 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 applic ation procedures as they are for all other services paid under the OPPS and ASC payment systems. Regardi ng 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 surgic al 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 packag ing policy for CY 2014. In fact, part of the rationale for extending packaging in the OPPS to include skin substitu tes that function as surgical supplies is that we already packag e several products that are the same as or similar to skin substitutes in the OPPS that are described by the term “implantable342 biological” due to their particul ar 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 concer n that packaging skin substitutes in the OPPS will inhibit th e 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 mo re than 3 years. Pass-through payments are intended to facilitate the adoption of certa in new products. In addition, we believe that the packaged payments for the associated surgical procedur es, including payment for the skin substitute are adequate and will not discourage use of th e skin substitute products used in these procedures. Furthermore, the final policy that distinguishes high cost from low cost skin substitutes addresses the issu e of differential cost among th e range of skin substitute products. Finally, this packag ing policy applies to skin s ubstitutes and other drugs and biologicals used in surgical procedures. It does not appl y broadly to all biotechnology.
Comment : Some commenters mentioned that th e skin substitute packaging policy will result in a site-of-service shift to th e 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 c onsidered as a part of that decision. We believe that we have adequate ly addressed concerns about heterogeneous resource costs resulting in payment inadequacy and that thes e procedures will continue to be performed in the HOPD. We received a few additional public comme nts 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 avai lable 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&DL Sort=2&DLSortDir=descending . One commenter in particular complained that, alt hough Mitosol is indicate d as “an adjunct for ab externo glaucoma surgery,” OPPS packaging requires that an item be integral to the procedure. The commenter stated that becau se 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 surgerie s do not include an anti -fibrotic [including Mitosol].” The commenter further stated thatMitosol serves a sepa rate clinical purpose344 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 packag ed. Finally, the commenter stated that the clinical benefits and orph an drug designation are reasons to not package Mitosol. Response : Mitosol is an anti-fibrotic dr ug (meaning that it inhibits wound healing) that is used in glaucoma surgery. Since this comment was filed, we granted Mitosol pass-through payment st atus. We address the comm enter’s specific points as follows. First, we want to dispel the noti on that packaged drugs must be used in the associated procedure 100 percent of the time th at the procedure is performed. That is not our OPPS packaging policy. As stated a bove 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 with in any of these categories may be properly packaged in the OPPS. Mitosol, as an adjunct to trabeculectomy, w ould 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, depende nt on, and supportive of a primary service, as noted above. We also disagree with the commenter’s as sertion 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 e ffectiveness was not proposed as a criterion for OPPS packaging determinations. Finally, wh ile FDA orphan drug desi gnation results in additional exclusivity according to the Fede ral 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 packag e it as a supply with glaucoma surgery in the
OPPS. After consideration of th e 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 cate gory 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 co st 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 li sted in Addendum P to this CY 2014 OPPS/ASC final rule with comment period. The payment for CPT codes 15271 through 15278 for surgical applic ation of high cost skin subs titutes (payment rate per square centimeter over $32 for CY 2014) and HCPCS codes C5271 through C5278 for346 surgical application of low cost skin substi tutes (payment rate pe r square centimeter $32 and under for CY 2014), including the cost of th e packaged skin subs titutes, 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 Diagnos tic Laboratory Tests Since the beginning of the OPPS, clinical diagnostic laborator y 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 paym ent systems. As stated in the April 17, 2000 OPPS final rule with comment period: “Rather than duplicate existing payment systems that are effectively achievi ng consistency of payments across different service delivery sites, we proposed to ex clude from the outpatient PPS those services furnished in a hospital outpatient setting th at were already subject to an existing fee schedule or other prospectively determin ed payment rate” (65 FR 18442). Because payment rates for laboratory tests were ba sed 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 fo r each separately coded item. We have347 examined the services performed in the hospi tal outpatient setting to determine those services that we believe shoul d 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 paymen t of items or services when they are provided along with primary services they supp ort. Based on this approach, we believe that laboratory tests (other th an molecular pathology tests, as discussed below) that are integral, ancillary, suppo rtive, dependent, or adjunctive to the primar y services provided in the hospital outpatient setting are services that should be packag ed. Laboratory tests and their results support c linical decision making for a broad spectrum of primary services provided in the hospital outpatient setting, incl uding surgery and diagnostic evaluations. Therefore, except as discussed below for molecular pat hology 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, de pendent, or adjunctive to a primary service or services pr ovided in the hospital outpatient setting and appropriate for packaging into the payment of the primary se rvice 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 th at the laboratory test codes that we were proposing to be packaged and assigned stat us indicator “N” for CY 2014 were listed in Addendum P to the proposed rule (which is available via the Internet on the CMS Web348 site). We also proposed to revise the re gulation text at § 419.2( b) and § 419.22(l) to reflect this laboratory test packaging proposal. We stated that we would consider a labor atory test to be un related to a primary service and, therefore, not partof the proposed packaging po licy when the laboratory test is the only service provided on a date of serv ice or when the laborat ory test is provided on the same date of service as the primary se rvice but is ordered for a different purpose than the primary service by a practitioner diffe rent 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 co ntinue 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 situa tion where the beneficiar y 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 te sts may have a different pattern of clinical use, which may make them generally less ti ed to a primary service in the hospital outpatient setting than the more common and r outine 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 a ssigned status indicator “A.”349 In addition to the laboratory packag ing policy proposals described above, we considered proposing an alternative laborat ory 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 la boratory tests (meeting the proposed standards above) with CLFS paym ent rates below a certa in dollar threshold amount would be packaged. Under this al ternative policy, tests meeting the proposed standards above, but for which the CLFS paym ent rates are above the threshold amount, would continue to be separate ly paid. We decided not to propose this alternative policy because, as discussed above in the backgr ound section, our packaging policies generally do not consider the cost of the individual it ems and services that are packaged, meaning that we package both inexpensive and e xpensive items according to OPPS packaging principles. We recognize that the Me dicare Part B deductible a nd coinsurance generally do not apply for laboratory tests pa id to hospitals at CLFS rates and that the deductible and coinsurance would apply to labo ratory tests packaged into other services in the OPPS. The purpose of the laboratory packaging propos al 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 te sts which would contain unnecessary growth in hospital outpatient spending over the long run, which benefits all stakeholders. We stated that we estimate that the combinati on of packaging laboratory tests into a wide array of primary services provided in the hos pital outpatient setting combined with our350 longstanding methodology to adju st 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 li mitation on the copayment amount for a procedure to the inpatient hospi tal deductible as set forth at section 1833(t)(8)( C)(i) of the Act would fully offset the financial imp act on Medicare beneficiaries receiving laboratory tests that would be subj ect to the propose d 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 coin surance and deductible do not apply under the CLFS, they would continue not to apply for tests that are ordere d, 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 support ed the proposal to p ackage laboratory tests because they believed that packaging laborator y 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 be neficiaries will con tinue to receive laboratory tests that are medically necessary. We are continuing to pay for these351 laboratory tests and have incl uded the cost of the associat ed laboratory tests with the estimated cost of primary hospital outpatie nt services when establishing payment for these services. We believe that packaged payment will allow hosp itals to better assess when and which laboratory tests are appr opriate and provide these services more efficiently, but that this policy will not aff ect 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 grea ter cost efficiency in hospitals. Response : We disagree. Packaging encourag es efficiency and is an essential component of a prospective payment system. Packaging payment for items and services that are typically integral, ancillary, suppor tive, dependent, or ad junctive to a primary service has been a fundamental part of th e OPPS since its impl ementation in August 2000. We believe that packaging encourages ho spitals 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 Ac t requires that CMS pay fo r laboratory tests (except inpatient laboratory tests) in a ll 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 paymen t under the OPPS. Section 1833(t) of the Act gives the Secretary discretion to designate which services ar e 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 liste d in section 1833(t)(1 )(B)(iv) of the Act. Laboratory tests provided in the hospital outpatient departme nt have always been considered hospital outpatient services. However, until this pr oposal, we have since the inception of the OPPS elected to separately pay for laboratory te sts in the hospital outpa tient 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 serv ices that are typically integral, ancillary, supportive, dependent, or adjunctive to a pr imary hospital outpatientservices under the
OPPS.
Comment : A few commenters expressed co ncern about increased beneficiary liability associated with laboratory tests being pa id under the OPPS, which has a coinsurance obligation, unlike payment for la boratory tests under the CLFS, which does not have an associated coinsurance obligati on by statute. One comme nter also requested that, if CMS does finalize the laboratory te st packaging policy for CY 2014, it exclude laboratory tests from the services into wh ich 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 reasse ssed 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 ar ray of primary services provided in the hospital outpatient setting combined with our longstandi ng 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 propos ed 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 sect ion 1833(t)(8)(C)(i) of the Act, would offset the financial impact on Medicare beneficiaries receiving la boratory tests that will be subject to the finalized packaging policy. In this final rule with comment perio d, 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 commen ts. We estimate that, in aggregate, the percentage of beneficiary liability for OPPS payments for CY 2014, including payment for certain clinical diagnostic laboratory te sts, 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 larg er payment bundles will result in a more efficient use of clinical diagnostic laboratory tests when they are inte gral or supportive of354 an outpatient service. Furthermore, to the extent that the coinsu rance 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 pr imary service as discussed above, or for molecular pathology tests, which will co ntinue to be paid under the CLFS. Regarding the commenter’s request that CMS exclude laboratory tests from the services into which they are packaged fo r 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 wh ich they are packaged for the purpose of determining the coinsurance amount.
Comment : Some commenters expressed conc ern about CMS’ proposed exception to packaging for laboratory tests provided on th e 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 pr imary hospital outpatient servi ce or services and where the ordered laboratory test also is for a diffe rent purpose than the primary service. Commenters were concerned about hospitals ’ administrative burde n 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 commenter s may have misunderstood the nature of the proposed laboratory packaging policy. We proposed to package laboratory tests when they are integral, ancillary, supportiv e, dependent, or adj unctive to a primary355 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 orde red the primary service. On e exception to our proposal to package laboratory tests is to exempt molecu lar pathology tests, which would continue to be separately paid when billed on a 13x claim. A laboratory test can be se parately paid when (1) the laboratory test is the only service provided to that benefici ary on that date of service; or(2) the laboratory test is on the same date of service as the primary serv ice but is ordered for a different purpose than the primary service by a pract itioner different than the practitioner who ordered the primary service. When a laboratory test is the only service provide d to a beneficiary at the hospital, the hospital can receive sepa rate 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. Th e 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 th an the eye procedure on the same date of service. While the laboratory test is on the sa me 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 pr ocedure. In this situation, the hospital can bill Medicare for the unrelated laboratory tests on a 14x claim and receive separate payment under the CLFS, si milar to when the laboratory tests are the356 only service performed in the hos pital 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 procedur e 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 su rgery. Payment for those preoperative laboratory tests would be packag ed 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 labora tory tests on the 14x claim according to this description of these limited excep tions. We plan to issue revi sed 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 br iefly 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 comp lex, expensive, and esoteric laboratory tests. Response : We appreciate the commenters’ t houghts on this alte rnative. We continue to believe that a dollar packaging threshold is not appropriate for laboratory tests because almost all laboratory tests are in expensive (97 percent of all laboratory tests have CLFS national limitation amounts of less than $100) relative to other services that357 are provided in the hospital outpatient department. This is unlike many of the drugs and biologicals that are used in the hospital outpatient departme nt that not uncommonly cost thousands of dollars per dose. Therefore, we continue to believe th at it is not necessary to adopt a payment threshold policy for p ackaging laboratory tests similar to the threshold policy for packagi ng 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 th at, like molecular pathology tests for which CMS proposed an exception to the proposal to conditionally package laboratory tests, these tests ha ve a different pattern of c linical use than most other laboratory tests and, therefore, should continue to be sepa rately paid in the hospital outpatient setting. Response : After considering the various re quests for exceptions for specific laboratory tests that we recei ved, we do not believe that a dditional exceptions to the laboratory packaging policy are necessary. We understand that ther e are laboratory tests that are less common and frequent than a standa rd panel, such as new tests. We do not believe that the tests descri bed by the commenters or othe r laboratory tests that were proposed to be packaged are similar to the te sts in the molecular pathology test series such that additional exceptions are warrant ed. We proposed to exclude the molecular pathology tests from our packaging proposal beca use, as a class of laboratory tests, their overall pattern of clinical use has not yet de veloped and we believe that these tests are less tied to a primary service than other la boratory tests. Once their pattern of use358 develops, we will assess whether we belie ve these laboratory tests also should be conditionally packaged. We do not believe that in situ hybridizat ion and cardiovascular screening or other types of la boratory tests are a developing cl ass of laboratory tests for which we do not know the pattern of use. Fo r 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 packag e laboratory test s are necessary. After consideration of the public comments we rece ived, for CY 2014, we are finalizing our proposal without modification to package laboratorytests in the OPPS when they are integral, ancillary, supportiv e, dependent, or adj unctive 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 ordere d 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 serv ice; or (2) a laboratory test is conducted on the same date of service as the primary serv ice but is ordered for a diffe rent purpose than the primary service by a practitioner different than the practitioner who or dered the primary service. We also are finalizing our pr oposal 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 our359 proposal without modification to revise th e regulation text at § 419.2(b) and § 419.22(l) to reflect this conditional labo ratory test packaging policy. The laboratory test codes subject to this packaging policy will be assigned status indicator “N” because any laboratory tests re ported on a 13x bill type will be packaged for CY 2014. These codes are listed in Adde ndum P to this final rule with comment period (which is available via th e 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 th e primary procedure performed,” and also states that “[a]dd-on codes are always perfor med 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 “D ebridement of extensive eczematous or infected skin; each additional 10% of the body su rface, or part thereof (list separately in addition to code for primary procedure).” Th is code is used for additional debridement beyond that described by the primary pro cedure code. Historically, the OPPS has generally paid separately for add-on code s 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 repr esent an extension or continuation of a primary procedure, which means that they are typically supportive, dependent, or adjunctive to a primary service, which is usua lly 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-serv ice 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 depe ndent nature and adjunc tive characteristics of procedures described by add-on codes a nd 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 O PPS/ASC proposed rule (78 FR 43573), we proposed to unconditionally package all pro cedures described by add-on codes in the
OPPS. Aside from advancing the OPPS as a pr ospective payment system by packaging add-on codes, an additional be nefit 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 pr ocedure and which costs are attributable to the add-on procedure. Furthermore, becau se we use single claims and pseudo single361 procedure claims for ratesetting, we genera lly must rely on inco rrectly coded claims containing only the add-on code to determ ine 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 proce dure 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 ha ve to use miscoded claims to calculate estimated costs for add-on codes. Packag ing add-on codes also would increase the number of single bills available for ratesetting for the prim ary procedures. We discuss how we model claims to establish relative payment weights, incl uding 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 includ e 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 vi a the Internet on the CMS Web site.
Comment : Some commenters suppo rted 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, proce dures described by add-on codes are not necessarily integral, ancillary, supportive, depe ndent, 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 integr al 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 a pply to infrequently performed add-on codes as the cost of these infrequent servic es will not be suffici ently 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 th ese procedures, commenters requested that CMS establish exceptions to its proposal to package add-on codes fo r specific services that commenters believed would be underpai d under the policy, in cluding, but not limited to, kyphoplasty add-on procedure, endosc opic retrograde cholangiopancreatography add-on procedure, pelvic reconstruction ad d-on procedures, neurol ysis, 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 related363 extension of or addition to the primary pr ocedure or service described by the primary procedure. The very definition of an add-on co de 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, s upportive, integral, or adjunctiv e 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 th e 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 pro cedures 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 ar e adopting, but delaying the implementation until CY 2015. We will continue to separately pay for pr ocedures described by add-on codes that are currently assigned to device-d ependent APCs. We note that almost all such codes will be included in a comprehe nsive 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 ar e assigned to device-dependent APCs. The device-dependent add-on codes that will con tinue 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 0656365 However, in general the cost of all me dical 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 procedur e 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 packag ed procedure or service. Payment for the primary procedure rather would reflect some payment for the ancillary procedure, but each time the primary procedure is performe d, the hospital receives additional payment, even when the ancillary service is not pr ovided. Unless an add-on code is always performed with a primary procedure, we woul d not expect the relative payment weight to reflect the full costs associat ed with performing the primar y procedure and certain add-on procedures, especially if the add-on procedur es are performed relativ ely infrequently as compared to the primary procedure. Our experience with packag ing services under the OPPS, where we continue to see packaged serv ices furnished with the primary procedure, leads us to believe that hospitals will con tinue to provide the fu ll range of medically necessary care to beneficiaries under overa ll 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 se lect infrequently performed services that may cost more (in addition to th e cost of the primary procedure) to pay more than the prospective payment for the prim ary 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 c onsider increasing it in the future to accommodate greater potential risk from high co st 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 in itial drug administra tion service. The commenters believed that such a policy c ould disadvantage providers of longer drug administration services, which are often protoc ol 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 freque ncy 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 warran ted at this time. Th erefore, we are not finalizing our proposal to package the dr ug administration add-on codes in CY 2014.367 However, we may continue to explore othe r payment options, including packaging and variations on packaging, in future years. After consideration of th e public comments we receive d, we are finalizing our proposal to unconditionally pa ckage procedures described by add-on codes, with the exception of add-on codes for drug administ ration 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 code s that are currently assigned to device-dependent APCs. We al so 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 fina l rule with comment period (which are available via the In ternet on the CMS Web site). (5) Ancillary Services (Status Indicator “X”) Under the OPPS, we currently pay separatelyfor 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 se rvices alone and without another primary service on the same date. As mentioned above, our intent is th at the OPPS be more of a prospective payment system through expanded packaging. Given that the l ongstanding OPPS policy368 is to package items and serv ices that are integral, anci llary, supportive, dependent, or adjunctive to a primary service, we st ated in the CY 2014 OPPS/ASC proposed rule (78 FR 43573) that we believe that these an cillary services, whic h 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 w ith a prospective payment system and the regulation at § 419.2(b) that packages ancillary services into primary services while preserving separate payment for those instan ces 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 assign ed a status indicator of “X” and assign these services to status indicator “Q1” (packa ged 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 beneficiarie s 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 st atus 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 this369 proposal was consistent with CMS’ policy of packaging services that are typically integral, ancillary, s upportive, dependent, or adjunc tive to a primary HOPD service. Response: We appreciate the commenters’ support.
Comment : Many commenters opposed the pr oposal to conditionally package services currently assigned status indicator “X.” These commenters stated that this category of services is too va ried and that the services inthis category are not always ancillary to the services into which th ey would be packaged. The commenters specifically mentioned radiation oncology plan ning services and pat hology services as examples of services that, under the proposal, could be p ackaged into a visit but would not be ancillary to that visit. They also obj ected because, in some cases, relatively costly services could be packaged into services w ith 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 curren tly assigned status indicator “X” are in all cases ancillary to the services into which th eir payment would be p ackaged. 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/or370 pharmacological stress; tracing only, without interpretation an d report). Stress testing is often performed as a part of myocardial perfusion imaging (MPI). MPI is most commonly reported with CPT code 78452 (Myoc ardial perfusion imaging, tomographic (SPECT) (including attenuation correction, qu alitative or quantitative wall motion, ejection fraction, by first pass or gated tec hnique, additional quantification, when performed); multiple studies, at rest and/or stress (exercise or pharmacologic) and/or redistribution and/or rest rein jection). 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 packagedinto MPI when a stress test accompanies
MPI. After consideration of th e public comments we receive d, we are not finalizing our proposal to conditionally package codes curren tly assigned the anci llary service status indicator “X” for CY 2014 when performed withanother service, with the exception that CPT code 93017 will be conditionally packaged. We may review the services assigned status indicator “X” (ancillary services) to determin e 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 bypa ss 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 bypa ss list for the CY 2014 OPPS, as discussed371 in section II.A.1.b. of the proposed rule. The byp ass 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 ratese tting. 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 serv ices, image processing services , intraoperative services, imaging supervision and interpretation se rvices, diagnostic radiopharmaceuticals, and contrast agents. In the CY 2014 OPPS/AS C proposed rule (78 FR 43570), we also proposed to conditionally package several dia gnostic items and services, including drugs, biologicals, and radiopharmaceuticals that functi on 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 charac teristics with these other conditionally or unconditionally packaged or proposed packaged categories of items and services in that they are diagnostic and are integral, an cillary, supportive, dependent, or adjunctive to a primary service. Examples include a barium swallo w 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 c odes on the bypass list and to assign them the appropriate status indicat or “Q1” beginning in the CY 2014 OPPS. Some of these diagnostic tests on the bypass list are curren tly assigned to status indicator “X” and, therefore, would be conditionally packaged under the proposed policy to conditionally package ancillary services cu rrently assigned status indica tor “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 te sts 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 pack age preventive services that are diagnostic tests on the bypass list.
Comment: Some commenters s upported CMS’ proposal to package diagnostic codes on the bypass list because they believe d that they are generally ancillary and supportive to other HOPD services. Response : We appreciate the commenters’ support.
Comment: Some commenters opposed packag ing diagnostic tests on the bypass list for the following reasons:

● Some of the tests, for example, ec hocardiography, included inthis category are not typically integral, ancillar y, supportive, dependent, or ad junctive to the service into which they would be packaged.373

● Some of the procedures on the bypass li st 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 schedul e 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 cat egory “diagnostic codes on the bypass list” are integral, ancillar y, supportive, dependent, or adj unctive to the service into which their payment is packaged. We beli eve that a reexamination of this group of services is warranted to determine which servic es 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 pack age diagnostic tests on the bypass list for CY 2014, or our proposal to assign these code s 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 affect ed by the CY 2014 packaging proposal for this374 category of services will remain on the bypasss list for the CY 2014 OPPS, as discussed in section II.A.1.b. of this fi nal 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 ha ve 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 proce dure to remove a device. Device removal procedures are frequently performed with procedures to repairor replace devices, although it is possible that a device removal procedure may occur without repair or replacement if the clinical indication for th e device that was removed no longer exists. When a separately coded device removal proced ure is performed with a separately coded device repair or replacement procedure, the device removal procedure should be considered as one part of an overall pro cedure 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 pr ocedure represents a service th at 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 remova l codes when they are billed with other surgical procedures involving repair or repl acement and assign a status indicator of “Q2.”375 We stated that we believe that this co nditional packaging policy is appropriate under longstanding OPPS packaging principles because these device removal procedures are an integral and supportive step in a more compre hensive overall procedure. Furthermore, conditionally packaging these device remova l 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 th e public comments we receive d, we are finalizing our policy to conditionally package device remova l procedures in the OPPS when performed together with a repair or replacement of a devi ce and to assign a status indicator of “Q2.” The specific device removal procedure codes that we are conditionally packaging and assigning to status indicator “Q 2” 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 Supplie s That Are Packaged in the OPPS Under the regulations at § 419.2(b)(4), medical and surgical supplies and equipment are unconditionally packaged in th e OPPS and have been since the beginning376 of the payment system. Supplies is a large cat egory 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 ra diopharmaceuticals. The only supplies that are sometimes paid separately in the hosp ital outpatient setting ar e prosthetic supplies under § 419.22(j), and if paid separately, th ey 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 th e hospital outpatient se tting 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 thes e 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 th at 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 ex cept prosthetic supplies. After consideration of the public comments we rece ived, we are updating the status indicators for all supplie s (except prosthetic supplies) to “N.” The specific Level II HCPCS A-codes whose status indicator are revised from “A” to “N” are listed in377 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 Re gulations at 42 CFR 419.2(b) and 42 CFR 419.22 In the CY 2013 OPPS/ASC final rule w ith comment period (77 FR 68272), after consideration of public comments we receiv ed 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 nonexclus ive list of items and services covered under the OPPS referred to in this paragraph ar e packaged into the payments for the related procedures or services with which such items and servic es are provided. In the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed to fu rther revise this re gulation 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 clarif ications to the existing language of § 419.2(b) to make it more clearly reflect current p ackaging policy. Finally, we propos ed to revise the list of services excluded from the OPPS at § 419.22.
Comment : Some commenters ur ged 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 therefor e we are finalizing our revision of the regulations.378 After consideration of the public comments receive d, 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 serv ices, intraoperative imaging, and imaging supervision and interpretation services. In addition to these imaging services that are either packaged or proposed to be pack aged, we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43575) that we are c onsidering a proposal for CY 2015 that would conditionally package all imaging services with any associated surgic al procedures. We stated that imaging services not provided w ith a surgical procedure would continue to either be separately paid according to a sta ndard 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 resu lt in less access to imaging in the HOPD. One commenter asked about the claims logi c 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 packagi ng 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 in379 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 comme nt period, we are continuing to use this methodology to calculate the relative paymen t weights for each APC for CY 2014. In years prior to CY 2007, we standardized al l the relative payment weights to APC 0601 (Mid-Level Clinic Visit) because mid-level cl inic visits were among the most frequently performed services in the hos pital outpatient setting. We assigned APC 0601 a relative payment weight of 1.00 and divided the mediancost for each APC by the median cost for APC 0601 to derive the relative payment weight for each APC. Beginning with the CY 2007 OPPS (71 FR 67990), we standard ized all of the relative payment weights for APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of th e clinic visit APCs. We selected APC 0606 as the base because APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five levels). For the CY 2013 OPPS (77 FR 68283), we established a policy of using geometric mean-based APC costs to calcula te relative payment weights. For the CY 2014 OPPS, we proposed to continue basi ng the relative payment weights on which OPPS payments will be made by using geom etric 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, we380 proposed to use the cost of the clinic visit APC in calculating unscaled weights, which for CY 2014 was proposed APC 0634. While we ha ve previously used APC 0606 as the base from which to develop the OPPS budget ne utral 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 discu ssed in more detail in section VII. of the proposed rule and this final rule with comment period. Following our general methodology for establishing relative paymen t 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 paym ent weight of 1.00 and to divide the geometric mean cost of each APC by the pr oposed 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 requ ires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a budget neutral manner. Budget neutrality ensures th at the estimated aggregate weight under the OPPS for CY 2014 is neither greater than nor less than the estimated aggregate weight that would have been made without the cha nges. To comply with this requirement concerning the APC changes, as we propos ed, we compare the estimated aggregate weight using the CY 2013 scaled relative pa yment 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 paym ent weight for each of these se rvices 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 paym ent 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 a ggregate weight. The service-mix is the same in the current and prospective years be cause we use the same set of claims for service volume in calculating the aggregate we ight for each year. We note that, as a result of the CY 2014 OPPS packaging policy for laboratory tests de scribed 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 outpatie nt laboratory tests paid at the CLFS rates. For a detailed discussion of the weight sc aler 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 CM HCs in our comparison of the estimated unscaled relative payment weights in CY 2014 to the estimated tota l 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. Ba sed on this comparison,382 we adjusted the CY 2014 unscaled relativ e 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 provide s 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 convers ion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefor e, 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 th e concern that CMS may have underfunded the OPPS in developing the budget ne utral weight scaler for the additional costs associated with la boratory tests for CY 2014. Response : We appreciate the commenter’ s concern. We discussed the calculation of the proposed CY 2014 budget ne utral weight scaler in the CY 2014 OPPS/ASC proposed rule (78 FR 43576) as well as the clai ms accounting narrative that we make available via the Internet on th e CMS Web site. In calculating the CY 2014 OPPS budget neutral weight scaler, we cal culated the CY 2013 aggregate payment weight associated with the laboratory test s paid at CLFS rates by applying the CY 2013 CLFS payment rates to the la boratory tests performed in the hospital setting. We note that this is the standard process we use to develop relative payment weights for budget383 neutrality for items and services that ha ve predetermined payment rates, such as separately paid OPPS drugs and New Tec hnology 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 correctio ns 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 am ount of the estimated payment weight being budget neutralized from these clinic al diagnostic laboratory tests. After consideration of th e public comments we receive d, we are finalizing our proposed methodology for calculating the OPPS s caled relative payment weights without modification, including updating of the budget ne utrality scaler for th is 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 paymen t weights listed in Addenda A and B to this final rule with comment period (which are availabl e via the Internet on the CMS Web site) incorporate the recalibration adjustments discus sed 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 Secret ary to update the conversion factor used to determine the pa yment rates under the OPPS on an annual basis by applying the OPD fee schedule increas e factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, s ubject to sections 1833(t)(17) and 1833(t) (3)(F) of the Act, the OPD fee schedule increase factor is equa l 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 fina l rule (78 FR 50607), consistent with current law, based on IHS Global Insight, In c.’s second quarter 2013 forecast of the FY 2014 market basket increas e, 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 Patien t 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 Educati on 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 incr ease factor under subpa ragraph (C)(iv) be reduced by the productivity adjustment descri bed 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 repo rting period, or other385 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 th e FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572), we discussed the calculati on 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 r ecent 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 fa ctor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in this CY 2014 O PPS/ASC final rule with comment period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50607), we discussed th e 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 require s that, for each of years 2010 through 2019, the OPD fee sche dule increase factor unde r section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment desc ribed 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 f actor under section 1833(t) (3)(C)(iv) of the Act. Therefore, in accordance with sectio ns 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 reducti on to the OPD fee schedule in crease 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 fa ctor 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 paym ent 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 increas e factor of 1.7 percent for the CY 2014 OPPS (which is 2.5 percent, the fina l 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 re duction of 2.0 percenta ge points from the OPD fee schedule increase factor adjustment to the convers ion 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 (whi ch 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 Progr am 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, fo r 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 comment s 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 discu ssed above, we are adjusting the OPD fee schedule increase factor and a dopting, as final, the amendm ent 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. Th erefore, 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 c onversion 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 neutra l basis. We are calculating an overall budget neutrality factor of 1.0002 for wage i ndex changes by comparing total estimated388 payments from our simulation model using th e 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 th is final rule with comment period, we are not making any changes to the rural adjustmentpolicy. 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 sect ion II.F. of this fina l rule with comment period. We are calculating a CY 2014 budget ne utrality 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 usi ng the CY 2013 final can cer hospital payment adjustment as required under se ction 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 fi nal cancer hospital payment adjustment has a limited impact on the budget neutrality cal culation. 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 pe riod, we estimate that pass-through spending for both drugs and biologicals and devices for CY 2014 will equal approximately $12.3389 million, which represents 0.02 percent of total projected CY 2014 OPPS spending. Therefore, the conversion f actor is also adjusted by the difference between the 0.15 percent estimate of pass-through sp ending for CY 2013 and the 0.02 percent estimate of CY 2014 pass-through spending, resu lting in an adjustment for CY 2014 of 0.13 percent. Finally, estimated payments fo r outliers remain at 1.0 percent of total OPPS payments for CY 2014. The final OPD fee schedule increase fact or 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 inde x budget neutrality adjustment of approximately 1.0002, the can cer hospital payment adjustment of 1.0005, and the adjustment of 0.13 pe rcent of projected OPPS spending for the difference in the pass-through spending result in a co nversion 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 Pr ogram will continue to be subject to a further reduction of 2.0 percentage points to the OPD fee schedul e increase factor adjustment to the conversion factor that w ould be used to calculate the OPPS payment rates made for their services as required by section 1833(t)(17) of the Act. For a complete discussion of the Hospital OQR 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 pe riod. To calculate the CY 2014 reduced market basket conversion factor for those hospitals that fail to meet the requirements of the390 Hospital OQR Program for the full CY 2014 payment update, we are making all other adjustments discussed above, but using a re duced OPD fee schedul e 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 th e 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 hospita ls that fail to meet the Hospital OQR requirements (a difference of -$1.453 in the conv ersion 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 paymen t rates for those items and services for which payment rates are calculated using geom etric 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 incr ease 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 c onversion 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 across391 geographic regions in a budget neutral manner” (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is calle d 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 percen t of the national OPPS payment. This labor-related share is based on a regression anal ysis that determined that, for all hospitals, approximately 60 percent of the costs of serv ices paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our re gression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we did not propose to revise this policy for the CY 2014 OPPS. We refer read ers to section II.H. of this final rule with comment period fo r a description and example of how the wage index for a particular hospital is used to determine the payment for the hospital. As discussed in section II.A.2.c. of th is final rule with comment period, for estimating APC costs, we standardize 60 percen t of estimated claims costs for geographic area wage variation using the same FY 2014 pr e-reclassified wage index that the IPPS uses to standardize costs. This standardiza tion process removes the effects of differences in area wage levels from the determinati on 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 i ndex as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Thus, the392 wage index that applies to a particular acu te care short-stay hosp ital 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 hospi tal overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually. The Affordable Care Act contained provi sions affecting the wage index. These provisions were discussed in the CY 2012 O PPS/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 fl oor of 1.00 in certain cases, and states that the frontier State floor shall no t be applied in a budget neutra l 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. Th at is, frontier State hospitals will receive a wage index of 1.00 if the otherwise applic able wage index (inc luding reclassification, rural and imputed floor, and rural floor budget ne utrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliat ed 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 ad justment applicable for the hospital will also393 apply for the affiliated HOPD. We refer read ers to the following sections in the FY 2011 through FY 2014 IPPS/LTCH PPS final rules for discussions regardi ng this provision, including our methodology for identifying whic h 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 th e 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, includi ng, but not limited t o, 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-migra tion 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 wa ge indices. In addition, we refer readers to the CY 2005 OPPS final ru le with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a detailed discus sion of the history of these wage index adjustments as applied under the OPPS. For purposes of the OPPS, we proposed to continue our pol icy 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 sec tion 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, they394 are eligible for the out-migration wage adjustment. Table 4J from the FY 2014 IPPS/LTCH PPS final rule as corrected (availa ble via the Internet on the CMS Web site

at: http://www.cms.gov/Medicare/M edicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html ) identifies counties eligib le 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 thatwaives its Lugar status in order to receive the out-migration ad justment has effectively waived its deemed urban status and, thus, is rural for all purposes under the IPPS, including being considered rural for the di sproportionate share hospital (DSH) payment adjustment, effective for the fiscal year in which the hospital receives the out-migration adjustment. We refer readers to the FY 2014 IPPS/LTCH PP S 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 wi ll 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/LTC H 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 thatbecome rural, rural coun ties that become urban, and splitting existing CBSAs (OMB Bulletin 13- 01). This bulletin can be found at:395 http://www.whitehouse.gov/sites/defaul t/files/omb/bulle tins/2013/b13-01.pdf . All of these designations have corresponding e ffects on the wage index system and its adjustments. In order to allow for suffici ent 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/LTC H 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 propos ed 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 adju stment 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 re gulations which require that we use the FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014. We did not receive any public comment s on our proposals. Therefore, we are finalizing our proposals without modificati on and are adopting the FY 2014 IPPS wage index for the CY 2014 OPPS in its entiret y, including the rura l 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 reasonabl e and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Theref ore, 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 comment396 period, which is available via the Intern et on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we ar e 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/Medi care/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 cost s from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calcu lated from the hospital’s most recent cost report to determine outlier payments, paym ents for pass-through devices, and monthly interim transitional corridor payments unde r the OPPS during the PPS year. Medicare contractors cannot calculate a CCR for some hos pitals because there is no cost report available. For these hospitals, CMS uses the statewide average default CCRs to determine the payments mentioned above until a hospital’s Medicare contractor is able to calculate the hospital’s actual CCR from its most recently submitted Medicare cost report. These hospitals include , but are not limited to, hospita ls that are new, have not accepted assignment of an existing hospital’s provider agreement, and have not 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 proposed397 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) inthe context of our adoption of an outlier reconciliation policy for cost re ports 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 th e proposed CY 2014 OPPS relative payment weights. Table 9 publishe d in the proposed rule (78 FR 43580 through 43581) listed the proposed CY 2014 default urba n 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 center s 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 th e final settled status by applying the differential between settled to submitte d overall CCRs for the cost centers relevant to outpatientservices from the most rece nt 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 clai ms corresponding to the year of the majority of cost reports used to calculate the ov erall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment pe riod (72 FR 66680 through 66682) and prior OPPS rules for a more detailed discussion of our established methodology for calculating398 the statewide average de fault CCRs, including the hospitals used in our calculations and our trimming criteria. We did not receive any public co mments on our CY 2014 proposal. We are finalizing our proposal to apply our standa rd methodology of calculating the statewide average default CCRs using the same hospital overall CCRs that we used to adjust charges to costs on claims data for setting the CY 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 wei ghted average CCR for all hospitals in the Nation as a substitute for Ma ryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits th e data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland be cause 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 longsta nding policy of using the national average CCR for Maryland. In general, observed cha nges 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 st atewide 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 0.290400

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 0.234401

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 0.338402

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 EACH s under Section 1833(t)(13)(B) of the Act In the CY 2006 OPPS final rule w ith comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologi cals, brachytherapy sources, and devices paid under the pass-through payment policy in a ccordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Me dicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provided the Secretary the author ity 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 hospita ls in urban areas. Our analysis showed a difference in costs for rural SCHs. Theref ore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 perc ent for all services and procedures paid under the OPPS, excluding separately paya ble drugs and biologicals, brachytherapy sources, and devices paid under the pass-th rough payment policy, in accordance with section 1833(t)(13)(B) of the Act. In CY 2007, we became aware that we di d not specifically address whether the adjustment applies to EACHs, which ar e considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Ac t. Thus, under the statute, EACHs are treated as SCHs.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 EA CHs 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, an d as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer become newly classified as an EACH. This adjustment for rural SCHs is budge t neutral and applied before calculating outlier payments and copayments. We st ated in the CY 2006 OPPS final rule with comment period (70 FR 68560) th at we would not reestablis h the adjustment amount on an annual basis, but we may review the adju stment 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 co mment 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 ru le (78 FR 43582), we proposed to continue our policy of a 7.1 pe rcent payment adjustment that is done in a budget neutral manner for rural SCHs, including EACHs, for a ll services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devi ces paid under the pass-through payment policy, and items pa id at charges reduced to costs.404 Comment : Several commenters supported th e 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 th e 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 afte r 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 rura l 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 ad justment in the near future by examining differences between urban hospitals’ costs and rural hos pitals’ costs using updated claims, cost reports, and provider information. We recogni ze the concerns that commenters present regarding budgeting concerns and will take in to consideration these concerns for any review and revision of the adjustment in the future. After consideration of th e public comments we receive d, we are finalizing our CY 2014 proposal, without modification, to appl y the 7.1 percent payment adjustment to rural SCHs, including EACHs, for all services and proce dures paid under the OPPS in CY 2014, excluding separately payable drugs and biologicals, devices paid under the pass-through payment policy, and items pa id at charges reduced to costs. F. OPPS Payment to Certain Cancer Hospita ls Described by Secti on 1886(d)(1)(B)(v) of the Act 1. Background405 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 hospi tals 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 pa yment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), Congress established sec tion 1833(t)(7) of the Act, “T ransitional Adjustment to Limit Decline in Payment,” to hold harmle ss cancer hospitals a nd 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 perm anently held harmless to their “pre-BBA amount,” and they receive transitional out patient 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 “p re-BBA amount” is an amount equal to the product of the reasonable cost of the hospita l for covered outpatient services for the portions of the hospital’s cost reporting peri od (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 am ount,” 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-2552-96406 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 inst ructs the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospi tals described in section 1886(d)(1)(B)(v) of the Act with respec t to APC groups exceed the costs incurred by other hospitals furnishing services under se ction 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 co st of drugs and biol ogicals incurred by such hospitals when studying cancer ho spital costliness. Further, section 1833(t)(1 8)(B) of the Act provides that if the Secr etary 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 in curred by the 11 specified cancer hospitals were greater than the costs incurred by othe r 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 highe r outpatient costs as407 discussed in the CY 2012 O PPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a po licy 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 ma de on an aggregate basis at cost report settlement. We note that the changes ma de 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 paym ents, 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 cance r hospital payment adjustment was 0.91. 2. Payment Adjustment for Certain Cancer Hospitals for CY 2014 In the CY 2014 OPPS/ASC proposed ru le (78 FR 43582), we proposed to continue our policy to provide a dditional payments to cancer hos pitals 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 th e proposed rule. To calculate the proposed CY 2014 target PCR, we used the same extr act 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 Wo rksheet E, Part B, for each408 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 approximatel y 90 percent of reasona ble 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 hospita l 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 re sult in a proposed targ et PCR equal to 0.90 for each cancer hospital.
Comment : Similar to public comments re ceived 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 ca ncer 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 s uggested 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 wh ich 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 se ction 1833(t)(18)(A) of the Act that costs incurred by cancer hospitals exceed those costs of other hospitals furnishing services under section409 1833(t) of the Act, the Secretary shall pr ovide 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 ad justment to reflect the higher costs, not losses, incurred at cancer hospita ls, 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 comp ared to the other O PPS hospitals’ losses per unit PCR.
Comment : Commenters stated that CMS s hould not recalculate the target PCR annually because the cancer hospitals require pa yment 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, wi ll enable us to provide payment adjustments to cancer hospitals that are accurate and equitabl e. 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 th e public comments we receive d, 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 were410 available at the time of this final rule w ith comment period. To calculate the final CY 2014 target PCR, we used the same extr act 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 th en limited the dataset to the hospitals with CY 2012 claims data that we used to mode l the impact of the final CY 2014 APC relative payment weights (4,044 hospitals) because it is appropriate to us e the same set of hospitals that we are using to calibrate the modeled CY 2014 O PPS. 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 th e cost report data of the 48 hospitals located in Puerto Rico from our dataset becaus e we do not believe thattheir cost structure reflects the costs of most hospitals paid under the OPPS and, theref ore, their inclusion may bias the calculation of hospital-weighted st atistics. We also removed the cost report data of 116 hospitals because th ese hospitals had costreport data that were not complete (missing aggregate OPPS payments, missing ag gregate 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 furnishi ng services under the OPPS are approximately 89 percent of reasonable cost (weighted average PCR of 0.89). Based on these data, we411 used a target PCR of 0.89 to determine th e CY 2014 cancer hospital payment adjustment to be paid at cost report se ttlement. 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 pe rcentage 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 hospi tal payment adjustment for each cancer hospital will be determined at cost report se ttlement and will de pend 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 pr ovisions 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 paymen ts 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 fi xed-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 t hose 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, th e 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 cons idered a final payment by longstanding OPPS policy. However, we implemented a reconcil iation process similar to the IPPS outlier reconciliation process fo r cost reports with cost reporti ng periods beginning on or after413 January 1, 2009, in our CY 2009 OPPS/AS C final rule with comment period (73 FR 68594 through 68599). It has been our policy for the past seve ral years to report the actual amount of outlier payments as a percent of total spe nding in the claims being used to model the proposed OPPS. Our current estimate of tota l outlier payments as a percent of total CY 2012 OPPS payment, using available CY 2012 claims and the revised OPPS expenditure estimate for the 2013 Trustee’s Re port, 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 to tal aggregated OPPS payments. As explained in the CY 2013 OPPS/AS C final rule with comment period (77 FR 68295 through 68297), we set our projecte d target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2013. The outlier thresholds were set so that estimated CY 2013 aggregate outlier payments would equal 1.0 percent of th e total estimated aggregate payments under the OPPS. Using CY 2012 claims data and CY 2013 paymen t 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 - Pr ovider-Specific Data file on the CMS Web414 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 ru le (78 FR 43584), we proposed to continue our policy of estima ting 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 equa l to 0.18 percent of outlier payments (or 0.0018 percent of total OPPS paym ents) 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 pr oportion 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 cont inue our longstanding policy that if a CMHC’s cost for partial hospitalization se rvices, paid under either APC 0172 (Level I Partial Hospitalizati on (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 ca lculated as 50 percen t 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 paym ents under the OPPS, we proposed that the hospital outlier threshold be set so that outlie r payments would be triggered when the cost415 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 ma intained by the Medica re contractors and used by the OPPS Pricer to pay claims. Th e claims that we use to model each OPPS update lag by 2 years. In order to estimate the CY 2014 hospita l outlier payments for the proposed rule, we inflated the charges on the CY 2012 clai ms using the same inflation factor of 1.0993 that we used to estimate the IPPS fixe d-dollar outlier thre shold 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 ch arges reported on CY 2012 claims. The methodology for determining this charge infl ation factor is disc ussed 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 us e of these charge inflation factors are appropriate for the OPPS because, with the exce ption of the inpatient routine service cost centers, hospitals use th e 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 c ould systematically ove restimate the OPPS hospital outlier threshold if we did not a pply a CCR inflation adjustment factor. Therefore, in the CY 2014 OPPS/ASC proposed rule, we proposed to apply the same CCR inflation adjustment factor that we appl y 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 fo r 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 P PS final rule (78 FR 50978 through 50982). Therefore, to model hospital outlier pa yments for the proposed rule, we applied the overall CCRs from the April 2013 OPSF f ile 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 inflati on factor of 1.0993 to approximate CY 2014 charges). We simu lated aggregated CY 2014 hospital outlier payments using these costs for several diffe rent fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming th at 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, un til 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 multiple417 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 we re met. For CMHCs, we proposed that, if a CMHC’s cost for partia l 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 per centage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient qu ality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet the Hospital OQR Program requirements, we pr oposed 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 more418 information on the Hospital OQR Program, we re fer 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 ach ieve the OPPS outlier spending target, based on their analysis of the thresholds and a ggregate outlier spending in prior years. Commenters also desired transparency a bout why an outlier threshold increase was necessary, when historical evidence suggested that such a change is unwarranted. One commenter recommended that the OPPS outlier pe rcentage 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 r ecommended changes to the OPPS fixed-dollar outlier threshold relied on direct comparisons between aggregate spending and the OPPS outlier thresholds. As discusse d earlier in this s ection, 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 outlie r spending as well as se rvices 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 hospi tal charging practices and fluctuations in the overall ancillary CCRs as well as change s in OPPS payment policy such as those involving packaging and compositing. Thos e changes can influence the individual419 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 Inte rnet on the CMS Web site. In the CY 2014 OPPS/ASC proposed rule, we proposed to upda te several OPPS packaging policies which would have a corresponding effect on th e 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 part icular, 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 si gnificant changes to both the APC payment and estimated cost portions of the OPPS outlier payment comparison. We appreciate the recommendation regard ing revisiting the correct OPPS outlier spending target and will c ontinue to consider whethe r a 1.0 percent OPPS outlier percentage spending target cont inues 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 calculati on. 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 fi nal CY 2012 claims that were adjusted to approximate CY 2014 charges (usi ng 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 the420 IPPS fixed dollar threshold for the FY 2014 IPPS/LTCH PPS final ru le (78 FR 50982). We simulated aggregated CY 2014 hospital outli er 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 servic e 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 O PPS 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. Fo r CMHCs, if a CMHC’s cost for partial hospitalization services, pa id under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier pa yment is calculated as 50 percent of the amount by which the cost exce eds 3.40 times the APC 0173 pa yment rate. We estimate that this threshold will al locate 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 ex isting regulations at 42 CFR Part 419, Subparts421 C and D. For this CY 2014 OPPS/ASC final rule with comment period, the payment rate for most services and procedures for wh ich 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 pa yment weight determined under section II.A. of this final rule with comme nt period. Therefore, the na tional unadjusted payment rate for most APCs contained in Addendum A to th is 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 Ac t, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points to their OPD fee schedule increase f actor, that is, the annual payment 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 re quired to report outpatient qual ity data and that fail to meet the Hospital OQR Program (formerly referr ed to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requir ements. For further discussion of the422 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 th at fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to this final rule with comment period), in a circumstance in which the multiple procedure discount does not apply, the procedure is not bilateral, and conditionally packaged services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood products with status indicator “R ” and brachytherapy sources with status indicator “U” are not subject to wage adjustment, they are subject to reduced payments when a hospital fails to meet th e Hospital OQR Program requirements. We note that we had proposed to create status indicator “J1” to refl ect the comprehensive APCs discussed in section II.A.2.e. of this fi nal 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 not e that we had proposed to delete status indicator “X” as part of the CY 2014 packagi ng proposal for ancillar y services, discussed in section II.A.4. of this final rule with comment period. We are not finalizing the ancillary services packaging policy, and therefor e status indicator “X” will continue to be active in the CY 2014 OPPS.423 Individual providers interested in calc ulating the payment amount that they will receive for a specific service from the natio nal 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 calcu lations 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 unadj usted 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 r eceive 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 implementati on of the OPPS, we have used 60 percent to represent our estimate of that portion of cost s attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustme nt for rural hospitals in the CY 2006 OPPS424 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 inwhich the hospita l 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 P ub. 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 w ith 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 hos pital 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 fi nal rule with comment period (which is available via the Internet on the CMS Web s ite) contains the qua lifying counties and the425 associated wage index increase developed fo r the FY 2014 IPPS and listed as Table 4J in the FY 2014 IPPS/LTCH PPS final rule and ava ilable 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 secti on 1886(d)(8) or secti on 1886(d)(10) of the
Act. Step 4 . Multiply the applicab le wage index determined under Steps 2 and 3 by the amount determined under Step 1 that re presents the labor-related portion of the national unadjusted payment rate. The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the na tional unadjusted payment rate for the specific service by the wage index.
X

a is the labor-related portion of the national unadjusted payment rate (wage adjusted).
X

a = .60 * (national unadjusted paymen t rate) * applicab le wage index. Step 5 . Calculate 40 percent (the nonla bor-related portion) of the national unadjusted payment rate and add that amount to the resulting product of Step 4. The result is the wage index adjusted paymen t rate for the relevant wage index area. The formula below is a mathematical repr esentation of Step 5 and calculates the remaining portion of the national payment rate , the amount not attrib utable to labor, and the adjusted payment for the specific service. Y is the nonlabor-related portion of the national unadjusted payment rate.
Y

= .40 * (national unadjusted payment rate).426 Adjusted Medicare Payment = Y + X a. Step 6 . If a provider is an SCH, set fort h in the regulations at § 412.92, or an EACH, which is considered to be an SC H 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 treatedas being located in a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment. The formula below is a mathematical re presentation of Step 6 and applies the rural adjustment for rural SCHs. Adjusted Medicare Payment (SCH or EA CH) = Adjusted Medicare Payment * 1.071. We have provided examples below of th e calculation of both the full and reduced national unadjusted payment rates that will a pply to certain outpatient items and services performed by hospitals that meet and thatfail 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 Yo rk that is assigned to CBSA 35644. This provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The CY 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 requirement s is approximately $312.41. This reduced rate is calculated by multiplying the repor ting 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 is427 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 nationa l 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 th e effective copayment rate (determined on a national unadjusted basis) fo r that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C )(ii)(V) of the Act, 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 provi des that, for a covered OPD service (or group of such services) furnished in a y ear, the national unadjusted copayment amount cannot be less than 20 percent of the OP D fee schedule amount. However, section428 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a y ear to the amount of the inpatient hospital deductible for that year. Section 4104 of the Affordable Care Ac t eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certain requirements, including flex ible sigmoidoscopies and sc reening colonoscopies, and waived the Part B deductible for screening colonoscopies that b ecome diagnostic during the procedure. Our discussi on of the changes made by the Affordable Care Act with regard to copayments for pr eventive services furnished on and after January 1, 2011, may be found in section XII.B. of the CY 2011 O PPS/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 fo r 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 co mment period (68 FR 63458).) In addition, we proposed to use the same standard rounding pr inciples that we have historically used in instances where the app lication of our standard c opayment 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 re fer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in wh ich we discuss our rationale for applying these rounding principles.) The proposed national unadjusted copayment amounts for429 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 X III.G. of the proposed rule, for CY 2014, the proposed Medicare beneficiary’s mini mum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment rate applies will equal the produc t 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 incr ease or decrease each year based on changes in the calculated APC payment rates du e to updated cost report and claims data, and any changes to the OPPS cost modeling pr ocess. However, as described in the CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves bene ficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459). We did not receive any public comme nts regarding the proposed methodology for calculating copayments for CY 2014. Therefore, fo r 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 give n service provided by a hospital that met or failed to meet its Hospital OQR Program requirements shoul d follow the formulas presented in the following steps. Step 1 . Calculate the beneficiary payment percentage for the APC by dividing the APC’s national unadjusted copayment by its payment rate. For example, 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 benefi ciary payment percentage is 20 percent. The formula below is a mathematical re presentation 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/na tional unadjusted payment rate for APC. Step 2 . Calculate the appropriate wage-adjusted payment rate for the APC for the provider in question, as indicated in Steps 2 through 4 under section II.H. of this final rule with comment period. Calculate the ru ral adjustment for eligible providers as indicated in Step 6 under section II.H. of this final rule with comment period. Step 3 . Multiply the percentage calcula ted in Step 1 by the payment rate calculated in Step 2. The result is the wage-adjusted copayment amount for the APC. The formula below is a mathematical re presentation of Step 3 and applies the431 beneficiary payment percentage to the adju sted payment rate for a service calculated under section II.H. of this fi nal rule with comment period, with and without the rural adjustment, to calculate the adjusted be neficiary copayment for a given service. Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment * B. Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted Medicare Payment * 1.071) * 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 copaym ent 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 1 833(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 hospita l deductible for that year.432 III. OPPS Ambulatory Payment Cla ssification (APC) Group Policies A. OPPS Treatment of New CPT and Level II HCPCS Codes CPT and Level II HCPCS codes are used to report procedures, services, items, and supplies under the hospital OPPS. Speci fically, CMS recognizes the following codes on OPPS claims:

● Category I CPT codes, which descri be surgical procedures and medical services;

● Category III CPT codes, which desc ribe new and emerging technologies, services, and procedures; and

● Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and servic es not described by CPT codes. CPT codes are established by the Americ an Medical Associat ion (AMA) and the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both thr ough the annual rulemaking cy cle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process via OPPS quarterly update CRs. This quarterly process offers hospitals access to codes that may more accura tely describe items or services furnished and/or provides payment or more accurate payment for these items or services in a timelier manner than if CMS waited for the annu al rulemaking process. We solicit public433 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 not e that because the payment rates associated with codes effective July 1 were not available to us in time for incorporation into the Addendaof the proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented thr ough the July 2013 OPPS quarterly update CR were not included in Addendum B of the pr oposed rule (which is available via the Internet on the CMS Web site), while t hose codes based upon the April 2013 OPPS quarterly update were included in AddendumB. 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 final434 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 solicite d public comments in the CY 2014 OPPS/ASC proposed rule or whether we are soliciti ng 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 co mment 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 fla gged with comment indicator “NI” (New code, interim APC assignment; comment s 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 and435 an APC and payment rate, if applicable, wh ich were subject to public comment following publication of the CY 2013 OPPS/ASC fina l rule with comment period. We are responding to public comments and finalizing ou r interim OPPS treatment of these codes in this CY 2014 OPPS/ASC fina l rule with comment period. We received public comments on severa l 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 commen ts 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 co mments on the CY 2013 OPPS/ASC final rule with comm ent period and the specific sections where the comments are addressed.

TABLE 19.—COMMENTS TO THE CY 201 3 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 interpre tation, 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 withinduction or attempted induction of an arrhythm ia with right atrial pacing and recording, ri ght ventricular pacing and recording, his recording with intracardiac catheter ablation of arrh ythmogenic 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 withinduction or attempted induction of an arrhythm ia with right atrial pacing and recording, ri ght ventricular pacing and recording, his recording with intracardiac catheter ablation of arrh ythmogenic focus; with treatment of ventricular tachycardia or focus of ventricular ectopy including intracardiac electrophysiologic 3d mapping, when performed, and left ventricular paci ng and recording, when performed II.A.2.f.(3) (Cardiac Electrophysiologic Evaluation and Ablation Composite)

93655 Intracardiac catheter ab lation 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 se parately in addition to code for primary procedure) II.A.2.f.(3) (Cardiac Electrophysiologic Evaluation and Ablation Composite)

93656 Comprehensive electrophysiologic evaluation including transseptal cath eterizations, insertion and repositioning of multiple electrode catheters with induction or atte mpted induction of an arrhythmia with atrial recording and pacing, when possible, right ventricular pacing and recording, his bundle recording with intracardiac catheter ablation of arrh ythmogenic focus, with treatment of atrial fi brillation by ablation by pulmonary vein isolation II.A.2.f.(3) (Cardiac Electrophysiologic Evaluation and Ablation Composite)

93657 Additional linear or fo cal 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 va riability 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 HCPC S and CPT Codes Effective April 1, 2013 and July 1, 2013 for Which We Solicited P ublic 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 th e July 2013 OPPS quarterly update CR440 (Transmittal 2718, Change Request 8338, dated June 7, 2013), we recognized several new HCPCS codes for separate payment under th e OPPS. Effective Ap ril 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 HCPC S 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 upda te. 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. Speci fically, 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 indi cate 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 previous ly described by HCPCS code Q0505, which was deleted on March 31, 2013.

TABLE 20.—NEW LEVEL II HCPCS CODE S IMPLEMENTED IN APRIL 2013 CY 2013 HCPCS

Code CY 2013 Long Descriptor April 2013 Status Indicator April 2013 APC C9130* Injection, immune globul in (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 0067441 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 ru le (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 comme nts on the proposed APC assignments and status indicators for HCPCS code s 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. a nd III.C.3.b., respectively, of this final rule with comment period. For CY 2014, the HCPCS Workgroup re placed HCPCS codes C9130, C9297, and C9298 with permanent HCPCS J-codes. Tabl e 21 below lists the replacement HCPCS J-codes for the temporary HCPCS C-codes. Co nsistent with our general policy of using442 permanent HCPCS codes rather than using temporary HCPCS codes for the reporting of drugs under the OPPS in order to streamlin e 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 peri od, we are assigning the Level II HCPCS codes listed in Table 21 below to the specifi ed APCs and status indicators for CY 2014.443 TABLE 21.—FINAL CY 2014 STATUS INDICATORS AND APC ASSIGNMENTS

FOR THE LEVEL II HCPCS CODES TH AT 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 gl obulin (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 ma king any changes to the status indicator and APC assignment for HCPCS code C 9735. Specifically, HCPCS code C9735 will continue to be assigned to APC 0150 for CY 2014 with a status indicator of “T.” However, we are reassigni ng 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 stat us indicator “A” to “N” to indicate444 that they are now packaged under the hosp ital OPPS, consistent with our packaging guidelines, which are discussed in section II.A.3. of this fi nal rule with comment period. Furthermore, because HCPCS codes J1556, J9262, and J7316 describe the same drug and the same dosage currently de scribed by HCPCS codes C9130, C9297, and C9298, respectively, these drugs will continue their pass-through status in CY 2014. Therefore, we are assigni ng HCPCS codes J1556, J9262, and J7316 to the same APCs and the same status indicators as their pr edecessor HCPCS codes, as shown in Table 21. As discussed in the CY 2014 OPPS/AS C proposed rule (78 FR 43589), through the July 2013 OPPS quarterly update CR, whic h 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 CODE S 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-Releas ing 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 HCPC S 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 HC PCS Q-codes that were made effective July 1, 2013, were previously described by HC PCS J-codes that were separately payable under the hospital OPPS. First, the HC PCS Workgroup replaced HCPCS code J9002446 (Injection, doxorubicin hydrochloride, liposom al, 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 lipo some. Consequently, the status indicator for HCPCS code J9002 was changed to “E” (Not Payable by Medicare), effective July 1, 2013. Because HCPCS code Q2050 de scribes 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 biol ogicals, including therapeutic radiopharmaceuticals; paid under O PPS; separate APC payment). We also assigned HCPCS code Q2050 to the same AP C as HCPCS code J9002, specifically APC 7046 (Doxil injection), effective July 1, 2013. Secondly, the HCPCS Workgroup repl aced HCPCS codes J3487 (Injection, zoledronic acid (Zometa), 1 mg) and J3488 (In jection, zoledronic acid (Reclast), 1 mg) with one new HCPCS code, specifically Q 2051, effective July 1, 2013, to appropriately identify and pay for both the brand and generi c forms of zoledronic acid. Consequently, the status indicators for HC PCS codes J3487 and J3488 were changed to “E,” effective July 1, 2013, to indicate that the codes we re 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 sepa rate 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 assi gned HCPCS code Q2051 to a new APC to maintain data consistenc y for future rulemaking. Specifically, HCPCS code Q2051 was assigned to APC 1356 (Zolde dronic acid 1mg), effective July 1, 2013.447 Of the 10 Level II HCPCS codes that we re made effective July 1, 2013, we did not recognize for separate payment the fo llowing 5 HCPCS codes: HCPCS codes K0008, K0013, and K0900, which were assigned to st atus 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 st atus indicator “E” (Not payable/Noncovered by Medicare; not paid under OPPS). In the CY 2014 OPPS/ASC proposed ru le (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 comme nts on the proposed APC assignments and status indicators for HCPCS codes C9131, K0008, K0013, K0900, Q0090, Q2033, Q2050, and Q2051. Therefore, we are adopti ng as final, without modification, our proposal to assign these eight Le vel 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 th is 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 a nd APC assignments for
CY 2014.448 TABLE 23.—FINAL CY 2014 STATUS INDICATORS AND APC ASSIGNMENTS

FOR THE LEVEL II HCPCS CODES TH AT 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 in traoperative 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-Releas ing 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 re placed 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 in449 CY 2014. Therefore, we are assigning HCPC S 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 un der OPPS; Separate APC payment), its replacement HCPCS code J3489, which describe s the same item as its predecessor code, will also continue its nonpass-through st atus 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 Janua ry 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 assignm ent of CPT code 0336T, which replaced HCPCS code C9736. In the CY 2014 OPPS/ASC proposed ru le (78 FR 43589), we proposed to continue our established policy of recogni zing Category I CPT vaccine codes for which FDA approval is imminent and Category III CP T 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 year450 through the July quarterly update CR, consis tent 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 Le vel 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 Medi care at reasonable cost. Through the July 2013 OPPS quarterly update CR (Transmittal 2718, Change Request 8338, dated June 7, 2013), we allowed se parate 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-covere d 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 assi gnments, and payment rates for CY 2014. TABLE 24.—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2013451

In the CY 2014 OPPS/ASC proposed rule (78 FR 43588 through 43590), we proposed to continue our process of soliciti ng public comments on our status indicators and APC assignments for the CPT/HCPCS code s effective April 1 and July 1. For the CY 2014 update, we solicited public co mments 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 intraocu lar pressure for 24 hours or longer, unilatera l 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 stabiliz ation 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 $6,506.96452 13, and 14 of the proposed rule. We proposed to finalize their status indicators and their APC assignments and payment rates, if appli cable, 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 availa ble 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 pe riod, 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 Ta ble 12 were included in Addendum B to the proposed rule (which is available via th e Internet on the CMS Web site), where their proposed CY 2014 payment rates were also shown. We did not receive any additional public comments on this process. The final status indicators, APC assignments, and paymen t rates, if applicable, for the Level II HCPCS codes and the Category III CPT code s 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 Which453 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 HC PCS 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 w ith 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 A ddendum B to this final rule with comment period. Specifically, the status indicator and the APC assi gnment 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 peri od, and we respond to these comments in the final rule with comment period for the next calendar year’s OPPS/A SC 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 pr oposed to include in Addendum B to this CY 2014 OPPS/ASC final rule with comment period the new Category I and III CPT454 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 ru le with comment period to indicate that we have assigned them an interim OPPS pa yment 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 Oct ober 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 paymen t status for CY 2014. In addition, because these codes have been assigned to comment i ndicator “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/A SC final rule with comment period. B. OPPS Changes--Variations within APCs455 1. Background Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification system for covered hospital outpatient departme nt services. Secti on 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services cl assified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification sy stem, referred to as Ambulatory Payment Classifications (APCs), as se t forth in § 419.31 of the regula tions. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is hom ogeneous both clinically and in terms of resource use. Using this classification syst em, we have establishe d distinct groups of similar services. We also have develope d separate APC groups for certain medical devices, drugs, biologicals, therapeutic ra diopharmaceuticals, and brachytherapy devices. We have packaged into payment for eachprocedure or service within an APC group the costs associated with those items or services that are dire ctly related to, and supportive of, performing the main independent procedures or furnishing the 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, pr ocedure room, or treatment room; (2) Use of recovery room; (3) Use of an observation bed;456 (4) Anesthesia, certain drugs, biologi cals, 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 admini stering and monitoring anesthesia or sedation; (6) Intraocular lenses (IOLs); (7) Incidental services such as venipuncture; (8) Capital-related costs; (9) Implantable items used in connecti on with diagnostic X-ray tests, diagnostic laboratory tests, and ot her diagnostic tests; (10) Durable medical equipment that is implantable; (11) Implantable prosthetic devices (oth er than dental) which replace all or part of an internal body organ (including colostom y bags and supplies directly related to colostomy care), including re placement of these devices; (12) Costs incurred to procure dono r tissue other than corneal tissue. Significant revisions to the regulations at §419.2(b) were proposed. Further discussion of our packaging proposals was in cluded 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 ty pically performed together duri ng a single clini cal encounter and that result in the provision of a co mplete service (72 FR 66650 through 66652).457 Under the CY 2013 OPPS (77 FR 68243 th rough 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) Pr ostate 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 Cont rast Composite (APC 8007); and (10) MRI and MRA with Contrast Composite (APC 8008). Further discussion of composite APCs is in cluded 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 we ight represents the hospital cost of the services included in thatAPC, relative to the hospital cost of the services included in new proposed APC 0634 (Hos pital Clinic Visits). The APC relative payment weights are scaled to new APC 0634 b ecause it is the hospital clinic visit APC and because clinic visits are among the most fr equently furnished services in the hospital458 outpatient setting. We refer readers to section V II. 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 accountchanges in medical practice, changes in technology, the addition of new services , new cost data, and other relevant information and factors. Secti on 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representa tives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups a nd the relative payment weights (the Panel recommendations for specific services for th e 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 provi des that, subject to certain exceptions, the items and services within an APC gr oup cannot be considered comparable with respect to the use of resources if the highest cost for an item or servic e in the group is more than 2 times greater than the lowest co st for an item or service within the same group (referred to as the “2 times rule”). Th e 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 excepti on in the case of a drug or biological that has been designated as an orphan drug unde r section 526 of the Federal Food, Drug, and Cosmetic Act).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 resource s, if the cost of the highest cost item or service within an APC group is more than 2 time s 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 si gnificant based on the number of claims. We note that, for purposes of identifying significant HCPCS code s for examination of the 2 times rule, we consider codes that have more than 1,000 si ngle major claims, or codes that have both greater than 99 single major claims and contri bute at least 2 percent of the single major claims used to establish the APC 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 subs et of 1,000 claims is negligible within the set of approximately 100 million single proce dure 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, su ch 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 in460 Addendum B to the proposed rule. We not e 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 avai lable 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 res ource 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 pr oposed rule are related to changes in costs of services that were obser ved 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 indi cator 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, th at were initially assi gned 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 excep tions to the 2 times limit on the variation of costs within each APC group in unusual cases such as low-volume items and services. Taking into account the APC changes that we proposed for CY 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 outpatien t 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 ru le (78 FR 43592) that were excepted from the 2 times rule were based on claims da ta for dates of service between January 1, 2012, and December 31, 2012, that were processed before January 1, 2013. For this final462 rule with comment period, we used claims da ta 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 th e public comments we received on the CY 2014 OPPS/ASC proposed rule and making changes to APC assignments based on those comments, we an alyzed the CY 2012 claims data used for this final rule with comment period to identif y the APCs with 2 times rule violations. Based on the final CY 2012 claims data, we f ound 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 ru le 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 th e public comments we received and our review of the CY 2012 costs from hospital claims and cost report data availa ble for this final rule with comment period, we are finaliz ing 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 propos al to except 6 of the proposed10 original APCs from the463 2 times rule, specifically, APCs 0060 (Manip ulation Therapy), 0075 (Level V Endoscopy Upper Airway), 0105 (Repair/Revision/Remova l of Pacemakers, AICDs, or Vascular Devices), 0148 (Level I Anal/Rectal Pro cedures), 0278 (Diagnos tic 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 cons ideration 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 cost s 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/HospitalOutpatient PPS/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 a nd 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 pr ocess. 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.” Th e “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 indicat or “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, becau se the commenter believed that both of these proposed policies would result in packag ing the payment for the service described by HCPCS code C9733. The commenter stated that packaging paymen t 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 separate ly 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 pr oposed packaging payment for the service described by HCPCS code C9733 with payment for CPT code 19357 (Breast reconstruction, immediate or delayed, with tissue expande r, including subsequent expansion) does not comport w ith CMS’ principle that pack aging payment for services should reflect how the service is reported. The commenter stated th at its disagreement with the packaging proposals is supporte d 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 c onducted, HCPCS code C9733 was reported in combination with CPT code 19357 approximately 90 percent of the time. The commenter also believed that packaging pa yment for HCPCS code C9733 contradicts the466 principle that CMS should be able to map the costs of th e packaged service to the separately payable services with which it is performed. Response : We disagree with the comment er that payment for the service described by HCPCS code C9733 should not be packaged when it is used intraoperatively on the sa me date of service as the primary procedure. While it is true that HCPCS code C9733 is a relatively new se rvice, the commenter stated that its own data analysis shows that the service is be ing 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 wh ich it is performed. In addition, we believe that packaging payment for the service described by HC PCS code C9733 does reflect how the service is furnished and how it is be ing 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 repo rted on the 10 claims appear to have been mapped to appropriate separately paid pro cedures. The procedure described by HCPCS code C9733 is often performed intraoperatively in combination with a number of primary procedures, including facial reconstruction and reanima tion, muscle flaps, trauma reconstruction, and digital and limb reattach ment and, as the commenter stated, breast reconstruction, which appears to be the focu s of the commenter’s concern. In other words, there are a number of plastic and rec onstructive surgical pr ocedures 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 pe riod, 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 c ode 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 comme nt we received, we are finalizing our proposal to maintain the assignment of “Q2” status indicator to HCPCS code C9733. However, we are reassigning HCPCS c ode C9733 to APC 0263 when the service described by HCPCS code C9733 is perfor med and reported separately. Further discussion of comprehensive APCs is included in section II.A.2.e. of th is 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 corre cted 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 pr oposed assignment of CPT code 0319T to APC 0107 and requested that CMS reassi gn 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 cardioverte r-defibrillator system with transvenous lead(s), single or dual chamber), which is currently assigned to APC 0108. Response : We believe that the procedur e described by CPT code 0319T is sufficiently clinically similar to the other procedures assi gned 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 resour ce costs for this procedure at this time. We expect to have claims data for CP T code 0319T in preparation for the CY 2015 rulemaking cycle and will reevaluate the AP C assignment of CPT code 0319T at that time. After consideration of th e public comments we receive d, we are finalizing our CY 2014 proposal, without modification, to c ontinue to assign CPT code 0319T to APC 0107, which has a final CY 2014 APC geom etric 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, init ial treatment day) and CPT code 37212 (Transcatheter therapy, venous infusion for thrombolysis other than coronary, any469 method, including radiological supe rvision and interpretation, initial treatment day) to APC 0621 (Level I Vascular Access Proce dures), 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 co mmenter 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 assigne d 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 ap pears 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 CP T code 75710 when performed and reported in conjunction with CPT code 37211 or CPT c ode 37212, compared to payment for the services when performed and reported sepa rately, although significan tly 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 procedur e described by CPT codes 37211 and 37212 are sufficiently clinically similar to th e other procedures assigned to APC 0621. In470 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 th e APC assignment of CPT codes 37211 and 37212 at that time. After consideration of th e public comments we receive d, 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 Ligati on (APCs 0091 and 0092) For CY 2014, we proposed to contin ue to assign CPT codes 36475 (Endovenous ablation therapy of incompetent vein, extrem ity, 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 s upervision and interpretation, intraprocedural roadmapping, and imaging guidance (ultrasound and fluor oscopy), when performed) to APC 0091 (Level II Vascular Ligation), which had a proposed payment rate of approximately $2,882. In addition, we proposed to conti nue to assign CPT code 36478 (Endovenous ablation therapy of incompetent vein, extrem ity, inclusive of all imaging guidance and471 monitoring, percutaneous, laser; first veintreated) 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 clin ical and cost homogeneity, and requested that CMS consider restruct uring APCs 0091 and 0092. The commenter requested that CMS review the clinical and cost characteristi cs 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 or der 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 requ ires an expensive implanted device. The commenter further stated that the cost associated w ith 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. Th e commenter stated that the CPT clinical vignettes for CPT code 36475 (radiofreque ncy) and CPT code 36478 (laser) show similarities between these two procedur es, which further support the clinical homogeneity of these two procedures. Th e commenter believed that assigning both of472 these procedures to two different APCs, a nd maintaining a payment differential between CPT code 36475 and CPT code 36478, incentivizes providers to choose radiofrequency instead of laser, which is a clinically co mparable procedure. The commenter believed that assigning the two proce dures 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 bo th 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 CP T code 37191 should be reassigned to another APC that is more appropriate based on the na ture of the procedure. Based on our review of the existing vascular-related APCs and i nput from our medical advisors, we believe that CPT code 37191 would be more appropr iately reassigned to APC 0093 (Vascular Reconstruction/Fistula Repair) because of th e 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 cons ideration all of the procedures in APCs 0091 and 0092, we have determined that combining APCs 0091 and 0092 into one APC473 is appropriate. To accomplish this reconf iguration, 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 si gnificant 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: “V ascular 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 comm ent 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 con tinue to assign HCPCS code G0455 (Preparation with instillation of fecal microbiota by any me thod, 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 microbiot a for instillation, including assessment of donor specimen), effective January 1, 2013, to de scribe 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 specime n would only be made if the specimen is ultimately used for the treatment of a beneficiar y. Because of this policy, we believe that it was appropriate to bundle the preparation a nd 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 insu fficient. 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 mi crobes, the supplies, or the overall work involved in providing this pro cedure. 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 endoscopic475 portion of the procedure. To pay appropria tely for this procedure, the commenter recommended that CMS delete existing HCPCS code G0455 and replace it with three new HCPCS G-codes. The commenter sugge sted that the thre e recommended HCPCS G-codes differentiate the various preparati on methods used in performing the procedure and be assigned accordingly to appropriate APCs. Specifically, the commenter recommended that one HCPCS G-code descri be instillation by orona sogastric 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 s uggestions. However, we believe that the existing HCPCS code G0455 appropria tely describes the procedure for which Medicare should pay. Under Medicare, pa yment 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 diagnos is and treatment of a beneficiary. Because of this policy, we believe that it is appropriate to bundl e the preparation and instillation of fecal microbiota under HCPCS code G0455. Based on our understanding of the pro cedure, 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 pract ice 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 th e use of resources, for any 2 times rule violations. In476 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 rece ived, we are finalizing our CY 2014 proposal, without modification, to c ontinue to assign HCPCS code G0455 to APC 0340. The final CY 2014 geometric m ean cost of HCPCS code G0455 is approximately $54. The final CY 2014 paym ent 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 syst em (eps); includes endoscopy) to APC 0422 (Level III Upper GI Procedures), which had a proposed payment rate of approximately $1,967. (The pr oposed payment rate reflects the corrected proposed rate included in the Septembe r 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 p lication procedure for the treatment of gastroesophageal reflux disease (GERD). Since April 2005, HCPCS code C9724 has been assigned to APC 0422. Of the thr ee 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 AP C 0422 to New Technology APC 1565 (New Technology—Level XXVIII ($5000-$5500)) or crea te 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 AP C 0422 for the CY 2013 update. Furthermore, because of concerns rela ted 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); incl udes endoscopy,” effective January 1, 2013, to accurately describe how the proc edure is currently performed. At the August 2013 HOP Panel meeting, the same presenter at the August 2012 HOP Panel meeting requested that the Pane l 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 commenter s 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 rate478 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 be tween 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 geometri c mean cost of approximately $6,801 based on 12 single claims (out of 73 to tal 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 pro cedures assigned to APC 0422, three procedures have geometric mean cost ranging betw een approximately $1,431 (for CPT code 43830) and approximately $2,042 (for CPT code 43228). APC 0422 consists of other procedures that manipulate the natura l or an artificial entrance to the stomach, similar to the proced ure described by TIF. We believe that maintaining the assignment of HCPCS c ode 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 th e 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 comment s 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, cryothe rapy) to APC 0423 (Lev el 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; howev er, the same service was previously described by CPT code 0135T (Ablation re nal 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 reassi gned CPT code 0135T (now CPT code 50593) from APC 0163 (Level IV Cy stourethroscopy and Other Gen itourinary Procedures) to APC 0423, effective January 1, 2007.
Comment : One commenter expressed concern th at 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 costs480 incurred by hospitals in performing th e 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 appropr iate device C-code, sp ecifically, HCPCS code C2618 (Probe, cryoablation). The commenter believed that the inadequacy of the proposed payment rate for APC 0423 is attributab le 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 reporti ng CPT code 50593 do not contain the associated charge for the requi red device used in performing the service, specifically HCPCS code C2618 (Probe, cryoa blation). The commenter stated that designating CPT code 50593 as a device-depend ent procedure would result in a more accurate payment for the procedure and c ontinued Medicare beneficiary access to percutaneous renal cryoa blation in the HOPD. Response : We continue to believe that CP T code 50593 is appropriately assigned to APC 0423 based on clinical and resource si milarities compared to other procedures also proposed for assignment to APC 0423 fo r CY 2014. As we stated in the CY 2007 OPPS final rule with comment peri od (71 FR 68049 through 68050), the CY 2008 OPPS/ASC final rule with comment pe riod (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 renal481 cryoablation procedure from APC 0163 to APC 0423 in CY 2007 based on the APC Panel’s recommendation. In addition, base d on our CY 2012 claims data, the resource use associated with CPT code 50593 is compar able 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, ba sed 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 da ta for the eight procedures assigned to this APC. Of the eight procedures, six pro cedures have the most significant geometric mean cost, ranging between approxim ately $3,117 (for CPT code 47511) and approximately $5,047 (for CPT code 50593). Ba sed 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 commente r’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 benefici ary 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 procedur e. We do not identify individual HCPCS codes as device-dependent HCPCS codes under th e OPPS. Rather, we first consider the clinical and resource characteristics of a procedure and determine the most appropriate482 APC assignment. When we determine that we should assign a procedure to an APC that is device-dependent, based on whether that AP C has been historically identified under the OPPS as having very high device costs, we th en consider the implementation of device edits, as appropriate. We again note that the identification of de vice-dependent APCs was particularly important in the early y ears 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 ut ilized over several years to ensure appropriate in corporation of the device costs into the procedure payments. At this point in time, hospitals have si gnificantly more experi ence reporting HCPCS codes for packaged and separately payabl e 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 pro cedure-to-device edits for all of the CPT codes assigned to APC 0423. Under the OPPS, there are many othe r procedures that require the use of483 implantable devices that, because they are as signed to OPPS APCs that are not devicedependent, do not have procedure-to-device ed its applied, even if those claims processing edits would be feasible. We continue to be lieve that our payments for procedures that utilize high-cost devices are appropriate for t hose services, even when those services are grouped with other procedures that either do not require the use of im plantable devices or which utilize devices that ar e 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 hospi tals that they must report all of the HCPCS codes that appropriately describe the items used to provide services, regardless of whether the HCPCS c odes are packaged or paid separately. If hospitals use more than one probe in perf orming the procedure described by CPT code 50593, we expect hospitals to report this in formation on the claim and adjust their charges accordingly. Hospitals should report the number of cryoabla tion probes used to perform the procedure described by CPT code 50593 as the number of units of HCPCS code C2618, which describes these devices, wi th 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 t hose 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 CM S 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 descri ptions, cryoablation probes have improved and these devices are now referred to as cr yoablation needles. The commenter believed that modifying the description of HCPC S 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 ad visors, we agree that a change in the description of HCPCS code C2618 is a ppropriate. Therefore, for the CY 2014 update, we are revising the descripti on for HCPCS code C2618 from “Probe, cryoablation” to “Probe/needle, cryoablation” effective January 1, 2014. After consideration of th e public comments we receive d, we are finalizing our CY 2014 proposal, without modification, to c ontinue to assign CPT code 50593 to APC 0423, which has a final CY 2014 geometric m ean cost of approximately $4,121. In addition, we are revising the code desc riptor for HCPCS code C2618 to read: “Probe/needle, cryoablation” effective Ja nuary 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 Subm ucosal Injection (APC 0150) We created HCPCS code C9735 (Anos copy; with directed submucosal injection(s), any substance) effective Apr il 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 Septembe r 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)
Comment : One commenter believed that th e proposed assignment of HCPCS code C9735 to APC 0150 is inappropriate. The commenter stated that the bulking agent used in the performance of the procedur e described by HCPCS code C9735 costs $4,900 for the 4 mL required for the injections, and th at 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 recommende d 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; implan tation artificial sphincter), and CPT code 0184T (Excision of rectal tu mor, transanal endoscopic microsurgical approach (ie, TEMS), including muscularis pr opria (ie, full thickness)). The commenter stated that the procedure described by CP T code 46762 is clinically similar to the486 procedure described by HCPCS code C 9735 because both procedures involve implantation of a product to treat fecal incon tinence, and that the procedure described by HCPCS code C9735 is similar to the pro cedure described by CPT code 0184T because both procedures involve new technology with significant procedure costs. Alternatively, the commenter reco mmended assigning HCPCS code C9735 to New Technology APC 1526, with a CY 2014 propos ed payment rate of approximately $4,250. Response : HCPCS code C9735 was created e ffective 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 assignme nt for HCPCS code C9735. Based on our established OPPS ratesetting methodology, we will review the APC assignment for487 HCPCS code C9735 once we have OPPS claims data for this servic e during our annual OPPS update process. Therefore, we are finalizing our proposal to maintain the assignment of HCPCS code C9735 to AP C 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 Im plantation with Prosthesis) contains arthroplasty procedures as well as osseoint egrated 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 propos ed payment rate reflects the corrected proposed rate included in the Septembe r 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 fr om converting APC 0425 to a comprehensive APC. The commenter recommended that CMS remove the following osseointegrated implant procedure codes from APC 0425 and assi gn them to a more clinically appropriate APC: CPT code 69714 (Implantation, osseoint egrated 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 pe rcutaneous attachment to external speech processor/cochlear stimulator; with out mastoidectomy); and CPT code 69718 (Replacement (including removal of existing device), osseointegrated implant, temporal bone, with percutaneous attachment to exte rnal speech processor/cochlear stimulator; with mastoidectomy). Response : In response to the commenter’s re quest, we have again reviewed the composition of APC 0425 for clinical and re source 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 procedur es assigned to the APC involve surgical procedures that use high-cost devices, incl uding 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 comme nt 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 C ode 0334T (Sacroiliac jo int stabilization for arthrodesis, percutaneous or minimally invasive (indirect vi sualization), 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 fu rther stated that th e 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 analys is, 38 hospitals submitted outpatient claims reporting CPT code 27280. However, no clai ms were used for CY 2014 Medicare ratesetting because CPT code 27280 was in cluded 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 pro cedure described by CPT code 27280, which uses490 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 stru ctures, 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 creati ng 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’ sugg estions. 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 li kely 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 rema in on the inpatient onl y list for CY 2014. CPT code 27280 is used primarily to report open sacroiliac joint fusi on procedures, rather than minimally invasive SI joint fusion pro cedures. Therefore, while some of the 38 claims may involve the minimally invasive t echniques, we are not convinced that these claims represent minimally invasive techniqu es, but consist mainly of open SI joint fusion procedures, which are the primarily repo rted procedures for this code. Regarding the commenters’ suggested option to crea te a new device pass-through category, we do491 not discuss the merits of OPPS pass-through stat us applications in our proposed or final rules. Regarding the commenters’ recomm ended option to assign CPT code 0334T to a New Technology APC or to create a new clin ical 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 cl inical homogeneity. However, we believe that CPT code 0334T can be appropriately assign ed to an existing clin ical APC, which is preferable because other clinically similar procedures populate the APC. The final geometric mean cost of APC 0208 is approxi mately $4,017. We agree that the resource use associated with the procedure describe d by CPT code 0334T is likely to be greater than the resource use associ ated with the typical pro cedures assigned to APC 0208. Therefore, we believe that a more appropria te 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 clinic ally similar to the procedure described by CPT code 0334T, and we believe that it is ap propriate 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 th e public comments we receive d, we are not finalizing our CY 2014 proposal to maintain the assignmen t 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 acce ssory nerves, bilateral (e.g., for chronic migraine)) and 52287 (Cystourethroscopy, with in jection(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 (L evel II Cystourethroscopy and Other Genitourinary Procedures), with a proposed payment rate of approximately $1,201. In addition, we proposed to con tinue to assign CPT code 64615 to APC 0204 (Level I Nerve Injections), with a propose d payment rate of approximately $214. (The proposed payment rates reflect the corrected propos ed 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 clin ical similarity to the procedure described by CPT code 64613 (C hemodenervation 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 commente r’s assertion thatthe procedure described by CPT code 64615 is more simila r to the procedure described by CPT code 64613. Based on the description of the proced ure, the procedure described by CPT code 64615 is most similar to the procedure de scribed by CPT code 64612 (Chemodenervation of muscle(s); muscle(s) innervated by faci al nerve, unilateral (e g, for blepharospasm, hemifacial spasm)), which is assigned to APC 0204. The procedures described by CPT codes 64612 and 64615 both involve facial ne rve muscles, whereas the procedure described by CPT code 64613 involves the neck muscles. Consequently, we believe that CPT code 64615 is appropriately assigne d to APC 0204 based on its clinical homogeneity to CPT code 64612. We note that, in addition to the paym ent for the procedure, hospitals would receive separate payment for the drug onabot ulinumtoxina, which is described by HCPCS code J0585 (Injection, onabotulinumtoxina, 1 un it), when the drug is administered during the procedure. Consistent with CMS’ longstanding polic y 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 av ailable 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 Cystour ethroscopy and Other Genitourinary494 Procedures). The commenter stated that the proposed APC assignment for CPT code 52287 is economically and clinical ly inappropriate. The comm enter further stated that the procedure described by CPT code 52287 is mo re clinically simila r to the procedure described by CPT code 52283 (Cystourethroscop y, 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 clinica lly 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, su ch 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 cu rrent 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 receive d, 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 c ode 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 pr oposed 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 th e nerve conduction test s. The commenters stated that the proposed payment of $67 fo r APC 0215 is inadequate because it does not cover the expenses associat ed with providing these serv ices. The commenters urged CMS to reconsider the proposed APC assignments for CPT codes 95907 through 95913, and suggested specific alternative APC a ssignments 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 from496 APC 0215 to APC 0216 (Level III Nerve and Musc le Services), and the reassignment of CPT codes 95911, 95912, and 95913 from APC 0218 to APC 0216. We also received a comment in res ponse 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, a nd suggested that the lower payment rates would negatively impact benefi ciary 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 th e 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 peri od 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 conduc tion 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 are497 listed in Table 26 below. The final CY 2014 payment rates for CPT codes 95907 through 95913 are included in Addendum B to this fina l 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 ha s been our practice, we annually review all the items and services within an APC group to determine, with resp ect 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 gr eater 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 whethe r 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 ratese tting until the CY 2015 rulemaking cycle. TABLE 26.—FINAL CY 2014 AP C 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 0216498

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 a nd Sympathetic Function (APC 0215) In CY 2013, the AMA’s Editorial Panel creat ed 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 pa ssive tilt: CPT code 95943 (Simultaneous, independent, quantitative measures of both parasympathetic function and sympathetic function) and CPT code 95924 (Testing of aut onomic nervous system function; combined parasympathetic and sympathetic adrenergic f unction 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 paym ent rate of approximately $43. We also assigned comment indicator “NI” to CPT c ode 95943 to indicate that the code was new for CY 2013 with an interim APC assignm ent that was subject to public comment following the publication of th e CY 2013 final rule with co mment period. We assigned CPT code 95924 (Testing of autonomic nervous system function; combined parasympathetic and sympathetic adrenergic f unction testing with at least 5 minutes of passive tilt) to APC 0218 (L evel II Nerve and Muscle Tests), which has a CY 2013 payment rate of approximately $80.499 Comment : One commenter who addressed th e 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 a pproximately $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 (paras ympathetic function)) and CPT code 95922 (Testing of autonomic nervous system func tion; vasomotor adrenergic innervation (sympathetic adrenergic function)), were assigned to APC 0218. In addition, the commenter stated that the test described by CP T code 95943 is almost identical to the test described by CPT code 95924, which is assi gned 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 fr om APC 0215 to APC 0218. We will reconsider the APC assignments for this code once claims data are available, as part of our usua l ratesetting methodology for CY 2015. d. Epidural Lysis (APCs 0203 and 0207)500 For CY 2013, CPT code 62263 (Epidural ly sis, multiple sessions) and CPT code 62264 (Epidural lysis on single day) are assigned to APC 0203 (Level IV Nerve Injections), with a paymen t 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 CP T codes 62263 and 62264 continued to differ by a similar magnitude for CY 2014: the CY 2014 pr oposed rule geometric mean cost of the procedure described by CPT code 62263 wa s 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 resour ces 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 sim ilar 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, af ter 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 reassi gn 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 approxim ately $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 propos ed rates included in the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web site.)
Comment : One commenter asked CMS to expl ain 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 comme nt 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 dete rmined that we need to improve the clinical and resource homogene ity 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), whic h has a final rule geometric mean cost of approximately $113 and CPT code 95972 (Complex neurostimula tor 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 a pproximately $277) to the lower Level II APC 0692 (which has a final rule geometric mean co st of approximately $116). In addition, to avoid 2 times rule violations we are rea ssigning CPT code 62367 (A nalysis of spinal fusion pump), which has a final rule geom etric mean cost of approximately $202, CPT code 62368 (Analysis with reprogramming), whic h has a final rule geometric mean cost of approximately $216, CPT code 62369 (Analy sis 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), whic h has a final rule geometric mean cost of approximately $286, from the lower Level II APC 0692 to th e 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 prosth esis 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 AP C 0672. The device implanted during this procedure (HCPCS code C1841 (Retinal prosth esis)) includes all internal and external components, and was granted pass-t hrough status beginning October 1, 2013.
Comment : One commenter requested that CMS reassign CPT code 0100T to a new APC with a payment rate of approxima tely $6,500, which the commenter estimated by combining the costs of procedures that th e commenter believed to be components of CPT code 0100T. The commenter also assert ed 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 be lieve that it is appropr iate to create and assign CPT code 0100T to a new APC at this tim e. 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 de scribed by CPT code 0100T is complex, the other services assigned to APC 0672, for ex ample the procedure described by CPT code504 67113 (Repair of complex retinal detachment ), are also complex and involve many different techniques and re quire extensive resources. b. Tear Film (APC 0230) For CY 2014, we proposed to assign th e new Category III CPT code 0330T (Tear film imaging, unilateral or bilateral, w ith 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 Treatment s). The commenter believed that the clinical and resource similarities of th e service described by CPT code 0330T to the services currently a ssigned to APC 0698 warrant reassignment. Response : We believe that the service de scribed by CPT code 0330T is most similar to the other imaging services assi gned to APC 0230, such as corneal topography or eye photography. We currently have no clai ms data for this se rvice for ratesetting purposes because CPT code 0330T became effectiv e 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 th rough our standard review process. After consideration of the public comme nt 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 imag ing, planar qualitative and quantitative assessment) and CPT code 0332T (Myocardial sympathetic innervation imaging, planar qualitative and quantitative assessment; w ith 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 appr oximately $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 w ith 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 th e 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 th e radiopharmaceutical alone used in these procedures. The commenters believed th at the assignment of CPT codes 0331T and 0332T to APC 0398 would impede Medicare bene ficiaries’ 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 w ould better reflect the estimated costs for these procedures. Other commenters indica ted that these new procedures are more comparable to the procedures assigned to APC 0377 (Level II Cardiac Imaging) in terms of clinical and res ource similarities. Response : We do not agree with the comm enters that CPT codes 0331T and 0332T should be assigned to a New Technol ogy APC for CY 2014 because we believe506 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 diagnos tic 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 dr ug 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 a nd 0332T to APC 0377 and, therefore, are modifying the codes’ APC assignment for CT 2014. After consideration of the public comments we rece ived, 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 HC PCS 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 geomet ric 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 Septembe r 6, 2013 OPPS Addendum B, which was posted507 on the CMS Web site.) We proposed to main tain 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 reassi gn 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 Syst em 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 tumo r 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 correcte d 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 imag ing procedure (including the packaged radiopharmaceutical) as a result of packaging of the radi opharmaceutical into CPT code 78607 and retention of the procedure in APC 0402, following expiration of the passthrough status of the procedure. The comme nters objected to the reduction from the pass-through payment amount of approxi mately $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 be neficiary access to care for this service. Several commenters believed that CPT code 78607 would be more appropriately assigned to APC 0308 (Posit ron Emission Tomography (PET) Imaging) rather than APC 0402 because CPT code 78607 is a new imaging service that uses more resources and is not clinica lly similar to the cisternogra phy 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 servic es more similar in terms of costs to CPT code 78607 and to correct the 2 times rule vi olation in APC 0402. However, we do not agree with the commenters that the proce dure 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 re source use, we are reassigning CPT code509 78607 from APC 0402 to APC 0408 (Level III Tu mor/Infection Imaging) for CY 2014, which has a final rule geometric mean cost of approximately $1,161.
Comment : One commenter asked CMS to expl ain its rationale for proposing to reassign CPT code 78647 from APC 0402 to AP C 0403. The commenter believed that this reassignment would decrease the paym ent 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 co st of APC 0402 than the final rule geometric mean cost of APC 0403. While there is no vi olation 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 a ssigned to APC 0402, we ar e not finalizing our proposal to reassign CPT code 78647 from AP C 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 expl ain 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 cost510 of APC 0403 (approximately $163). Therefore, based on the similarity of the costs of the services assigned to APCs 0402 and 0403, we ar e finalizing our propos al to reassign CPT code 78605 from APC 0403 to APC 0402.
Comment : One commenter asked CMS to expl ain 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 assi gnment 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 cl oser to the final rule geom etric mean cost of APC 0406 (approximately $384) than the final rule geometric mean cost of APC 0414 (approximately $659), and is clinically sim ilar to the other tumo r imaging services assigned to APC 0406. Therefore, we are finalizing our pro posal to reassign CPT code 78801 from APC 0414 to APC 0406 for CY 2014.511 8. Radiology Oncology a. Intraoperative Radiation Therapy (IO RT) 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 perfor med) 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 app lication, 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 crea ted two new Category I CPT codes for intraoperative radiation ther apy (IORT) treatment delivery, effective January 1, 2012: CPT codes 77424 (Intraoperative radiation tr eatment 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 Radiosur gery, MRgFUS, and MEG), with a CY 2013 payment rate of $978.25 because we believed th ese IORT service codes were similar to other services assigned to APC 0065 in terms of clinical characteris tics, 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 we512 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 de livery of radiation therapy when performed intraoperatively, and th at it would no longer be required to report the placement and removal of the applicator via HCPCS code C 9726 on a claim. Therefore, we proposed to delete HCPCS code C9726, effective Ja nuary 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 we ll as the delivery of radiation therapy when performed intr aoperatively, with CPT codes 77424 and 77425, which we proposed to continue to assign to APC 0065.
Comment : Many commenters disagreed with CM S’ 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 de lete HCPCS code C9726 because it would no longer be required to report th at service on the claim. Seve ral commenters indicated that the service described by HCPCS code C9726 is performed by the surgeon before and after IORT delivery, and represen ts the cost of the applicator and hospital costs related to the surgeon’s placement of the applicat or, while CPT codes 77424 and 77425 represent513 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 descript ions of CPT codes 77424 and 77425. Some commenters also indicated that placement and removal of a pplicators for radiati on therapy for various other parts of the body are separately reporte d 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 clai ms 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 ina 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 currentlyno service codes other th an HCPCS code C9726 that separately describe placement of a rigid appl icator 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, a nd that the service is not included in the descriptions of CPT codes 77424 and 77425. Th erefore, after cons idering all of the public comments on IORT, we are not finalizi ng our proposal to delete HCPCS code C9726 for CY 2014. However, to make the co ding consistent with other intraoperative514 procedures involving catheters or applicators used for radiation therapy treatment of the breast, for CY 2014, we are designating HCPC S code C9726 as an add-on code to the primary procedure that involved the intraope rative 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 ther e 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 commente rs’ suggestions for alternative payment methodologies for IORT and may consider such alternatives in the future. After consideration of th e public comments we receive d, we are not finalizing our proposal to delete HCPCS c ode C9726 for CY 2014. We ar e 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 descri ptor for HCPCS code C9726 to read: “Placement and removal (if performed) of applicator into breast for intraoperative radiation therapy, add-on to primary breast pr ocedure.” We are continuing to assign CPT codes 77424 and 77425 to APC 0065 for CY 201 4, which has a final geometric mean515 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 Radiati on 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 includ es two procedures: CPT code 77523 (Proton treatment delivery, intermediate) and CP T code 77525 (Proton treatment delivery, complex). The payment rates for proton beam radiation therapy servi ces are set annually based on claims data according to th e 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 inAPC 0664. As we discuss in section III.B. of this final rule with comment period, a 2 times rule viola tion occurs when the cost of the highest cost significant item or servi ce within an APC group is more than 2 times greater than the cost of the lo west cost significant item or service within that same group. In making this determination, we consider on ly codes that have more than 1,000 single major claims or codes that ha ve both greater th an 99 single major claims and contribute at least 2 percent of the si ngle major claims used to establish the APC cost to be significant. If neither of these claims thre sholds is met, there is not a 2 times rule violation even if the highest cost item or serv ice 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 rule516 violation within APC 0664 because the cl aims 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 cl aims data for CPT code 77520 increased--the number of single claims was greater than 99 and contributed at l east 2 percent of the single claims used to establis h 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 radi ation therapy services. We also proposed to delete APC 0664. We invited public comments on this proposal.
Comment : Several commenters stated thatthey 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 shoul d 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 belie ved 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 comp lex 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 me thodology, we determined that the number of claims for CPT code 77520 is not significant and, therefor e, a 2 times rule violation within APC 0664 does not exist for CY 2014. After consideration of th e public comments we receive d, because there is now no 2 times rule violation within APC 0664, we ar e 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 differe nt radiation source types, specifically, Cobalt-60 and linear acc elerator (linac). Among the linac-based SRS procedures, the current HCPCS G-codes distin guish 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 be lieved 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 descri bed by HCPCS code G0243. We refer readers to the CY 2007 OPPS final rule (71 FR 68023 th rough 68026) for a detailed discussion of the history of the SRS codes. Since CY 2007, HCPCS codes G 0173, G0251, G0339, G0340, and CPT code 77371 have been the codes used under the OPPS to describe SRS treatment delivery procedures. However, SRS techniques a nd equipment have evolved and expanded over time. In light of these developments a nd 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 elim inating unnecessary complexity, redundancy, and outdated distinctions that no longer repres ent meaningful distinct ions for purposes of OPPS payment. Based on our review of th e current SRS technology, we understand that most current linac-based SRS technology incorp orates some type of robotic feature. Therefore, we believe that it is no longer necessary to cont inue 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 versus519 fractionated treatments. Table 16 of the pr oposed 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 thei r associated status indicators and APC assignments for the current HCPCS G-codes fo r 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 sessi on cranial treatment codes, to APC 0067, which we proposed to rename “Level II Stereota ctic 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 th e proposed renamed APC 0067. The CY 2014 proposed APC payment rates for the CPT code s 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 stat us indicators and their APC assignments and payment rates in this CY 2014 OPPS/ASC fina l 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, 20 13, 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 notinclude claims data for HCPCS codes G0251, G0339, and G0340. In addition, our initial proposed payment rate of approximately $8,576 for APC 0067 only include d claims data for CPT codes 77372 and520 77371 and did not include claims data fo r HCPCS code G0173. Consequently, we corrected this error and posted the corr ected payment rates for APCs 0066 and 0067 on September 6, 2013. Because of this correc tion, 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 CP T 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 cha nge 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 paym ent levels for the SRS CPT codes. The commenters agreed that utilizing the CPT c odes would standardize the reporting of SRS services across all payers, which the hosp ital industry has favored since the SRS treatment delivery CPT codes were establis hed 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’ s upport for our proposal. We believe that adopting the SRS treatme nt 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 bo th the linear accelerator-based SRS technology and Cobalt-60 SRS technology supporte d CMS’ proposal and stated that the change would equalize payments for both techno logies 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 paymen t 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 sy stem for single session cranial SRS. In addition, some commenters stated that the proposal is consis tent with the provisions of section 634 of the American Ta xpayer Relief Act (ATRA) of 2012. Response : We appreciate the commenters’ supp ort for our proposal. As specified in the April 2013 OPPS Update CR (Trans mittal 2664, CR 8228) dated March 1, 2013, section 634 of the ATRA require s 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 appl y to rural hospitals, sole community hospitals, or rural referral cen ters. In this final rule w ith comment period, for CY 2014, we are reassigning CPT code 77371 and assi gning CPT code 77372 (the successor codes for HCPCS code G0173) to APC 0067. Th erefore, CPT codes 77371 and 77372 will have the same payment amount. We agree with the commenters that this APC assignment satisfies the requireme nts of section 634 of the ATRA.522 Comment : Some commenters expressed conc ern regarding the proposal for SRS and suggested that CMS delay implementation of the proposal. The commenters suggested that, to pay appr opriately for SRS services, CMS consider for CY 2015 the development of a comprehensive APC for th e 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 co mmenters stated that single session cranial SRS procedures performed with either C obalt 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 encourag ed 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 co mmenters’ suggestion to delay implementation of the proposal because we believe that adopting the CPT codes and restructuring the SRS APCs improve the cl inical and resource homogeneity for SRS while satisfying the requirement s of section 634 of the ATRA. We appreciate the commenters’ sugges tion 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 paym ent 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 in itial proposed APC payment rates for APCs 0066 and 0067. Response : As explained above, we revised th e 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 a ppropriate HCPCS codes, including the various HCPCS G-codes that were proposed for dele tion. We should have included the CY 2012 SRS HCPCS G-code claims data in our propos ed CY 2014 ratesetting; otherwise, some of the services would be si gnificantly underrepresented in th e APC payment calculations. We believe that the corrected proposed APC pa yment 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 STEREO TACTIC 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 of1 session; multisource Cobalt 60 based 0127 $3,300.64*

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$7,910.51* 77371 Radiation treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of cranial lesion(s) consistingof 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 roboticlinear acceleratorbased stereotactic
ra diosurgery 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 $2,047.86525

*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 expr essed concern with the proposed packaging of payments for certain CPT codes describing th e Cobalt-60 SRS procedure. In particular, the commenters indicated that the proposal to package an cillary services, including certain SRS radiation planning codes, penalizes hospitals for providing the more efficient form of SRS, namely, the Cobalt-60 tec hnology, which is provided as a single-day service. Some of the commenters stated th at under CMS’ packag ing 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 pa id separately. In particular, the commenters were concerned that the proposed policy for packaging of fractionated treatment.

G0340 Image-guided roboticlinear 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 $2,354.79526 payment for CPT codes 77290, 77295, 77300, 77334, and 77370, if finalized, would result in higher payments for patients trea ted 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 sec tion II.A.3. of this final rule with comment period, we are not finalizing our propos al to package payment of ancillary tests. The SRS planning services, specifically t hose 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, stat us indicators, and APC assignments for these CPT codes are listed in Table 28 below.527 TABLE 28.—FINAL CY 2014 STAT US 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 correct ed 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 clai ms data for HCPCS code G0173 should have been used to determine the payment rate fo r APC 0067 because this code was more than528 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. A lthough 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 SR S procedures. Furthermore, assigning CPT codes 77371 and 77372 to the same APC also satisfies the requ irements 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 equa l 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 ble nded 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 de termining 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 radi ation therapy (SBRT), as described by CPT529 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 CP T 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 percen t 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 la test 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 descri be 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 pract ice 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 th at describes a single session intracranial SRS treatment procedure with no mention of th e 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 lin ac-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 mo st significant distinctions between the various SRS procedures: (1) Cobalt-60 versus linac radiation sour ces; and (2) single session cranial versus fractiona ted treatments. If the th ree-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 believ e that coding reform in this area would be best addressed through a dedicated CPT workgr oup that would include all of the various physician specialties, such as neurosurge ry and radiation oncology, and the other stakeholders involved in the delivery of this critical treatment moda lity. 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 th e assumption of more531 precise coding but without the benefit of a br oad perspective of stakeholder and physician specialist input. Otherwise, we risk unint entionally 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 c linical 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 commenter s stated that the lack of clarify promotes inefficiency and ensures misuse of CPT codes. Response : We agree with the commenters th at the transition from the HCPCS G-codes to the CPT codes could be confusi ng in certain cases. Therefore, we are providing the following coding guidan ce for CPT codes 77371, 77372, and 77373. CPT code 77371 is to be used only for single se ssion 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) th at 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 du ring 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 singl e session of SRS treatment for a cranial lesion, up to a total of no more than five fract ions, and one to five sessions (but no more532 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 neve r 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 cr anial SRS treatment seri es and must only be used in cranial SRS delivery service when th ere 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 th e public comments we receive d, we are finalizing our CY 2014 proposal without modification. Specif ically, we are finalizing our proposal to reassign CPT code 77371 to APC 0067; re place 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 codes533 will remain active under the MPFS for CY 2014. Consequently, we are finalizing our proposal to change the status indicator for the HCPCS G-code s 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 tr eatment delivery services, their status indicators, APC assignments, and payment rates for CY 2014. TABLE 29.—FINAL CY 2014 AP C 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 of1 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 $1,921.30534

*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 Edito rial Panel created two new Category I CPT codes: CPT code 31660 (Bronchoscopy, ri gid or flexible, in cluding fluoroscopic guidance, when performed; with bronchia l thermoplasty, 1 lobe) and CPT code 31661 (Bronchoscopy, rigid or flexible, including fluor oscopic 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 bronchia l thermoplasty, 1 lobe) and CPT code 0277T G0339 Image-guided roboticlinear acceleratorbased stereotactic radiosurgery, complete course of therapy in one session or first session of fractionated treatment. 0067 $3,300.64

G0340 Image-guided roboticlinear 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 $2,354.79535 (Bronchoscopy, rigid or flexible, including fluor oscopic guidance, when performed; with bronchial thermoplasty, 2 or more lobes), wh ich were deleted as of January 1, 2013. In the CY OPPS/ASC 2013 final rule with co mment 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 packag ed 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 procedur es 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 br onchial 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 br onchial 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 pa yment status, the payment rate for APC 0415 will not reflect the costs associ ated with CPT codes 31660 and 31661, the procedure with which the HCPC S code C1886 device is used. The commenter stated that the two bronchial thermoplasty CPT code s available in CY 2012, CPT code 0276T and CPT code 0277T, were subject to noncoverage policies for all Category III CPT codes by536 most Medicare Administrative Contractors (MACs), which resulted in few Medicare claims for CY 2012, the claims data year us ed 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, wh ich is reportedly $2,500. The commenter also expressed its con cerns 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 performe d; with transbronchi al 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 thermoplas ty 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 highe r volume, lower cost procedur e codes assigned to the Level II Endoscopy Lower Airway APC and the lo wer volume, higher cost procedure codes assigned to a new proposed Level III Endosc opy 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 B iliary Procedures), which the commenter believed has a number of clinical simila rities, including one pulmonary procedure described by CPT code 32998 (Ablation therapy for reduction or eradic ation of 1 or more537 pulmonary tumor(s) including pleura or ches t wall when involved by tumor extension, percutaneous, radiofrequency, unilateral). Response : Regarding the commenter’s con cerns about the claims data for bronchial thermoplasty servic es, we believe that the co st of the HCPCS code C1886 device is reflected in the proposed paymen t 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 c ode 0276T, 16 single claims reported the HCPCS code C1886 device with a geometric mean co st 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 se parately report the HCPCS code C1886 device for pass-through payment on claims reporting CPT code 0276T but instead reported the cost of the HCPC S 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 sepa rately, with a geometric mean cost of approximately $4,175, while 8 claims were submitted without the HCPCS code C1886 device reported separately, w ith a somewhat lower geometric mean cost of $2,780. However, our final geometric mean costs (bas ed on the final rule claims data) for CPT codes 0276T and 0277T, $4,019 and $3,700, respectiv ely, are similar to the geometric mean cost of bronchial thermoplasty se rvices with the HCPCS code C1886 device reported separately that we found in our analysis of CPT codes 0276T and 0277T538 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 additi on, 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 ava ilable 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 da ta. This lower frequency would promote volatility of costs for such a Level III lo wer airway endoscopy APC. Based on the reasons set forth above, we ar e 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 ope rating 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 proposed539 payment rate reflects the corrected proposed rate in the September 6, 2013 OPPS Addendum B, which was poste d on the CMS Web site.)
Comment : One commenter stated that the pr oposed rule cost of CPT code 31571 does not support the reassignm ent of this procedure code from APC 0075 to APC 0074. The commenter believed that the propos ed 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 0 074 and 0075 required the proposed realignment of the procedures w ithin those APCs to avoid 2 ti mes rule violations. If CPT code 31571 remained assigned to APC 0075, a 2 tim es rule violation would have resulted because the cost of the pro cedure 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 w ithout removal of tissue from frontal sinus), which had a proposed rule ge ometric mean cost of approximately $4,623. This situation appears to remain the case base d 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 th e 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. Furt hermore, we believe that the procedure540 described by CPT code 31571 is similar in te rms 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. Theref ore, we are finalizing our pr oposal 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 exer cise (includes monitoring), one hour, per session, up to two sessions per day) from APC 0102 (Level II Pu lmonary Treatment) to APC 0077 (Level I Pulmonary Treatment), with a proposed pa yment 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 AP C 0102 with a similar payment rate of approximately $39. CMS established HCPCS code G0424 eff ective January 1, 2010, to describe a one-hour session of pulmonary rehabilita tion. This HCPCS code was established consistent with the requirements set fort h in section 144(a)(1) of Public Law 110-275 (MIPPA), which added section 1861(fff) to the Act, to provide Medica re Part B coverage and payment for a comprehensive program of pulmonary rehabilitation services furnished to beneficiaries with chroni c obstructive pulmonary diseas e, 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 endur ance of respiratory muscles, face to face, one on one, each 15 minutes (i ncludes monitoring)), G0238 (Therapeutic procedures to improve respiratory functi on, other than described by G0237, one on one, face to face, per 15 minutes (i ncludes monitoring)), and G 0239 (Therapeutic procedures to improve respiratory function or increase st rength or endurance of respiratory muscles, two or more individuals (incl udes monitoring)), are assigned. Several commenters stated that the length of time in performing the service described by HC PCS code G0424 is not consistent with the length of time to perform the other servic es assigned to APC 0077. In particular, the commenters stated that HC PCS code G0424 represents a 60-minute to 90- minute procedure, which is not similar to th e 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 co mmenters stated that the assignment of HCPCS code G0424 to APC 0077 would create a 2 times rule violation. Some commenters further believed that hospitals ar e underreporting the co sts of the procedure described by HCPCS code G0424, and stated th at 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 mi nute procedures). Some commenters recommended that CMS establish a payment for HCPCS code G0424 using claims data542 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, fo r 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 comme nt 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 c ode 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 describe d 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 geom etric 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 note543 that APC 0077 included various pulmonary tr eatments whose geometric mean costs range between $23 and $43. Based on the late st hospital outpatient claims data, we believe that HCPCS code G0424 can be appropriately reassigned to APC 0077. Regarding the commenters’ statement a bout 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’ a ssertion that assigning HCPCS code G0424 to APC 0077 would create a 2 times rule vi olation. 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 th e 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 ot her services assigned to APC 0077.544 After consideration of th e public comments we receive d, we are finalizing our CY 2014 proposal, without modification, to reassign HCPCS c ode G0424 from APC 0102 to APC 0077. APC 0077 has a final CY 2014 geometric mean cost of approximately $39. The final CY 2014 paym ent 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 code s 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 (N asal/sinus endoscopy, surgical; with dilation of sphenoid sinus ostium (eg, balloon d ilation)) 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 co st and frequency of a single code, CPT code 31541 (Laryngoscopy, direct, operative, with excision of tumor and/or stripping of vocal cords or epiglottis; w ith operating microscope or te lescope), which had a proposed geometric mean cost of approximately $2,085, and comprised 61 percent of the APC’s single frequency claims for ratesetting. Th e commenter requested that CMS analyze the545 appropriateness of continuing to assign CPT codes 31295, 31296, and 31297 to APC 0075 and/or the appropriateness of conti nuing to assign CPT c ode 31541 to APC 0075. Response : Based on updated claims data, we reviewed the procedures in APC 0074 (Level IV Endoscopy Upper Airway) a nd APC 0075. During our review, we found 2 times rule violations in both APCs. To re solve one of the 2 times rule violations, we reassigned CPT code 31541 from APC 0075 to AP C 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 reassigni ng 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 th e public comments we receiv ed, 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 fr om APC 0075 to APC 0074 for CY 2014. b. Radiofrequency Ablation of Uterine Fibroids (APC 0174) We created HCPCS code C9736 (Laparos copy, surgical, radiofrequency ablation of uterine fibroid(s), includi ng intraoperative guidance and monitoring, when performed) effective July 1, 2013. The procedure became know n to us by means of an application to546 assign the procedure to a New Technology AP C. We assigned HCPCS code C9736 to APC 0131 (Level II Laparoscopy) because we be lieved that it has the greatest degree of clinical similarity to the laparoscopic pro cedures 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 recen tly created new Category III CPT code 0336T (Laparoscopy, surgical, ablation of ut erine fibroid(s), in cluding intraoperative ultrasound guidance and monitoring, radiofre quency), 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 recommende d 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 (L aparoscopy, surgical, ablation of 1 or more liver tumor(s); radiofrequency) and CPT code 50542 (Laparoscopy, surgical; ablation of renal mass lesion(s), includi ng intraoperative ultrasound guidance and547 monitoring, when performed), have clinical a nd resource characteristics similar to the characteristics of the procedures descri bed by HCPCS code C9736. The commenters stated that both procedures are performed in an operating room (OR) under general anesthesia and involve diagnostic laparosc opy, 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 pr ocedure described by HCPCS code C9736 costs $2,584, which is part of more than $3,400 in to tal 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 in tensive. The commenters also requested that CMS delete HCPCS code C9736 a nd 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, effectiv e July 1, 2013. We rout inely 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 re viewing claims data on ce 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 simila r 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, we548 are deleting HCPCS code C 9736, 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 re view once our claims data begin to reflect the cost of this procedure. After consideration of th e public comments we receive d, 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 Gu ided Focused Ultrasound (APC 0065) The AMA’s CPT Editorial Panel crea ted two Category III CPT codes that describe Magnetic Resonance Image Guided Focused Ultrasound (MRgFUS) used in ablation of uterine fibroids, effective Ja nuary 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 gui dance; total leiomyomata vol ume greater or equal to 200 cc of tissue). The CMS HCPCS Workgroup cr eated a third code related to MRgFUS, HCPCS code C9734 (Focused ultrasound ablati on/therapeutic intervention, other than uterine leiomyomata, with ma gnetic resonance (MR) guidan ce), effective April 1, 2013. HCPCS code C9734 originally described the service “with or without MR guidance”. However, effective July l, 2013, we change d 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 is549 $3,300.64. For CY 2014, as part of a proposedrestructuring of the Stereotactic Radiosurgery (SRS) APCs and procedures, we proposed to reassign SRS procedures to other APCs and to maintain intraope rative radiation therapy (IORT) and magnetoencephalography (MEG) procedures inAPC 0065. We proposed to reassign the service codes for MRgFUS procedures to AP C 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 435 94). (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 proce dures 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 con cern 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 base d on clinical and resource characteristics of other services assigned to APC 0065. On e 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 simila r 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 paymen t 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 restruct uring the SRS APCs, or to pack age 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 packag es them, to total approximately $2,800. The commenter recommended that, if CMS fina lizes 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 Revasc ularization of the Lower Extremity), which has a proposed payment rate of approximately $10,314, or a New Technology APC reflecting a similar leve l of resources use. The commenter acknowledged that there are few Medicare cl aims data reporting the MRgFUS procedure codes, and stated that th e procedures described by CPT codes 0071T and 0072T are generally performed on younger women and th at, although HCPCS code C9734 is a new code effective in CY 2013, the commenter exp ects there will be a significant number of551 patients over age 65 with metastatic bone can cer who will receive treatment with the procedure described by HCPCS code C9734. Response : We do not agree with the commen ter 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 ra diation therapy. We believe that MRgFUS procedures are more similar to the services in restructured APC 0065, which are distinct from SRS clinical characte ristics. 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 estimate s for MRgFUS procedures presented by the commenter, it is our longstanding policy to reassign procedures to APCs based on Medicare claims data that support reassignmen t, rather than relying on external cost estimates. After consideration of th e public comments we receive d, 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 policie s 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, te chnical 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 pr oposed payment rate reflects the corrected552 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 additiona l marker (list separately in addition to code for first marker)), which is currently assigned to APC 0342 (Level I Pat hology) 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 fi nal 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 a pproximately $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 paymen t methodology for add-on codes for CY 2014. Based on our latest hospital outpatient cl aims data, we decided not to revise the APC assignment for CPT code 88184 and instead d ecided 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 mean553 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 th e public comment that we re ceived and review of our latest hospital outpatient claims data for th is 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 availabl e 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 reassi gn CPT code 11980 (Subcutaneous hormone pellet implantation (implantation of estradio l 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 ra te of approximately $103. (The proposed payment rate reflects the corrected proposed rate in the September 6, 2013 OPPS Addendum B, which was poste d on the CMS Web site.) In the proposed rule, we note that we pr oposed to make some changes related to APC 0340 for CY 2014. We proposed to revi se the title of APC 0340 from “Minor Ancillary Procedures” to “Level I Minor Pro cedures” and to establish a second level APC to describe minor ancillary procedures, speci fically, APC 0420, with th e title of “Level II554 Minor Procedures,” as listed in Addendu m A to the CY 2014 OPPS/ASC proposed rule, which was posted on the CMS Web site. Base d 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 concer n about the APC assignment of CPT code 11980 and suggested two options to addres s the code’s APC assignment. Under the first option, the commenter suggested that CMS consider establis hing a new APC that describes minor ancillary procedures, specifica lly a Level III Minor Procedures APC, and assign CPT code 11980 to this newly created AP C. 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 Leve l 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 geom etric mean cost of greater than $300. As an alternative option, the commenter reco mmended 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 pe llets for men and estradiol pe llets 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 outpatien t claims data, we be lieve the two-level555 APC appropriately pays for the minor procedur es that are currently assigned to APCs 0340 and 0420. As has been our practice since the im plementation of the OPPS, we annually review all the items and services within an APC group to determine, with respect to comparability of the use of resources, for any 2 times rule violations. In making this determination, we review our claims data and determine whether we need to make changes to the current APC assignments 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 fina l rule with comment period (which is available via the Internet on the CMS Web site). f. Peyronie Disease Inje ction 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 similari ty to other procedur es 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 CM S continue to assign this code to APC556 0164, which is the APC assignment for CY 2013. The commenter stated the CPT code 54200 is clinically similar to the procedur es described by CPT codes 54220 (Irrigation of corpora cavernosa for priapism) and 54235 (Injection of corpora cavernosa with pharmacologic agent(s) (eg, papaverine, phent olamine)), 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 establis h 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 suggesti on to continue to assign CPT code 54200 to APC 0164. Our analysis reveals that the reso urce cost associated with the procedure described by CPT code 54200 is similar to th e resource cost of th e procedure described by CPT code 54220, which is assigned to AP C 0164. Specifically, the geometric mean cost for CPT code 54200 is approximately $167 based on 330 single cl aims (out of 351 total claims), which is similar to the geom etric mean cost of approximately $166 for CPT code 54220 based on 25 single clai ms (out of 427 total claims). Based on the claims data, we believe that CPT code 54200 shoul d continue to be assigned to APC 0164. With regard to the commenter’s suggesti on to set the geometric mean cost at $163 for APC 0164, we do not cap the geometric m ean 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 section557 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 fr om 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 availa ble via the Internet on the CMS Web site). g. Negative Pressure Wound Therapy (NPWT) (APC 0016) We established HCPCS code G0456 (N egative 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 instru ctions 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 dr essing(s), topical applica tion(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 fu rnished through a disposable device. We assigned these services to AP C 0016 (Level IV Debridement & Destruction), which has a CY 2013 payment rate of approximately $210. For CY 2014, we proposed to continue to558 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 hom ogeneity and resource costs of the other procedures assigned to proposed APC 0186, pr oposed APC 0186 is the most appropriate assignment for HCPCS codes G0456 and G0457. A nother 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 comment ers’ assertion that HCPCS codes G0456 and G0457 are similar, in terms of clin ical 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 co sts 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 15002,559 approximately $547 based on 657 single claims ( out of 4,119 total claims). (We have not included the geometric mean cost for CPT c ode 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 w ound therapy CPT codes 97605 and 97606, but not as significant as those services de scribed 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 clai ms (out of 85,285 total claims), and approximately $140 for CPT code 97606 base d on 7,681 single claims (out of 10,771 total claims). Based on the nature of th e procedure, the advi ce 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 assi gnment for HCPCS codes G0456 and G0457 because these procedures describe debridemen t-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 rule making cycle. We remind hospitals that we review, on an annual basis, the APC assignm ents for all services and items paid under the OPPS.560 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 inappr opriate considering that the current national average selling price for the device used with the proce dure is approximately $270. In addition, the commenter requested th at CMS revise the status indicator of HCPCS codes G0456 and G0457 from “T” (Signi ficant Procedure, Multiple Reduction Applies) to “S” (Significant Procedure, Not Discounted When Multiple) in order to not undercompensate hospitals for performing the pr ocedure when it is performed with other services on the same day. Response : For the CY 2014 update, the paym ent 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 a nd 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 indica tor assignment of HCPCS codes G0456 and G0457, we note that all codes assigned to AP C 0016 are crosswalked to status indicator “T” and have no corresponding “S ” status indicator. In a ddition, we do not believe that every service or procedure should be paid at 100 percent. The multiple procedure reduction for status indicator “T” services rec ognizes that efficiencies are gained when multiple procedures are performed in a singl e session. We believe that this policy is appropriately applied to the wound treatment procedures in question.561 After consideration of the public comment s 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 fina l 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 fina l 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 con tinue to assign HCPCS code G0460 (Autologous platelet rich pl asma for chronic wounds/u lcers, including phlebotomy, centrifugation, and all other pr eparatory procedures, administration and dressings, per treatment) to APC 0013 (Level II Debridemen t & Destruction) with a proposed payment rate of approximately $83. (The proposed pa yment rate reflects the corrected proposed rate in the September 6, 2013 OPPS Addendu m B, which was posted on the CMS Web site.)
Comment : Many of the commenters disagreed with the proposed APC assignment for HCPCS code G0460. Severa l commenters stated that the proposed payment rate of approximately $83 for APC 001 3 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 a562 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 Re pair 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 base d 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 inAddendum B to this final rule with comment period (which is available vi a the Internet on the CMS Web site). It has been our practice since the impl ementation of the OPPS in 2000 to review, on an annual basis, the APC assignments for the procedures and se rvices paid under the OPPS. We will review the APC assignme nt for HCPCS code G0460 and determine whether an APC reassignment is ne cessary for the CY 2015 ratesetting.563 i. Payment for Radioisotopes Derived From Non-Highly Enriched Uranium (HEU) Sources (APC 1442) Radioisotopes are widely used in m odern medical imaging, particularly for cardiac imaging and predominantly for the el derly (Medicare) popul ation. Technetium 99 (Tc-99m), the radioisotope used in the majo rity of such diagnostic imaging services, is currently produced in legacy reactors outside of the United States using highly enriched uranium (HEU). The Administration has esta blished an agenda to eliminate domestic reliance on these reactors, and is promoting the conversi on 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 e xpect 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 hist orical claims data. Therefore, for CY 2013, we finalized a policy to provide an additional payment of $10 for the marginal cost for radioisotopes pr oduced 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-hi ghly enriched uranium source, full cost recovery add-on, per study dose) once per dos e along with any diagnos tic scan or scans furnished using Tc-99m as long as the Tc-99m doses used can be ce rtified 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 en riched uranium (non-HEU) sources, as described by HCPCS code Q9969. One comm enter 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 cost s 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 commente rs 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 consid ering stakeholder reque sts and stakeholder feedback. We determined that non-HEU sourced Mo-99, the Tc-99m precursor, is expected to cost more than current sources fr om 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 passe d on uniformly as the industry converts. Therefore, we used our authority under se ction 1833(t)(2)(E) of the Act to ensure payment equity among hospitals to propose a nd finalize a policy through rulemaking that created this additional payment to address th e incremental cost of obtaining Tc-99m from the new sources of supply. We stated in our CY 2013 OPPS/ASC final rule with565 comment period (77 FR 68316) th at 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 a nnual 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 tim e. We do not agree with the commenters’ sugges tion to eliminate the benefi ciary’s copayment because section 1833(t)(8) of the Act and §§ 419.41 th rough 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, unde r the OPPS, a category of devices be eligible for transi tional pass-through payments for at least 2, but not more than 3 years. This pass-through pa yment eligibility period begins with the first date on which transitional pass-through payments may be made for any medical device that is described by the category. We may establish a new device category for pass-through payment in any quarter. Under our established policy, we base the pass-through status expiration date for a device category on the date on whic h pass-through payment is effective for the566 category, which is the first date on which pass-through payment may be made for any medical device that is described by such cat egory. We propose and finalize the dates for expiration of pass-through status for device ca tegories as part of the OPPS annual update. We also have an established policy to p ackage the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which the devices are reported in the cl aims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now separa tely paid in accordance with section 1833(t)(2)(H) of the Act, are an ex ception to this established policy. There currently are three device categor ies 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, a ny modality (insertable)), wh ich we made effective for pass-through payment as of January 1, 2012. Recognizing that th ese 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 commen t 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 pack age the respective costs of the HCPCS codes C1830, C1840, and C1886 devices into the co sts of the procedures with which the devices are reported in the hospital cl aims data used in OPPS ratesetting. b. CY 2014 Policy567 As previously stated, we have an estab lished policy to package the costs of the devices that are no longer eligible for pa ss-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 oc ular telescope prosthesis including removal of crystalline lens), which became effec tive 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 Pro cedures), 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 pr ocedure 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 reporte d 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 lo cal Medicare contract or had denied ASC568 payment at least twice because the Medica re 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 pa yment of HCPCS code C1830. Under the ASC payment system, § 416.164(b)(2) of the regulations requires that we pay separately for certain implantabl e items and services that have pass-through status under the OPPS. HCPCS code C1830 was made effec tive 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 proced ure with which the device is reported in the hospital claims data used in the developmen t 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 decisi on to expire category C1830 from pass-through payment as of January 1, 2014, or our ASC policy. We ar e not aware of systematic problems with billing of HCPCS code C1830 either in th e OPPS payment system or the ASC payment system. The commenter cited that there we re several instances in which one local569 contractor rejected HCPCS c ode 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 se tting 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 hos pitals. 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 designati on of this procedure as device-intensive in the ASC setting. The commenter also ur ged 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 cl aims were from a hospital that was not a customer, and which apparently reported cost s 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 recommendati on 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 th e public comments we received, we are maintaining our previous decision to expire device categories C1830, C1840, and C1886 from570 pass-through payment status, which we fina lized in the CY 2013 OP PS/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 c ode 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 cu rrently active categories fo r 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 categor y eligible for pass-through payment that we created effective October 1, 2013, C1841 (Retinal pr osthesis, includes all internal and external components). However, this category will not e xpire in CY 2014.) 2. Provisions for Reducing Transitional Pass-th rough Payments to Offset Costs Packaged into APC Groups a. Background Section 1833(t)(6)(D)(ii) of the Act se ts the amount of additional pass-through payment for an eligible device as the am ount by which the hospital’s charges for a device, adjusted to cost (the cost of th e device) exceeds the portion of the otherwise571 applicable Medicare outpat ient department fee schedule amount (the APC payment amount) associated with the device. We ha ve an established policy to estimate the portion of each APC payment rate that could reasonably be attr ibuted to the cost of the associated devices that ar e 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 AP C payment amount that we determine is associated with the cost of the device, defi ned 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 met hodology to estimate the portion of each APC payment rate that could reasona bly be attributed to the cost of an associated device eligible for pass-through paymen t, 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 w ith 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 accordan ce with our establishe d practice, the device572 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 devi ce category for pass-th rough 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 pack aged costs related to implantable biologicals in the device offset calculations in accordance with our policy that the pass-through evaluation process and paymen t methodology for implantable biologicals that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) and that are newly approved for pass -through status beginning on or after January 1, 2010, be the device pass-thr ough process and payment methodology only (74 FR 60476). b. CY 2014 Policy In the CY 2014 OPPS/ASC proposed ru le (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 attrib uted to (that is, refl ect) the cost of an associated device eligible for pass-through paym ent, using claims data from the period used for the most recent recalibration of th e 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 biolog icals that are surgically inserted or implanted (through a surgical incision or a natural orifice) and that are newly approved for pass-through status beginning on or after January 1, 2010, be the device pass-through process and paym ent methodology only. The rati onale for this policy is573 provided in the CY 2010 O PPS/ASC final rule with comment period (74 FR 60471 through 60477). We also proposed to conti nue our established policies for calculating and setting the device APC offset amounts for each device category eligible for pass-through payment. In addi tion, we proposed to continue to review each new device category on a case-by-case basis to determine whether device costs associated with the new category are already packaged into the existing APC structure. If device costs packaged into the existing APC structure are associated with the new category, we proposed to deduct the device APC offset am ount from the pass-through payment for the device category. As stated earlier, these de vice APC offset amounts also would be used in order to evaluate whether the cost of a device in an application for a new device category for pass-through payment is not insi gnificant in relation to the APC payment amount for the service related to th e category of devices (§ 419.66(d)). 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 offs et amounts. In addition, we proposed to continue to calculate and se t any device APC offset amount for any new device pass-through category that includes a newly eligible impl antable biological beginning in CY 2014 using the same methodology we have historically used to calculate and set device APC offset amounts for devi ce categories eligible for pass-through payment, and to include the costs of implant able biologicals in th e calculation of the device APC offset amounts (78 FR 43596).574 In addition, in the CY 2014 OPPS/AS C 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 as sociated 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 w ithout modification. In addition, we will update, on the CMS Web site at http://www.cms.gov/Medicar e/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html, the list of all procedural APCs with the final CY 2014 portions of the APC payment amounts th at we determine are associated with the cost of devices so that this information is available for use by the public in developing potential CY 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 criter ia that new medical devices must meet to be considered e ligible 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 se rvice furnished, is used for one patient only,575 comes in contact with human tissue, and is su rgically 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 te rms have not been specifically defined or described in prior regulatory language, preamble, or guidance. In an effort to reduce further confusion and ensure all applican ts 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 existi ng 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 pro cedure of implantation of a pacemaker. We have interpreted the accompanying term “s ubordinate” in conjunction with the term “integral,” in that a “sub ordinate” device is dependent upon the overall procedure of implanting the device, and we have not interp reted the term separately, or applied the term “subordinate” as a separate criteri on. Because of confus ion among pass-through status applicants regarding the use of both terms “integral” and “subordinate,” and because we do not believe it is necessary th at the regulation speci fically 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, as576 previously explained, we proposed to delete the term “subordinate” fr om this criterion’s regulatory text under existing § 419.66(b)(3 ). The proposed revised § 419.66(b)(3) regulatory language read as fo llows: “The device is an in tegral part of the service furnished, is used for one patient only, come s in contact with human tissue, and is surgically implanted or inse rted, whether or not it remains with the patient when the patient is released from the hospital.” We did not receive any public comment s on this proposal. Therefore, we are finalizing, without modification, our proposal to delete the te rm “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 de vice is an integral part of the service furnished, is used for one patient only, come s in contact with human tissue, and is surgically implanted or inse rted, 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 implem ented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals are instructed to report no cost/full credit ca ses using the “FB” modifier on the line with the procedure code in which the no cost/full credit device is used. In cases in which the577 device is furnished without cost or with full credit, the hospital is instructed to report a token device charge of less than $1.01. In cas es in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospi tal is instructed to report as the device charge the difference between its usual char ge for the device being implanted and its usual charge for the device for which it r eceived full credit. In CY 2008, we expanded this payment adjustment policy to include ca ses in which hospitals receive partial credit of 50 percent or more of the co st of a specified device. Hosp itals are instructed to append the “FC” modifier to the procedure code thatreports the service provided to furnish the device when they receive a part ial credit of 50 percent or mo re of the cost of the new device. We refer readers to the CY 2008 O PPS/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 fu rnishes a specified de vice without cost or with a full or partial credit. For CY 2013 a nd prior years, our polic y 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 cred it 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 de vice. Specifically, unde r 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 Recei ved from the Manufacturer for a Replaced Medical Device) when the hospi tal receives a credit for a re placed 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 requ ired 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). Specif ically: (1) all procedures assigned to the sele cted APCs must involve implan table 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 (a t least temporarily); and (3) the device offset amount must be significant, which, for purposes of this pol icy, is defined as exceeding 40 percent of the APC cost. We also proposed to continue to restrict the devi ces 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 proporti on of the total payment rate for an APC. We stated that we continue to believe th ese criteria are appropriate because no cost579 devices and device credits are lik ely to be associated with pa rticular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the beneficiary leaves the hospital. We believe that the reduction in payment is appropriate only when the cost of the device is a significant part of the total cost of the APC into which the device cost is packaged, and that the 40-percent threshold is a reasonable definition of a significant cost.
Comment : A majority of commenters suppor ted CMS’ proposed adjustment to the OPPS payment for no cost/full credit a nd 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 le ad 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 a nd the hospital would receive no payment for the procedural portion of the service. That commenter s uggested that CMS develop a floor for the offset and urged CMS to wo rk with hospital stakeholders to better understand the overall impact to hospitals a nd to ensure that hospitals would be appropriately paid for the procedural aspect of the device/lead replacement. Another commenter requested that CMS re move APCs 0082, 0083 0104, 0229, 0319, and 0656 from the final listing of APCs cove red by the no cost/full credit policy. Response : We appreciate the support of our proposal by the majority of commenters. We disagree with commenters’ as sertion that the proposed change from the “FB”/”FC” modifiers to the “FD” value code for the adjustment to OPPS payment for no580 cost/full credit and partial credit devices w ould cause added admini strative burden. We believe that the use of the “FD” value code will not cause added administrative burden for hospitals. We also disa gree with the assertion that using the “FD” value code methodology in the OPPS would lead to an inaccu racy 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 paymen t would be consumed by the credit and the hospital would receive no payment for the nondevi ce portion of the co sts related to the service. Therefore, we are limiting the O PPS payment deduction for the applicable APCs listed below in Table 30 of this final rule wi th comment period to the total amount of the device offset when the “FD” value code app ears 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 pa rtial credit device adjustment policy will apply for CY 2014. After consideration of th e public comments we receive d, we are finalizing our CY 2014 proposal to modify our existing poli cy of reducing OPPS pa yment for specified APCs when a hospital furnishes a specified devi ce without cost or with a full or partial credit. Specifically, we are finalizing our proposal to require hos pitals to report the amount of the credit in the am ount portion for value code “FD” (Credit Received from581 the Manufacturer for a Replaced Medical Device) when the ho spital receives a credit for a replaced device listed in Table 31 of this fi nal 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 AP Cs and devices to which the proposed modified no cost/full credit and partial cred it device adjustment policy would apply for CY 2014, consistent with the three criteria di scussed earlier in this section, based on the final CY 2012 claims data available for th e CY 2014 OPPS/ASC final rule with comment period. We examined the offset amounts calculate d 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 cha nges to the proposed lists of APCs and devices to which this modified policy applies. Table 30 below lists the APCs to wh ich the finalized modified payment adjustment policy for no cost/full credit a nd 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 a nd partial credit devices applies in CY 2014.582

TABLE 30.—APCs TO WHICH THE MO DIFIED 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/Re placement of Neurostimulator Electrodes

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

0083 Coronary Angioplasty, Valvulopl asty, 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/Replaceme nt of Permanent Pacemaker 0104 Transcatheter Placement of Intracoronary Stents 0106 Insertion/Replacement of Pacemaker Leads and/or Electrodes 0107 Level I Implantation of Card ioverter-Defibrillators (ICDs) 0108 Level II Implantation of Card ioverter-Defibrillators (ICDs) 0227 Implantation of Drug Infusion Device 0229 Level II Endovascular Revascular ization 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 Neurostimulato r Pulse Generator and Electrode 0319 Level III Endovascular Revascular ization 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 Pacing583 CY 2014

APC CY 2014 APC Title 0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents 0674 Prostate Cryoablation 0680 Insertion of Patient Activated Event Recorders584

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, temp585 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 paymen ts” for certain drugs and biol ogicals (also referred to as biologics). As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act 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 th erapy; and current radiopharmaceutical drugs and biologicals. “Cur rent” refers to drugs or biologicals that are outpatient hospital services under Part B for which payment was made on the first date the hospital O PPS was implemented. Transitional pass-through pa yments also are provided for certain “new” drugs and biologicals that were not being paid for as an HOPD service as of December 31, 1996 and whose cost is “not insigni ficant” in relation to the OPPS payments for the procedures or services associated with the new dr ug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” As required by statute, transitional pass-through payments for a drug or biological described in section586 1833(t)(6)(C)(i)(II) of the Ac t 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 dr ugs and biologicals and their designated APCs were assigned status indicator “G” in Addenda A and B to the proposed rule, which are available vi a 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 biologi cal, is the amount by which the amount determined under section 1842(o) of the Act for the drug or biological exceeds the portion of the otherwise app licable Medicare OPD fee sc hedule that the Secretary determines is associated with the drug or biol ogical. If the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the pass-through payment amount is determined by the Secretary to be equal to the average price for the drug or biological for all competitive acquis ition areas and the year established under such section as calculated 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 pa ss-through payment amount is set forth in regulations at 42 CFR 419.64. These re gulations 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 determ ines 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 dr ugs and biologicals described in section587 1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses several source s 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 me thodologies described therein. Additional information on the ASP methodology can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medi care-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html

. The pass-through applicati on and review process for drugs and biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpa tientPPS/passthrough_payment.html

. 2. Drugs and Biologicals with E xpiring 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 biol ogicals 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 fo r at least 2 years and no more than 3 years by December 31, 2013. These drugs a nd biologicals were approved for passthrough status on or before January 1, 2012. W ith the exception of those groups of drugs and biologicals that are always packaged when they do not have pass-through status, specifically diagnostic radiopharmaceuticals, co ntrast agents, anesthesia drugs, and our new groups of policy packaged products descri bed in section II.A.3. of the proposed rule, namely drugs, biologicals, and radiopharmaceuti cals that function as supplies when used588 in a diagnostic test or procedure and drugs and biologicals that f unction as supplies when used in a surgical procedure, our standa rd methodology for providing payment for drugs and biologicals with expiring pass-through status in an upc oming 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 wi th comment period. If the estimated per day cost for the drug or biological is less than or equal to the appli cable OPPS drug packaging threshold, we would package payment for the dr ug or biological into the payment for the associated procedure in the upcoming calendar y ear. 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 radiophar maceuticals, 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 radiopharm aceutical is subsequently packaged. To provide for a full 3-year pass-through peri od, 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/AS C 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 y ears, after the product’s first payment as a hospital outpatient service under Medicare Part B. We conti nue to believe that this period of payment appropriately facilitate s dissemination of thes e new products into clinical practice and facilitates the collection of sufficient hospital claims data reflective of their costs for future OPPS ratesetting. Ou r longstanding practice has been to provide pass-through payment for a period of 2 to 3 y ears, with expiration of pass-through status proposed and finalized through the annual ru lemaking process. Each year, when proposing to expire the pass-th rough status of certain drugs and biologicals, we examine our claims data for these products. We observe that hospitals typica lly have incorporated these products into their chargemasters based on the utilization and costs observed in our claims data. Under the existing pass-thr ough policy, we begin pass-through payment on a quarterly basis, depending on when applicatio ns are submitted to us for consideration. We are confident that the peri od of time for which drugs, biol ogicals, 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 pa ss-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) shoul d not expire on December 31, 2013, because this product has not received pass-through payments for a peri od of at least 2 years after the payment was first made for this pr oduct as a hospital out patient 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 cl aims 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 re quired by statute. Th erefore, we are not finalizing our proposal to expire the pass-through stat us for HCPCS code Q4131 on December 31, 2013. After consideration of th e public comments we receiv ed, we are modifying our proposal to expire the pass-thr ough status of the 15 drugs and biologicals that were listed in Table 19 of the CY 2014 OPPS/ASC propos ed rule (78 FR 43599). The pass-through status for HCPCS code Q4131 will not expi re 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 fina l status indicators and the final APC assignments for these drugs and biologicals for CY 2014.591 TABLE 32.—DRUGS AND BIOLOGICAL S 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 Radiopharmaceutical s with New or Continuing Pass-Through Status in CY 2014 In the CY 2014 OPPS/ASC proposed ru le (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 O PPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2013. These drugs and biologicals, which592 were approved for pass-through status be tween 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 stat us 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 biologi cals (the pass-through payment amount) as the difference between the amount authorized under section 1842(o) of th e Act and the portion of the otherwise applicable OPD fee schedule that th e Secretary determines is associated with the drug or biological. Payment for drugs a nd 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 bi ologicals with pass-thr ough status at a rate of ASP+6 percent in CY 2014, which is the am ount 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 thes e drugs and biologicals would receive in the physician’s office setti ng 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 differen ce between the amount authorized under section 1842(o) of the Act, which is ASP+6 percent, and the porti on of the otherwise593 applicable OPD fee schedule that the Secret ary determines is appropriate, proposed at ASP+6 percent, is $0. In the case of policy-packaged drugs (w hich include contrast agents, diagnostic radiopharmaceuticals, anesthesia drugs, and our new groups of policy packaged products described in section II.A.3. of this fina l rule with comment period, namely drugs, biologicals, and radiopharmaceuticals that functi on 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 thei r 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 ar e granted pass-through status based on the ASP methodology. As stated above, for purposes of pass-th rough payment, we consider radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receives pass-through status during CY 2014, we594 proposed to follow the standard ASP methodology to determine the pass-through payment rate that drugs receive under sect ion 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we proposed to provide pass-through payment at WAC+6 percent, th e equivalent payment provided to passthrough drugs and biologicals without ASP info rmation. If WAC information is also not available, we proposed to provide payment for the pass-through radiopharmaceutical at 95 percent of its most recent AWP.
Comment : 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 radi opharmaceuticals, 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 se veral 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 un der the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical recei ves 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 acqui sition 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 the595 payment rate of ASP+6 percent (or pa yment based on the ASP methodology) is appropriate to provide payment for both th e radiopharmaceutical’s acquisition cost and any associated handling and overhead costs. After consideration of th e public comments we receive d, we are finalizing our proposal to provide payment for drugs, biologicals, diagnostic and therapeutic radiopharmaceuticals, and contra st agents that are grante d pass-through status based on the ASP methodology. If a diagnostic or therap eutic radiopharmaceutical receives passthrough status during CY 2014, we will fo llow the standard ASP methodology to determine the pass-through paym ent rate that drugs receive under section 1842(o) of the Act, which is ASP+6 percent. If ASP dataare not available for a radiopharmaceutical, we will provide pass-through payment at WA C+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 percen t of its most recent AWP. As discussed in more detail in sectio n II.A.3. of this final rule with comment period, over the last 6 years, we implem ented a policy whereby payment for all nonpass-through diagnostic radiopharmaceuticals, c ontrast agents, and anesthesia drugs is packaged into payment for the associat ed procedure. Inthe CY 2014 OPPS/ASC proposed rule, we proposed to continue th e packaging of these items, and we also proposed new groups of policy-packaged produc ts 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 that596 function as supplies when used in a surgical pr ocedure, regardless of their per day cost, in CY 2014. As stated earlier, pass-through pa yment 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-pack aged would otherwise be packaged if the product did not have pass-thr ough 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 bi ological is utilized. The calculation of the policy-packaged drug APC offset amounts is de scribed in more detail in section IV.A.2. of this final rule with co mment period. It follows that the copayment for the nonpass-through payment portion (the otherwise a pplicable fee schedule amount that we would also offset from payment for the drug or biological if a paymen t offset applies) of the total OPPS payment for those drugs and biologicals would, therefore, be accounted for in the copayment for the associated clin ical APC in which the drug or biological is used. According to section 1833(t)(8)(E) of the Act, the amount of copayment associated with pass-through items is equal to the amount of copayment that would be applicable if the pass-through adjustment was not applied. Therefore, as we did in CY 2013, we proposed to continue to set the associated copayment amount to zero for CY 2014 for pass-through diagnostic radiopharmaceuticals, cont rast agents, and anesthesia drugs that would otherwise be p ackaged if the item di d not have pass-through status. We also proposed to set the asso ciated copayment amount to zero for the597 additional categories of policy-packaged pr oducts proposed for CY 2014 described in section II.A.3. of the proposed rule. The separate OPPS payment to a ho spital for the pass-through diagnostic radiopharmaceutical, contrast agent, anesth esia 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 (w hich 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 biological s that would otherwise be packaged if the product did not have pass-thr ough status. The commenters not ed that this policy is consistent with statutory requirements and provi des 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’ supp ort of our proposal. According to section 1833(t)(8)(E) of the Act, the amount of copayment associat ed with pass-through items is equal to the amount of copayment th at 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 otherw ise 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 a598 therapeutic radiopharmaceutical with pass-thro ugh 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 receive d, we are finalizing our proposal, without modification, to continue to set the associated copayment amount for pass-through diagnostic radiopharm aceuticals, contrast agents, and anesthesia drugs that would otherwise be packaged if the item di d 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 biolog icals that have pass-th rough status, and to set a copayment amount of zero for th ese drugs and biol ogicals 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 stat us 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 gl obulin (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 9369600 4. Provisions for Reducing Transitiona l Pass-Through Payments for Diagnostic Radiopharmaceuticals; Contrast Agents; Dr ugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Di agnostic 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 radiopharmaceu ticals and contrast agents were paid separately under the OPPS if their mean per day costs were greater than the applicable year’s drug packaging threshold. In CY 2008 (72 FR 66768), we began a policy of packaging payment for all nonpass-through diag nostic radiopharmaceuticals and contrast agents as ancillary and suppor tive items and services into their associated nuclear medicine procedures. Therefore, be ginning in CY 2008, nonpass-through diagnostic radiopharmaceuticals and contra st agents were not subject to the annual OPPS drug packaging threshold to determine their packag ed or separately payable payment status, and instead all nonpass-through diagnostic radio pharmaceuticals and contrast agents were packaged as a matter of policy. For CY 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 describe d above, section 1833(t)(6 )(D)(i) of the Act specifies that the transiti onal pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee sc hedule amount. There are currently two diagnostic radiopharmaceuticals with pass-throu gh 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 c ode C9406 beginning July 1, 2011, and we proposed that its pass-through status woul d expire on December 31, 2013. HCPCS code C1204 (Technetium Tc 99m tilmanocept, diagno stic, 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 radi opharmaceuticals would be paid at ASP+6 percent, while those new pass-through di agnostic radiopharmaceuticals without ASP information would be paid at WAC+6 percen t or, if WAC is not available, payment would be based on 95 percent of the pr oduct’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 re flecting the portion of the APC payment associated with predecessor radiopharmaceuti cals in order to ensure no duplicate602 radiopharmaceutical payment is made. In CY 2009, we established a policy to estimate the portion of each APC payment rate that coul d reasonably be attributed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pa ss-through payment (73 FR 68638 through 68641). Specifically, we use the policy-packaged drug offset fraction for AP Cs containing nuclear medicine procedures, calculated as 1 minus th e following: the cost from single procedure claims in the APC after removing the cost fo r 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 po licy-packaged drugs as only nonpass-through diagnostic radiopharmaceuticals and contrast agen ts, 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 biolog icals that are surgically inserted or implanted (through a surgical incision or a natural orif ice) and implantable biologicals that are surgically inserted or implan ted (through a surgical incision or a natural or ifice) with newly approved pass-through status beginni ng in CY 2010 or later as devices, for purposes of the OPPS, rather than drugs. To determine the actual APC offs et amount for pass-through diagnostic radiopharmaceuticals that take s 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-through603 diagnostic radiopharmaceutical is used a nd, 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 719 36), we finalized a policy to require hospitals to append modifier “FB” to specifiednuclear 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 t oken 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 me dicine procedures are not reduced when a diagnostic radiopharmaceutical is received at no cost or fu ll credit. Based on claims data, it appears that hospitals rarely receive diagnostic ra diopharmaceuticals 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 c ontrast 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 associat ed offset amounts, for the CY 2014 OPPS are available for purchase under a CMS data use agreem ent 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,” wh ich now includes the additional variables previously available only in the OPPS id entifiable data set, including ICD 9 CMS diagnosis codes and revenue code payment am ounts. We do not pos t 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 radiopharmaceutic als 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 radiopha rmaceuticals and contrast agents when considering a new diagnostic radiopharmaceu tical 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 modifi er “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. Th erefore, we do not believe605 that the “FB” modifier policy, as it rela tes to diagnostic radiopharmaceuticals, is warranted. After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to continue to apply the di agnostic radiopharmaceutical offset policy to payment for pass-through di agnostic 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 lis ted in Table 34 in this final rule with comment period by the full policy-packaged offset amount appropriate for diagnostic radiopharmaceuticals. We also are finalizi ng 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 wh ich nuclear medicine procedures will be assigned in CY 2014 and for which we expect th at an APC offset could be applicable in the case of diagnostic radiopharmaceu ticals with pass-through status.606 TABLE 34.—APCs TO WHICH A DIAG NOSTIC 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 sp ecifies that the tr ansitional pass-through payment amount for pass-through drugs and bi ologicals is the diffe rence between the amount paid under section 1842(o) of the Ac t and the otherwise applicable OPD fee schedule amount. Currently, there are no contra st 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 wit hout ASP information would be paid at607 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-t hrough 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 contra st 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 a pproved for pass-through status as a drug or biological during CY 2014, to deduct from th e 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 dup licate contrast agent payment is made. In CY 2010, we established a policy to es timate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor contrast agents when considering new contrast agents for pa ss-through payment (74 FR 60482 through 60484). For CY 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, cal culated 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 contrastagents that takes into consideration the otherwise applicable OPPS payment amount, we proposed to multiply the policy packaged drug608 offset fraction by the APC payment amount for the procedure with which the pass-through contrast agent is used and, accordingly, reduc e the separate OPPS payment for the pass-through contrast agent by this amount. We proposed to continue to apply this methodology for CY 2014 to recognize that when a contrast agent with pass-through status is billed with any pr ocedural 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 th an $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 c ontrast 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 pr oposed 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 paym ent 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 offset609 amounts that will be used for that year for purposes of both evaluating cost significance for candidate pass-through device categor ies and drugs and biologicals, including contrast agents, and establishing any appropr iate APC offset amount s. Specifically, the file will continue to provide the amounts a nd percentages of APC payment associated with packaged implantable devices, “polic y packaged” drugs, and “threshold-packaged” drugs and biologicals for every OPPS clinical APC. After consideration of th e public comments we receive d, 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 bi lled with any procedural APC listed in Table 35 below, a specific offset based on the pro cedural APC will be applied to the payment for the contrast agent to ensure that duplicat e payment is not made for the contrast agent.610 TABLE 35.—APCs TO WHICH A CO NTRAST 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, Valvulopl asty, and Level I Endovascular Revascularization 0093 Vascular Reconstruc tion/Fistula Repair 0104 Transcatheter Placement of Intracoronary Stents 0152 Level I Percutaneous Abdomi nal and Biliary Procedures 0177 Level I Echocardiogram With Contrast 0178 Level II Echocardiogram With Contrast 0229 Level II Endovascular Revascular ization of the Lower Extremity 0278 Diagnostic Urography 0279 Level II Angiography and Venography 0280 Level III Angiography and Venography 0283 Computed Tomography with Contrast 0284 Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast 0333 Computed Tomography without Contrast followed by Contrast 0334 Combined Abdomen and Pelvis CT with Contrast 0337 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast 0375 Ancillary Outpatient Services When Patient Expires 0383 Cardiac Computed Tomographic Imaging 0388 Discography 0442 Dosimetric Drug Administration 0653 Vascular Reconstruction/Fi stula Repair with Device 0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents 0662 CT Angiography 0668 Level I Angiography and Venography 8006 CT and CTA with Contrast Composite 8008 MRI and MRA with Contrast Composite611 d. Payment Offset Policy for Products Packag ed 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 Func tion as Supplies When Used in a Surgical Procedure Section 1833(t)(6)(D)(i) of the Act sp ecifies that the tr ansitional pass-through payment amount for pass-through drugs and bi ologicals is the diffe rence between the amount paid under section 1842(o) of the Ac t 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 polic y to package drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure and drugs and biologi cals that function as supplies when used in a surgical procedure, we specifically proposed that sk in substitutes and stress agents used in myocardial perfusion imaging (MPI) be po licy 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 functi on 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 p ackaged, 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 reflec ts the portion of612 the APC payment associated with predecesso r products in order to ensure no duplicate payment is made from the payment for pass-through drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure and drugs and biologi cals 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 attribut ed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 thr ough 68641). For CY 2014, we proposed to apply this same policy to drugs, biological s, 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 surgic al procedure (78 FR 43603). Specifically, in the case of pass-through skin subs titutes, we proposed to ut ilize 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 singl e procedure claims in the APC. Because policy packaged radiopharmaceuticals also woul d be included in the drug offset fraction for the APC to which MPI procedures are a ssigned, 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-p ackaged drugs excluding policy-packaged diagnostic radiopharmaceuticals divided by the co st from single procedure claims in the613 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 comment s on this proposal. Therefore, we are finalizing our proposal, without modification, to recognize thatwhen 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 w ill 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 th at an APC offset could be applicable in the case of skin substitute s with pass-through status. Table 37 below displays the APCs to wh ich MPI procedures will be assigned in CY 2014 and for which we expect that an APC o ffset 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 athttp://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 purpos es 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 associ ated with packaged implantable devices, policy-packaged drugs, and threshold packag ed drugs and biologicals for every OPPS clinical APC. TABLE 36.—APCs TO WHICH A SK IN 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 Imaging615 B. OPPS Payment for Drugs, Biologi cals, and Radiopharmaceuticals without Pass-Through Status 1. Background Under the CY 2013 OPPS, we currentlypay for drugs, biologicals, and radiopharmaceuticals that do not have pass-thro ugh status in one of two ways: as a packaged payment included in the payment 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 ra te for the procedure or treatment with which the products are usually furnished. Ho spitals do not receive separate payment for packaged items and supplies, and hospitals ma y not bill beneficiaries separately for any packaged items and supplies whose costs ar e recognized and paid within the national OPPS payment rate for the associated pro cedure or service. (Transmittal A-01-133, issued on November 20, 2001, explains in gr eater detail the rules regarding separate payment for packaged services.) Packaging costs into a single aggregate payment for a service, procedure, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, pack aging the costs of items and services into the payment for the primary procedur e or service with which they are associated encourages hospital efficiencies and also enables hospita ls to manage their resources with maximum flexibility.616 2. Criteria for Packaging Payment for Drugs, Biologicals, and Radiopharmaceuticals a. Background As indicated in section V.B.1. of th is final rule with comment period, in accordance with section 1833(t)(16) (B) of the Act, the threshol d for establishing separate APCs for payment of drugs and biological s was set to $50 per administration during CYs 2005 and 2006. In CY 2007, we used the four quarter moving average Producer Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) to trend the $50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold became effective) to th e third quarter of CY 2007. We then rounded the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 threshold amount of $55. Using the same me thodology as that used in CY 2007 (which is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085 through 68086)), we set the packag ing threshold for establishing separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009. For CY 2010, we set the packaging threshold at $65; 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 the617 most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for Human Use (Prescription) (B ureau of Labor Statistics (B LS) 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 a ll 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 pa st 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 pe riod) 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 fo r Prescription Drugs, we refer readers to the CY 2007 OPPS/ASC final rule with comme nt period (71 FR 68085 through 68086).) b. Cost Threshold for Packaging of Paymen t for HCPCS Codes That Describe Certain Drugs, Certain Biologicals, and Therap eutic 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 HC PCS code-specific basis, the per day cost618 of all drugs, biologicals, and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) that had a HCPC S code in CY 2012 and were paid (via packaged or separate payment) under the O PPS. We used data from CY 2012 claims processed before January 1, 2013 for this calcu lation. 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 se ction II.A.3. of the proposed rule. In order to calculate the per day cost s for drugs, biologicals, and therapeutic radiopharmaceuticals to determ ine their proposed packaging status in CY 2014, we used the methodology that was described in de tail 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 paymen t rate of ASP+6 per cent (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 th at 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 ava ilable for use at the time of development of the proposed rule. These data also were th e 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 radiopharmaceutic als, 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 payabl e. Consistent with our past practice, we crossw alked historical OPPS claims data from the CY 2012 HCPCS codes that were reported to the CY 2013 HC PCS 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 p ackaging 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 u pdate factor for the y ear that is reflective of all statutory adjustments.620 Response : As stated in the CY 2007 OPPS/AS C final rule with comment period (71 FR 68086), we believe that packaging cert ain 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 mech anism to gauge Part B drug inflation. Therefore, because of our continued belief th at packaging is a fundamental component of a prospective payment system that conti nues to provide import ant flexibility and efficiency in the delivery of high quality hos pital outpatient services , we are not adopting the commenters’ recommendations to pay se parately for all drugs, biologicals, and radiopharmaceuticals for CY 2014 or to eliminat e or to freeze the p ackaging threshold at $80. We disagree with the commenters who s uggested 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 upda ting the $50 threshold of the CY 2005 OPPS is consistent with industry and government practices and th at the PPI for Prescription Drugs is an appropriate mechanism to gauge Part B drug inflation. As we stated in the CY 2007 OPPS/ASC final rule with co mment period (71 FR 68085), we believe that the PPI for Prescription Drugs reflects price changes at the wholesale or ma nufacturer stage. Because OPPS payment rates for drugs and biologicals are generally based on the ASP data that are reported by their manufacturers , we believe that the PPI for Prescription Drugs is an appropriate price index to use to update the p ackaging threshold for CY 2007621 and beyond. In contrast, the market basket update contains numerous price proxies, including, but not limited to, proxies fo r wages and salaries, utilities, and nonlabor-related expenses, that are not relate d to price increases fo r prescription drugs. Therefore, we believe that the market basketas a whole is not an appropriate mechanism for determining the outpatient drug packagi ng 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 dr ugs, 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/AS C 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 th reshold 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 thres hold 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 radiopha rmaceuticals for the OPPS/ASC final rule622 with comment period. We note that it is also our policy to make an annual packaging determination for a HCPCS code only when we develop the OPPS/AS C final rule with comment period for the update year. Only HCPC S codes that are identified as separately payable in the final rule with comment peri od are subject to quarterly updates. For our calculation of per day costs of HCPCS codes fo r 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, effectiv e July 1, 2013, along w ith updated hospital claims data from CY 2012. We note that we also used these data for budget neutrality estimates and impact analyses for th is final rule with comment period. Payment rates for HCPCS codes for sepa rately 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 pa yment 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 thei r mean unit cost from all of the CY 2012 claims data and updated cost re port 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 with623 comment period may be different from the same drug HCPCS code’s packaging status determined based on the data used for the pr oposed rule. Under such circumstances, we proposed to continue to follow the establis hed 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 dr ug packaging threshold and the drug’s payment status (packaged or separately pa yable) in CY 2013. Specifically, for CY 2014, consistent with our historical practice, we proposed to a pply the following policies to these HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to the drug packaging thre shold 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 paymen t in CY 2014, and that then have per day costs equal to or less than the CY 2014 fina l rule drug packaging threshold, based on the updated ASPs and hospital claims data used fo r 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 ru le 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 co sts greater than the CY 2014 final rule drug624 packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2014 final rule, would receiv e 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 fl uctuates relative to the CY 2014 OPPS drug packaging threshold and the drug’s payment stat us (packaged or separately payable) in CY 2013. Therefore, we are finalizing our proposal, without modifi cation, 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 (In jection, ganciclovir sodium, 500 mg) for CY 2014. Using update d ASPs and the CY 2012 hospital claims data available for this final rule w ith 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 cl aims 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 rece ived claims data and the per day cost for this product is more than the $90 CY 2014 p ackaged 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 pur poses, multiple HCPCS codes reporting different dosages for the same covered Part B drugs or biologicals in order to reduce hospitals’ administrative burden by permitting them to report all HCPCS codes for drugs and biologicals. In genera l, prior to CY 2008, the OPPS recognized for payment only the HCPCS code that described the lowest dosage of a drug or biological. We extended this recognition to multiple HCPCS codes for se veral other drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, we app lied a policy that as signed the status indicator of the previ ously recognized HCPCS code to the associated newly recognized code(s), reflecting the packaged or separately payable status of the new code(s). In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we explained that once claims data were available for these previously unrecognized HCPCS codes, we would determine the packaging status and resu lting status indicator for each HCPCS code according to the general, established HCPC S code-specific methodology for determining a code’s packaging status for a given update year. However, we also stated that we planned to closely follow our claims data to ensure that our annual packaging determinations for the different HCPCS codes describing the same dr ug or biological did not create inappropriate payment incentives for hospitals to repor t certain HCPCS codes instead of others.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 cl aims data for the HCPCS codes describing different dosages of the same drug or biol ogical that were newl y recognized in CY 2008 and found that our claims data would result in several different packaging determinations for different codes describing the same drug or biological. Furthermore, we found that our claims data included few units and days for a number of newly recognized HCPCS codes, resulting in our concer n that these data reflected claims from only a small number of hospitals, even though the drug or biolog ical itself may be reported by many other hospitals under the most common HCPCS code . Based on these findings from our first available claims data for the newly recogni zed HCPCS codes, we believed that adopting our standard HCPCS code-specific packaging determinations for these codes could lead to payment incentives for hospitals to repor t certain HCPCS codes instead of others, particularly because we do not currently require hospitals to report al l drug and biological HCPCS codes under the OPPS in consideration of our previous policy that generally recognized only the lowest dosage HCPCS code for a drug or biological for OPPS payment. For CY 2014, we continue to believ e that adopting the standard HCPCS code-specific packaging determin ations for these codes could lead to payment incentives for hospitals to report certain HCPCS code s for drugs instead of others. Making packaging determinations on a drug-specific ba sis eliminates these incentives and allows627 hospitals flexibility in choosing to report a ll HCPCS codes for different dosages of the same drug or only the lowest dosage HC PCS code. Therefore, in the CY 2014 OPPS/ASC proposed rule (78 FR 43606), we proposed to continue our policy to make packaging determinations on a drug-specific ba sis, 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 packag ing determination that is consistent across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2012 claims data and our pricing information at ASP+6 percent across all of the HCPCS codes that de scribe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descri ptor. The following drugs did not have pricing information available for the ASP methodology for th is 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 th e mean unit cost available from the fourth quarter CY 2012 claims data to make the p ackaging determinations for these drugs: HCPCS codes J3471 (Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units)); J3472 (In jection, hyaluronida se, ovine, preservative free, per 1000 usp units); Q0171 (Chlorpromazine hydroc hloride, 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, for628 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 tim e 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 dosa ge regimen); Q0177 (Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription anti-eme tic, for use as a complete therapeutic substitute for an IV anti-emetic at the tim e of chemotherapy treatment, not to exceed a 48-hour dosage regimen); and Q0178 (Hydroxyz ine 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 aver age ASP+6 percent per unit payment amount across all dosage levels of a specific drug or biological by the estima ted units per day for all HCPCS codes that describe each drug or bi ological from our claims data to determine the estimated per day cost of each drug or biol ogical at less than or equal to $90 (so that all HCPCS codes for the same drug or biologic al 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 comment s on this proposal. Therefore, we are finalizing our CY 2014 proposal, without modifi cation, to continue to make packaging determinations on a drug-specific basis, rath er than a HCPCS code-specific basis, for629 those HCPCS codes that describe the same drug or biological but different dosages. The packaging status of each drug and biologi cal HCPCS code to which this methodology will apply is displayed in Table 38 below. TABLE 38.—HCPCS CODES TO WH ICH 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 globuli n, intramuscular over 10 cc K J1642 Injection, heparin sodium, (hep arin 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 su lfate, up to 500 mg N J2270 Injection, morphine su lfate, up to 10 mg N J2271 Injection, morphine sulfate, 100mg N J2788 Injection, rho d immune gl obulin, human, minidose, 50 micrograms (250 i.u.) N
J2790 Injection, rho d immune gl obulin, 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 N630

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 us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

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

Q0167 Dronabinol, 2.5 mg, oral, 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 us e as a complete therapeutic substitute for an IV antieme tic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0170 Promethazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV antieme tic 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 antieme tic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N631

CY 2014 HCPCS

Code CY 2014 Long Descriptor CY 2014 SI
Q0172 Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

Q0175 Perphenazine, 4 mg, oral, F DA 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, F DA 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 us e as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen N

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

3. Payment for Drugs and Biologicals w ithout Pass-Through Status That Are Not Packaged a. Payment for Specified Covered Outpat ient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and Biologicals Section 1833(t)(14) of the Act de fines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14 )(B)(i) of the Act, a “specified covered outpatient drug” (known as a SCOD) is defined as a covere d outpatient drug, as defined in section 1927(k)(2) of the Act, for which a separate APC has been established and that either is a632 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 include d 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 Ac t requires that payment for SCODs in CY 2006 and subsequent years be equal to th e average acquisition cost for the drug for that year as determined by the Secretary, su bject to any adjustment for overhead costs and taking into account the hospital acquis ition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Most physician Part B drugs are paid at ASP+6 pe rcent pursuant to sec tion 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 overh ead 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 relate d expenses. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adju st the weights for am bulatory procedure classifications for SCODs to take into account the fi ndings of the MedPAC study. It has been our longstanding policy to a pply 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 paymen t 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, whic h 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 provi sion 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 ta king into account634 relevant pharmacy overhead and related hand ling expenses. We have attempted to collect more data on hospital overhead ch arges for drugs and biologicals by making several proposals that would re quire hospitals to change the way they report the cost and charges for drugs. None of these proposals we re adopted due to si gnificant 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 calculate d 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 a nd 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 considerat ion comments made by the pharmacy stakeholders and acknowledging the limitations of the reported da ta due to charge compression and hospitals’ reporting practices , we added an “overhead adjustment” (an internal adjustment of the data) by redistributing cost fr om coded and uncoded packaged drugs and biologicals to separately payable drugs in order to provi de more appropriate payments for drugs and biologicals in th e HOPD. We continued this overhead adjustment methodology through CY 2012, and fu rther refined our overhead adjustment methodology by finalizing a policy to update th e redistribution amount for inflation and to keep the redistribution ratio constant betw een the proposed rule and the final rule. For a detailed discussion of our OPPS drug paym ent policies from CY 2006 to CY 2012, we635 refer readers to the CY 2013 OPPS/ASC fina l 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 st andard drug payment methodology, with the overhead adjustment, has always yielded a fina lized 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 ra nge is an appropriate payment rate for separately payable drugs and biologicals administered within the HOPD, including acquisition and pharmacy overhead and rela ted expenses. However, because of continuing uncertainty about the full cost of pharmacy overhead and acquisition cost, based in large part on the limita tions of the submitted hospital charge and claims data for drugs, we indicated our concern that the c ontinued use of the standard drug payment methodology (including the overhead adjustment) still may not appropr iately account for average acquisition and pharmacy overhead cost and, therefore, may result in payment rates that are not as predictable, accura te, 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 adju sted by the Secretary as necessary. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386), we noted that636 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, PartB 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 predictabil ity 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 pa st 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 biol ogicals 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 paymen t amount for separately payable drugs and biologicals requires no further adjustment a nd represents the combined acquisition and pharmacy overhead payment for drugs and biol ogicals, 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 ne utral weight scaler is not applied in determining payments for th ese separately paid drugs and biological for CY 2013 (77 FR 68389).637 b. CY 2014 Payment Policy In the CY 2014 OPPS/ASC proposed ru le (78 FR 43608), we proposed to continue our CY 2013 policy and pay for sepa rately 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 am ount 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 biological s are included in the budget neutrality adjustments, under the require ments in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in de termining payments for these separately paid drugs and biologicals.
Comment : Commenters supported CMS’ proposal to pay for separately payable drugs and biologicals based on the statutor y default rate of ASP+6 percent. The commenters stated that ASP+6 percent is admi nistratively simple, improves stability of drug and biological payments, and better c overs the costs of drug acquisition and pharmacy overhead. A few commenters s upported CMS’ proposal, but recommended that CMS examine ways to compensate hospi tals for the unique, higher overhead and handling costs associated with therapeu tic radiopharmaceuticals. One commenter recommended that CMS design a payment st rategy 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’ supp ort of our proposal. We continue to believe that ASP+6 percent based on the st atutory 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 ad ditional overhead adjustment is required for separately payable drugs, biologicals and th erapeutic 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 outsi de the scope of the proposed rule.
Comment : Some commenters reco mmended 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 appropr iately 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 comme nt 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 re port 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) gu idance 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 outsi de the scope of the proposed rule. After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to pay for sepa rately 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 sepa rately payable drugs and biologicals requires no further adjustment and represen ts the combined acquisition and pharmacy overhead payment for drugs and biologicals fo r CY 2014. In addition, we are finalizing our proposal which states that payment for se parately payable drugs and biologicals be included in the budget neutrality adjustme nts, under the requirements of section 1833(t)(9)(B) of the Act, and that the budget ne utral weight scaler is not applied in determining payment of these separately paid drugs and biologicals. We note that separately payable drug and biological paym ent 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 sepa rately payable nonpa ss-through drugs and biologicals and ASP+6 percent for pass-through drugs and biol ogicals, reflect either ASP information that is the basis for calculating pa yment 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 re port information available for this final rule with comment period. In general, thes e published payment rates are not reflective of640 actual January 2014 payment rates. This is because payment rates for drugs and biologicals with ASP information for Janua ry 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 Septembe r 30, 2013) are used to set the payment rates that are released for the quarter beginning in January 201 4 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 availabl e 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 ma y be drugs and biologi cals that have ASP information available for this final rule with comment period (reflecting October 2013 ASP data) that do not have ASP informati on available for the quarter beginning in January 2014. These drugs and biologicals w ill 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 fo r CY 2013, we established a policy to pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology641 adopted for separately payable drugs and biol ogicals. If ASP information is unavailable for a therapeutic radiopharmaceutical, we ba se therapeutic radiopharmaceutical payment on mean unit cost data derived from hospita l 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 continue s to be appropriate for nonpass-through separately payable therapeutic radiopharm aceuticals 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 therapeuti c radiopharmaceuticals at ASP+6 percent, based on the statutory default described in se ction 1833(t)(14)(A)(iii)(I I) 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 comm ent 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 th e 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 st atutory default payment rate of ASP+6 percent, if ASP data are submitted to CMS. Response : We appreciate the commenters’ suppor t. We continue to believe that providing payment for therapeutic radiopharm aceuticals based on ASP or mean unit cost if ASP information is not available woul d provide appropriate payment for these products. When ASP data are not available, we believe that paying for therapeutic radiopharmaceuticals using mean unit cost will appropr iately pay for th e average hospital acquisition and associated handling cost s of nonpass-through separately payable therapeutic radiopharmaceuticals. As we st ated 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 reli es 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 fo r average therapeutic radiopharmaceutical acquisition cost and associated handling costs when manuf acturers are not required to submit ASP data. Payment based on WA C or AWP under the established OPPS ASP methodology for payment of separately paya ble 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 A SP submission timeframes for reporting under section 1847A of the Act. Because ASP reporting for OPPS payment of separately643 payable therapeutic radiopharmaceutical is no t required, a manufacturer’s choice to not submit ASP could result in payment fo r 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 th e 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 increas e 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 th e public comments we receive d, we are finalizing our proposal, without modification, to conti nue 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 pa yment rates for nonpass-through separately payable therapeutic radiopharmaceuticals are in cluded 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 fo r blood clotting factors under the same methodology as other nonpass-th rough separately payable dr ugs and biologicals under the OPPS and continued paying an updated fu rnishing fee. That is, for CY 2013, we provided payment for blood clotting factors unde r 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 paym ent. 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, c onsistent with our proposed payment policy for other nonpass-through separa tely 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 cl otting factors under th e OPPS is consistent with the methodology applied in the physicia n 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 (CP I) for medical care for the 12-month period ending with June of the previous year. Becau se the Bureau of Labor Statistics releases the applicable CPI data af ter the MPFS and OPPS/ASC pr oposed rules are published, we were not able to include the actual upda ted 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 a nd the updated furnishing fee calculated based on that figure through applicable program inst ructions and posting on the CMS Web site

at: http://www.cms.gov/Medicare/Medi care-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 commen ters’ support of our policy. After consideration of th e public comments we receive d, we are finalizing our proposal, without modification, to provide payment for bloo d clotting factors under the same methodology as other separately paya ble drugs and biologicals under the OPPS and to continue payment of an updated furnishi ng fee. We will announ ce the actual figure of the percent change in the applicable CPI a nd 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, Biol ogicals, and Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital Claims Data The Medicare Prescription Drug, Impr ovement, and Modernization Act of 2003 (Pub. L. 108-173) did not address the OPPS pa yment in CY 2005 and subsequent years for drugs, biologicals, and radiopharmaceutical s that have assigned HCPCS codes, but646 that do not have a reference AWP or appr oval 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 esta blishing a payment rate for th em, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799). For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and radiopharmaceutical s with HCPCS codes (specifically those new drug, biological, and radiopharmaceutical HC PCS codes in each of those calendar years that did not crosswalk to predece ssor HCPCS codes) but which did not have pass-through status, at a rate that was equivalent to the payment they received in the physician’s office setting, established in accordance with the ASP methodology for drugs and biologicals, and based on charges adjust ed to cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a policy to pr ovide payment for new drugs (excluding contrast agents and diagnostic radiopha rmaceuticals) and biologicals (excluding implantable biologicals for CY 2009) with HCPCS codes, but which did not have pass-through status and were without OPPS hospital claims data, at ASP+5 percent and ASP+4 percent, respectively, consistent w ith the final OPPS payment methodology for other separately payable drugs and biologi cals. New therapeutic radiopharmaceuticals were paid at charges adjusted to cost ba sed on the statutory requirement for CY 2008 and CY 2009 and payment for new diagnostic radiopharmaceuticals was packaged in both
years.647 For CY 2010, we continued to provide pa yment for new drugs (excluding contrast agents) and biologicals with HCPCS codes that do not have pass-thr ough status and are without OPPS hospital claims data at ASP+ 4 percent, consistent with the CY 2010 payment methodology for other separate ly payable nonpass-through drugs and biologicals. We also finalized a policy to extend the CY 2009 payment methodology to new therapeutic radiopharmaceutical HCPCS code s, 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 ra diopharmaceuticals that do not crosswalk to CY 2009 HCPCS codes, do not have pass-thro ugh 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 w ithout OPPS hospital claims data at ASP+5 percent, ASP+4 percent, and ASP+6 percent, respectivel y, consistent with the final OPPS payment methodology for other separately payable dr ugs 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 th erapeutic radiopharmaceuticals that do not have pass-through status at ASP+6 percent, consistent with the proposed CY 2014 payment methodology for other separately pa yable 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 radiopharmaceutic als would be treated like other drugs, biologicals, and therapeutic ra diopharmaceuticals under the OPPS. For CY 2014, we also proposed to pa ckage payment for all new nonpass-through policy-packaged products (diagnostic radiophar maceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceutical s that function as supplies when used in a diagnostic test or proce dure, and drugs and biologicals that function as supplies when used in a surgical procedure) with HCPC S codes but without cl aims data (those new CY 2014 HCPCS codes that do not crosswalk to predecessor HCPCS codes). This is consistent with the proposed policy packag ing of all existing nonpa ss-through diagnostic radiopharmaceuticals, contra st agents, anesthesia dr ugs, drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure, and drugs and biol ogicals that function as supplie s when used in a surgical procedure, as discussed in more detail in se ction 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 paymen t 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 pa yment at 95 percent of the product’s most recent AWP. We also proposed to assign st atus indicator “K” (Separately paid nonpassthrough drugs and biologicals, including th erapeutic radiopharmaceuticals) to HCPCS codes for new drugs and biologicals without OPPS claims data and for which we have649 not granted pass-through st atus. With respect to new nonpass-through drugs and biologicals for which we do not have ASP da ta, 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 woul d 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, wh ich 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 consiste nt with prior years’ po licies for these items, and would ensure that new nonpass-through drug s and biologicals woul d be treated like other drugs and biologicals under the OPPS, unless they ar e granted pass-through status. Similarly, we proposed to continue to ba se 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 avai lable. If the WACs are also unavailable, we proposed to make payment for new therapeutic radioph armaceuticals 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 w ith 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 paym ent, we proposed to announce any changes to the payment amounts for new drugs and bi ologicals 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 su bmissions (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 not e that the new CY 2014 HCPCS codes for drugs, biologicals, and therapeutic radiopharm aceuticals were not avai lable at the time of development of the proposed rule. Howeve r, these agents are included in Addendum B to this CY 2014 OPPS/ASC fina l rule with comment period (w hich is available via the Internet on the CMS Web site), where they are assigned comment indicator “NI.” This comment indicator reflects that their inte rim 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 wh ich there are no other HCPCS codes that describe different doses of the same drug, butwhich have pricing information available for the ASP methodology. In order to determin e the packaging status of these products for CY 2014, we proposed to continue our polic y to calculate an esti mate of the per day cost of each of these items by multiplying th e payment rate of each product based on ASP+6 percent, similar to other nonpass-thr ough drugs and biologicals paid separately under the OPPS, by an estimated average num ber of units of each product that would651 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 pr oposed 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 th e per day administration cost to be greater than $90 (with the exception of diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and ra diopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologica ls 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 inthe 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 unavail able, we would make payment at 95 percent of the most recent AWP available. The pr oposed estimated units per day and status indicators for these items we re 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 inform ation for the ASP methodology for the CY 2014 OPPS/ASC proposed rule. For CY 2010, we fina lized a policy to assi gn status indicator “E” (Not paid by Medicare when submitted on outpatient claims (any outpatient bill652 type)) whenever we lacked claims data a nd pricing information and were unable to determine the per day cost of a drug or biolog ical. 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 fo r 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 th at 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 th e ASP methodology that we re assigned status indicator “E” on this basis at the time of th e 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 pa y for them separately for the remainder of CY 2014 if pricing information were to become available. We did not receive any public comme nts on our CY 2014 proposals to provide payment for new drugs, biologicals, and ther apeutic radiopharmaceuticals using the ASP methodology and to use an estimated per day co st 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 in formation 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 co mments on our proposal to continue to assign status indicator “E” to drugs and biol ogicals 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 met hodology 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 0838654

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 3050655 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 globul in (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, oxytetracyc line hcl, up to 50 mg E J2725 Injection, protirelin, per 250 mcg E J2940 Injection, somatrem, 1 mg E J3365 Injection, iv, uroki nase, 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 Proce dure-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 rule656 (78 FR 43612), we proposed to no longe r require the nuclear medicine procedure-to-radiolabeled product edits. Unde r this proposal, hospitals would still be expected to adhere to the gui delines of correct coding and ap pend the correct radiolabeled product code to the claim when applicable . However, claims would no longer be returned to providers when HCPCS codes fo r 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 pr oduct 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 th at we should continue the nuclear medicine procedure-to-radiolab eled product edits. We belie ve that hospitals have now had several years of experience reporting pro cedures involving radi olabeled products and have grown accustomed to ensuring that they co de 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 th e public comments we receive d, we are finalizing our proposal to no longer require the nuclear medicine proced ure-to-radiolabeled product edits. Hospitals will still be expected to a dhere to the guidelines of correct coding and append the correct radiolabeled product code to the claim when applicable.657 VI. Estimate of OPPS Tr ansitional Pass-Through Spendi ng for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Background Section 1833(t)(6)(E) of the Act limits the total projected am ount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable pe rcentage,” currently not to exceed 2.0 percent of total program payments estimated to be ma de for all covered services under the OPPS furnished for that year. If we estimate befo re the beginning of the calendar year that the total amount of pass-through payments in th at 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 pa ss-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 a pplicable percentage and the appropriate prorata reduction to the conversion factor fo r 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. Th e first group of items consists of device categories that were recently made elig ible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2014. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used658 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 quart ers of CY 2013 or beginning in CY 2014. The sum of the CY 2014 pass-thr ough 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 secti on 1833(t)(6)(D )(ii) of the Act, and as outlined in previous rule s, 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-thr ough payment for implantable biologicals newly approved for pass-through payment begi nning on or after January 1, 2010, that are surgically inserted or implan ted (through a surgical incision or a natural orifice) is the device pass-through process and payment meth odology (74 FR 60476). As has been our past practice (76 FR 74335), we include anestimate of any implantable biologicals eligible for pass-through paym ent 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 es tablishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (o r, if the drug or biological is covered under a competitive acquisition contra ct under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as659 calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary dete rmines is associated with the drug or biological. We note that the Part B dr ug 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 se parately 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 repres ents 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 biologic als at ASP+6 percent, as we discussed in section V.A. of this fi nal rule with comment peri od, 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-throu gh 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 radioph armaceuticals that function as supplies when used in a diagnostic test or procedur e and drugs and biologica ls that function as supplies when used in a surgical procedure fo r 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 lik e other pass-through drugs and biologicals for CY 2014. Therefore, our es timate of pass-through payment for policy-660 packaged drugs and biologicals with pass-th rough 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 co sts of certain policy-packaged drugs or biologicals are already packaged into the existin g APC structure. If we determine that a policy-packaged drug or biological appr oved for pass-through payment resembles predecessor drugs or biological s already included in the co sts of the APCs that are associated with the drug rece iving pass-through payment, we offset the amount of passthrough payment for the policy-packaged dr ug or biological. For these drugs or biologicals, the APC offset amount is the por tion 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 biol ogical 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 de vices, the first group of drugs and biologicals requiring a pass-thr ough payment estimate consists of those products that were recently made eligible for pass-thr ough payment and that will continue to be eligible for pass-through pa yment 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 beginni ng in CY 2014. The sum of the CY 2014 pass-through estimates for these two groups of drugs and biologicals equals the total661 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/A SC 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, consis tent 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 estima tion purposes, there is one device category, C1841 (Retinal prosth esis, includes all in ternal 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 elig ible for pass-through payment for CY 2014. As discussed in secti on IV.A. of this final rule with comment period, we finalized in the CY 2013 OPPS/AS C 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-th rough 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 pa yment 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 a nd before January 1, 2014; and contingent projections for new device categories establishe d in the second through fourth quarters of662 CY 2014. We are using the general met hodology 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 comment s regarding our proposed estimate for device pass-through spending. For this final ru le with comment period, the estimate of CY 2014 pass-through spending for this se cond group of device categories is $9.5 million, which is a slight decrease from th e $10 million estimate in the proposed rule (78 FR 43613). Using our established methodol ogy, we are establis hing that the total estimated pass-through spending for device cate gories 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 fo r 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 th eir utilization, inform ation provided in the respective pass-through applications, histor ical hospital claims data, pharmaceutical industry information, and clinical informati on regarding those drugs or biologicals to project the CY 2014 OPPS u tilization of the products. For the known drugs and biologicals (e xcluding policy-packaged diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a dia gnostic test or procedure, and drugs and biologicals that function as suppl ies when used in a surgical procedure) that will be663 continuing on pass-through st atus 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 sepa rately paid at ASP+6 percent, which is zero for this group of drugs. Because paymen t for policy-packaged drugs and biologicals is packaged if the product was not paid se parately 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 fi rst group of drugs and nonimplantable biologicals. Therefore, for this final rule with comment period, we are finalizing our proposed methodology. Using our establ ished 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 spendi ng for drugs and biologicals in the second group (that is, drugs and biologicals th at we knew at the time of development of664 the final rule are newly eligible for pa ss-through payment in CY 2014, additional drugs and biologicals that we estimate could be a pproved for pass-through status subsequent to the development of the final rule and befo re January 1, 2014, and projections for new drugs and biologicals that c ould be initially eligible fo r 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 dr ugs, and projected annual changes in service volume and intensity as our basis fo r making the CY 2014 pass-through payment estimate. We also consider the most recent OPPS experience in approving new pass-through drugs and biol ogicals. Using our proposedmethodology 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 th is final rule with comment period, we are finalizing our proposed methodology. Usi ng that methodology and updated data and information, we calculated a final CY 2014 spending estimate for this second group of drugs and implantable biological s of approximately $0.9 million. As discussed in section V.A. of this final rule with comment period, radiopharmaceuticals are considered drugs fo r pass-through purposes. Therefore, we include radiopharmaceuticals in our CY 2014 pass-through spending estimate for drugs and biologicals. Our CY 2014 estimate fo r total pass-through spending for drugs and665 biologicals (spending for the first group of drugs and biologicals ($1.4 million) plus spending for the second group of drugs a nd biologicals ($0.9 million)) equals $2.3 million. In summary, in accordance with the me thodology described above in this section, for this final rule with comment period, we estimate that total pa ss-through spending for the device categories and the drugs and biol ogicals that are c ontinuing 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 biolog icals), 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 Ho spital 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 activa tion. 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 re fer 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.666 TABLE 41.—CY 2013 HCPCS CODES US ED 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 th e evaluation and management of a patient (Level 1)

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

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

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

99285 Emergency department visit for th e evaluation and management of a patient (Level 5)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 manage ment of the critically ill or critically injured patient; first 30-74 minutes

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

B. Payment for Hospital Outpatient C linic and Emergency Department Visits Since April 7, 2000, we have instructed hos pitals to report facility resources for clinic and ED hospital outpatient visits usi ng the CPT E/M codes and to develop internal hospital guidelines for reporting the appropria te visit level (65 FR 18451). Because a national set of hospital-specifi c 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 fo llow 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 fo r hospital-specific na tional guidelines for visit billing since the OPPS started in 2000, and we have signaled through rulemaking our intent to develop guidelines, this comp lex undertaking has proven challenging. Our work with interested stakehol ders, such as hospital associa tions, along with a contractor, has confirmed that no single approach c ould consistently and accurately capture hospitals’ relative costs. Public comments received on this issue, as well as our own668 knowledge of how clinics operate, ha ve led us to conclude that it is not feasible to adopt a set of national guidelines for reporting hospita l 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. More over, 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 longstandi ng policies related to hospital outpatient clinic and ED visits. Rather than recogni zing 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 rec ognizes a single visit leve l for clinic visits, Type A ED visits, and Type B ED visits fo r payment under the OPPS is appropriate for several reasons. First, we indi cated that the proposal is in line with our strategic goal of using larger payment bundles to maximize hos pitals’ 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 in centives hospitals may have to provide medically unnecessary services or expend addi tional, unnecessary resources to achieve a higher level of visit payment under the OPPS. S econd, we stated that we believe that it is important to consider ways in which we can reduce the administrative burden that Medicare payment policies plac e 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 II669 HCPCS codes would reduce administrative burden and would be easily adopted by hospitals, because the three ne w codes would require hospita ls 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 in ternal guidelines to differen tiate among five levels of resource use for every clinic visit and ED vi sit they provide, and by eliminating the need to distinguish between new and established pa tients. Third, we stat ed that our proposal would allow a large universe of claims to be u tilized for ratesetting for each of the three newly proposed alphanumeric Level II HCPCS vis it codes. We stated that we believe this large volume of claims available fo r 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 comple xity 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 w ill 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 propos ed to discontinue our longstanding policy of recognizing five distinct visit levels for clinic visits and ED visits based on the670 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 und er 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 base d on the total geometri c 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. U nder this proposal, all clinic visits would be reported using the new HCPCS G-code, regardle ss of whether or not the patient has been registered as an inpatient or outpatient of th e hospital within the 3 years prior to a visit. In addition, in the CY 2014 OPPS/AS C proposed rule (78 FR 43614 through 43617), we proposed to disconti nue our longstanding policy of recognizing five distinct visit levels for Type A ED visits and inst ead proposed to create a new alphanumeric HCPCS G-code for hospital use only representi ng any Type A ED visit under the OPPS. We proposed to assign the newly created al phanumeric 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 ne w HCPCS G-code based on the total671 geometric mean cost of the levels 1 through 5 CPT E/M codes for Type A ED visits currently recognized under th e OPPS (CPT codes 99281 through 99285). We stated that while we would use data for CPT code s 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 l ongstanding policy of recognizing five distinct visit le vels 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 al phanumeric 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 ne w HCPCS G-code based on the total geometric mean cost of the levels 1 th rough 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 meancost for new APC 0636, we would no longer recognize those HCPCS codes for Type B ED vi sits when they app ear on hospital claims effective January 1, 2014. We noted that we would use the hospita l claims data for the three new HCPCS G-codes when available for future ratesetti ng. We summarized the proposed changes to the visit coding and payment structure in Tabl e 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 stated672 that we believe this proposal will allow us to make accurate payments for visits broadscale because we will be using data from th e 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 i ndicated that we were interested in hearing from stakeholders regarding whether a differe nt 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 w ould not be best accommodated by a single level of payment. If such cases exist, we welcomed stakehol der input into whether and how this proposal could be changed in the final rule to eith er make exceptions for or accommodate these special cases. We stated that if commen ters provided compelling comments describing such special cases or the need for additiona l 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 polic y in the final rule. We noted that, to the extent that commenters recomm ended that additional levels of payment or special high complexity or low complexity cases be recogn ized, 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 vi sits into a single visit level for both Type A and Type B ED673 visits. Commenters stated that the proposedsingle 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 benefi ciaries who require highe r levels of care. Commenters also stated that a single ED visit level would result in higher copayment amounts for beneficiaries receiv ing services consistent with a lower level ED visit. Commenters expressed concern that hospita ls would pressure physicians and hospital staff to reduce the time in the ED to lessen th e potential loss of reve nues associated with a single level ED visit payment, potentially l eading to a deterioration of patient care. Commenters argued that the proposed ED vis it policy is inequitabl e 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 lo wer-acuity ED patients into Type B EDs or onsite or nearby urgent care clinics. Commenters urge d 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 reservati ons 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 acce ss to care under the Affordable Care Act. Commenters also argued that there is a bi as toward lower level visit code costs in calculating the geometric mean cost for the ne w collapsed visit codes as higher level visit codes are more often billed with separately pa id 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 the674 CY 2014 OPPS/ASC proposed rule data. Comm enters also stated the proposed policy removes CMS’ ability to track and documen t 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 se ssions currently underway to implement International Classification of Diseases, 10 th Edition (ICD-10). Commenters asserted that the proposed policy would create added admi nistrative burden as other payers will continue to require the reporti ng of the five E/M code levels . Commenters suggested that CMS work with the AMA to develop facili ty-specific CPT codes for Type A ED and Type B ED visits and seek input from industry stakeholders, specifically hospital representatives, to develop desc riptions for these new codes that allow for their consistent application by hospital outpatient department s. Commenters also recommended that CMS develop hospital-specific national guidelin es for hospitals to report ED visits. Commenters stated that they did not unde rstand why this propos al is necessary in light of CMS’ previous statements that hospita ls are generally billi ng appropriately and in a consistent manner that distinguishes among th e different levels of visits based on the required hospital resources and CMS’ current utilization of Comprehensive Error Rate Testing (CERT), Recovery Audit Contra ctors (RACs), Zone Program Integrity Contractors (ZPICs), and other methods of review to identify medically unnecessary675 services. Commenters stated that CMS should conduct selected focused audits in lieu of the proposed policy if CMS believe s that hospitals are upcoding. Response : We appreciate all of the public co mments we received on our proposal to collapse the current five levels of ED vis its into a single visit level for both Type A and Type B ED visits. We specifically sought co mment 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 th e final rule to either make exceptions for or accommodate these special case s. We also stated in the proposed rule that if commenters provided compelling commen ts describing such special cases or the need for additional payment levels, should they exist, and if there ar e alternative policies that would more accurately and appropriate ly 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 pa yment structure for ED visits, including the particular number of visit le vels that would not underrepresen t resources required to treat the most complex patients, such as trauma pa tients. 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 visi ts. We will maintain the current coding676 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 propose d, 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 leve l model to pay for Type A ED and Type B ED visits under the OPPS. Another comme nter suggested CMS continue to use the current CPT codes for clinic E/M services bu t assign the CPT codes to one of three ED Visit APCs. One commenter suggested CMS cr eate three composite ED services based on the ancillary services packaged with ED claim. A few comm enters 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 ou r proposed ED visits policy would affect payments for the most complex patients. We be lieve it is best to de lay any change in ED visit coding while we consider further the mo st appropriate payment structure for Type A and Type B ED visits.677 Comment : Commenters generally opposed our proposal to crea te a single new alphanumeric HCPCS G-code for hospital use on ly representing all c linic visits under the OPPS and to assign the newly created alphanum eric 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 we re fewer objections to a single payment for clinic visits and t hose objections lacked the forcefulness and specificity of the objections to a single le vel of payment for Type A and Type B ED visits. A few commenters stated that, while they did not favo r a single payment for clinic visits, given the nature of th e services provided at clinic visits, a single payment level would be acceptable. A majority of comme nters supported CMS’ proposal to eliminate the distinction between “new” and “establishe d” 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 hi gher levels of care and higher copayment amounts for beneficiaries receiving lower leve l 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 admi nistrative burden as other payers will continue to require the reporti ng 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 th at 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 lo wer level visit code costs in calculating the geometric mean cost for the new collapsed vis it 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 propo sal 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 thatthe proposed policy removes CMS’ ability to track and document differences in patient acuity and is inconsistent with CMS’ previously stated purpose in creating MS-D RGs under the IPPS to account for differences in costs due to differences in patient severi ty. Moreover, commenters stated the proposed policy should not be implemented in CY 2014 due to its interacti on with CMS’ proposal to expand packaging and hosp itals’ 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 stakehol ders, specifically hospital representatives, to develop desc riptions 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 understa nding of why this proposal is necessary in light of CMS’ previous statements that hos pitals are generally bi lling appropriately and in a consistent manner that di stinguishes among the different le vels of visits based on the required hospital resources and CMS’ curren t utilization of CERT , RACs, ZPICs, and679 other methods of review to identify medica lly unnecessary services. Commenters stated that CMS should conduct selected focused audi ts in lieu of the proposed policy if CMS believes that hospitals are upcoding. Response : We appreciate all of the pub lic comments we received on our proposed policy to create a single new al phanumeric HCPCS G-code for hospital use only representing any clinic visit under th e 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 pr oposed 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 appr opriately captured and reflected in the single level payment for clinic visits. We also belie ve that a single visit code is consistent with a prospective payment system, where payment is based on an average estimated relative cost for the servi ce, 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 esta blished clinic visits in our data, and there is significantly less di sparity in estimated geometric m ean 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 th e geometric mean costs of all visits. Although the cost for any given clinic visit may be highe r or lower than the geometric mean cost of APC 0634, the payment remains appropriate to th e hospital delivering a variety of clinic680 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 ove rpayment for hospitals that may serve a population with a more complex overall case-mi x. 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 establishe d patients suggests that hospitals prefer the administrative ease of not tracking new or es tablished 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 proce dures 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 c odes 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 for681 APC 0634 is comparable to the total distributi on 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 pr oposal for a single payment is contrary to CMS’ stated purpose in creating MS-DRG s under the IPPS to account for differences in costs due to differences in patient se verity. MS-DRGs are designed to reflect significant differences in resource cost s for an inpatient stay. The MS-DRG classification of a particular discharge is ba sed, as appropriate, on the patient’s age, sex, principal diagnosis (that is, the diagnosis esta blished after study to be chiefly responsible for causing the patient’s admission to the hos pital), secondary diagnoses, procedures performed, and discharge status. A single pa yment for a clinic visit does not pose the same level of financial risk. The observed co st 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 enc ounter 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 erro rs in the proposed rule payment files, we note that we released corrected data f iles 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 pr ocess, 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 code s and is proportional to their appearance in the claims data. As with all prospective payment systems that depend upon a prospectively established payment derive d 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 co st of any particular case. It is our belief and continued expectation that hospitals and physicians and other practitione rs will furnish appropriate care to Medicare beneficiaries. We continue to believe discontinuing th e 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 ow n internal guidelines to differentiate among five levels of resource use for every clinic vi sit 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 cl inic visits. We note that the level of CPT code is not the only method for assessing pati ent 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 finali zation of our proposed clinic visit policy should be delayed because of our CY 2014 propos al to expand packagin g or the presence of hospital training sessions to implement ICD-10 coding. We note that our CY 2014 OPPS packaging policies create no additiona l administrative burden for hospital coding683 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 criter ia for billing either new or established clinic visi ts, and the discontinuance of the requirement for hospitals to distinguish different clinic vis it levels through internal guideli nes will result in significant administrative simplification for hospitals. With regard to national guidelines, we ha ve 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 successfu lly 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 th e proposal is unexpected, each annual rulemaking cycle includes some proposed polic y changes to the OPPS, and some of those proposals may be more or less predictable. We believe that, desp ite hospitals’ use of internal guidelines, differentiati ng 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 vi sit versus a level 2, or a level 2 versus a level 3, etc. A single code al so negates the ability or incen tive 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 followi ng 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 creati ng new HCPCS codes. Multiple commenters suggested that CMS employ a three acuity leve l model to pay for clinic visits under the OPPS. Another commenter suggested that CM S 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 a nd 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 betw een new and established clinic visits while continuing to recognize CPT codes that make th at 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 ne w alphanumeric HCPCS G-code and assigning this c ode to new APC 0634 is the optimal OPPS payment policy for clinic visits.685 After consideration of th e public comments we receive d, we are finalizing our proposal to create a new alphanumeric HCPC S code, G0463 (Hospital outpatient clinic visit for assessment and management of a pa tient), for hospital use only representing any clinic visit under the OPPS and to assi gn new HCPCS code G0463 to new APC 0634. We also are finalizing our proposal to us e 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 recogni ze 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 pol icy of recognizing five distin ct visit levels for Type B ED visits and to create a new alphanu meric 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 cr eated alphanumeric Type A ED visit HCPCS G-code to its own newly created APC 0635, nor are we finaliz ing our proposal to assign the newly created alphanumeric Type B ED visit HC PCS G-code to its ow n 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 B686 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 assignme nts for CY 2014 are depicted below in Table 42.687 TABLE 42.—CY 2013 CLINIC AND EMERGENCY DEPARTMENT VISIT HCPCS CODES AND APC ASSIGNMENT S COMPARED TO CY 2014 CLINIC AND EMERGENCY DEPARTMENT VI SIT 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 provi ded to address this issue. We may propose changes to the coding and APC assignment s 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 me thodology 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 cri tical care CPT codes 99291 (Cri tical care, evaluation and management of the critically ill or critic ally injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill or critically injured patient; each additional 30 mi nutes (List separately in addition to code for primary service)) to include a wide range of ancillar y services such as electrocardiograms, chest X-rays, and pulse oximetry. As we have statedin 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 (inc luding those services that would otherwise be reported by and paid to hospitals using a ny of the CPT codes specified by the CPT Editorial Panel) should not be billed separatel y. Instead, hospitals were instructed to report charges for any serv ices provided as part of the critical care services. In establishing payment rates for cr itical care services a nd other services, CMS packages the costs of certain items and serv ices separately reported by HCPCS codes into payment for critical care services and ot her services, according to the standard OPPS methodology for packaging costs (Medicar e 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 hosp ital reporting purposes, cr itical care codes do not include the specified anci llary services. Beginning in CY 2011, hospitals that report in accordance with the CPT guidelines should re port all of the ancillary services and their associated charges separately when they are provided in conjunction with critical care. Because the CY 2011 payment rate for critical care services was based on hospital claims data from CY 2009, during which time hospita ls would have reported charges for any ancillary services provided as part of the cr itical care services, we stated in the CY 2011 OPPS/ASC final rule with comm ent period that we believed it was inappropriate to pay separately in CY 2011 for the an cillary services that hospita ls may now report in addition to critical care services ( 75 FR 71988). Therefore, for CY 2011, we continued to recognize the existing CPT codes for critical ca re services and estab lished a payment rate based on historical data, into which the cost of the ancillary services 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 conj unction 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 fo r 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 status690 indicated for status indica tor “Q3” in Addendum D1 to the CY 2011 OPPS/ASC final rule with comment period. The ancillary serv ices that were include d in the definition of critical care prior to CY 2011 and that are conditionally p ackaged 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 servi ces 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 establishe d in the CY 2011 OPPS/ASC final rule with comment period of calculating a payment ra te 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 serv ices in order to avoid overpayment. As we discussed in the CY 2013 OPPS/AS C 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 th e reporting of all the ancillary services and their associated char ges 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 co st data for CY 2013 represented a change from our historical practice to base paymen t rates on median costs, and because we had hospital claims data for the first time reflect ing the revised coding guidance for critical691 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 percen t, respectively. Additionally, when compared to CY 2010 hospi tal claims data, CY 2011 hospital claims data showed no substantial change in the an cillary services that were presented on the same claims as critical care services, a nd also showed continue d low volumes of many ancillary services. We stated in the CY 2013 OPPS/ASC final rule with comment period that, had the majority of hosp itals changed their billing prac tices to separately report and charge for the ancillary servic es formerly included in the de finition 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 cha nge in the services reported on critical care clai ms, along with the increases in the line item costs and charges for critical care serv ices, 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 period692 that we continued to believe that it is ina ppropriate to pay separately in CY 2013 for the ancillary services that hospitals may now repor t 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 servic es and establish a payment rate based on historical claims data. We also continue d to implement claims processing edits that conditionally packaged payment for the ancillar y services that were reported on the same date of service as critical care services in or der 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 th e 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 fo r the ancillary services that hospitals may now report in addition to critical care serv ices. 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 establis h a payment rate based on historical claims693 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 serv ices in order to avoid overpayment.
Comment : Commenters recommended that CMS, in setting the payment rate for packaging ancillary services in to the critical care servic es, 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 sec tion II.A.1.c. of this final rule with comment period, we calculat e hospital-specific ove rall ancillary CCRs and hospital-specific departmental CCRs for each hospital for which we have claims data. We apply the hospital-specific CCR to the hospi tal’s charges at the most detailed level possible, based on a revenue code-to-cost cente r crosswalk that cont ains a hierarchy of CCRs used to estimate costs from charges for e ach revenue code. Therefore, we base our cost estimation of each packaged ancillary se rvice on the most spec ific cost center to which the revenue code reported with that serv ice maps. We then package the cost that we estimate as a result of that process into th e geometric mean cost calculation for critical

care. After consideration of the public comments receive d, 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 servic es and establish a payment rate based on historical claims data. We also are fina lizing our proposal to c ontinue to implement claims processing edits that c onditionally package payment for the ancillary services that694 are reported on the same date of service as critical care services in order to avoid overpayment. We will continue to monitor the hospita l claims data for CPT code 99291 in order to determine whether revisions to this polic y are warranted based on changes in hospitals’ billing practices. VIII. Payment for Partial Hospitalization Services A. Background Partial hospitalization is an intensive out patient program of psychiatric services provided to patients as an alternative to i npatient psychiatric care for individuals who have an acute mental illness. Sectio n 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 pursu ant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such pr ogram), which sets forth the phy sician’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 hospi talization services. S ection 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 (C MHC) (as defined in subparagraph (B)), and “which is a distinct and organized intensiv e ambulatory treatment service offering less than 24-hour-d aily care other than in an individual’s home or in an695 inpatient or residential sett ing.” 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 provi des the Secretary with the authority to designate the OPD services to be covered under the OPPS. The Me dicare regulations that implement this provision specify, under 42 CFR 419.21, that payments under the OPPS will be made for partial hospitalizati on services furnished by CMHCs as well as Medicare Part B services fu rnished to hospital outpatient s designated by the Secretary, which include partial hospitalizatio n services (65 FR 18444 through 18445). Section 1833(t)(2)(C) of the Act, in pe rtinent part, requires the Secretary to “establish relative payment we ights for covered OPD servic es (and any groups of such services described in subparagraph (B)) base d on median (or, atthe election of the Secretary, mean) hospital costs” using data on claims from 1996 and data from the most recent available cost reports. In pertin ent part, subparagraph (B) provides that the Secretary may establish groups of covered OP D services, within a classification system developed by the Secretary for covered OPD serv ices, so that services classified within each group are comparable clinic ally and with respect to the use of resources. In accordance with these provisions, we ha ve developed the PHP APCs. Section 1833(t)(9)(A) of the Act requir es the Secretary to “review not less often than annually and revise the groups, the rela tive 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 co st 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 establ ished a per diem payment methodology for the PHP APCs, effective for services furnis hed on or after July 1, 2000 (65 FR 18452 through 18455). Under this methodology, the medi an per diem costs have been used to calculate the relative payment weights for PHP APCs. From CY 2003 through CY 2006, the me dian per diem costs for CMHCs fluctuated significantly from year to y ear, while the median per diem costs for hospital-based PHPs remained relatively cons tant. We were concerned that CMHCs may have increased and decreased their charges in response to Medicare payment policies. Therefore, we began efforts to strengthen th e PHP benefit through extensive data analysis and policy and payment changes finalized in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66670 through 66676). We made two refinements to the methodology for computing the PHP median: th e 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 compu ting 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 re gulatory, policy, and payment changes, including a two-tiered payment approach fo r PHP services under which we paid one amount for days with 3 services (APC 0172 Le vel 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 th e 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 finaliz ed 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 criteriaand 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 revise d 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 appr oach for PHP services and used only hospital-based PHP data in compu ting 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 wit hout knowing the impact of the policy and payment changes we made in CY 2009. B ecause of the 2-year lag between data collection and rulemaking, the ch anges 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 am ended 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 da ily care “other than in an individual’s home or in an inpatient or residential sett ing.” In addition, in accordance with section 1301(a) of HCERA 2010, we revised the defini tion 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 th ese two provisions of HCERA 2010 in section X.C. of the CY 2011 OPPS/ASC final ru le 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 pe r diem payment rates, two for CMHCs (for Level I and Level II services) and two for hos pital-based PHPs (for Level I and Level II services), based on each provider’s own uni que 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 clai ms data, CMHC costs had significantly decreased again. We attributed the decrea se to the lower cost structure of CMHCs compared to hospital-based PHP providers, a nd not the impact of the CY 2009 policies. CMHCs have a lower cost structure than hos pital-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. Therefor e, 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 that699 paying hospital-based PHPs at a lo wer rate than their cost stru cture reflects could lead to hospital-based PHP closures and possible access problems for Medicare beneficiaries because hospital-based PHPs ar e 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 pr evalence in Florida, Texas, and Louisiana. Creating the four payment rates (two for CM HCs 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 Leve l I and Level II per diem costs were calculated by taking 50 percent of th e 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 me dian. A 2-year transition under this methodology moved us in the direction of our goa l, 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 pr otect access to care for beneficiaries. We also stated that we would review and an alyze the data during the CY 2012 rulemaking cycle and, based on these analyses, we might fu rther refine the payment mechanism. We700 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/AS C 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 deri ved solely from hospitals. As discussed above, section 1833(t)(2)(C) of the Act requires CMS to “establish relative payment weights for covered OPD services (and any groups of such services . . .) . . . based on . . . hospital costs.” Numerous courts have he ld that “based on” does not mean “based exclusively on.” On July 25, 2011, the District Court dismissed the plaintiffs’ complaint and application for a preliminary injunction fo r 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 th e 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 viola tion 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 da ta derived solely from CMHCs and the relative payment weights for hospital-based PHP services based exclusively on hospital data. The statute is reasonabl y interpreted to allow the relative payment weights for the OPPS payment rates for PHP services provide d by CMHCs to be based solely on CMHC data and relative payment weights for hos pital-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 we ights for covered OPD servic es (and any groups of such services described in subparagraph (B)) based on . . . hospital costs.” In pertinent part, subparagraph (B) provides that “the Secret ary may establish groups of covered OPD services . . . so that services classified w ithin each group are comp arable clinically and with respect to the use of resources.” In accordance with subparagraph (B), 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 cr eating the original AP C 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 for702 PHP services were based on a combination of hospital and CMHC data. For CY 2009, we established new APCs for PHP servi ces based exclusively on hospital data. Specifically, we adopted a tw o-tiered APC methodology (in lieu of the original APC 0033) under which CMS paid one rate for da ys with 3 services (APC 0172) and a different payment rate for days with 4 or more services (APC 0173). These two new APCs were established using only hospital da ta. For CY 2011, we added two new APCs (APCs 0175 and 0176) for PHP services provi ded by hospitals and based the relative payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were designated for PHP services provided by CMHCs and were based on a mixture of hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, the relative payment weights for the two AP Cs 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 hosp ital data in determining the OPPS relative payment weights for PHP services provide d by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make plain that the data source for the re lative payment weights is subject to change from one period to another. S ection 1833(t)(2)(C) of the Act provides that, in establishing th e relative payment weights, “t he Secretary shall [ ] us[e] data on claims from 1996 and us [e] data from the most recent available cost reports.” We703 used 1996 data (in addition to 1997 data) indetermining only the original relative payment weights for 2000. In the ensuing ca lendar year updates, we continually used more recent cost report data. Moreover, section 1833(t)(9)(A ) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relativ e payment weights, and the wage and other adjustments described in para graph (2) to take into account changes in medical practice, changes in technology, the ad dition of new services, new cost data, and other relevant information and factors.” For purposes of the CY 2012 update, we exercised our authority under se ction 1833(t)(9)(A) of the Act to change the data source for the relative payment weights for PHP se rvices provided by CMHCs based on “new cost data, and other relevant information and factors.” In the CY 2013 OPPS/ASC final rule w ith comment period, we finalized our proposal to base the relative payment wei ghts that underpin the OPPS APCs, including the four PHP APCs, on geometric means rath er than on the medians. For CY 2013, we established the four PHP APC per diem pa yment 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/AS C 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 establishe d policies to calculat e the four PHP APC per diem payment rates based on geometric m ean per diem costs using the most recent704 claims data for each provider type. We computed proposed CMHC PHP APC geometric mean per diem costs for Level I (3 services pe r 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 fo r 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 reflecte d in Table 42a below.

TABLE 42a.—PROPOSED CY 2014 GEOM ETRIC MEAN PER DIEM COSTS FOR CMHC AND HOSPITAL-BASED PH P 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 remained705 relatively constant when compared to the CY 2013 final geometric mean per diem costs for CMHCs established in the CY 2013 O PPS/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 a pproximately $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 pe r diem costs for hospital-based PHPs calculated under the propos ed 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 geometri c 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 pe r 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 c ontinued distinc tion between APC payments for PHP services provided by CM HCs and APC payments for PHP services provided by hospital-based PHPs. These commente rs believed that the cost structures of the two provider types are signi ficantly different and, theref ore, the payments should be different. Conversely, a few co mmenters stated that they do not like th e distinction between provider types. Instead, thes e commenters believed that CMHCs and706 hospital-based PHPs should receive the same payment rates. The commenters believed that the ratesetting methodology used to esta blish payment rates for PHP services also has fueled a fundamental shift in payments away from less expe nsive CMHCs to more expensive hospital-based PHPs, resulting in overall higher CMS expenditures for the same services, which is discriminating ag ainst CMHCs that pr ovide identical PHP services. One commenter did not agree with CMS’ statement that “CMHCs have a lower cost structure than hospital-based PHP provide rs, in part because the data showed that CMHCs provide fewer PHP services in a day a nd use less costly staff than hospital-based PHPs.” The commenter stated that CMS im plies that “CMHCs provide less valuable services than hospital-based PHPs, hire le ss 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 di em 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 ca lculating the payment rates for PHP services based on the claims and cost report data submitted by our providers. We continue to707 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 ap propriately 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 othe r 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 overh ead expense for the provider; that is, less time the provider needs to pay staff, less tim e 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 hosp ital-based PHPs, CMHCs provide inferior, less708 valuable or poor quality serv ices 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 provide r 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 hos pital-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 con tinue to support the two-tiered payments for PHP services. We believe that paying pr oviders based on the f our 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 O PPS 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 th e adoption of the provider-specific structure in CY 2011, payment for partial hospitaliz ation services provided by CMHCs has709 decreased by approximately 50 percent. Th is 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 paym ent 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 year s and they believed that payment rate reductions are a primary reason for the closur es. These commenters pointed out that another reduction in the per diem payment rates may result in more CMHC closures, therefore decreasing the numb er of providers and availa ble resources for the most disadvantaged portion of the beneficiary population. Commenters also expressed concern rega rding the decrease in payment rates for Level II hospital-based PHP services. On e commenter stated that the proposed 9.2 percent decrease in the Level II per diem payment rate for hosp ital-based PHPs would result in inadequate payment for hospitals’ di rect and indirect cost s 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 PH P 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 adequa tely pay for their costs to provide PHP services and may result in closures for bot h CMHCs and hospital-based PHPs. However, based on the final geometric mean per diem costs for CY 2014, CMHCs will receive an710 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 an d 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). Ho spital-based PHPs al so 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 serv ice 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 CM HCs and hospital-based pr oviders, 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 busin ess closures. As we stated in the CY 2012 OPPS/ASC final rule with co mment period (76 FR 74350), the closure of PHPs may be due to a number of reasons, such as poor bus iness management or marketing decisions, competition, oversaturation of certain geographic areas, and Federal and State fraud and abuse efforts, among others. However, we ta ke seriously the comment ers’ concerns that a reduction in PHP APC per diem payment rate s could erode the viab ility 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 me thodology 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 goa l of deriving more accurate information from available claims and cost report data, as well as increasing th e benefits of using a metric that more accurately describes the range of costs associated with providing services and, thus, resulting in the most a ppropriate payments. We continue to believe that basing the relative payment weights on geometric mean costs promotes better stability in the payment system by making O PPS payments more reflective of the range of costs associated with provi ding services. Therefore, we believe that using geometric mean costs to calculate the relative paym ent weights for the OPPS represents an improvement to our cost estimation process a nd leads to the establishment of relative payment weights that are more refl ective of service cost patterns. Finally, in response to commenters re questing that we suspend the proposed CY 2014 PHP payment rates and maintain th e 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 thatpayment 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 that712 significant fluctuations from year to year make budgeting difficult for hospital-based PHPs. Another commenter asked if the decr ease 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 si gnificant dollars around in the OPPS system. Response : We recognize the commenters’ conc ern 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 ha ve 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 asso ciated 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 neutra l payment system, and as a result, changes in the relative payment weights associat ed 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 cha nges to the charging structure and the variety of hospitals and CMHCs providing the servi ces, contribute to changes in the payment713 rates. Providers may choose to update or maintain their charges each year based on a variety of business reasons, but these cha nges 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 ch ange its mix of services or to change its charges and clinical practice for some servi ces also contributes to the fluctuation in payment rates. Therefore, both policy and da ta 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 PH P 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 ma y 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 volat ility 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 mo re accurately estimate the cost of a service upon which the relative payment weights are based.714 In summary, after consid eration of the public comme nts we received, we are finalizing our CY 2014 proposal, without modifi cation, to update th e 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 finalizi ng 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 ME AN 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 po ssible future initiatives that may help to715 ensure the long-term stability of PHPs and further improve the accuracy of payment for PHP services. Along with our broad, ongoing obj ectives 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 acu te 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 PH P benefit. We did not propose new Medicare policy in this discussion of possible futu re 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 fo r 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 stru cture for PHP services to determine whether alternative methodologies to pay for PHP se rvices would reduce unnecessary care while maintaining or increasing the quality of car e provided. We invited public comments on alternative payment methodologies. Another area in which we solicited pub lic comments is whether payment based on an episode of care, or a per diem similar to t hose 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 fu rnished in psychiatric hospita ls, and psychiatric units in716 acute care hospitals and critical access hospita ls. The IPF PPS base rate is adjusted to account for patient and facility characterist ics 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 provisi on for interrupted stays, additional payment for outlier cases, and a per treatment payment for electroconvulsive therapy (ECT) treatments. For detailed information regarding the implementa tion 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 a dditional 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 request ing 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. Ma inly, commenters sugge sted that CMS take three steps: (1) establish a ratesetting task force to develop a new payment rate methodology that captures all relevant data a nd reflects the real costs to providers to deliver these services; (2) examine the Medicare mental health benefits; and (3) encourage legislative cha nges to expand mental health services. These commenters stressed that any proposed change to the payment methodology for PHP services must717 involve relevant stakeholde rs in Federal agencies (such as SAMHSA) as well as representatives from CMHCs and hos pital providers and associations. Response : We appreciate the commenters’ i nput 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 room s 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 isol ation. The commenters suggested that CMS look at Medicare benefits for psychiatric servi ces overall and take the necessary steps to develop coverage of a comprehensive set of se rvices 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 th ese Medicare beneficiaries was 131 days versus 59 days between admissions for those beneficiaries who did not participate in
PHPs. Many commenters representing hospitals a nd 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 wit hout statutory changes to the existing PHP benefit. A few comment ers indicated that in the absence of any718 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 approachwould 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 requi red number of service hours and days of treatment required per week. The commenter believ ed that more flexibility in this area is necessary to accommodate patients’ work and fa mily 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 enhancedper diem payment rate that reflects the costs of treating patients with more compli cated clinical needs similar to the IPF PPS would also be worth considering. Many commenters representing hospital asso ciations indicated that it would be useful to evaluate the way in which over all Medicare mental health benefits are structured. The commenters believed that, compared to the scope of services many719 private health insurers cover, Medicare bene fits are much narrower. The commenters stated, for instance, that Medi care beneficiaries are currentl y limited to only 190 days of inpatient psychiatric hospital care in their lifetime. A ccording to the commenters, no other Medicare inpatient hospital service has th is type of arbitrary cap on benefits. In addition, the commenters stated that, rath er than covering the full continuum of behavioral health care services, Medicare curre ntly covers only inpatient psychiatric care, hospital-based and CMHC-based PHP serv ices, and office-based services. The commenters further stated that the PHP bene fit is drawn very narrowly so as to only cover care for the most acutely ill patients who would otherwise re quire 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 rehabi litation, 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 broadeni ng the Medicare ment al health benefit structure to encompass the other components of the continuum would require statutory changes. The commenters believed that ma king 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 singl e provider-based payment structure be established for PHP services that reflects the in tensity of services that people with serious mental illnesses generally require because this benefit is meant to substitute for inpatient720 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 predic table 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 provide rs with no differentiation between payment rates for hospital-based PHP services and pa yments rates for PHP services provided by CMHCs. The commenter also urged CMS to establish quality and outcomes criteria to evaluate performance, influence future rate setting, and provide re wards to individual providers for outstanding quality and outcomes while at the same time keeping their cost under control. Response : We appreciate the commenters’ sugg estions and recommendations for strengthening the PHP benefit and paymen t structure. We will take them under advisement for any future refinements. Another area on which we solicited public comments was physician certification/recertificat ion 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 furnis hed to a Medicare beneficiar y, a physician must certify (and recertify when such services are furnishe d 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 indi vidualized written plan of treatment for furnishing such721 services must be established and reviewed periodically by a physician, and such services must be furnished while the individual is unde r the care of a physician. For more details, we refer readers to 42 CFR 424.24(e). Current regulations specify that a physici an recertification must be signed by a physician who is treating the patient and ha s knowledge of the patient’s response to treatment. A recertification is required as of the 18 th day of partial hospitalization services. Subsequent recertifi cations are required at interval s 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 physici an to be as of the 18 th day of partial hosp italization services, reflects current PHP treatment practices. Specifi cally, we stated that we were interested in whether the first recertific ation date should be changed to some other standard that accords with best practices and why.
Comment : Several commenters indicated th at they had no recommended changes to physician certification and r ecertification requirements a nd did not believe that an alternative recommendation is warranted at this time. The commenters indicated that they did not believe that th ere was any reason to change the 18-day recertification requirement and the “no longer than 30 days” le ngth 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 s uggest the need for such a change in the requirements.722 Response : We thank the commenters for thei r input and suggestions and will take them under advisement for future refinements With respect to the individualized writte n plan of treatment for furnishing partial hospitalization services, as di scussed above, a physician mustestablish 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. Th e physician determines the frequency and duration of the PHP services taking into acc ount accepted norms of me dical practice and a reasonable expectati on of improvement in the patient’s condition. (We refer readers to § 424.24(e)(2) of the regulations.) We indi cated that we are interested in what requirements should be included in the writte n plan of treatment to better direct PHP resources toward appropriate discharge and follow-up with appropria te support services. Specifically, we invited public comments on two issues: (1) the best way that discharge from a PHP could be expedited for those i ndividuals no longer at risk of inpatient psychiatric hospitalization; a nd (2) whether the written planof 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 requi re that specific actions be taken by the physician and/or staff to assist a beneficiar y in transitioning from a PHP to a lower level of care. For example, we are interested inwhether the written plan of treatment should require that, upon discharge, patients ha ve written instruct ions that include:

● A full list of their medications, do sages and any necessa ry prescriptions;723

● Their next scheduled appointment with a psychiatrist or qu alified practitioner who may bill for his or her professional se rvices 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 treatme nt a full list of patients’ medications, dosages, and any necessary prescriptions as well as written notice of the next scheduled appointment with a psychiatri st or qualified practitioner who may bill for his or her professional services under Medica re Part B, including the phone number, address and appointment date and time. Howeve r, the commenters did not believe that it would be feasible for a PHP to provide a “c onfirmed place to live in a stable environment with support services” for its patients. Th e commenters noted that among the admission criteria for a PHP is the requirement that th e 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 enviro nment would require intensive case management. The comme nters believed that, if intensive case management was included in the PHP benef it available to Medicare beneficiaries, it724 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 wr itten plan of treatment. Several commenters suggested additional requirements for the written plan of treatment to better direct PHP resources to ensure appropriate di scharges and follow-up services, such as expedited discharge for pa tients who are no longer at risk for inpatient psychiatric hospitalizations, and specific actions to assist pa tients at discharge, including providing written instructions for medications, documentati on of the next appointment with the appropriate Medicare Part B participa ting practitioner, confirmation of a place of residence, and other care coordination inform ation. One commenter stated that the PHP medical necessity criterion shoul d 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 wr itten treatment plan for a patient receiving PHP services include goals that will curt ail the patient’s need for a higher level of care through adherence to the PHP’s atte ndance requirements and his or her prescribed medication regimen, identify the patient’s symptoms a nd prognosis for improvement, and take into consideration the patient’s coping skills. Th e 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 attributab le to persons with chronic and persistent mental illnesses and included in the writt en treatment plan for PHP services. Response : We thank the commenters for thei r 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 prior ity for CMS. We implement quality initiatives to ensure quality health care for Me dicare beneficiaries through accountability and public disclosure. We us e 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 shoul d be included in those measures? In addition, should the quality measures be similar or identical to those measures established for IPFs under the IPF Qualit y 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 cons ideration and invited public comments on these issues.
Comment : Many commenters indicated that th ey 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 convers ation with the measure developers to determine if any of these measures would be suitable for the outpatient setting. In particular, the commenters indicated that th e care transition measure (HBIPS 7) and the antipsychotic medication measures (HBIPS 4 and 5) are likely candi dates and worthy of further discussion. Other commenters also suggested that CMS consider the HBIPS 6 measure regarding continuity of care a nd the HBIPS 1 measure regarding admission726 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 indi cated that starting with these inpatient measures may prove informative as CMS moves forward in considering alternative measures for the hosp ital outpatient department setting. Many commenters urged CMS to work coll aboratively with th e 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 car e 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 a ssess the quality of PHP services should be specified, tested and National Quality Foru m (NQF)-endorsed for that care setting, and reviewed by the Measure Applications Pa rtnership (MAP) before the measures are proposed for inclusion under a quality reporti ng program for PHP services provided on an outpatient basis. One commenter supporte d 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 mi ght apply or be modified to apply to quality measures for PHP services. Another commenter stated that the quali ty indicators CMS are seeking must be very specific and relate to the patient’s current outpatient visit. The commenter suggested the following quality indicators a nd discharge requirements for PHP services727 in order to evaluate performance: (1) Acce ss--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 sche duled attendance consistent with a minimum attendance average of 4 days per calendar w eek 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 discha rge (as needed); and (4) Continuity of Care--The percentage of post-discharge continuity of care plans provided to the ne xt level of care providers upon discharge. Another commenter suggested that, inst ead of calculating the PHP APC per diem payment rates using claims data, CMS should us e the quality of the provided services to base payments, including record reviews, de nials due to lack of medical necessity or inadequate documentation, site visits, interv iews 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 establishi ng 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 purch asing incentives (rather than antiquated payment methodologies involving cost-based purch asing) is more appropriate to improve the quality of care provided.728 Response : We thank the commenters for thei r input and suggestions and will take them under advisement for future refinements. We appreciate the wide range of co mments we received from health and behavioral health care associa tions, hospitals, providers and professionals interested in future initiatives related to partial hospita lization services. We will take them into consideration for further rulemaking to strengt hen the PHP benefit and payment structure. D. Separate Threshold for Outlier Payments to CMHCs As discussed in the CY 2004 OPPS fina l rule with comment period (68 FR 63469 through 63470), after examining the costs, char ges, and outlier payments for CMHCs, we believed that establishing a separate OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific outlier pol icy would direct OPPS outlier payments towards genuine cost of outlier cases, and address situations where charges were being artificially increased to enhance outlier paym ents. We created a se parate outlier policy that would be specific to the estimated cost s 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 comprehe nsively 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 paym ents, 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 successf ul in keeping outlier payments to CMHCs in line with the percentage of OPPS payments made to CMHCs. In the CY 2014 OPPS/ASC proposed ru le (78 FR 43622), we proposed to continue designating a portion of the estim ated 1.0 percent ou tlier 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 tota l OPPS payments in CY 2014, excluding outlier payments. Therefore, we proposed to designate 0.0016 pe rcent 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 CM HC payments for CY 2014, we proposed to continue to set the thresh old for CY 2014 at 3.40 times the highest CMHC PHP APC payment rate (that is, APC 0173 (Level II Partia l Hospitalization)). We stated that we continue to believe that this approach w ould neutralize the impact of inflated CMHC charges on outlier payments and better ta rget outlier paymen ts to those truly exceptionally high-cost cases that might othe rwise 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 proposedto continue to pay 50 percent of CMHC per diem costs over the threshold. In sect ion II.G. of the CY 2014 OPPS/ASC proposed730 rule (78 FR 43622), for the hospital outpatientoutlier payment polic y, we proposed to set a dollar threshold in addition to an APC mu ltiplier threshold. Because the PHP APCs are the only APCs for which CMHCs may receiv e payment under the OPPS, we would not expect to redirect outlier payments by imposi ng a dollar threshold. Th erefore, we did not propose to set a dollar threshold for CMHC outlier payments. In summary, we proposed to establis h that if a CMHC’s cost for partial hospitalization services, pa id under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier paym ent would be calculate d 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 th e public comments we receive d, we are finalizing our CY 2014 proposal to set a separate outlier thre shold for CMHCs. As discussed in section II.G. of this final rule with comment period, usin g 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 allo cated a portion of the 1.00 percent, an amount equal to 0.16 percent of outlier payments or 0.0016 percent of to tal 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 percenta ge applicable to costs in excess of the threshold at 50731 percent. In other words, if a CMHC’s cost for partial hosp italization 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 pe rcent of the amount by wh ich 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/A SC final rule with comment period (76 FR 74352 through 74353) for a full historic al discussion of our longstanding policies on how we identify procedures that are typical ly provided only in an inpatient setting (referred to as the inpatient list) and, ther efore, 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 re viewing the current li st 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 e quipped 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 pr ocedure is being performed in numerous hospitals on an outpatient basis. 5. A determination is made that the pr ocedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list. Using this methodology, we did not identif y 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 requeste d that CMS remove CPT codes 37182 (Insertion of transvenous intr ahepatic portosystemic shunt(s) (TIPS) (includes venous access, hepatic and portal vein catheterization, portography with hemodynamic evaluation, intrahepatic tract formation/dila tation, 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 sessi on); and 54417 (Removal733 and replacement of a non-inflatable (semi-rigi d) or inflatable (sel f-contained) penile prosthesis through an infected field at th e same operative session) from the CY 2014 inpatient list based on their own experien ce, specialty society recommendation, or designation of a procedure as sa fe in the outpatient setting un der 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 perf ormed 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; enter ectomy, resection of small inte stine, single resection and anastomosis), 44203 (Laparoscopy, surgical; each additional small intestine resection and anastomosis), 44204 (Laparoscopy, surgical; co lectomy, partial, with anastomosis); 44205 (Laparoscopy, surgical; colectomy, partial, with removal of terminal ileum with ileocolostomy), 44206 (Laparosco py, surgical; colectomy, part ial, with end colostomy and closure of distal segment (Hartmann t ype procedure)), 44207 (Laparoscopy, surgical; colectomy, partial, with anastomosis, with coloproctostomy (low pelvic anastomosis)), 44208 (Laparoscopy, surgical; colectomy, pa rtial, with anas tomosis, with coloproctostomy (low pelvic anastomosi s) with colostomy), and 44213 (Laparoscopy, surgical, mobilization (take-down) of spleni c 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 perf ormed 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 th e inpatient list. We note that CPT codes 44202, 44203, 44204, and 44205 are currentlyassigned 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 defibrilla tor 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 reev aluation, we determined that these five procedures can be safely performed in th e outpatient setting. Th erefore, 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 inpa tient only list is a valuable tool for ensuring that the OPPS only pays for services th at can safely be performed in the hospital outpatient setting, and we are not eliminating th e inpatient only list at this time. We believe that there are many surgical proce dures 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 separate ly payable status i ndicators and establish payment rates in the OPPS.
Comment : One commenter recommended that CM S remove the fourth criterion, “A determination is made that the procedure is being performed in numerous hospitals on an outpatient basis,” to determine whether c odes 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 poten tially could be removed from the inpatient list for a number of years without significant conc ern raised by public commenters. We also remind the commenter th at 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. Therefor e, we do not find reason to rem ove the fourth criterion from our established methodology for identifying a ny procedures that potentially could be removed from the inpatient list. If this were the case for a se rvice (even though it may appear unlikely), the service may be a good candi date for removal from the inpatient list.736 After consideration of th e public comments we receive d, we are finalizing our proposal to continue to use the methodol ogy 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 modify ing 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 i ndictors are displayed in Table 45 below. TABLE 45.—PROCEDURES ADDED TH E 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 segmen t (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 Ou tpatient Therapeutic Services 1. Enforcement Instruction for the Supervisi on 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 hospita l outpatient therapeuti c services covered and paid by Medicare in hospitals, as well as in provider-based departme nts of hospitals, as set forth in the CY 2000 OPPS final rule w ith comment period (65 FR 18525). In the CY 2010 OPPS/ASC final rule with comme nt period (74 FR 60575 through 60591), we finalized a technical correction to the title and text of th e applicable regulations at 42 CFR 410.27 to clarify that this standard ap plies in CAHs as well as hospitals. In response to concerns expressed by the hospita l community, in particular CAHs and small rural hospitals, that they would have diffi culty meeting this st andard, on March 15, 2010, we instructed all Medicare contractors not to evaluate or enforce the supervision requirements for therapeutic services pr ovided 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 nonenf orcement (“enforcement instruction”) as an interim measure for CY 2011, and expanded it to appl y to small rural hospitals having 100 or fewer beds (75 FR 72007). We continued to consider the issue further in our annual738 OPPS notice and comment rulemaking, and impl emented an independent review process in 2012 to obtain advice from the Hospital Outp atient 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 stakehol der requests for changes in the required level of supervision of indivi dual hospital outpatient therapeutic services. In addition, we extended the enforcement instruction the pa st 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/AS C 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?r edirect=/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 th e Panel’s recommendations, we modified our supervision requirements to pr ovide that most of the se rvices considered may be739 furnished under general supervision, in accordan ce 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/Downlo ads/CY2013-OPPS-General-Supervision.pdf

. We believe the independent Panel re view advisory process has proved an effective means for the hospital community to identify hospital outpatient therapeutic services that can safely be furnished unde r general supervision, where the supervising practitioner does not have to be immediately av ailable in person to pr ovide assistance and direction. Therefore, as we discusse d 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 ensu re the quality and safety of hospital and CAH outpatient therapeutic services paid by Me dicare. We stated in the pr oposed rule that, for CY 2014, we anticipated allowing the enforcement instru ction 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 athttp://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Downlo ads/CY2013-OPPS-General-Supervision.pdf ). In the proposed rule, we stated that we we re interested in rece iving public comments on any potential impacts on access to care and qua lity of care for specific services that may result from allowing the enforcement instruct ion to expire at the end of CY 2013. We740 requested public comments on sp ecific services for which CAHs and small rural hospitals anticipate difficulty furnishing th e 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 r ecruiting 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 di rect 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 antibio tics and other drugs, cardiac an d pulmonary rehabilitation, observation, blood transfusion, radiation oncology and wound care services. The commenters expressed concern that hospita l revenues would be reduced from these business lines, and that some patients would el ect to discontinue their care because of741 increased cost or inability to travel farthe r 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 insuran ce marketplaces and the expansion of Medicaid under the Affordable Care Act. MedPAC stated in its public comment that , in light of the de cision to enforce the supervision instructions, CMS s hould continue working with th e Panel to define services that are appropriate for general supervision. Response : We continue to believe that directsupervision 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 direc tly (are not delegable) ; therefore, general supervision would not be appropriate for the ma jority of services. The independent Panel review advisory process was established through notice and comment rulemaking as the means of identifying hospital outpatient therapeu tic services that can safely be furnished under general supervision, where the superv ising practitioner does not have to be immediately available in person to provi de assistance and direction (76 FR 74360 through 74371). We encourage hospitals to cont inue using the Panel process to bring to CMS’ attention services that may not require the immediate av ailability of a supervising practitioner, especially where it is poss ible to reduce the burden on the workforce742 available to small rural hospitals and CAHs while ensuring the qua lity and safety of patient care. We encourage hospitals and C AHs to continue using the established Panel process to request changes they believe woul d be appropriate in supervision levels for individual hospital outpatient therapeutic services, especially those the commenters mentioned that have not yet been evaluate d 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/AdvisoryPanelonA mbulatoryPaymentCla ssificationGroups.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 ha ve some flexibility to determine the type of practitioner who may superv ise other hospital outpatient therapeutic services, in the case of PR, CR, and intensive cardiac reha bilitation (ICR) services, the statutory language does not provide such flexibility. Section 1861(eee)(2)(B) of the Act imposes strict requirements, describi ng the direct physician supervis ion 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 th e public comments we receive d, 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 supervisi on requirements for observation services furnished in the hospital by designating observation services (HCPCS codes G0378 (Hospital observation services, per hour) and G0379 (Direct admissi on of patient for observation care)) as nonsurgical extended duration th erapeutic services (“extende d duration services”). As we provided in the CY 2011 OPPS/ASC fi nal rule with comment period and 42 CFR 410.27(a)(1)(iv)(E), extended duration serv ices require direct supervision at the initiation of the service, which may be follo wed by general supervision for the remainder of the service at the discre tion of the supervising physic ian or appropriate nonphysician practitioner, once that practi tioner has determined that the patient is stable. The determination by the supervising physician or appropriate nonphysicia n practitioner that the beneficiary is stable and may be tran sitioned 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 dur ation services, we have received several inquiries from stakeholders regarding whethe r Medicare requires mu ltiple evaluations of the beneficiary during the provi sion of observation services. Specifically, stakeholders asked whether, once the supervising physic ian or appropriate nonphysician practitioner transitions the beneficiary to general supe rvision and documents the transition in the medical record, Medicare requir es further assessment of the beneficiary either per hour (because observation services are billed per hour) or at some other point during provision744 of the service. In the CY 2014 OPPS/ASC propos ed rule, we stated that we are clarifying that, for observation services, if the supe rvising physician or appropriate nonphysician practitioner determines and docum ents in the medical record th at the beneficiary is stable and may be transitioned to general supervisi on, 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 clarific ation, stating that it answers many questions regarding whether Me dicare requires hourly eval uations of the patient during the provision of obs ervation services. Response : We appreciate the commenters ’ support and are finalizing our clarification without modificati on. We believe that this clar ification 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 (P T), 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 se rvices and another sepa rate 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 the745 manual medical review process beginning on January 1, 2014. The American Taxpayer Relief Act of 2012 (Pub. L. 112-240) required th at therapy services furnished by a CAH during 2013 are counted toward the therapy cap s using the MPFS rate, and we proposed to continue this methodology for 2014 and subseque nt years. CAHs w ill still be paid for therapy services under the r easonable cost methodology fo r 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 in formation about our pr oposal, a summation of the public comments we received on the proposal and our responses, and detailed information about our final policy. After cons ideration 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 servic es 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 additio nal 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 fu rnished “incident to” a physician’s or nonphysician practitioner’s servic e (which we refer to as hospital or CAH outpatient therapeutic services) to requi re that individuals furnishi ng these services do so in746 compliance with applicable State law. U nder 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 servic es are performed only by qualified personnel in accordance with all applicable laws a nd regulations. We proposed to revise the existing regulations to explicitly require th at individuals who pe rform 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 th e 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 fo r hospital outpatient therapeutic services, to CAHs as well as other hospitals. 2. Background Section 1861(s)(2)(B) of the Act estab lishes the benefit category for hospital “incident to” medical and other health servic es, which are paid under Medicare Part B. The statute specifies that “incident to” serv ices are “hospital services (including drugs and biological which are notusually self-administered by the patient) incident to physicians’ services rendered to outpatients and partial hospitalizati on services incident to such services.” In the CY 2012 O PPS/ASC final rule with comment period (76 FR 74369 through 74370), we clarified that hospital outpatient therapeutic services furnished incident to a physician’s servic e even when described by benefit categories747 other than the specific “incid ent to” provision in section 1861(s)(2)(B) of the Act (for example, radiation therapy services descri bed under section 1861( s)(4) of the Act). Because hospital outpatient therapeutic servi ces 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 hos pital outpatient ther apeutic services. In addition to the requirements of the statute, the regulati on 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 practitione r’s service (hospital or CAH outpatient therapeutic services). Sec tion 410.27 describes hospital or CAH services and supplies furnished incident to a physician’s or nonphysic ian practitioner’s services as therapeutic services and provides the conditions of paym ent. Specifically, § 410.27(a) provides that Medicare Part B pays for therapeutic hosp ital or CAH services and supplies furnished incident to a physician’s or nonphysician practi tioner’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 p hysician 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 alt hough incidental part of a physician’s or nonphysician practitioner’s services;748

● In the hospital or CAH or in a departme nt 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 practitione r. For purposes of this section, “nonphysician prac titioner,” as defined in § 410.27(g), means a clinical psychologist, licensed clinical social worker, physician assi stant, nurse practitioner, clinical nurse specialist, or certified nurse-midwife. Sections 410.27(b) through (f) provide additional c onditions of payment for partial hospitalization services, drugs and biol ogicals, emergency services, and services furnished by an entity other than the hos pital (or CAH). We commonly refer to the services described in § 410.27 as “incident to” services. In recent years, we have discussed a nd refined the supervision regulations under § 410.27, which are conditions of Medicare Pa rt B payment for hospital outpatient “incident to” (“therapeutic”) services. For ex ample, we have discussed our belief that direct supervision is the most appropriate level of supervisi on for most of these services, unless personal supervision or personal performance of th e services by the physician or nonphysician practitioner is more appropriate, given the “incident to” nature of the services as an integral although incide ntal 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 the749 physician supervises the provision of those se rvices when he or she does not provide them directly (75 FR 72006). This is refl ected in our requirement for a minimum of direct supervision, except for a limited se t of services that may be furnished under general supervision or are designated as nonsurgical extended duration therapeutic services which require direct supervision initially with pot ential transition to general supervision (we refer readers to the CMS Web site athttp://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Downlo ads/CY2013-OPPS-General-Supervision.pdf ). In § 410.27(a)(1)(iv)(C) and (D), we regul ate the qualifications of physicians and nonphysician practitioners superv ising 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 assistan ce and direction, the supervising practitioner would have to be State-licensed and possess hos pital privileges to perform the supervised procedure (75 FR 72007). Sim ilarly, in the CY 2010 OP PS/ASC final rule with comment period, we stated that the supe rvisory practitio ner “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 Medi care Benefit Policy Manual (MBPM, Pub. 100-02) that hospital outpatient therapeutic serv ices and supplies must be furnished under the order of a physician or othe r practitioner practici ng within the extent of the Act, the Code of Federal Regulations, and State la w (Chapter 6, Section 20.5.2 of the MBPM). Section 20.5.2 of the MBPM specifies that th e services must be furnished by hospital750 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 occa sion of the actual re ndition of a personal professional service by the physician responsible for care of the patient. However, during any course of treatment rendered by auxiliar y personnel, the physic ian must personally see the patient periodically and sufficiently ofte n 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 physicia n’s service if the attending physician merely wrote an order fo r the services or supplies and referred the patient to the hospital withoutbeing involved in the manage ment 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 th e assessment of the qua lifications of the individuals to whom the services are dele gated. As medical pr actice 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 furn ished incident to a physician’s or nonphysician practitioner’s services have expanded. Under curren t 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 furnis h hospital outpatient therapeutic (“incident to”) services are licensed and are otherwise qualified to do so. Specifically, we have stated that, considering that hospitals furnis h a wide array of complex outpatient services751 and procedures, including surgical procedures , we would expect that hospitals have the credentialing procedures, bylaws, and other policies in pla ce to ensure that hospital outpatient services furnished to Medicar e beneficiaries are being provided only by qualified practitioners in accord ance with all applicable la ws 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 rela ting to supervision by a physician or qualified nonphysic ian 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 di d not meet the State standards for those services in the State in which services were performed. The physician or nonphysician practitioner billing for the se rvices 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 provi ding the particular services (or aspect of the services). Although we would expect that all hospita l 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 specifica lly make compliance with State law a condition of payment for services (or aspect s of services) and s upplies furnished and billed as “incident to” services. Nor do any of the payment regulations regarding hospital752 outpatient therapeutic servi ces and supplies incident to the services of nonphysician practitioners contain this re quirement. Therefore, Medicare has had limited recourse when hospital outpatient therapeutic (“incide nt to”) services are not furnished in compliance with State law. In 2009, the Office of Inspector Gene ral (OIG) issued a report entitled “Prevalence and Qualifications of Nonphys icians Who Performed Medicare Physician Services” (OEI-09-06-00430) that considered, inpart, the qualifica tions of auxiliary personnel providing “incident to” physician serv ices. After finding that services were being provided and billed to Medicare by auxiliary personnel “...who did not possess the required licenses or certifica tions 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 pe rsonally perform the services they bill to Medicare ensure that no persons except...nonph ysicians who have the necessary training, certification, and/or licensure pursuant to State laws, Stat e regulations, and Medicare regulations personally perform the services under th e direct supervision of a licensed physician.” In the CY 2014 OPPS/ASC pr oposed 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 ot her personnel providi ng hospital outpatient therapeutic services to Medi care 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 Me dicare payments can be recovered when such753 services are not furnished in compliance w ith 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 propos ed 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 in cident to a physician’s or nonphysician practitioner’s service... if they are furnishe d “In accordance with applicable State law.” We stated that the proposed policy would recogn ize 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) out patient therapeutic services. We indicated that the proposal is consis tent with other areas of the Medicare program where CMS defers to State rules regard ing the delivery of hospital services. For example, in determining who can admit patient s as inpatients of a hospital, the hospital conditions of participation (CoPs) defer to State law and the author ity 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 pa tients 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 pr actitioners that must care for Me dicare patients], that patient is under the care of a doctor of medicine or osteopathy.” Therefore, in determining who754 may admit inpatients to a hospital, Medicare defers to State law rules. As we stated in a recent rule addressing credentialing and priv ileging and telemedicine services under the CoPs (77 FR 29047): “CMS recognizes that pr actitioner licensure la ws and regulations have traditionally been, and c ontinue to be, the provenance of individual States, and we are not seeking to preempt St ate 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 medi cal staff may also incl ude 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 applicab le standards that are requir ed by State or local laws. We believe it is appropriate to simila rly require as a condition of payment for individual services that all hospital outpatient services furn ished incident to a physician’s or nonphysician practitioner’s services be furnished in accordance with State law requirements. As evidenced by these exam ples, throughout the Medicare program, the qualifications required for the de livery of health care servic es 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 serv ices that do not meet the sta ndards 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 accord ance with State law. We solicited public comments on our proposal.755 Comment : Several commenters supported the general premise that individuals who provide services and supp lies 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 wh ere a hospital improperly billed Medicare for services because the physician or practitione r had some minor defect with his or her license or certification, but there was no con cern about a practitione r acting outside the scope of practice or the quality of care furnished. Several commenters asserted that the proposal is not necessary or appropriate beca use 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 correc tive action plan. The commenters noted that, while the sanction for violating the CoPs a nd the penalties under section 1156 of the Act do not include payment recoupment for the part icular 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 worki ng, possibly indefinitely, without the direct supervision of physicians or other qualified nonphysician prac titioners in certain smaller756 hospitals. These commenters believed the proposal would be an important means of ensuring that ancillary personnel are properl y trained, experienced, and potentially–in some States–even licensed, given that th ey would furnish services relatively independently in CAHs and small rural hos pitals without direct supervision. The commenters stated that the pr oposal would ensure that tech nicians and other individuals furnishing “incident to” services are properl y educated, trained, and experienced, and would ensure high quality care, not just for Medicare beneficiaries, but for all patients. Response : We agree with commenters th at the CoPs and other statutory provisions provide for corrective action plans as a condition to con tinued eligibility to provide Medicare and Medicaid se rvices on a reimbursable basis. However, we believe it is appropriate to also recoup payment for indivi dual 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 en sure compliance with the law. We are concerned with the comments thatindicated that our proposed revision to § 410.27 is necessary, in the absence of a dire ct supervision standard for payment, to ensure the safety and quality of care or co mpliance with State law. The instruction regarding enforcement of supe rvision requirements (discussed in section XI.A. of this final rule with comment period) does not relieve CAHs or sm all rural hospitals of their obligations under State law, the hospital CoPs, or section 1156 of the Ac t, to ensure that the individuals who furnish hospital outpatien t therapeutic services are licensed and otherwise qualified to do so. The enfor cement instruction (available on the CMS Web site at http://www.cms.gov/Medicar e/Medicare-Fee-for-Service-757 Payment/HospitalOutpatientPPS/Download s/Physician_Supervis ion_Nonenf_Notice.pdf ) specifically states, “CMS continues to expect the hospitals covere d 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 ou tpatient therapeutic services in these hospitals for CY 2010-2013, we contin ue to emphasize quality and safety for services provided to all patients in these facili ties.” We note that as discussed in section X.A.1. of this final rule with comment pe riod, 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 benefi ciaries. The hospital outpatient supervision rules are directed at ensuring that supervisory practitioners are licen sed or authorized by the State and possess hospital pr ivileges to direct and, if necessary, inte rvene in the services they supervise (75 FR 72007), wh ile our proposed requirement for compliance with applicable State law ensures that superv ised individuals are li censed and qualified to provide the services or aspects of se rvices that are delegated to them.
A fter consideration of th e public comments we received, we are finalizing proposed new paragraph (a)(1)(vi) under § 410.2 7, without modificati on, to provide that Medicare Part B pays for therapeutic hosp ital 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.” Th is final policy does not impose any new758 requirements on hospitals that bill the Medica re program because practitioners and other personnel furnishing services alre ady are required to comply withthe laws of the State in which the services are furnished. This re gulatory 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 ap plicable 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 regula te 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 therapeu tic hospital or CAH services and supplies furnished incident to a physician’s or no nphysician practitioner’s service as “all services and supplies furnishe d to hospital or CAH out patients that are not diagnostic services and that aid the p hysician or nonphysician practitioner in the treatment of the patient, including dr ugs 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 wh ich are not usually se lf-administered by the patient) incident to physicians’ services rendered to outpatients and partial hospitalization services incident to su ch services.” The statute include s in this benefit category “drugs and biologicals which are not usually self-administered by th e patient.” In the CY 2014 OPPS/ASC proposed rule, we proposed to make a technical correcti on that would amend759 the description of these drugs and biologicals at § 410.27(a) to more appropriately reflect the statutory language. Speci fically, we proposed to delete the phrase “drugs and biologicals that cannot be self-a dministered” and replace it with the phrase “drugs and biologicals which are not usually self-admin istered.” 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 furnis hed incident to a physician’s or nonphysician practitioner’s service, which are defined as al l 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, in cluding drugs and biologicals which are not usually self-administered....” We did not receive any public comment s on this proposed technical correction. Therefore, we are finalizing th e 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 Schedul e (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, integra tion of those practices as a department of the hospital, and the result ant increase in the delivery of physicians’ services in a hospital setting (for example, we refer reader s to Carol M. Ostrom, “Why You Might Pay Twice for On e 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 Studying760 Health System Change, August 2011). When a Medicare beneficiary receives outpatient services in a hospital, the to tal payment amount for outpatient services made by Medicare is generally higher than the total paymen t amount made by Medicare when a physician furnishes those same services in a freestanding clinic or in a physicia n’s office. As more physician practices become hospital-based, news articles have high lighted beneficiary liability that is in curred when services are provide d in a hospital-based physician practice. MedPAC has questioned the appr opriateness of increased Medicare payment and beneficiary cost-sharing when physic ians’ offices become hospital outpatient departments and has recommended that Me dicare pay selected hospital outpatient services at the MPFS rates (MedPAC Ma rch 2012 Report to Congress, “Addressing Medicare Payment Differences across Settin gs,” presentation to the Commission on March 7, 2013). The total payment (including both Medi care program payment and beneficiary cost-sharing) generally is hi gher 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 departme nt 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 the761 provider-based department of a hospital). However, the tota l payment (facility fee plus physician fee) is generally more for a servi ce 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 co insurance 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 provi der-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-titl e42-vol2/pdf/CFR-2010-title42-vol2- sec413-65.pdf ). Since October 1, 2002, we have notrequired hospitals to seek from CMS a determination of provider- based status for a facility th at 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 hos pital 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 servic es furnished in off-campus provider-based hospital departments. We stated that we ha ve considered several potential methods for physician and hospital claims. Claims-based approaches could include: (1) for physician762 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 departme nt; 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 repor ting 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 servic es furnished in off-campus provider-based departments of hospitals, they expressed diffe rent opinions on how to best collect these additional data. Some commenters pref erred identifying serv ices furnished in provider-based departments on the Medicare cost report, while other commenters preferred one of the claims-based approach es. Some commenters supported either approach and noted the trade-offs in terms of the type of data that could be collected763 accurately and the administrative burden i nvolved. Some commenters suggested that CMS convene a group of stakeholders to de velop consensus on the best approach. Commenters generally recommended that CMS choose the least administratively burdensome approach that would ensure accura te data collection, but did not necessarily agree on what approach would optimally achi eve that result. For example, commenters indicated that limiting the data collection to cost report approaches results in little administrative burden for physicians because theydo not file cost reports, but could result in varying degrees of admini strative effort for hospitals, depending on the specific cost reporting requirements. Several commenters noted that some hos pitals already voluntarily identify costs specific to provider-based depart ments on their cost reports. These commenters asserted that because cost and charge information is already reporte d 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 comm enters noted that cost report information would be transparent and audited for accura cy. One commenter recommended aggregate reporting of all off-campus provider-based departments as one or several cost centers. Another commenter suggested that CMS consider assi gning separate subprovider numbers for off-campus departments simila r to those used for rehabilitation and psychiatric units. Other commenters believed that a HCPC S modifier would mo re 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 least764 administratively burdensome approach because hospitals and physicians already report a number of claims-based modifi ers. However, other commen ters, using this same fact about the number of existing claims-based m odifiers, 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 att aching a modifier to each service reported on the claim that was furnished in an off- campus provider-based department. Some commenters stated that establ ishing 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 fu rnished 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 limite d 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 di d not recommend a particular data collection approach. MedPAC indicated that any da ta 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 consideratio n 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 fo r services under the OPPS. They indicate whether a service represented by a HCPCS code is payable under the OPPS or another payment system and also whether particul ar OPPS policies apply to the code. The complete list of the CY 2014 status indicator s and their definitions is displayed in Addendum D1 on the CMS Web site at: http://www.cms.gov/Me dicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/index.html . The CY 2014 status indicator assignments for APCs and HCPCS codes ar e 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 “J 1” to identify HCPCS codes that are paid under a comprehensive APC. We proposed th at a claim with the new proposed status indicator “J1” would trigger a compre hensive 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 c onsideration of the public comments we received, we have deci ded 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 a ssign ancillary services that are currently assigned status indicator “X” to either status indicator “Q1” or “S.” Services assigned status indicator “Q1” include many minor dia gnostic tests that are ge nerally 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 th at 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 appropr iate 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 packag ing criteria, so that codes assigned status indicator “Q1” are STV-packaged, rather th an STVX-packaged, because status indicator “X” was proposed for deletion. The public comments that we received re garding ancillary services assigned to status indicator “X” are discu ssed 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 2014767 proposal to package ancillary se rvices. 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 desc ribes 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 applie s,” 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 as signed 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 in terest in refining the methodology used for assigning status i ndicators “S” and “T” under th e 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. Howe ver, we may consider this comment during future rulemaking.768 After consideration of th e public comments we receive d, we are finalizing our CY 2014 proposal, without modification. We ar e 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 i ndicator “A” because these services are not recognized by OPPS when submitted on an outpatie nt hospital Part B bill type and are instead assigned to status indicator “B.” We did not receive any public comment s regarding our proposed update of the definition of status indicator “A.” Therefor e, 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 indi cators that are in effect for the CY 2013
OPPS.769

● “CH”—Active HCPCS codes in current a nd next calendar year; status indicator and/or APC assignment have changed or activ e HCPCS code that will be discontinued at the end of the current calendar year.

● “NI”—New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code. We proposed to use the “CH” comme nt indicator in the CY 2014 OPPS/ASC proposed rule to indicate HCPCS codes fo r 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 belie ve 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 HC PCS 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 c onfiguration of the composite APC would be changed in the CY 2014 OPPS/ASC final rule with comment period. In addition, we proposed that any ex isting HCPCS codes with substantial revisions to the code desc riptors for CY 2014 compared to the CY 2013 descriptors would be labeled with comment indicat or “NI” in Addendum B to the CY 2014770 OPPS/ASC final rule with commen t period. However, we stated that in order to receive the comment indicator “NI,” the CY 2014 revisi on 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 O PPS 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 comm ent 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 commen t indicator “NI” in Addendum B to the CY 2014 OPPS/ASC final rule with comment period. Only HCPCS codes with comment indicat or “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 fina l rule with comment period are not open to public comment, unless we specifically request additional comments elsewhere in this final rule with comment period.
Comment : One commenter requested that CM S create a new comment indicator for changes to an APC assignment and to k eep comment indicator “CH” to designate changes to status indicators. The comment er 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 i ndicate 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 change s. Therefore, we believe that the CY 2013 definitions of the OPPS comment indicators co ntinue 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 Sur gical 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 legisla tive 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 comm ent period (76 FR 74378 through 74379) and the CY 2013 OPPS/ASC final ru le with comment period (77 FR 68434 through 68467). 2. Policies Governing Changes to the Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services Under § 416.2 and § 416.166 of the regulati ons, subject to ce rtain exclusions, covered surgical procedures in an ASC are su rgical procedures that are separately paid772 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 followi ng the procedure (“overnight stay”). We adopted this standard for defining which surg ical procedures are covered under the ASC payment system as an indicator of th e complexity of the procedure and its appropriateness for Medicare payment in ASCs. We use this standard only for purposes of evaluating procedures to determine whether or not they are appropriate to be furnished to Medicare beneficiaries in AS Cs. We define surgical proc edures as those described by Category I CPT codes in the surgical ra nge 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 procedur es: (1) brachytherapy sources; (2) certain implantable items that have pass-through stat us under the OPPS; (3) certain items and services that we designate as contractor-p riced, including, but not limited to, procurement of corneal tissue; (4) certain drugs and biologi cals for which separate payment is allowed under the OPPS; and (5) certain radiology servic es for which separate payment is allowed under the OPPS. These covered ancillary serv ices are specified in § 416.164(b) and, as stated previously, are eligib le for separate ASC payment (72 FR 42495). Payment for ancillary items and services th at 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 rate s for, covered surgic al procedures and covered ancillary services in ASCs in c onjunction 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 pa yment policies for covered surgical procedures, drugs, biologicals, and certain other covered an cillary services on the OPPS payment policies, we also provide quarte rly update change requests (CRs) for ASC services throughout the year (January, April, July, a nd 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 ne wly 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 releas ed only once a year and, therefore, are implemented only through the January quart erly update. New Category I CPT vaccine codes are released tw ice a year and, therefore, are im plemented 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 upda te 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 ne wly proposed for removal from the OPPS774 inpatient list), new procedures , and procedures for which there is revised coding, to identify any that we believe meet the crit eria for designation as ASC covered surgical procedures or covered ancill ary services. Updating the li sts 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, pa yment rates, are used as the basis for the payment of covered surgical procedures and covered ancillary servic es under the revised ASC payment system. This joint update pro cess ensures that the ASC updates occur in a regular, predictable, and timely manner. 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 Le vel II HCPCS codes are used to report procedures, services, items, and supplies und er the ASC payment system. Specifically, we recognize the following codes on ASC clai ms: (1) Category I CPT codes, which describe surgical procedures and vaccine codes; (2) Category III CPT codes, which describe new and emerging technologies, se rvices, and procedur es; and (3) Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services notdescribed 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 a nd Level II HCPCS codes that describe surgical procedures, and to make pre liminary determinations during the annual775 OPPS/ASC rulemaking process re garding 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 th rough 42535). In addition, we identify new codes as ASC covered ancillary services ba sed upon the final payment policies of the revised ASC payment system. 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 OP PS/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 co mments 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 a nd III CPT and Level II HCPCS codes that were effective January 1, 2013. We al so 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 comm ent period to indicate that we were assigning them an interim payment status a nd payment rate, if applicable, which were subject to public comment following public ation of the CY 2013 OPPS/ASC final rule with comment period. In the proposed rule, we stated that we will respond to public776 comments and finalize the treatment of thes e 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 we re not addressed in the CY 2013 OPPS/ASC final ru le 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 covere d surgical procedures and covered ancillary services, re spectively. Table 33 of th e 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 propos ed 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 Leve l 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 documen t (78 FR 54845)) listed the new Level II777 HCPCS codes that were implemented July 1, 2013, along with their proposed payment indicators and proposed AS C payment rates for CY 2014. We assigned payment indicator “K2” (Dr ugs and biologicals paid separately when provided integral to a surgic al procedure on the ASC list; payment based on OPPS rate) to the six new drug and biological Level II HC PCS codes that are separately paid when provided in ASCs. We assigned paymen t indicator “L1” (Influenza vaccine; pneumococcal vaccine; packaged item/service, no separate payment made) to the new vaccine Level II HCPCS code and payment i ndicator “G2” (Non-office-based surgical procedure added in CY 2008 or later; paym ent 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 cove red surgical procedures and covered ancillary services listed in Tables 33 and 34 of the proposed ru le, as corrected (78 FR 43630; Table 34 was corrected in the September 6, 2013 correcti ng document (78 FR 54845)). Those HCPCS codes became payable in ASCs beginning Ap ril 1, or July 1, 2013, and are paid at the ASC rates posted for the appropriate cale ndar 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 th e CMS Web site). We note that all ASC addenda are only available via the Internet on the CMS Web site. Because the payment778 rates associated with the new Level II HCPC S codes that became effective July 1, 2013 (listed in Table 34 of the propos ed rule, as corrected) were no t available to us in time for incorporation into the Addendato the OPPS/ASC proposed rule , our policy is to include these HCPCS codes and their proposed paymen t indicators and pa yment 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 comm ent period. Thus, the codes implemented by the July 2013 ASC quarterly update CR a nd their proposed CY 2014 payment rates (based on July 2013 ASP data) that are disp layed 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 (w hich are available vi a the Internet on the CMS Web site). The final list of ASC covere d surgical procedures and covered ancillary services and the associated payment wei ghts 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 cove red ancillary services in April 2013 and July 2013 through the quarterly update CRs, as lis ted 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 th is CY 2014 OPPS/ASC final rule with comment period.779 We did not receive any public comment s 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 July2013 through the quarterly update CRs as shown below, in Tables 46 and 47, respectively. These new HC PCS codes are also displayed in Addenda AA and BB to this final rule with comment peri od. We note that afte r publication of the CY 2014 OPPS/ASC proposed rule, the CM S HCPCS Workgroup created permanent HCPCS J-codes for CY 2014 to replace ce rtain 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 gl obulin (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 G2780 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), includi ng intraoperative guidance and monitoring, when performed G2

Q2033 90673 Influenza virus vaccine Influenza virus vaccine, trivalent, derived from recombinant DNA (RIV3), hemagglutinin (HA) protei n only, preservative and antibiotic free, for intramuscular use L1

Q2050* Q2050 Injection, Doxorubicin Hydr ochloride, 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 AS C 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 paym ent indicators and proposed payment rates for CY 2014. Because the payment rate s associated with the new Category III CPT codes that became effective for July were not available to us in time for incorporation into the Addendato the OPPS/ASC proposed rule , our policy is to include the codes, their proposed payment indicat ors, and proposed payment rates in the preamble to the proposed rule but not in th e Addenda to the propos ed rule. The codes781 listed in Table 35 of the CY 2014 OPPS/ASC proposed rule, as corrected (78 FR 43631; 78 FR 54845) and their final payment indicat ors and rates are included in Addendum BB to this CY 2014 OPPS/ASC fina l rule with comment period. We proposed to assign payment indicator “Z2” (Radiology service paid separately when provided integral to a surgical pr ocedure 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 c overed surgical procedures that are paid separately under the OPPS. We solicite d public comment on the proposed payment indicators and the payment ra tes for the new Category III CPT codes that were newly recognized as ASC covered ancillary servic es 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/AS C final rule with comment period. We did not receive any public comment s regarding this proposal. We are adopting as final for CY 2014 the ASC paymen t indicators for the covered ancillary services described by the new Category II I 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 (whi ch 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 i nnervation imaging, planar qualitative and quantitative assessment Z2

0332T Myocardial sympathetic i nnervation 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 HCPC S codes that are effective January 1 in the final rule with comment period updati ng the ASC payment system for the following calendar year. These codes are released to the public via the CM S HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January ASC quarterly update CRs. In the past, we also have released new Level II HCPCS codes that are effective October 1 through the October ASC quarterly update CRs and incorporated these new codes in the final rule with co mment period updating the ASC payment system for the following calendar year. All of thes e codes are flagged with comment indicator “NI” in Addenda AA and BB to the OPPS/AS C final rule with comment period to indicate that we are assigning them an interi m payment status which is subject to public comment. The payment indicator and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are ope n to public comment in the OPPS/ASC final783 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 ru le (78 FR 43631), we proposed to continue this process for CY 2014. Specifical ly, for CY 2014, we proposed to include in Addenda AA and BB to the CY 2014 OPPS/ASC fi nal 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 th e 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” inAddenda AA and BB to this CY 2014 OPPS/ASC final rule with comm ent period to indicate that we have assigned them an interim payment status. We also stated thattheir payment indicators and payment rates, if applicable, would be open to public co mment in the CY 2014 OPPS/ASC final rule with comment period and would be finalized in the CY 2015 OPPS/AS C 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 c odes that currently are paid under the OPPS, but not included on the ASC list of cove red surgical procedures, to determine if changes in technology and/or medical practice 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 Medi care beneficiaries or would re quire an overnight stay if performed in ASCs. Therefore, in the CY 2014 OPPS/AS C 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 previ ous request that, with knowledge of the anatomic location, CMS should apply the sa fety criteria to the entire spectrum of services reportable by an unlisted code. Th e commenter believed that, under such an analysis, CMS would determine that the fo llowing unlisted codes associated with eye procedures would not compromi se patient safety and, theref ore, should be added to the list of ASC covered surgical procedures: CPT code 66999 (Unlisted procedure, anterior segment of eye); CPT code 67299 (Unliste d procedure, posterior segment); CPT code 67399 (Unlisted procedure, ocular musc le); CPT code 67999 (Unlisted procedure,785 eyelids); CPT code 68399 (Unlisted proce dure, conjunctiva); and CPT code 68899 (Unlisted procedure, lacrimal system). Response : As we have stated in th e 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 elig ible 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 cr iteria. This final policy is discussed in detail in the A ugust 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 argue d that these procedures are as safe as procedures that are currently on the list of ASC covered pr ocedures 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 g787

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 request ed for addition to the ASC lis t, we did not review the 6 procedures that are reported by CPT codes that are on the OPPS i npatient only list788 (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 asterisk s in Table 49), consistent w ith 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 additi on, 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 proce dures, we do not agree that all of the procedures are appr opriate for provision to Medi care beneficiaries in ASCs. Although the commenters asserted that the pr ocedures they were requesting for addition to the list are as safe as pr ocedures 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 be neficiary who undergoes the pr ocedure would typically be expected to require active medical mon itoring 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 us ed under the revised ASC payment system to identify procedures that woul d be expected to pose a si gnificant safety risk when performed in an ASC include, but are not lim ited to, those procedures that: generally result in extensive blood loss; require major or prolonged invasion of body cavities; directly involve major blood vesse ls; are generally emergent or life threatening in nature;789 commonly require systemic thrombolytic ther apy; are designated as requiring inpatient care under § 419.22(n); can only be reported us ing 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 liste d in Table 49, we found that many of the procedures either would be expected to pose a threat to beneficiar y safety or require active medical monitoring at midnight follo wing the procedure. Specifically, we found that prevailing medical practice called for inpatient hospital stays for beneficiaries undergoing many of the procedures and that so me of the procedures directly involve major blood vessels and/or may result in exte nsive 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 th e 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, a nd payment indicators are displayed in Table 50 below.790

TABLE 50.—NEW ASC COVERED SU RGICAL PROCEDURES FOR CY 2014

b. Covered Surgical Procedur es Designated as Office-Based (1) Background In the August 2, 2007 ASC final rule, we finalized our policy to designate as “office-based” those procedures that are a dded to the ASC list of covered surgical procedures in CY 2008 or late r years that we determine are performed predominantly (more than 50 percent of the time) in physic ians’ offices based on consideration of the most recent available volume and utilization data for each individual procedure code and/or, if appropriate, th e clinical characteristic s, utilization, and volum e of related codes. In that rule, we also finalized our policyto exempt all procedures on the CY 2007 ASC list from application of the office-based cl assification (72 FR 42512) . The procedures that were added to the ASC list of covered surgical procedures be ginning in CY 2008 that we determined were office-based were id entified in Addendum AA to that rule by payment indicator “P2” (Office-based surgic al procedure added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight); “P3” (Office-based su rgical procedures added to ASC list in CY 2008 or later 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 patellect omy and soft tissue repair G2 60240 Thyroidectomy, total or complete G2 60500 Parathyroidectomy or explora tion of parathyroid(s); G2791 with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE RVUs); or “R2” (Office-based surgical procedure adde d to ASC list in CY 2008 or later without MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight), depending on whether we estimated it would be paid according to the standard ASC payment methodology based on its OPPS relati ve payment weight or at the MPFS nonfacility PE RVU-based amount. Consistent with our final policy to annually review and update the list of surgical procedures eligible for payment in ASCs, each year we identify surgical procedures as either temporarily office-based, permanently office-based, or non-office-based, after taking into account updated volume and utilization data. (2) Changes for CY 2014 to Covered Surgic al Procedures Designa ted as Office-Based In developing the CY 2014 OPPS/ASC proposed rule, we followed our policy to annually review and update the surgical pro cedures 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 characterist ics for all surgical procedures that are assigned payment indicator “G2” (Non-office-based surgical pr ocedure 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/AS C 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 a nd utilization data resulted in our identifica tion of three covered surgical procedures that we believe meet th e 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’ offi ces and that our medical advisors believe the services are of a level of complexity consistent with other procedures performed routinely in physicians’ offices. The thr ee CPT codes we proposed to permanently designate as office-based we re listed in Table 36 of th e 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 nonfacili ty PE RVU payment amount for procedures that CMS identifies as office-based. This co mmenter expressed concern that this policy does not provide adequate payment for some services performed in an ASC. Response : We have responded to this commen t in the past and we continue to believe that our policy of identifying low comp lexity procedures that are usually provided in physicians’ offices and limiting their payment in ASCs to the physician’s office payment amount is necessary and valid. We belie ve this is the most appropriate 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 th e procedure described by CPT code 37761 (Ligation of perforator vein(s), subf ascial, open, including ultrasound guidance, when performed, 1 leg) should not be desi gnated as office-based. This commenter suggested that inaccurate codi ng for place of service results in the volume and utilization data indicating that the proce dure is performed more than 50 percent of the time in physicians’ offices and that the level of co mplexity associated with CPT code 37761 is not consistent with other procedures pe rformed 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 ti me in physicians’ offices. Our policy is to designate as office-based t hose procedures that are perfor med more than 50 percent of the time in physicians’ offices; therefor e, we are designating CPT code 37761 as office-based for CY 2014 as we proposed. After consideration of th e public comments we receive d, 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 u tilization data and other information for the eight procedures finalized for temporary office-based st atus 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, ther e 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, incl uding 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 P3795 (Treatment of extensive or progressive reti nopathy, 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 cryothe rapy). 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 fo r CY 2013, CPT code 0227T (Anoscopy, high resolution (HRA) (with magnification and chemical agen t enhancement); with biopsy(ies)), is sufficient to indicate that th is procedure is no t performed predominantly in physicians’ offices and, therefore, should not be assigned an office-b ased 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 unde r the OPPS for CY 2014 as discussed in section II.A.3. of the proposed rule. Cons equently, we proposed to assign payment indicator “N1” to the following three cove red surgical procedur e codes in CY 2014:

● CPT code 0226T (Anoscopy, high reso lution (HRA) (with magnification and chemical agent enhancement); diagnostic, including collection of specimen(s) by brushing or washing when performed);

● CPT code 0299T (Extracorporeal s hock wave for integumentary wound healing, high energy, including topical applic ation and dressing care; initial wound); and796

● CPT code 0300T (Extracorporeal s hock wave for integumentary wound healing, high energy, including topical applic ation and dressing care; each additional wound (list separately in addition to code for primary procedure)). The proposed CY 2014 payment indicator de signations 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 designati ons for CY 2014 are temporary also were indicated by asterisks in A ddendum AA to the proposed rule , as corrected (which is available via the Internet on the CMS Web s ite). We invited public comment on these proposals. We did not receive any public comment s on these proposals. For CY 2014, we are finalizing our proposal, wit hout 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 Ta ble 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 a nd chemical agent enhancement); with biopsy(ies)) as office-based in CY 2014 and ar e assigning payment indicator “G2” to this code. Finally, we are finalizing our propos al to assign payment indicator “N1” to HCPCS code 0300T because this procedur e 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 2012797 volume and utilization data and other in formation 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 INDI CATORS 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 dressi ng 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 inaddition 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 prematurit y), 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 un til 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 rela ted codes, we determined that two of the procedures described by new CPT codes would be predominantly performed in physicians’ offices. However, because we ha d no utilization data for the procedures specifically described by these new CPT code s, we made the office-based designations temporary rather than permanent and we w ill reevaluate the procedures when data become available. The temporary payment indicators for th e two office-based procedures displayed in Table 53 below are flagged with commen t indicator “NI” in Addendum AA to this OPPS/ASC final rule with comm ent period to indicate that we are assigning them an interim payment status which is subject to public comment. 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 PAYMEN T INDICATORS FOR NEW CY 2014 CPT CODES FOR ASC COVERED SURG ICAL 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, se roma, 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 ne edle 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 Procedur es 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 fo r calculating the ASC payment rates for covered surgical procedures that are assigned to the subs et of OPPS device-dependent APCs with a device offset percentage greater than 50 percent of the APC cost under the OPPS, in order to ensure that payment for th e procedure is adequate to provide packaged payment for the high-cost implantable devices used in those procedures.801 (2) Changes to List of ASC Covere d 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 de vice-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 comp rehensive service, our OPPS proposal is to make a single prospective payment based on th e cost of all indivi dually reported codes that represent the provision of a primary serv ice 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 de vice-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 comp rehensive service whenever a HCPCS codethat is assigned to a comprehensive APC appears on the claim, the ASC claimsprocessing system does not allow for this type of conditional packag ing. Therefore, we proposed that all separately paid OPPS ancillar y services that are pr ovided 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 for802 separately paid ancillary servic es 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 devi ce offset amounts for comprehensive APCs would be based on the CY 2014 OPPS relativ e payments weights that have been calculated using the standard APC rate setting 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 fo r the procedure is adequate to provide packaged payment for the high-cost implantab le devices used in those procedures. Device-intensive procedures are currently defi ned 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-de pendent 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 cha nges 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 devi ce-intensive procedure payment methodology, consistent with this modified definition of device-intensive pro cedures, reflecting the proposed APC assignments of procedures a nd 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 w ould be subject to the device -intensive procedure payment methodology for CY 2014 were listed in Tabl e 38 of the CY 2014 OPPS/ASC proposed rule (78 FR 43634 through 43635). The CPT c ode, 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 AP C 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 include d in Addendum AA to the proposed rule, as corrected (which is ava ilable 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 suffici ency 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 wh ich CMS can establish a median device cost and not just to the procedures where th e device offset percentage is greater than 50 percent of the APC cost unde r 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 paymen t 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 th e CY 2014 OPPS/ASC propos ed rule (78 FR 43558 through 43561), we proposed to create comprehensive APCs to replace 29 of the 39 device-dependent APCs under the OPPS. Becau se 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 percen tage 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 de vice offset can be established. Nor do we agree with the commenters who sugges ted 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 proced ure costs, those costs are less likely to be as predictable across sites-of-service. Accord ingly, we believe that it is possible for ASCs to achieve efficiencies relative to HOPDs when providing those procedures, and that the application805 of the ASC conversion factor to the entire AS C payment weight is appropriate. We refer readers to our response to this comme nt 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; a nd 77 FR 68449, respectively). We also continue to belie ve it would not be appropriate to vary the portion of the national payment that is wage-adjusted for di fferent services, such as applying the wage index only to the service portion of the ASC payment for device-intensive procedures, as the commenters requested, because our ASC po licy 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 adjustme nt to the entire ASC payment rate for device-intensive procedures. We refer read ers 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 th is 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 crea te 29 comprehensive APCs to replace 29 of the most costly de vice 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 pr ocedures as those procedures that are assigned to any APC with a device offset percentage greater than 50 percent. For CY 2014, we will806 continue to define ASC device-i ntensive 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 cu rrent device-intensive procedure payment methodology and reflecting the APC assignments of procedures and APC device offset percentages based on the CY 2012 OPPS claims a nd cost report data available for this final rule with comment period. We ar e designating the ASC covered surgical procedures displayed in Tabl e 54 below as device-intensive and subject to the deviceintensive procedure payment methodology fo r CY 2014. The CPT code, the CPT code short descriptor, the final CY 2014 ASC paym ent indicator (PI), the final CY 2014 OPPS APC assignment, the final CY 2014 OPPS AP C 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. A ll 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 fo r costly devices implanted in ASCs at no cost/full credit or partial credit as set forth in § 416.179 is c onsistent with the current OPPS policy. The established ASC policy a dopts 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 the807 CY 2009 OPPS/ASC final rule with comment period for a full discussion of the ASC payment adjustment policy for no cost/full cr edit and partial credit devices (73 FR 68742 through 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. Curre ntly 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 cred it 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 credita provider receives for a replaced device. Although we proposed to modify the polic y of reducing payments when a hospital furnishes a specified device without cost or with full or partial cr edit under the OPPS, we proposed to maintain our current ASC po licy for reducing payments to ASCs for specified device-intensive procedures when th e 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 ASC808 covered device-intensive procedures that woul d 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 th rough 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 th e no cost/full credit or partial credit device adjustment policy and is performed to implant a device that is furnishe d at no cost or with full credit from the manufacturer, the ASC would append the HCPC S “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 covere d surgical procedure being furnished by the
ASC. For partial credit, we proposed to redu ce 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 they809 received a partial credit of 50 percent or mo re of the cost of a new device, ASCs would have the option of either: (1) submitting th e claim for the device replacement procedure to their Medicare contractor after the proce dure’s performance but prior to manufacturer acknowledgment of credit for the device, a nd subsequently contact ing the contractor regarding a claim adjustment once the credit determination is made; or (2) holding the claim for the device implantation procedur e 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 c ode if the partial cred it 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 ad justment 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 adju stment 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 surgi cal procedure listed in Table 54 below when the device is furnished without cost or withfull 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” mo difier to the HCPCS code for a surgical810 procedure listed in Table 54 below that is su bject to the partial credit device adjustment policy when the facility receives a partial credit of 50 percen t or more of the cost of a device.

TABLE 54.—ASC COVERED SURGICAL PROCEDURES DESIGNATED AS DEVICE-INTENSIVE FOR CY 2014, I NCLUDING ASC COVE RED 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 2014DeviceDependent 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% Yes811

CPT Code Short Descriptor Final CY 2014 ASC PI Final CY 2014

OPPS APC Final CY 2014DeviceDependent 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% Yes812

CPT Code Short Descriptor Final CY 2014 ASC PI Final CY 2014

OPPS APC Final CY 2014DeviceDependent 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 of813 covered surgical procedures, a review of the procedures that are being proposed for removal from the OPPS inpatient list for possi ble inclusion on the ASC list of covered surgical procedures. There are no proce dures 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 possi ble 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 servic es 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 ch anges 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 th e OPPS for CY 2014: drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure; drugs and biologica ls that function as supplies when used in a surgical procedure; clinical diagnos tic laboratory tests; procedur es described by add-on codes;814 ancillary services (status indicator “X”); di agnostic 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 fo r which we proposed a change in the ASC payment indicator to reflect a pr oposed change in the OPPS treatment of the service for CY 2014. Except for the Level II HCPCS codes a nd Level III CPT codes listed in Table 34 and Table 35 of the CY 2014 OPPS/ASC pr oposed 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 comment s on our proposal. Therefore, we are finalizing, without modification, our proposal to update the AS C list of covered ancillary services to reflect the paym ent status for the services under the OPPS. All CY 2014 ASC covered ancillary services a nd their final payment indicators are included in Addendum BB to this final rule with comment period (whi ch is available via the Internet on the CMS Web site).815 D. ASC Payment for Covered Surgical Pr ocedures and Covered Ancillary Services 1. ASC Payment for Covered Surgical Procedures a. Background Our ASC payment policies for covered su rgical procedures under the revised ASC payment system are fully described in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66828 through 66831). Under our established policy for the revised ASC payment system, the ASC sta ndard ratesetting methodology of multiplying the ASC relative payment weight for the pro cedure by the ASC conversion factor for that same year is used to calcul ate the national unadjusted payment rates for procedures with payment 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 transiti onal payment prior to CY 2011. Although the 4-year transitional peri od 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 id entify procedures that are exempted from application of the office-based designation. The rate calculation established for de vice-intensive procedures (payment indicator “J8”) is structured so that the p ackaged device payment amount is the same as under the OPPS, and only the service portion of the rate is subject to the ASC standard ratesetting methodology. In the CY 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” using816 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-base d amount (we refer readers to the CY 2014 MPFS final rule with comment pe riod) 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 upda ted 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 estimat ed 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 establis hed rate calculation methodologies under § 416.171 and using our pr oposed modified definition for deviceintensive procedures as discussed above. Because the proposed OPPS relative payment weights are based on geometric mean co sts 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 the817 ASC standard ratesetting methodology for pr ocedures assigned payment indicators “A2” and “G2.” We proposed that payment rates for offi ce-based procedures (payment indicators “P2,” “P3,” and “R2”) and device-intensive procedures (payment indicator “J8”) be calculated according to our established po licies, incorporating the device-intensive procedure methodology as appropriate. T hus, we proposed to update the payment amounts for device-intensive procedures, us ing 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 th e proposed CY 2014 ASC payment amount calculated according to th e standard ratesetting me thodology. We invited public comment on these proposals.
Comment : With regard to device removal procedures, commenters recommended that CMS modify its policy to package proced ures in the ASC when the procedures are conditionally packaged in the OPPS. The co mmenters stated that, under this policy, no Medicare payment would be made for device removal procedures perf ormed 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 the818 payment is packaged when it is provided w ith a significant procedur e but is separately paid when the service appears on the claim without a significant procedure. Because ASC services always include a surgical pr ocedure, HCPCS codes that are conditionally packaged under the OPPS are always packag ed (payment indicator “N1”) under the ASC payment system. Under the OPPS, we are fi nalizing 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 proc edure is performed in an ASC without another surgical procedure included on the cl aim. We believe that our ASC policy to package procedures that are conditionally pack aged in the OPPS should be modified with regard to device removal procedures so th at these procedures will continue to be separately paid in the ASC. After consideration of th e public comments we receive d, we are finalizing our proposal to calculate CY 2014 payment rate s for ASC covered surgical procedures according to our established methodologies, with the exception of device removal procedures. For the 71 device removal procedur es 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 conti nue to provide separa te payment in CY 2014. c. Waiver of Coinsurance and Deductible for Certain Preventive Services As discussed in the CY 2014 OPPS/AS C proposed rule (78 FR 43637), section 1833(a)(1) and section 1833(b)(1 ) of the Act waive the coinsurance and the Part B819 deductible for those preventive services unde r section 1861(ddd)(3)( A) of the Act as described in section 1861(ww)(2) of the Ac t (excluding electrocardiograms) that are recommended by the United States Preventive Services Task Force (USPSTF) with a grade of A or B for any indication or popul ation and that are appropriate for the individual. Section 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 provi sions 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 th e 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 peri od (75 FR 72047 through 72049). We did not propose any changes to our policies or the ca tegories 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) us es electronic devices to sequentially pace both sides of the heart to improve its output. CRT utilizes a pacing electrode implanted in combination with either a pacemaker or an implantable cardioverter defibrillator (ICD). CRT perf ormed by the implantation of an ICD along with a pacing electrode is referred to as “CRT–D.” In the CY 2012 OPPS/ASC final rule with comment period, we finalized our proposal to establish the CY 2012 ASC payment rate820 for CRT-D services based on the OPPS payment rate applicable to APC 0108 when procedures described by CPT codes 33225 (Inser tion of pacing electrode, cardiac venous system, for left ventricular pacing, at time of insertion of pacing car dioverter-def ibrillator 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-def ibrillator system with tran svenous lead(s), single or dual chamber) are performed on the same date of service in an AS C. ASCs use the corresponding HCPCS Level II G-code (G0448) for proper reporting when the procedures described by CPT codes 33225 a nd 33249 are performed on the same date of service. For a complete discussion of our policy regarding paymen t 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 continue d assignment to APC 0108 but CPT code 33225 is proposed to be packaged under the OPPS. Consequently, in the CY 2014 OPPS/A SC 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 re ceive 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 pr oposed that the ASC payment rate for CRT-D services (procedures described by CPT codes 33249 and 33225) would be based on the821 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 th is 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 crea te 29 comprehensive APCs to replace 29 of the most costly de vice-dependent APCs under the OPPS but we will not implement the finalized comp rehensive 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 ar e 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 a nd 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 pa yment 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, ASC822 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 treatm ent 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/ca theters. At least two CPT codes are used to report the treatment serv ice because there are separate codes that describe placement of the needles/catheter s and the application of the brachytherapy sources: CPT code 55875 (Transperineal placemen t of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy); and CPT code 77778 (Interstitial radiation sour ce application; complex). Generally, the component services represented by both codes are provi ded in the same operative session on the same date of service to the Medicare bene ficiary being treated with LDR brachytherapy for prostate cancer. In the CY 2013 OPPS/ASC final rule w ith comment period, we finalized our proposal to establish the CY 2013 ASC paymen t 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 da te 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 a nd 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 code823 55875, the service described by CPT code 77778 w ill 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 co ntinue to be assigned to APC 0163. For a complete discussion of our policy regardi ng payment for LDR prostate brachytherapy services in ASCs, we refer readers to th e 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 polic y regarding ASC payment for LDR prostate brachytherapy services for CY 2014. 2. Payment for Covered Ancillary Services a. Background Our final payment policie s under the revised ASC payment system for covered ancillary services vary according to the part icular type of servi ce and its payment policy under the OPPS. Our overall policy provides se parate ASC payment for certain ancillary items and services integrally related to the provision of ASC covere d surgical procedures that are paid separately under the OPPS a nd provides packaged ASC payment for other ancillary items and services that are p ackaged or conditionally packaged (status indicators “N,” “Q1,” and “Q2”) under the OPPS. In the CY 2013 OPPS/ASC proposed rule (77 FR 45169), we furthe r clarified our policy regard ing the payment indicator assignment of codes that are conditionally packaged in the OPPS (status indicators “Q1” and “Q2”). Under the OPPS, a conditionallypackaged code describes a HCPCS code where the payment is packaged when it is pr ovided with a significant procedure but is separately paid when the service appears on the claim without a signi ficant procedure.824 Because ASC services always include a su rgical procedure, HCPCS codes that are conditionally packaged under the OPPS are alwa ys 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 separa te 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 ac cording to the ASC standard ratesetting methodology (72 FR 42497). However, as finalized in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72050), payment indicators for all nuclear medicine procedures (defined as CPT codes in the range of 78000 through 78999) that are designated as ra diology services that are pa id separately when provided integral to a surgical procedure on the ASC lis t are set to “Z2” so that payment is made based on the ASC standard ratesetting methodol ogy rather than the MPFS nonfacility PE RVU amount, regardless of which is lower. This modification to the ASC payment methodology for ancillary serv ices was finalized in response to a comment on the CY 2011 OPPS/ASC proposed rule that sugg ested it is inappropriate to use the MPFS-based payment methodology for nuclear medicine procedures because the associated diagnostic radiopharmaceutical, although packaged under the ASC payment825 system, is separately paid under the MPFS (42 CFR 416.171(d)(1)). We set the payment indicator to “Z2” for these nuclear medici ne procedures in the ASC setting so that payment for these procedures would be ba sed on the OPPS relative payment weight rather than the MPFS nonfacility PE RVU-base d amount to ensure that the ASC will be compensated for the cost associated with the diagnostic radiopharmaceuticals. In addition, because the same issue ex ists for radiology procedures that use contrast agents (the contrast agent is packaged under th e 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 cont rast 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 pros pective 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 pr ovided integral to ASC covered surgical procedures at prospective rates adopted under the OPPS. Other separately paid covered ancillaryservices in ASCs, specifically corneal tissue acquisition and device categories with OPPS pass-through status, do not have prospectively established ASC payment rates a ccording to the final policies of the revised ASC payment system (72 FR 42502 a nd 42508 through 42509; 42 CFR 416.164(b)).826 Under the revised ASC payment system, corn eal tissue acquisition is paid based on the invoiced costs for acquiring the corneal tissu e for transplantation. Devices that are eligible for pass-through pa yment 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 C 1830 (Powered bone marrow biopsy needle), HCPCS code C1840 (Lens, intraocular (tel escopic)), HCPCS code C1841 (Retinal prosthesis, includes all internal and ex ternal components), and HCPCS code C1886 (Catheter, extravascular tissu e ablation, any modality (inser table)). Payment amounts for HCPCS codes C1830, C1840, C1841, and C1886 under the ASC payment system are contractor priced. In th e CY 2013 OPPS/ASC final rule with comment period, we finalized the expiration of pass-throu gh 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 th e 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 pa yment effective October 1, 2013, and will continue to be eligible fo r 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 pa yment rates and make changes to ASC payment indicators as necessary to mainta in consistency between the OPPS and ASC827 payment system regarding the packaged or sepa rately 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 sour ces and separately payable drugs and biologicals equal to the pr oposed CY 2014 OPPS rates. Consistent with established ASC pa yment policy (72 FR 42497), the proposed CY 2014 payment for separately payable c overed 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 (exc ept as discussed below for nuclear medicine procedures and radiology servic es 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 serv ice is packaged or conditionally packaged under the OPPS. The payment indicators in Addendum BB to th e proposed rule, as corrected, indicate whether the proposed paymen t rates for radiology serv ices 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 se rvices that we proposed to pay based on the ASC standard ratesetti ng methodology were assigned payment indicator “Z2” (Radiology service paid se parately when provided integr al 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 were828 assigned payment indicator “Z3” (Radiology service paid separately when provided integral to a surgical procedure on AS C list; payment based on MPFS nonfacility PE RVUs). As finalized in the CY 2011 OPPS/AS C final rule with comment period (75 FR 72050), payment indicators for all nucle ar medicine procedures (defined as CPT codes in the range of 78000 through 78999) that are designated as radi ology services that are paid separately when provided integral to a surgical procedure on the ASC list are set to “Z2” so that payment 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 costfor 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/AS C final rule with comment period (76 FR 74429 through 74430), payment indicators fo r 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 in clude 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 thei r proposed payment indicators were listed in Addendum BB to the proposed rule, as correc ted (which is available via the Internet on the CMS Web site). We invited public comment on these proposals.829 Comment : One commenter requested that th e procedure described by CPT code 33225 (Insertion of pacing electr ode, cardiac venous system, fo r left ventricular pacing, at time of insertion of pacing cardioverte r-defibrillator or pacemaker pulse generator (eg, for upgrade to dual chamber system) (list se parately 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 identifie d 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 permanen t pacemaker with transvenous electrode(s); ventricular)) that include th is add-on code. The commente r indicated that the proposed ASC payment rates for CRT-P services de crease 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 pr ovide separate ASC payment fo r 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 c onditionally packaged (status indicators “N,” “Q1,” and “Q2”) under the OPPS. As detailed in section II.A.3.c. of th is final rule with comment period, we are finalizing our propos al to package procedures described by add-on codes under the OPPS for CY 2014. Th erefore, in order to align the ASC payment bundles with those under the OPPS, the ASC payment for CPT code 33225 will830 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 c odes; and (5) device removal procedures. However, we are not finalizi ng our proposal to package anci llary services or diagnostic tests on the bypass list under the OPPS for CY 2014. Therefore, with respect to the commenters’ concerns about the proposed p ackaging of ancillary services, ancillary services will continue to have sepa rate 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 pa yment 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 change s to the relative paym ent weights that are associated with laboratory packaging will notresult in duplicate or additional Medicare payment in aggregate. In addition, because th e packaged laboratory tests are spread over many APCs, we also believe that the imp act 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 rece ived, 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 thei r final CY 2014 payment indicators are listed in Addendum BB (which is available via the In ternet on the CMS Web site) to this final rule with comment period. E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Application Cycle Our process for reviewing applications to establish new classes of new technology intraocular lenses (NTIOLs) is as follows:

● Applicants submit their NTIOL reque sts 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 the832 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 th e calendar year in wh ich the proposal is published. In accordance with section 141(b )(3) of Pub. L. 103-432 and our regulations at § 416.185(b), the deadline for receipt of public comments is 30 days following publication of the lis t of requests in the proposed rule.

● In the final rule updating the ASC and OPPS payment rates for the following calendar year, we —

○ 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 apar t from other IOLs (inc luding those previously approved as members of other expired or activ e NTIOL classes) and that is associated with an improved clinical outcome.

○ The date of implementation of a paymen t adjustment in the case of approval of an IOL as a member of a new NTIOL class woul d be set prospectively as of 30 days after publication of the ASC payment update fina l 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 Ne w NTIOL Classes for CY 2014 As discussed in the CY 2014 OPPS/AS C 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 effec tive beginning in CY 2015, requests for review of applications for a new class of new t echnology IOLs must be received at CMS by 5 p.m. EST, on March 3, 2014. Send requests to ASC/NTIOL, Divi sion of Outpatient Care, Mailstop C4–05–17, Centers for Medicare and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244–1850. To be c onsidered, 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 comme nt period (72 FR 66855). We created Addendum DD1 to define ASC payment indi cators that we use in Addenda AA and BB to provide payment information regarding covered surgical procedures and covered ancillary services, respectively, under the revised ASC payment system. The ASC payment indicators in Addendum DD1 are intended to capture policy relevant characteristics of HCPCS codes that may recei ve packaged or separate payment in ASCs, such as whether they were on the ASC list of covered services prior to CY 2008; payment designation, such as device- intensive or office-based, and the corresponding ASC payment methodology; and their classification as separately payable ancillary services including radiology services , brachytherapy sources, OPPS pass-through devices, corneal tissue acquisition services, drugs or biologicals, or NTIOLs. We also created Addendum DD2 that 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 identif y, for the revised ASC payment system, the status of a specific HCPCS code and its paym ent indicator with respect to the timeframe when comments will be accepted. The comment indicator “NI” is used in the OPPS/ASC final rule with comment period to indicate ne w codes for the next calendar year for which the interim payment indicator assigned is subject to comment. The comment indicator835 “NI” is also assigned to existi ng codes with substantial revisi ons 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 fina l 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 cale ndar 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 reader s that a change has been made from one calendar year to the next, but do not indicat e 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 paym ent 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 ru le 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 ra tes under the revised ASC payment system on APC groups and the OPPS relative payment we ights. Consistent with that policy and the requirement at section 1833(i) (2)(D)(ii) of the Act that th e revised payment system be implemented so that it would be budget neut ral, the initial ASC conversion factor (CY 2008) was calculated so that estimated total Medicare payments under the revised ASC payment system in the first year w ould be budget neutral to estimated total Medicare payments under the prior (CY 2007) ASC payment system (the ASC conversion factor is multiplied by the rela tive payment weights calculated for many ASC services in order to establish payment rates) . That is, application of the ASC conversion factor was designed to result in aggregate Medicare expenditures under the revised ASC payment system in CY 2008 equal to aggreg ate Medicare expenditu res that would have occurred in CY 2008 in the ab sence of the revised system, taking into consideration the cap on ASC payments in CY 2007 as require d under section 1833( i)(2)(E) of the Act (72 FR 42522). 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 “e xpenditures” in the context of the budget neutrality requirement under se ction 1833(i)(2)(D)(ii) of the Act to mean expenditures from the Medicare Part B Trust Fund. We do not consider expe nditures to include beneficiary coinsurance and copayments. Th is distinction was important for the CY 2008 ASC budget neutrality model that considered payments across the OPPS, ASC, and MPFS payment systems. However, because co insurance is almost always 20 percent for ASC services, this interpretation of expend itures has minimal impact for subsequent budget neutrality adjustments calculated w ithin the revised ASC payment system. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 through 66858), we set out a step-by-step illustration of the final budget neutrality adjustment calculation based on the methodology fina lized in the August 2, 2007 final rule (72 FR 42521 through 42531) and as applied to updated data available for the CY 2008 OPPS/ASC final rule with co mment period. The application of that methodology to the data available for the CY 2008 OPPS/ASC final rule with comment period resulted in a budget neutrality adjustment of 0.65. For CY 2008, we adopted the OPPS relative payment weights as the ASC relative payment weights for most services and, consiste nt with the final polic y, we calculated the CY 2008 ASC payment rates by multiplying th e ASC relative payment weights by the final CY 2008 ASC conversion factor of $41.401. For covered office-based surgical procedures and covered ancillary radiology services (excluding covered ancillary radiology services involving certa in nuclear medicine procedur es or involving the use of contrast agents, as discussed in section 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 am ount 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 altern ative ratesetting methodologies for specific types of services (f or example, device-intensive procedures). As discussed in the August 2, 2007 fi nal 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 calculati ng 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 base d on a GAO report of ASC costs using 2004 survey data. Beginning in CY 2008, CMS acc ounted for geographic wage variation in labor cost when calculating individual AS C 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 pr ovided 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 ad justment to the labor portion of ASC costs. In addition, use of the unadjusted hospital wage data avoids further reductions in certai n rural statewide wage inde x values that result from reclassification. We continue to believe that the unadjusted hospita l wage indices, which are updated yearly and are used by many other Medicare payment systems, appropriately account for geographic variati on in labor costs for ASCs.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 beento use the average of the wage indices for CBSAs (or metropolitan divisions as applicable ) that are contiguous to the area that has no wage index (where “contiguous” is defined as sharing a border). We have applied a proxy wage index based on this met hodology to ASCs located in CBSA 25980 (Hinesville-Fort Stewart, GA). 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 c ould be used to set the wage index for that area, we determine the ASC wage index by calcu lating 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 divisi ons 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 commen t in the past, and believe our prior rationale for using unadjusted wa ge indices is still a sound one. We continue to believe that the unadjusted hospital wage indices, which are update d yearly and are used by840 almost all Medicare payment systems, appr opriately account for ge ographic 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 peri od (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 th e public comments we receiv ed, we are continuing our established policy to account for geographi c wage variation in labor cost when calculating individual ASC payment by applyi ng the pre-floor and pre-reclassified hospital wage index values that CMS calcu lated for payment, using updated CBSAs. Further, we are continuing our established po licy to use the average of the wage indices for CBSAs (or metropolitan divisions as appli cable) that are conti guous to the area that has no wage index. For CY 2014, we also ar e 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 c ontiguous 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 wei ghts each year usin g the national OPPS relative payment weights (and MPFS nonfacility PE RVU-based amounts, as applicable) for that same calendar year and uniformly scale the ASC relative payment weights for each update year to make them budget neutral (72 FR 42533). Consistent with our841 established policy, in th e CY 2014 OPPS/ASC proposed rule (78 FR 43640 through 43641), we proposed to scale the CY 2014 rela tive payment weights for ASCs according to the following method. Holding ASC utilizatio n and the mix of services constant from CY 2012, we proposed to compare the tota l payment using the CY 2013 ASC relative payment weights with the tota l payment using the CY 2014 relative payment weights to take into account the change s in the OPPS relative paym ent weights between CY 2013 and CY 2014. We proposed to use the rati o of CY 2013 to CY 2014 total payment (the weight scaler) to scale th e ASC relative payment weights for CY 2014. The proposed CY 2014 ASC scaler is 0.9102 as correct ed (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 se rvices 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 pr edetermined 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 wei ghts would not apply to those services. The ASC payment weights for those services without predetermined national payment amounts (that is, those services with nationa l payment amounts that would be based on842 OPPS relative payment weights) would be scal ed to eliminate any di fference in the total payment between the current year and the update year. For any given year’s ratesetting, we t ypically 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 approxima tely 99 percent of all ASC claims data for
CY 2012. To create an analytic file to support ca lculation 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 c ode. We used the National Provider Identifier for the purpose of identifying uni que ASCs within the CY 2012 claims data. We used the supplier zip code reported on th e claim to associate State, county, and CBSA with each ASC. This file, available to the public as a supporting data file for the proposed rule, is posted on the CMS Web site at: http://www.cms.gov/ResearchStatistics-Data-and-Systems/Files-for-Ord er/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 scal er adjustment is necessary to make the difference in aggregate ASC payments cal culated using the CY 2013 ASC relative payment weights and the CY 2014 relative payment weights budget neutral. We calculated the difference in aggregate paymen ts due to the change in relative payment weights holding constant the ASC conversi on factor, the most recent CY 2012 ASC843 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 th rough 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 ad justment is calculated and applied to the OPPS conversion factor. For CY 2014, we calcu lated 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-reclassifi ed hospital wage indi ces. Specifically, holding CY 2012 ASC utilization and servic e-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 pr oposed CY 2014 pre-floor and pre-reclassified hospital wage indices. We used the 50-percen t labor-related share fo r both total adjusted844 payment calculations. We then compared the total adjusted payment calculated with the CY 2013 pre-floor and pre-reclassified hospi tal wage indices to the total adjusted payment calculated with the proposed CY 2014 pre-floor and pre-r eclassified hospital wage indices and applied the resulting ra tio 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 fact or. We note that, on February 28, 2013, OMB issued OMB Bulletin No. 13-01 announc ing revisions to the delineation of Metropolitan Statistical Areas, Micropolitan St atistical 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-reclassifiedhospital wage indices, the CY 2014 ASC wage indices do not reflect the OMB changes. Section 1833(i)(2)(C)(i) of the Act requi res 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 perc entage increase in the Consumer Price Index for all urban consumers (U.S. city aver age) 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 mech anism, but it requires the payment amounts to be increased by the CPI-U in the absence of any update. Because the Secretary updates the AS C 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 the845 CPI-U for CY 2010 and subsequent calendar year s. Therefore, the annual update to the ASC payment system is the CPI-U (refe rred 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 require s that “any annual update under [the ASC payment] system for the year, after applica tion of clause (iv), shall be reduced by the productivity adjustment described in secti on 1886(b)(3)(B)(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 multif actor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicab le 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 Secret ary 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 applica tion 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 paymen t 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 unadjusted846 payment rates using the ASCQR Program redu ced update conversion factor that would apply to ASCs that fail to meet their qua lity reporting require ments for the CY 2014 payment determination and subsequent years. The application of th e 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 syst em 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 negativ e 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 adde d by section 3401(k) of the Affordable Care Act, requires that the Secretary reduce the annual update fact or, after application of any quality reporting reduction, by th e 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 th an 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 upd ate factor that is less than zero, the847 resulting update to the ASC payment rate s 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 comm ent period (75 FR 72062 through 72064). In the CY 2014 OPPS/ASC proposed ru le (78 FR 43642), based on IHS Global Insight’s (IGI’s) 2013 first quarter forecast w ith 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, ba sed on IGI’s 2013 first quarter forecast, the MFP adjustment for the period ending with th e 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 component s 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 comme nt 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 aff ects 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-adju sted CPI-U update factor of 0.9 percent for ASCs meeting the quality reporting requirement s. 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 requireme nts. We proposed to reduce the CPI-U848 update of 1.4 percent by 2.0 percentage point s for ASCs that do not meet the quality reporting requirements and then apply th e 0.5 percentage point MFP reduction. Therefore, we proposed to apply a -1.1 per cent 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 th at if more recent data are subsequently available (for example, a more recent es timate 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 ad just 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 di scussed above, which results in a proposed CY 2014 ASC conversion factor of $43.321 fo r ASCs meeting the quality reporting requirements. For ASCs not meeting the qua lity 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, comment ers requested that CMS adopt the hospital market basket to update the ASC pa yment 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 Am erican household, rather than849 an outpatient surgical provider. Commenter s 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 adopti ng 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 cont inued 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 CM S is required to apply the MFP adjustment to the ASC annual update. Commenters stated that, as an output price index, the CPI-U index already accounts for productivity thus ASCs, in essence, are receiving a productivity adjustment that is twice that applied to the HOPD update. Because CMS has discretion regarding the index used to update ASCs, but is requir ed in statute to adjust the ASC update by the MFP, commenters urged CMS to use the hospital market basket, which is an input price index that does not already account for productivity, to update ASC payment rates and thereby allow the appropriate application of the required productivity adjustment. These commenters s uggested 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 divergen ce 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 th e goods and services provided by ASCs and that use of the hospital market basket w ould minimize the divergence in the payment850 rates between the OPPS and ASC payment syst em, we believe that the hospital market basket does not align with the cost structures of ASCs. Hospitals provide a much wider range of services, such as room and boa rd and emergency services, and the costs associated with providing these services ar e 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 th e 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 appropri ately 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 appr oximation of the price increases facing ASCs. We appreciate the commenter’s sugg estion 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 ali gnment 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 a lign the MFP adjustment with the update timeframe for each payment system rather than aligning the MFP adjustment across payment systems. After consideration of th e public comments we receiv ed, we are applying our established methodology for determining th e final CY 2014 ASC conversion factor. Using more complete CY 2012 data for this final rule with comment period than was851 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 i ndex used in the MFP forecast calculation as discussed and fina lized in the CY 2012 MPFS final rule with comment period (76 FR 73300 through 73301) is 0.5 percent, re sulting in an MFP-adjusted CPI–U update factor of 1.2 pe rcent for ASCs that meet the quality reporting requirements. The final ASC conve rsion factor of $43.471, for ASCs that meet the quality reporting requirements, is the pr oduct of the CY 2013 c onversion factor of $42.917 multiplied by the wage index budget ne utrality adjustment of 1.0009 and the MFP-adjusted CPI–U payment update of 1.2 pe rcent. For ASCs that do not meet the quality reporting requirement s, 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 re duction, resulting in a –0.8 percent quality reporting/MFP-adjusted CPI-U update factor. The final ASC conversion factor of $42.612 for ASCs th at 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 adju stment of 1.0009 and the quality reporting/MFP-adjusted CPI-U pa yment 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 surg ical procedures and covered ancillary852 services, respectively. The payment rates in cluded in these addenda reflect the full ASC payment update and not the reduced payment up date used to calculate payment rates for ASCs not meeting the quality reporting re quirements 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 su rgical 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 pro cedure is performed in a single operative session. Display of the comment indicator “CH” in the column titled “Comment Indicator” indicates a cha nge in payment policy for th e item or service, including identifying discontinued HCPCS codes, desi gnating items or services newly payable under the ASC payment system, and identifying items or services with changes in the ASC payment indicator for CY 2014. Displa y of the comment indi cator “NI” in the column titled “Comment Indicator” indicates that the code is new (or substantially revised) and that the payment indicator assignment is an inte rim assignment that is open to comment 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 li sted services for CY 2014. The payment weights for all covered surgical procedures and covered ancillar y services whose ASC payment rates are based on OPPS relative payment weights were scaled for budget853 neutrality. Thus, scaling was not applied to the device port ion of the device-intensive procedures, services that are paid at the MPFS nonfacility PE RVU-based amount, separately payable covered anci llary services that have a predetermined national payment amount, such as drugs and biologicals and brac hytherapy 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 produc tivity adjustment (as discussed in section XII.H.2.b. of this fina l rule with comment period). In Addendum BB, there are no relative payment weights displayed in the “CY 2014 Payment Weight” column for items a nd services with predetermined national payment amounts, such as separately pa yable 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 pa yment rates listed in Addendum BB for separately payable drugs and biologicals ar e based on ASP data used for payment in physicians’ offices in October 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 informati on as detailed in Addenda AA and BB.854 Therefore, Addenda AA and BB to this fina l rule with comment period (which are available via the Internet on the CMS Web s ite) display the updated ASC payment rates for CY 2014 for covered surgical procedures and covered ancillary services, respectively, and provide additional informati on related to the CY 2014 rates.

XIII. Hospital Outpatient Qu ality Reporting Program Updates A. Background 1. Overview CMS has implemented quality measure reporting programs for multiple settings of care. These programs promote higher qualit y, more efficient health care for Medicare beneficiaries. The quality data reporting program for hospital outpatient care, known as the Hospital Outpatient Quality Reporti ng (Hospital OQR) Program , formerly known as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP), has been generally modeled after the qual ity data reporting program for hospital inpatient services known as the Hospital Inpatient Quality Re porting (Hospital IQR) Program (formerly known as the Reporting Hospital Quality Da ta for Annual Payment Update (RHQDAPU) Program). Both of these quality reporting programs for hospital services have financial incentives for the reporting of quality data to CMS. CMS also has implemented quality meas ure reporting programs for other settings of care and for certain pr ofessionals, including:855

● Care furnished by physicians and ot her eligible profe ssionals, under the Physician Quality Reporting System (PQRS, formerly referred to as the Physician Quality Reporting Program Initiative (PQRI));

● Inpatient rehabilitation facilities, under the Inpatient Reha bilitation Facility Quality Reporting Program (IRF QRP);

● Long-term care hospitals, under th e Long-Term Care Hospital Quality Reporting (LTCHQR) Program;

● PPS-exempt cancer hospitals, under th e 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 Hospita l Value-Based Purchasing Program and an end-stage renal disease (ESRD) Qualit y Incentive Program that link payment to performance. In implementing the Hospital OQR Program and other quality reporting programs, we have focused on measures th at have high impact and support national priorities for improved quality and efficien cy of care for Medicare beneficiaries as856 reflected in the National Qua lity Strategy, as well as conditions for which wide cost and treatment variations have been reported, desp ite established clinical guidelines. To the extent possible under various aut horizing statutes, our ultimate goal is to align the clinical quality measure requirements of the Hospita l OQR Program and various other programs, such as the Hospital IQR Program, the ASCQ R Program, and the Me dicare and Medicaid Electronic Health Record (EHR) Incentiv e Programs, authorized by the Health Information Technology for Economic and Clinic al 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 co llection 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 infrastruc tural 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 activ ities 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 re porting programs, we refer readers to the CY 2013 OPPS/ASC final rule with comme nt period (77 FR 68467 through 68469) for the discussion of the principles for our consid erations for future measures, and we intend to generally apply these same pr inciples in future rulemaking.
Comment : One commenter requested that for burden reduction purposes, CMS should not implement more than two ch art-abstracted measures per year.857 Response : We consider potential reporting bu rden on hospitals. We do weigh the relevance and the utility of measures agains t potential burden on providers. We thank the commenters for the feedback and will take it in to consideration for future proposals. We note that we are working toward the even tual adoption of electronically-specified measures, which will reduce the burden of chart-abstracted measures.
Comment : A few commenters recommended th at CMS ensure that the proposed measures are specified to provide anopportunity 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 specificat ions were all submitted to NQF by the measure stewards. We believe that these m easure specifications will provide the detailed information needed for the public to unders tand the measures being proposed and to provide meaningful comments on the proposed measures during the ru lemaking process. Proposed measures are not included in the Hospital OQR Specifica tions Manual because we generally incorporate specifications for meas ures to be used in the program into the Hospital OQR Specifications Manual, al ong with implementation guidance after publication of the final rule with comment period, but prior to implementation. For maintenance of technical specifications, our ge neral policy is to provi de six months lead time between Hospital OQR Specifications Ma nual 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 Outp atient Quality Reporting (Hospital OQR) Program We refer readers to the CY 2011 OPPS/A SC final rule with comment period (75 FR 72064) for a detailed discussion of th e statutory history of the Hospital OQR Program. 3. Measure Updates and Data Publication a. Process for Updating Quality Measures Technical specifications fo r the Hospital OQR Program measures are listed in the Hospital OQR Specifications Manual, which is posted on the CMS Qu alityNet Web site

at: http://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FSpecsManualTemplate&cid=1228772438492

. We maintain the technical specifications for the measures by updating this Hospital OQR Specifications Manual and includ ing detailed instruc tions and calculation algorithms. In some cases where the specifi cations 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 subreg ulatory 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 proces s 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 hos pice 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 pr ovide links to where additi onal information on the updates can be found. As stated in CY 2009 OPPS/AS C, 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 rel ease the Hospital OQR Specifications Manual every 6 months and release addenda as necessa ry. 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 mont hs 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 wh en a standard of performance assessed by a measure becomes more stringent (for exam ple, changes in acceptable timing of860 medication, procedure/process, or test admini stration). 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 extendi ng 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 incor porate nonsubstantive upda tes to Hospital OQR Program measures in the most expeditious manner possible, while preserving the public’s ability to comment on updates that so fundame ntally change an endorsed measure that it is no longer the same measure th at 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 c onsidered substantive versus non-substantive apply to all measur es 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 s ubstantive change that follows current proposed rulemaking processes. The comment er requested clarific ation regarding the publication, preview, and comment period via rulemaking for ICD-9-CM to ICD-10- CM/PCS mappings for all value sets for dia gnoses 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 measur es. Our examples included updated diagnosis861 or procedure codes, medication updates for cat egories of medications, or a broadening of
age ranges. We will be transitioning all of our bil ling 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) recentlypublished this crosswalk for the Hospital OQR Program on our Web site at: http://www.cms.gov/Medicar e/Quality-InitiativesPatient-AssessmentInstruments/HospitalQualityInits/Hospita lOutpatientQualityR eportingProgram.html ; and. (3) solicited comment on this cro sswalk from July 1, 2013 through August 31, 2013. We normally incorporate coding updates for the measures us ing our established subregulatory process because such updates do not change the basi c, underlying concepts being measured. Moving from ICD–9 to the ICD–10 coding system falls within the parameters of our subregulatory process. However, we recogni ze 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 conseque ntly, prior measure results do not correspond to results for the same meas ures under the new coding system. In this situation, we will determine whet her to continue publicly re porting the quarters of data that were collected under the ICD-9 coding sy stem, or report only the newer quarters of data collected under the ICD-10 coding syst em. We intend to study the effect of transitioning to the ICD-10 system on tre ndability 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/A SC proposed rule (78 FR 43645) for the discussion of our policy for the publica tion 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 mu st 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 thatloads quickly on a vari ety of devices and at slower internet connection speeds. The comme nter encouraged CMS to offer the data in languages commonly spoken in th e United States, and cites th e 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 proc ess, we finalized a policy that, beginning with the CY 2013 rulemaking, when we adoptmeasures 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 rulema king, we finalized a process for immediate retirement (a term we later ch anged 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 Hosp ital 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 w ith the same change in the Hospital IQR864 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 RHQDAP U Program) measures. These criteria are: (1) measure performance among hospitals is so high and unva rying that meaningful distinctions and improvements in performance can no longe r be made (“topped out” measures); (2) performance or improvement on a measure do es not result in better patient outcomes; (3) a measure does not align with current clinical guidelines orpractice; (4) the availability of a more broadly applicable (across settings, popul ations, or conditions) measure for the topic; (5) the availability of a measure that is more proximal in time to desired patient outcomes for the pa rticular topic; (6) the availa bility of a measure that is more strongly associated with desired patie nt outcomes for the particular topic; and (7) collection or public reporting of a measur e 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 m easures for removal. In the CY 2013 OPPS/ASC final rule with comment peri od (77 FR 68472 through 68473), we finalized our proposal to apply these measure remova l criteria in the Hosp ital 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-endor sed 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/AS C 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 M easures 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 “Propos ed 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 Speci fied Elements Received by Discharged ED Patients, and (2) OP-24: Cardiac Rehabil itation Measure: Patient Referral from an Outpatient Setting. We reflected our pr oposal in a chart (78 FR 43647) depicting measures we proposed to remove, and also refe rred in the title of the chart to CY 2016 as the first payment year affected by our propos al. 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 contra dictory information and inquiries about866 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 i ndividual measures.
Comment : Many commenters noted that the di scussions 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 inadvert ently 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 removi ng 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 Reco rd 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 January2012, hospitals raised concerns about the measure specifications, including potential priv acy issues related to releasing certain elements of the transition r ecord to either the patient being discharged from an867 emergency department or the patient’s caregi ver. Some examples provided by hospitals are the release of sensitive lab results or ra diological findings to a parent, spouse, or guardian of a minor patient, or to the res ponsible party for a phys ically incapacitated patient. In order to address the safety concerns related to confidentiality as raised by the industry in the above discussion, in Apr il 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 Elem ents 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 valid ation. 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 th e 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 transi tion 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 care868 rendered at facilities; and the measure st eward, 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 st eward 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 re sume once we updated the Hospital OQR Specifications Manual and made any nece ssary 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 w ould 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 a ddress 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 da ta abstraction more subjective because individual hospitals can determine which information should be included in the transition record in order to co mply with this measure. In the absence of standardized data elements, we were not able to resolve this issue of data abstraction for869 common data elements, and therefore, could not ensure consistency of data submission and accuracy of measure results. We also learned that all aspects for th is 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, a nd 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 re ly on chart-abstraction, which can result in variations in data elements. Instead, the Medicare EHR Incentive Program incorporates a methodology that includes standa rdized 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 patien ts discharged from the inpatient department or Emergency Department (ED) onl ine 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. Th erefore, to reduce dup licative requirements among programs and measurement burden, we pr oposed 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’ ju stifications 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 va lue for this measure because the CMS data systems are not able to accommodate a mi ssing field without error. The commenter stated that while OP-19 was suspended, reportin g hospitals needed to continue to collect and report data and ensure that the data fi eld 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 conc ern. 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 fo r 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 abst raction 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 suppor t 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 curre nt system will not accept a null value for OP-19. An upcoming release of our Hospital Reporting system will address this issue by871 removing OP-19 and OP-24 from our data colle ction 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 meas ures without causing undue burden to the reporting community. After consideration of th e public comments we received, we are finalizing the removal of OP-19 with the cl arification that removal a pplies for the CY 2015 payment determination and subsequent years. b. Removal of OP-24: Cardiac Rehabil itation 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 Specificat ions 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 contin ued difficulties with defining the measure care setting. The measure specifications pr ovided 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 identifying872 hospital outpatient visits for evaluation and management purposes using either chart abstraction or HOPD claims da ta, and difficulty in determin ing 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 s upported CMS’ justification for removing measure OP-24. Response : We appreciate all the feedback supporting our pro posal to remove OP-24 from the Hospital OQR Program measure set for the CY 2015 payment determination and subsequent years. After consideration of th e 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 Meas ure: Patient Referral from an Outpatient Setting873 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 a nd 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 Thera py 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 – Us e of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material 0489 OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive 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 Arriva l 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 Evaluati on 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 Patien t Referral From an Outpatient Setting***

-- OP-25: Safe Surgery Checklist Use875 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 corres ponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&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 cont inue 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 Paym ent 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 y ears. These measures include one HAI measure – Influenza Vaccination Coverage among Healthcare Personnel (NQF #0431), currently collected by the Centers for Dis ease Control and Prevention (CDC) via the National Healthcare Safety Network (NHSN) – and four chart-abstracted measures. The876 chart-abstracted measures are: (1) Compli cations within 30 Da ys Following Cataract Surgery Requiring Additional Surgical Pr ocedures (NQF #0564), (2) Endoscopy/Polyp Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients (NQF #0658), (3) Endoscopy/Polyp su rveillance: Colonoscopy Interval for Patients with a History of Adenomatous Po lyps – 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 Consid eration for December 1, 2012” on the NQF Web site at: http://www.qualityforum.org/Setting_Prioritie s/Partnership/Measure_Applications_Partn ership.aspx in compliance with section 1890A(a)(2) of the Act. Sec tion 1890A(a)(2) is part of the pre-rulemaking process establ ished under section 1890A of the Act, and requires the Secretary to make ava ilable to the public by December 1 st 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_Prioritie s/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 th e program “reflect consensus among affected parties and, to the extent feas ible and practicable, that thes e measures include measures set forth by one or more national cons ensus building ent ities” under section 1833(t)(17)(C)(i) of the Act. Fu rthermore, the services target ed in the proposed measures are services commonly provide d to patients who visit hosp ital 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 inuse in the Hospital OQR Pr ogram to collect structural measure information. More information regarding the propos ed 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 al so sought public comment on whether we should collect patient-level da ta via certified EHR technolog y 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 da ta via EHR technology would allow CMS to878 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 Pr ogram, CMS should not collect patient-level data through EHR technology for these m easures; rather, CMS should limit data collection to aggregate data . Many commenters did not support patient-level data collection specificallydue to EHR system concerns. These commenters supported collecting aggregate data becau se the EHR environment is not mature. One commenter stated that a group of its stakeholder hospita ls are in the early stages of adopting EHR systems and encouraged CMS to delay re quiring patient-level data where their infrastructure is not ready to collect patient information. Some commenters do not support patien t-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 patie nt-level data via EHR technology. Response : We appreciate the comments we received on whether we should collect patient-level data via certified EHR tec hnology on the four proposed chartabstracted measures and th e potential timing for doing so. We agree with commenters that chart- abstracted measure data collected in aggregate form is currently the most appropr iate collection method, and we are finalizing the aggregate mode of data collection for th e three new chart-abstracted measures in section XIII.H.2.f. of this final rule with comment period.879 We will consider these commenters’ con cerns 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 t echnology. 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 sugge sted that CMS only adopt measures where a validation strategy is in place. These commen ters 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 w ithout 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’ vi ews as being in support of patientlevel data collection and da ta collection via EHR technol ogy. We likewis e support the future adoption of measures with patient-l evel 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 coll ection. In this final rule with comment period, we have finalized three measures thatare chart-abstracted with aggregate data880 submission via the Web-based tool. We cannot validate the data that is submitted in this manner. We agree with commenters that valid ation 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 reduc ing burden. These commenters believed this would be the case if hospitals must first pe rform a patient-level review for each medical record in order to compile the aggregate da ta. Commenters were generally concerned about burden, and some commenters favored both an emphasis on adoption of claimsbased measures and measures that do not require ch art abstraction. Response : We appreciate the commenters’ conc erns 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 tec hnology on the four proposed chart-abstracted measures (this would not apply to the one HAI measure, Influenza Vaccination Coverage among Healthcare Perso nnel), 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 comment s 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) prov iding data to measure quality of care; (2) supporting CMS’ alignment of measures and requirements across data reporting and value based purchasing programs whenever pos sible and as early as possible in the implementation phases of new programs; (3) a llowing stakeholders to meet Meaningful Use (MU) standards through submission of data to the Hospital OQR Program; and, (4) adopting future EHR measures that are fu lly endorsed, tested, and specified by CMS. Many commenters asked CMS to c onsider technology barriers to efficient and accurate EHR-based quality reporting, including the need for wi dely adopted standards, information models, and vocabularies to support EHR-based reporting. Many commenters also asked CMS not to adopt aggr essive timelines for EHR data submission and recommended specific policies and timelines related to electronic submission. Some commenters urged CMS to carefully consid er confidentiality, privacy, and security regulations, and to consider State-based re gulations 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 collectthe data needed to accurately capture the care provided in off-campus pr ovider-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 per centage of health care personnel (HCP) who have been immunized for influenza. Ra tes of serious illness and death resulting from influenza and its complications are in creased 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 incr eased risk. HCP can acquire influenza from patients and can transmit influenza to patient s and other HCP. Many HCP provide care for, or are in frequent cont act with, patients with influen za or patients at high risk for complications of influenza. The involvemen t of HCP in influenza transmission has been a long-standing concern. 1,2,3 Vaccination is an effective preventive m easure against influenza, and can prevent many illnesses, deaths, and losses in productivity. 4 HCP are consider ed a high priority for expanding influenza vaccine use. Achiev ing 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 dise ase 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 influen za 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., Serwin t, J., Butta, J., O’Riordan, M.A., Steinhoff, M.C.: Effectiveness of influenza vaccine in health care professionals; a rand omized trial. The Journal of the American Medical Association 1999;281:908-913.883 measure is appropriate for measuring th e quality of care in hospital outpatient departments. We proposed to adopt this proc ess measure for the CY 2016 payment determination and subsequent years. We also proposed that Hospital OPDs use the NHSN infrastructure and prot ocol 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 requireme nts will be unchanged for data submission to NHSN for the Hospital OQR Program. Th e 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 f acility, or reported in writing (paper or electronic) or provided document ation that influenza vaccinat ion was received elsewhere; (b) were determined to have a medical c ontraindication/condition of severe allergic reaction to eggs or to other component(s) of the vaccine, or hist ory of Guillain-Barre Syndrome within 6 weeks after a previous influenza vaccination; (c) declined a vaccination; or (d) persons with unknown v accination 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 hea lthcare 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/QPST ool.aspx?Exact=false&Keyword=0431

.884 In its 2013 Pre-Rulemaking Report, ( http://www.qualityforum.or g/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 w ould address a measure type that is not adequately represented in the program measure set. Furthe rmore, the adoption of this measure will align with both the Hospital IQR Program, which adopted the measure for the FY 2015 payment determination and subs equent 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 paym ent determination. However, in the CY 2012 OPPS/ASC final rule with comme nt period (76 FR 74470 through 74472), we decided not to finalize the m easure (76 FR 74472) and, instead , decided to propose it in future rulemaking for the CY 2016 payment dete rmination and subsequent years in order to address measure refinements in the denom inator and operational issues. We believe that these refinements have si nce 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 fe deral 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 nonsubsta ntive changes to measures arising out of885 the NQF process stated in the CY 2009 O PPS/ASC final rule with comment period (73 FR 68766 through 68767), we would use th is 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 i nvited 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 repo rt the same measure for both settings. A few commenters re quested clarifications for th e 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 hospi tals to report by a ttesting through the Hospital IQR Program that both their inpatie nt and outpatient heal thcare 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 aw are that some HCP may work across both of these settings. We also reali ze that it may be difficult for hos pitals 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 co mmenters’ concerns by providing clear instructions on the appropriat e 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 measur e specifications in our planned December 2013 addendum to the Hospital OQR Specificati ons 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 th e Hospital IQR Specifications Manual, which we anticipate will be published on Apr il 1, 2014 to cover the discharges dated October 1, 2014 – June 30, 2015. In addition, as the measure stew ard, the CDC’s NHSN plans to set up the capability to clearly diffe rentiate 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 Stat es with legislation prohibiting healthcare providers from requiring employees to obtai n 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 and887 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 wh ere it was promoted but not required, and 24 percent worked in settings where it was ne ither 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 th at neither required nor promoted vaccination (50.4 percent). Thus, there is wide variation in workplac e programs for the influenza vaccination and in vaccine cove rage among HCP. Therefore, we believe that tracking influenza vaccination coverage is pivotal to raise vaccination adhe rence to higher and more uniform levels across the Nation. We acknowledge the commenter’s con cern regarding State laws prohibiting providers from requiring that healthcare work ers get an influenza vaccination. We want to clarify that the numerator of the populati on of this measure includes more than just HCPs who received an influenza vaccination ad ministered at the healthcare facility, or who reported in writing (paper or electr onic) or provided documentation that they received an influenza vaccination elsewhere. The numerator popul ation also includes HCP who: (a) have a medical contraindicati on/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 stat us or do not otherwise meet any of the other definitions in the numerator categories. We believe that these last three categories888 encompass HCP who may not have been vaccin ated and cannot be required to comply with a vaccination requirement under State la w. Therefore, we do not believe that a waiver is needed for States where legisla tion prohibits providers from requiring that HCPs get influenza vaccinations as a conditi on of employment. Regardless of whether requiring the influenza vaccination with empl oyment is prohibited by the State, HOPDs can still take actions to impr ove their vaccination rates.
Comment : One commenter asked whether CMS would publicly report this measure separately for the Hospital OQR Pr ogram, 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 th e public comments we received, we are finalizing as proposed the measure OP-27: Influen za 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 gene ral comments applicable to these four measures, summarizing and responding to m easure-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 proposed889 chart-abstracted measures based on their clai ms that follow-up visits and assessments are performed in places other than in HOPDs. Th us, 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 pos t-operative visual function and patient outcomes, and determine additional surgical pr ocedures as necessary in their respective offices and not in the HOPD. Likewise, phys icians perform colonoscopy at HOPDs, but follow-up colonoscopy intervals are determ ined by the physician and documented in medical records kept in the physician’s office. Some commenters asserted that measur es for the outpatient setting should be geared towards tracking the ca re of patients during their HOPD visits. Patients who receive some type of care in the HOPD do not al ways 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 genera lly not practical to ha ve 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 pr ograms, CMS must design meas ures that recognize that890 there are differences in how facilities and physicians collect information, report quality measures, and interact with patients. Many commenters concluded that these f our 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 in dividual eligible physicians). Commenters asserted that the measures are duplicativ e as both PQRS measur es and Hospital OQR Program measures. Some commenters expre ssed concerns that the measures are neither NQF-endorsed for the HOPD setting nor field-tested. Response : We thank those commenters who ex pressed support for the measures. While these measures are suitable for cl inician office settings, as indicated by commenters, we also believe they are suitabl e for settings that s upply services to the same target populations for the measures, such as HOPDs. The intent of the measures is to promote accountability for Medicare bene ficiaries, 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, su ch as ophthalmologists, to collaborate, communicate, and share information withHOPDs. We hope this new mode of coordination will become the comm on practice in healthcare delivery. HOPDs provide care without the higher cost associated with inpatient hospitalization. More and mo re procedures are done safely and effectively on an891 outpatient basis and we expect this trend will continue. Therefore, we believe that assessing care coordination is a very importantaspect of evaluating the overall quality of care furnished by HOPDs. We stress that tr ue clinical integration is evidenced by effective patient coordination of care across he alth 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 e ffort 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 an alysis 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 provide r 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 fac ility setting by the measure stewards. These three measures are: (1) Endoscopy/Polyp Surve illance: Appropriate follow-up interval for normal colonoscopy in average risk pa tients (NQF #0658); (2) Endoscopy/Polyp Surveillance: Colonoscopy Interv al 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 Da ys 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 Hosp ital OQR Program would further align measures across outpatient hospital and ambul atory settings, which furnish many similar services to beneficiaries. The availabilityof 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 measur es 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/C linic setting, which we have historically interpreted as including the HOPD setting.
Comment : Some commenters noted that an initial catar act surgery or colonoscopy may be performed at a differe nt HOPD. This situation would make retrieving data burdensome. Some commen ters believed that obtaining office visit records and surgical outcome data from other ph ysician 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 th ree proposed measures is to encourage the coordination of care across health care set tings, providers, and suppliers as often as893 possible. We would like to see HOPDs, opht halmologists and other physicians actively and routinely engaged in exchanging informa tion to better communicate and coordinate the care of patients. We note that there are a variety of ways to collect patient-re lated data and, at times, it may be appropriate for HOPDs to obt ain data directly from the ophthalmologist or other physician who either ordered a pr ocedure for a patient or performed that procedure. HOPDs may have professional and commercial relationships with these ophthalmologists or other physicians. As suc h, an HOPD may have the ability to develop the means to obtain follow-up information incl uding 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 Notificatio n 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 burde n. We detail the data subm ission procedures for the measures in section XIII.H.2. of th is 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 di fficult to validate. A894 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’ concer ns that it could be difficult or burdensome for hospitals to retrieve from physic ian 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 in formation. In order to accommodate these concerns, we have ta ken several steps that we believe should alleviate some of this burden. The Web-ba sed collection strategy we are finalizing for the measures and subsequent release of specifications a nd 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 exemp tion and a sampling methodology for hospitals with a high volume of cases covered by the new measures. We believe that these provisions should together sign ificantly reduce burden for the three chart-abstracted measures we are finalizing. We have discus sed these modifications in more detail in section XIII.H.2.f of this fi nal rule with comment period. We do not include chart-abstracted meas ures 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 thatwe 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 ot her. Using these kinds of measures will895 help us capture HOPDs’ efforts at care c oordination, 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 co mmunication and coordina tion of patient care. We received specific comments on the individual proposed chart-abstracted measures and they are discussed below. 2. Complications Within 30 Days Followi ng Cataract Surgery Requiring Additional Surgical Procedures (NQF #0564) The proposed measure assesses the percenta ge of patients aged 18 years and older with a diagnosis of uncompli cated cataract who had catarac t 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 uncomm on, 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, cansignify important issues in the care being provided. Advances in technology and surgical skills over the last 30 years have rendered cataract surgery sa fer 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 wh ich are performed in hospital surgical896 outpatient departments, a 2-percent rate is a significant number of surgeries associated with complications. 5 The measure numerator is: patients w ho had one or more specified operative procedures for any of the following majo r complications within 30 days following cataract surgery: retained nuclear fragment s, endophthalmitis, dislocated or wrong power IOL, retinal detachment, or wound dehiscence. The measure denominator is: all patients aged 18 years and older who ha d cataract surgery and no signif icant pre-operative ocular conditions impacting the surgical complication ra te. This measure excludes patients with certain comorbid conditions impacting the surg ical 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.or g/Publications/2013/02/MAP_Pre-Rulemaking_Report_- _February_2013.aspx ), the MAP supported this measure a nd noted that the measure addresses a high impact condition that is no t 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 th is measure is unnecessary as complications from cataract surgery are ra re and data collection would be very burdensome, since the volume of cataract surgery performed is huge. Commenters added that this measure requires very detailed info rmation 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 ru le (78 FR 43649), a large number of complications from cataract surgery occur ev en though the percentage of complications from cataract surgery is small. The MAP i ndicated that the measure addresses a high impact condition that is not adequately a ddressed in the Hospital OQR measure set. Therefore, we believe that complications fo llowing 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 wouldfar 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 coor dination between providers and pr actitioners 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 wh ich 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 f act 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 (s uch as the patient survey data for OP-31,898 which basically involves coll ecting a patient’s perceptions about visual improvement following cataract surgery). Incontrast, there is far more information necessary for OP28 and the nature of that information is mo re 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 surg ical 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-adjuste d 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 fo r using claims to identify surgical complications for patients who have had tota l hip and knee replacements, and therefore, we believe that it may be possible to do so fo r cataract surgeries as well. This is not the case with the other three measures, whic h 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: Appropr iate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658) The proposed measure assesses the percenta ge of patients aged 50 years and older receiving screening colonoscopy wit hout 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, colonosc opy 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 in creases 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 ag ed 50 years and older receiving screening colonoscopy without biopsy or polypectomy. This measure excludes patients with documentation of medical reason(s) for reco mmending a follow-up interval of less than 10 years (for example, an above-average ri sk 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.or g/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 th e 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 MA P input when deciding on which measures to adopt for the program. We not e 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 ca regivers 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 st ress, 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 rest s solely with the Secretar y. Although, ideally, we would want the MAP to fully support all measures fo r our programs, we recognize that it is not always possible. A “support directio n” recommendation by the MAP indicates “measures, measure concepts, or measure ideas that should be phased into the program901 measure set over time, after specific issu es 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 addresse s the critical issue of colonoscopies potentially performed too frequently and pot entially 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 th e public comments we receive d, we are finalizing this measure for the CY 2016 payment determina tion and subsequent years as proposed. 4. Endoscopy/Polyp Surveillance: Colonoscopy In terval 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 colonos copy, with a history of a pr ior colonic polyp in previous colonoscopy findings who had a follow-up interv al 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 col onoscopy 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 polyps902 have been removed by colonoscopy, follow-up colonoscopy at 3 years detects important colonic lesions as effectively as follo w-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 colonosc opy. The measure denominator is: all patients aged 18 years and older receiving a surveillanc e 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 in terval of less than 3 years since the last colonoscopy (for example, last colonoscopy in complete, last colonoscopy had inadequate prep, piecemeal removal of adenomas, or last colonoscopy found greater than 10 adenomas); or (2) documentation of a syst em reason(s) for an interval of less than 3 years since the last colonoscopy (for exam ple, unable to locate previous colonoscopy report, previous colonoscopy re port was incomplete). The sp ecifications for this measure are available at http://www.qualityforum.org/QPS/0659

. In its 2013 Pre-Rulemaking Report, ( http://www.qualityforum.or g/Publications/2013/02/MAP_Pre-Rulemaking_Report_- _February_2013.aspx ), the MAP supported the directi on of the measure. A “support direction” recommendation by the MAP indi cates “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. Co mmenters 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 re spect to the Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Norm al Colonoscopy in Average Risk Patients (NQF #0658) measure. We believe that this measure addresses the critical area of timely following-up colonoscopies to detect impor tant colonic lesions after newly diagnosed adenomatous polyps have been removed by colonoscopy. Pr oper timing can be effective in reducing the incidence of subsequent colorectal cancer. Because colonoscopy is so commonly performed at HOPDs, and because this m easure 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 exp ect that this change will appear on the NQF Web site in the near future.904 After consideration of th e public comments we receive d, we are finalizing this measure, without modification, for th e 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 percenta ge 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 im prove a patient’s vision and associated functioning. This outcome is achieved cons istently through carefu l attention to the accurate measurement of axial length and corn eal power and the appr opriate selection of an IOL. Failure to achieve improved visual functioning after surg ery in eyes without comorbid ocular conditions that could imp act the success of the surgery would reflect care that should be assessed for opportunitie s for improvement. Evidence suggests that visual improvement occurs in about 86 – 98 percent of surgeries in eyes without comorbid conditions. However, with an a nnual volume of 2.8 milli on 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 fo r 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 sa mple 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 func tion instrument. The measure denominator is: all patients aged 18 years and older in sample who had cat aract 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 NQ F Measure Evaluation available at http://www.qualityforum.org/WorkArea/li nkit.aspx?LinkIdentifier=id&ItemID=68317

. In its 2013 Pre-Rulemaking Report, ( http://www.qualityforum.or g/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 measur e 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 cate gory 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 becaus e 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 meas ure requires patients to complete a pre-operative and a post-operative visual f unction questionnaire. The follow-up survey may occur in intervals of one day, two w eeks or one month post-op. The pre- and post-surgery surveys are conducted in the phys ician 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 in troduction of bias (such as how a physician906 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 operati ng procedures in place in order to conduct these visual assessments or for HOPDs to acqui re them from patients’ physicians in order to properly follow up by comparing pre- and pos t-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 rece ived on the burden associated with the chart-abstracted measures we are finaliz ing, we have modified our implementation strategy in a manner that we believe will si gnificantly minimize collection and reporting burden. We detail the data submission pro cedures for this measure and others in section XIII.H.2. of this final rule with comment period.907 After consideration of th e public comments we received, we are finalizing this measure for the CY 2016 payment determina tion and subsequent years as proposed. In summary, we are finalizing four ne w measures (one CDC/NHSN measure and three chart-abstracted measures): (1) In fluenza Vaccination Coverage among Healthcare Personnel; (2) Endoscopy/Polyp Surveillance : Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patie nts; (3) Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a Hist ory of Adenomatous Polyps – Avoidance of Inappropriate Use; and (4) Cataracts – Improve ment 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 C overage 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 Patie nt’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 subse quent 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 Thera py 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 – Us e of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material 0489 OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive 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 Arriva l to ED Departure for Discharged ED Patients -- OP-20: Door to Diagnostic Evaluati on 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 Cove rage among Healthcare Personnel*** 0658 OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow -up Interval for909 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 Patie nt’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 corr esponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&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 Meas ure Topics for Future Consideration The current measure set for the Hospita l 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 th at 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 th at are currently part of the Hospital OQR Program using certified EHR t echnology. 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 cons iderable work needs to be done by measure owners and developers to make this possible w ith respect to the clinical quality measures targeted for electronic specifications (e-s pecifications). This includes completing e-specifications for measur es, pilot testing, reliability and validity testing, and910 implementing such specifications into certifi ed 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-maki ng 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 h ealth care in hospital outpatient settings, including partial hospitali zation programs (PHPs) th at 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; patie nt 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 Ho spital IQR Program and the ASCQR Program, all of which are targeting the same broa d measure domains for future expansion. We invited public comment on this appro ach and on our suggestions and rationale for possible measure topics for future c onsideration 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 difficile911 (C

- difficile) , catheter-associated urinary tract inf ection (CAUTI), and MRSA Bacteremia (MRSA)

● Clinician-level measures that can be applied appropriately in the hospital outpatient setting for conditions such as diab etes, coronary artery disease, and COPD

● Patient-Reported Outcomes Measures Response : We thank the commenters for th e feedback and will take it into consideration for future measures. In addition, we solicited comments on th e 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 Progr am: Polyp-therapy with antipsychotic medications; Post-discharge of continuity of care; Alcohol screeni ng; 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 setti ng, and NQF-endorsed and reviewed by the MAP. The commenter was concerned about the ne ed 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 whethe r to propose the measures for PHPs in future rulemaking.
Comment : Some commenters made specifi c recommendations for new measure proposals for PHPs. Commenters believed th at with appropriate modification, the adoption of some of the IPFQR Program m easures for PHPs could promote enhanced care coordination between PHPs and IPFs. Specifically, the commenters recomme nded modifying two pairs of IPFQR measures for the PHP setting: Hospital-Based Inpatient Psychiatric Services (HBIPS) 4 and 5 (multiple antipsychotics); and HBIPS 6 an d 7 (continuity of care). According to the commenters, HBIPS 4 requires the identi fication of patients who are discharged on two or more antipsychotic medications, wh ile HBIPS 5 reports the number of patients discharged on multiple antipsychotic medi cations with appropriate justification. Antipsychotics are important t ools 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 antipsychotic s given to patients, but the tapering of drugs cannot always be co mpleted during an inpa tient hospitalization. Based on the information they presented, co mmenters 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 HBI PS 4 and 5 in both IPFs and PH Ps might encourage better coordination of the use of antipsychotic medications across these two settings.913 Commenters also noted that sim ilarly, HBIPS 6 measures whether a post-discharge continuing care plan is cr eated, 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 pr ovider with a summary of a patient’s course of treatment, discharge medications and any recommendati ons for ongoing care. Whenever a patient changes care settings, the tran smission of a plan of care equi ps the new health care team with important information to shape a patient’s treatment plan. Based on the commenters’ understanding of the measures theydescribed, they asserted that assessing both IPFs and PHPs on these measures c ould reinforce the need for ongoing, two-way communication across a patient’s be havioral 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 S ecretary will incur a 2.0 percentage point reduction to their Outpatient De partment (OPD) fee schedule in crease factor; that is, the annual payment update factor. Section 1833(t)( 17)(A)(ii) of the Act specifies that any914 reduction applies only to the payment year i nvolved and will not be taken into account in computing the applicable OPD fee schedule increase factor for a subsequent payment
year. The application of a reduced OPD fee sc hedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are re quired to report outpatient qual ity data 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 upd ate without the reduction. For a more detailed discussion of how the payment reducti on for failure to meet the administrative, data collection, and data submission requi rements of the Hospital OQR Program was initially implemented, we refer readers to the CY 2009 OPPS/AS C 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 c onversion factor and the scal ed relative weight for the APC to which the service is assigned. Th e OPPS conversion factor, which is updated annually by the OPD fee schedule increase factor, is used to calculate the OPPS payment rate for services with the fo llowing status indicators (listed in Addendum B to this final rule with comment period, which is availabl e via the Internet on the CMS Web site): “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” or “U.” We note that we proposed to delete status indicator “X” as described in sectio ns II.A.3. and XI. of the proposed rule. We also note that we proposed to develop status indicator “J1” as part of the proposed915 comprehensive APC discussed in section II.A .2.e. of the proposed rule. Payment for all services assigned to these status indicators wi ll 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 i ndicator “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 comment s on the CY 2014 OPPS status indicators to which the payment reduction to OPPS paym ent rates would apply, for hospitals who fail to meet the OQR reporting requirements. We note that the “J 1” 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 th is 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 increas e factor is an input into the OPPS conversion factor, which is used to calculate OPPS payment rate s. To implement the requirement to reduce the OPD fee schedule increase factor for hospitals that fail to meet reporting requirements, we calculate two conversion factors - a full market basket conversion factor (that is, the full conversion factor), a nd a reduced market basket conversion factor (that is, the reduced conversion factor). We then calculate a reduc tion ratio by dividing the reduced conversion factor by the full conve rsion factor. We re fer to this reduction916 ratio as the “reporting ratio” to indicate that it applies to paym ent for hospitals that fail to meet their reporting requirements. Applyi ng this reporting ratio to the OPPS payment amounts results in reduced national unadjuste d payment rates that are mathematically equivalent to the reduced national unadjust ed payment rates that would result if we multiplied the scaled OPPS relative weight s by the reduced conversion factor. To determine the reduced national unadjusted paym ent rates that applied to hospitals that failed to meet their quality reporting requi rements for the CY 2010 OPPS, we multiplied the final full national unadjusted paymen t rate found in Addendum B of the CY 2010 OPPS/ASC final rule with comment period by the CY 2010 OPPS fina l reporting ratio of 0.980 (74 FR 60642). In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 through 68772), we established a policy that the Me dicare beneficiary’s minimum unadjusted copayment and national unadjusted copayment fo r a service to which a reduced national unadjusted payment rate applies would each equal the product of th e reporting ratio and the national unadjusted copayment or the mini mum unadjusted copayment, as applicable, for the service. Under this policy, we a pply the reporting ratio to both the minimum unadjusted copayment and national unadjusted c opayment for those hospitals that receive the payment reduction for failure to meet the Hospital OQR Program reporting requirements. This application of the re porting ratio to the national unadjusted and minimum unadjusted copayments is calcula ted according to § 419.41 of our regulations, prior to any adjustment for a hospital’s fa ilure to meet the quality reporting standards917 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 th e requirements of the Hospital OQR Program. For example, the following standard adjustme nts apply to the redu ced national unadjusted payment rates: the wage index adjustment; the multiple procedure adjustment; the interrupted procedure adjustment; the rural sole community hospital adjustment; and the adjustment for devices furnished with full or partial credit or wit hout cost. We believe that these adjustments continue to be equally applicable to payments for hospitals that do not meet the Hospital OQR Program requirements. Similarly, OPPS outlier payments made for high cost and complex procedures wi ll 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 pa yments for purposes of outlier eligibility and payment calculation. This policy confor ms to current practice under the IPPS. We established this policy in the OPPS beginni ng in the CY 2010 OPPS/AS C final rule with comment period (74 FR 60642). For a comp lete discussion of the OPPS outlier calculation and eligibilit y criteria, we refer readers to se ction II.G. of the proposed rule. 2. Reporting Ratio Application and Asso ciated Adjustment Policy for CY 2014 In the CY 2014 OPPS/ASC proposed ru le (78 FR 43652), we proposed to continue our established po licy of applying the reducti on of the OPD fee schedule918 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 a pply 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 in dicator “X” as describe d in sections II.A.3. and XI. of the proposed rule. We also note th at we proposed to deve lop status indicator “J1” as part of the proposed comprehensiv e 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 reporti ng ratio to the national unadj usted payment rates and the minimum unadjusted and national unadjusted co payment 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 hosp itals that fail to meet the requirements of the Hospital OQR Program. Similarly, we proposed to continue to calculate OPPS outlier eligibility and outlier payment ba sed on the reduced paym ent 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 Progr am 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 paym ent adjustments. For the OPPS outlier payment calculation, we finalized a policy to calculate OPPS outliers using payments with the Hospital OQR Program reduction alre ady applied. This application of the quality reporting payment re duction in calculating the OPPS outliers is similar to how this issue is handled under the IPPS. After consideration of the public comme nt 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 whic h 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, minimu m unadjusted copayments, and national unadjusted copayments for all applicable servi ces for those hospitals failing to meet the Hospital OQR Program reporting requirements. This reporting ratio applies to HCPCS codes assigned status indicator s “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 paym ent 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 submi ssion, and data validation requirements (if applicable). Hospitals that do not meet Hosp ital OQR Program require ments, as well as hospitals not participating in the program a nd hospitals that withdraw from the program, will not receive the full O PPS payment rate update. Instead, in accordance with section 1833(t)(17)(A) of the Act, thos e hospitals will recei ve a reduction of 2.0 percentage points to their OPD fee sche dule increase factor for the applicable payment year. We established administrative require ments for the payment determination requirements for the CY 2013 payment update and subsequent years in the CY 2012 OPPS/ASC final rule with comment pe riod (76 FR 74479 through 74487). In the CY 2013 OPPS/ASC final rule with comme nt period (77 FR 68480 through 68481), we modified these requirements by extending the deadline for certain hospitals to submit a921 participation form. For the CY 2014 payment determination and subsequent years, we modified the deadline for hospitals that are not currently particip ating in the Hospital OQR Program and wish to participate, provi ded 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 Ja nuary 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 re quirements are unchanged from those adopted in the CY 2013 O PPS/ASC final rule with comment period (77 FR 68480 through 68481). In the CY 2014 OPPS/ASC pr oposed rule (78 FR 43653), we proposed to codify these procedural requirements at § 419.46(a). To partic ipate in the Hospital OQR Program, a hospital – as defined in sec tion 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 s ecurity 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 previ ously completed, if a hospital has previously withdrawn, or if the hospita l acquires a new CMS Certification Number (CCN). For Hospital OQR Program purposes, hospitals th at share the same CCN are required to922 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 eff ective Medicare provider agreement. Deadlines for submitting the notice of pa rticipation form are based on the date identified as a hospital’s Medicare acceptance date:

● If a hospital has a Medi care acceptance date before January 1 of the year prior to the affected annual payment update, the hos pital must complete and submit to CMS a completed Hospital OQR Notice of Participa tion Form by July 31 of the calendar year prior to the affected annual payment update.

● If a hospital has a Medi care acceptance date on or after January 1 of the year prior to the affected annual payment upda te, the hospital must submit a completed participation form no later than 180 days fr om 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 unc hanged from those adopted in the CY 2012 OPPS/ASC final rule with comment peri od (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 partic ipating 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 w ithdraw any time from January 1 to November 1 of the year prio r to the affected annual payment update. A923 withdrawn hospital will not be able to later sign up to participate in that payment update, is subject to a reduced annual payment upda te 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 clar ification 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 locat ion of clinical services pr ovided. 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 prov ided at that location should be included in the Hospital OQR Program reporting, along w ith all activity reported for that CCN. A hospital may refer to the Web site ( https://www.qualitynet.org/dcs/ContentSer ver?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 th e public comments we received, we are finalizing as proposed, our proposal to codify certain Hosp ital OQR Program proc edural 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 Ho spital OQR Program, including lists of: 11 measures finalized for the CY 2011 payment determination in the CY 2010 OPPS/ASC final rule with co mment period (74 FR 60637); 15 m easures 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 fi nal 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 comme nt 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 co mment period, we confirmed the removal of one measure for the CY 2013 payment determination a nd 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 peri od, 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 Subm ission 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 re moval 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 determinati on and continue forward into subsequent years. Our proposal to remove OP-19 fr om 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) woul d not require a participating hospital to take any new action, because we previ ously 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 Hosp ital 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 subseque nt years. In section XIII.H.2.b. of the CY 2014 OPPS/ASC proposed rule (78 FR 43653) , however, we referred to the removal926 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 remova l of OP-24 should be gin 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 ear liest 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 fi ve 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 C overage 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 – A voidance of Inappropriate Use; and927

● OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on 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 meas ure 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 Pr ogram procedural requirements that we discussed and adopted in the CY 2012 O PPS/ASC final rule with comment period (76 FR 74480 through 74482). We proposed to codi fy 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 secti on 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 m easure 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 m easure and data type are posted on the QualityNet Web site. In general, deadlines for patient-lev el data submitted directly to CMS would be928 approximately 4 months after the last day of each calendar quarter. For example, the submission deadline for data for services fu rnished during the firs t 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) stati ng our practice of posting actu al submission deadlines by measure and by data type on the QualityNet Web site ( http://www.QualityNet.org ). We proposed to codify our policies fo r 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/A SC final rule with comment period (77 FR 68481) to establish da ta 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 paymen t 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 Me dicare 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 th e year prior to the affected annual payment update, the hospital mu st collect data for encounters beginning with the first full quarter following submissi on of the completed Hospital OQR Notice of Participation Form. All hospitals, whether th e Medicare acceptance date is before or929 after January 1 of the year pr ior to an affected annual pa yment update, must follow data submission deadlines as specified on the QualityNet Web site. We invited public comment on these proposals.
Comment : One commenter supported codifyin g 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 qu estion the adequacy of this preview period

to correct errors. Response : While we appreciate these con cerns, because these comments are outside the scope of our proposed rule, we w ill take the comments into consideration for future rulemaking. After consideration of th e public comments we received, we are finalizing as proposed our proposal to codify general subm ission requirements at § 419.46(c): (1) our practice of posting actual submission dead lines 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 subm ission deadlines for a hospital that did not participate in the previous year’s Ho spital 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 Se lection for Surgical Patients;

● OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients;

● OP-20: Door to Diagnostic Evalua tion 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 Interp retation 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 discussed931 above, we did not propose any new chart-abstract ed 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 pr oposed 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-bas ed 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 – Us e of Contrast Material;

● OP-11: Thorax CT – Use of Contrast Material;

● OP-13: Cardiac Imaging for Preopera tive 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 discusse d in the CY 2014 OPPS/A SC proposed rule (78932 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 cl aims 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 th e 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. Unde r 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 peri od 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 recen t data for claims-based measures on the Web site. This modification brings our claims data six months mo re 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 y ears, to continue this approach and to use paid Medicare FFS claims for services fr om a 12 month period from July three years before the payment determination through J une 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 (d enied Medicare Part A i npatient, 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 thes e 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 inte nded to be inpatient for the purpose of accurately meeting the submission requireme nts. 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 pursuan t to a Part A inpatien t 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 refe rring to our policies finalized in the FY 2014 IPPS/LTCH PPS final rule regard ing hospital Part B billing following reasonable and necessary Part A hospital i npatient claim denial s (78 FR 50908 through 50938). Specifically, in the fina l 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 determ ines under § 482.30(d) or § 485.641 (utilization review) after a beneficiary is discharged th at the beneficiary’s inpatient admission was not reasonable and necessary, the hospital may bill Medicare for the Part B inpatient services (furnished afte r the time of inpatient admission) that would have been reasonable and necessary if the beneficiary had been tr eated as a hospital outpatient rather than admitted as an inpatient, provided the benefici ary is enrolled in Medicare Part B. These services must be submitted on a Part B inpa tient claim. We also provided that for beneficiaries treated as hospital outpatient s prior to an inpatie nt 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 servic es must be submitted on a Part B outpatient claim. When billing Part B following this ty pe 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 se rvices billed on the Pa rt B outpatient claim, and is considered an inpatient for services bill ed on the Part B inpatient claim. For Part A935 claims with dates of admission on or after Oc tober 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 fu rnished 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 rega rd 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 thr ough 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 admissi on, 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 ti mely filing deadline) to submit certain rebilled Part B outpatient claims for serv ices 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 se rvice that are processed and paid after the936 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 clai m 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 th e 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 1 st of the 3 years before the payment determination through June 30 th 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 re porting programs as structural measures (measures concerned with attributes of where care occurs, such as material resources, human resour ces, 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 meas ure. 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 Classify ing 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 termi nology and now refer to the mode of data submission as Web-based. Thus, the previously finalized Web-base d 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 w ith 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 WithoutBeing Seen , is in cluded in this list because, while patient-level data for this measure is collected via chart-abstraction, HOPDs submit aggregate data using an on line 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 paym ent determination, hosp itals 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 hosp itals 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 determinatio n and subsequent ye ars. We proposed that hospitals would be required to submit da ta 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 w ould be required to submit data between July 1, 2015 and November 1, 2015 with respec t 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 m easure 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 – A voidance of Inappropriate Use; and939

● OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery. Specifically, for data collection, we pr oposed 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 duri ng the data submission window proposed for Web-based measures as stated above, and w ould 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 patie nt-level reporting. While this proposal applies to the CY 2016 payment determination and subsequent years, in the CY 2014 O PPS/ASC proposed rule (78 FR 43656), we summarized for the proposed and existing chart-abstracted measures collected via the Web-based tool, data collecti on periods and deadlines as th ey apply to just the CY 2016 payment determination. We recognize that aggregate-level repor ting has the potential to result in less accurate measure rates than patient-level re porting. However, to reduce burden for hospitals, we believe that an aggregate da ta 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 patien t-level data via certi fied EHR technology on the four proposed chart-abstracted measures (this woul d not apply to the one HAI measure, OP-27: Influenza Vaccination Cove rage among Healthcare Personnel), and the potential timing for doing so. We refer reader s 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 a bout determining the a ppropriate interval between colonoscopies if a patient had his or her last colonoscopy in a different HOPD or other facility. Another commenter wa s concerned about how HOPDs should be collecting the pre-procedure information necessary to make these determinations, noting that it would require significan t 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 co lonoscopy 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 add itional 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 ordering941 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 pa tients 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 appropr iate interval between colonoscopies. Pre-procedure information can include a pa tient’s history, perhaps in the form of a medical record or as obtained through ve rbal communication with the patient. We believe this information, which includes how recently patients had their previous colonoscopy and any other factors that mi ght affect a HOPD’s determination of an appropriate interval, is esse ntial to a HOPD’s decision abou t 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 certa in procedures must manage the risk of procedural harm to patients and coordi nate care by improving the communication between the HOPD, its patients, specialist phys ician 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-pro cedure interaction with patients in order to establish their procedural hi story, either by using an NP or RN, as one commenter942 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, patie nts can authorize the release of medical information from one provider or practitioner to another.
Comment : One commenter recommended that CM S require reporting of data that is included in validation. Response : We believe this commenter woul d like the Hospital OQR Program to restrict data collection to meas ures 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 outp atient setting. Many commenters argued that CMS’ proposed requirement to collect aggr egate-level data to report through the Webbased tool would actually increase the burde n on hospitals. These commenters point out that the hospital must perform patient-level reviews to repor t 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 numer ator, 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 are943 difficulties with CMS’ infrastructure, and th e commenter believes that any additional measures are likely to cause operational di fficulties with data collection via the QualityNet Web site. Response : We understand all new measures im pose some burden on hospitals to gather and report data. We also appreciate that many co mmenters favor CMS adopting claims-based measures into the Hospital OQR Program whenever possible, as we discuss in section XIII.E.1 above. However, we be lieve that the measures we are adopting are important indicators of the quality of care HOP Ds 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-ba sed reporting, we would like to clarify that the Hospital OQR Program requires enteri ng aggregate data via the Web-based tool, not patient-level data or deta il. A hospital is required to populate one numerator and one denominator field for the applicable measur es onto QualityNet. However, hospitals would still be required to perform a patient-l evel 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 abstract ing data for all other previously finalized chart-abstracted measures; this process involve s identifying their tota l 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 for944 measure OP-22. However, if a hospital doe s 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 prov ide 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 re quired 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 fi nalized 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 specifi cations for OP-29, OP-30, and OP-31 in the upcoming December 2013 addendum to the Hosp ital OQR Specifications Manual. We note that numerators, denominators, and excl usions have been established and made public as shown on the NQF Web site. The Hospital OQR Specifications Manual includes instructions for identifying a measur e’s population (for example, using specific data elements), an algorithm for each meas ure in both diagram and narrative form, and sampling methodology for measures as appli cable. The Hospital OQR Specifications Manual also includes information on the rationa le for each measure, how each measure is publicly reported, how improvement is noted, et c., and it identifies references to Medical or other scientific journals that include disc ussion 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 comment ers’ 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 facilit ate 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 pe riod. Specifically, we will employ the same sampling requirements for these measures that are currently used for the ED Throughput measure set (that is, meas ures OP-18/NQF 0496, OP-20/NQF 0498, and OP-22/NQF 0499). Sampling is a process of selecting a repres entative part of a population in order to estimate the hospital’s performance, without collecting data for its entire population. In this way, using a statis tically valid sample, a hospital can measure its performance in an effective and effici ent manner. We describe how to obtain a statistically valid sample a nd the current sampling methodol ogy and requirements for ED Throughput Measure Set within “Section 4 - Po pulation and Sampling Specifications” of the Hospital OQR Specifications Manua l, 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 follo w the same methodology for new measures OP-29 (NQF 0658), OP-30 (NQF 0659), and OP-31 (NQF 1536). In the upcoming946 release of the addendum to the Hospital OQR Specifications Manua l (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 exem ption 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-abstra cted measures in the Hospital IQR Program (73 FR 48617), but annualized to be consiste nt 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 e xperiences malfunctions, and we work to resolve system issues as quickly as we are ab le 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 sy stem will be able to collect aggregate data for OP-29, OP-30, and OP-31 by the firs t deadline for measure submission.947 After consideration of th e public comments we receive d, we are finalizing our proposal, for the CY 2016 payment determination and subsequent years, that hospitals will be required to submit Web-based data be tween July 1 and November 1 of the year prior to a payment determination with respec t 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 enc ounter 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 da ta 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 deadlin es to the new measures OP-29, OP-30, and OP-31; (2) that hospitals submit aggreg ate-level data through the CMS We b-based tool (the outpatient section of the QualityNet Web site); and, (3) th at 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 sa mpling scheme and low case threshold exemption. We will publish a sampling scheme for newly finalized measures in the upcoming December 2013 addendum to the Hosp ital OQR Specifications Manual. For the low case threshold exemption, we are finaliz ing that any hospital that performs 20 or fewer procedures annually for a particular new measure, wi ll not be required to submit any data for that new measure.948 Set out below are the finalized data colle ction 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 Requirement s 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 X III.E.1. of this final rule with comment period, we are finalizing the addition of OP-27: Influe nza Vaccination Coverage among Healthcare Personnel to the Hospital OQR Program measure set. We proposed to use the data submission and reporting standard pro cedures 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 procedur es. We believe that these procedures are feasible because they are already widely us ed by over 4,000 hospitals reporting HAI data using NHSN. Our proposal seeks to redu ce hospital burden by aligning our data submission and reporting procedures with NHS N procedures currently used by hospitals who participate in the reporting requirements for the Hospital IQR Program as well as hospitals in the 30 States a nd the District of Columbia that mandate HAI reporting via
NHSN. We proposed to adopt the NHSN HAI m easure data collection timeframe of October 1 through March 31 st , as previously finalized in the Hospital IQR Program (76 FR 51631 through 51633), which links data collection to the tim e period in which influenza vaccinations are administered duri ng the influenza season. Because data for this measure would be collected seasonally, we proposed that hospita ls submit their data950 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 v accine becomes availabl e) to March 31, 2015, the submission deadline would be May 15, 2015. This data submission deadline corresponds to that finalized by the Hosp ital 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 commente r urged that prior to implementation of any HOPD measures in the NHSN, CMS and CDC mu st work together to find the necessary resources to sustain and expand the reporting capabilities of the NHSN. The commenter also stated that hospital s are having difficulty in obtaining reports from the NHSN system and when this probl em is reported to NHSN, hospitals either receive no response or a generic response withno expected correc tion date provided. The commenter voiced concerns that this lim its hospitals’ ability to use NHSN data for performance improvement efforts, and that th e 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 Hospita l IQR Program. The Hospital OQR Program951 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 th e Hospital IQR Program will not need to reenroll or get a new account, because they ha ve already establishe d 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 expe riences with the Hospital IQR Program report will be leveraged in the CMS outpatient feedba ck report, called the Provider Participation Report. The existing Provider Participation Re port will be modified to include a column to indicate whether a facility has successfully reported th e 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 request s 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 relies952 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 measur e. 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 we ll equipped to repor t 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 necessaryto report these categories of vaccinated personnel for hospital outpatient departments, since many hospitals use the same human resource system to collect relevant inform ation on both hospital i npatient and outpatient department personnel. The CDC will collaborate with CMS on refining and publishing specifications for how to attribute worker s 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 documenta tion that influenza vaccination was received elsewhere. The numerator also includes t hose who were determined to have a medical contraindication or particular allergy or immune status, who declined the influenza953 vaccination, or who have an unknown vaccinatio n 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 hospita l 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 nonethel ess believe that the benefit of reducing influenza in hospitals outweighs any bur den incurred by screening all staff, volunteers, students, and offsite personne l. We believe that this burden should, by and large, amount to gathering informati on about immunization during initial worker orientation and during flu vaccine season fo r existing workers, providing vaccines when appropriate, and keeping track of who has been vaccinated. After consideration of th e public comments we received, we are finalizing as proposed our proposal to use the data submi ssion and reporting standard procedures set forth by the CDC for NHSN participation in ge neral 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 1 st through March 31 st 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 subseque nt 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 en counters 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, an d 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 Requireme nts 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 a nd CY 2013 OPPS/ASC final rules with comment period (76 FR 74484 through 74487 and 77 FR 68484 through 68487) for a955 discussion of finalized policies regardi ng 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 select ed under section 1833(17)(C) of the Act by reviewing documentation of patient encounters submitted by selected participating hospitals. U pon written request, a hospital must submit to CMS or its contractor supporting medical record documentation that th e hospital used for purposes of data submission under the program. The sp ecific 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 sp ecified 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 propos al 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 the956 complexity of the measures and the fact that there has been no evidence facilities submit inaccurate data to give the appear ance 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 comment er believed that successful submission of records should be sufficient to assure data integrity. Response : We disagree. While we apprecia te 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 valida tion each payment determination year, which provides an additional incentive to maintain data quality. Th e validation process assesses overall data accuracy using data abstracted by CMS from hospital medical record copies, as compared to the data that a hospital subm its 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 abstracti on and data submission standards. However, we believe that requiring hospitals to meet a reliability score serves a purpose beyond deterring hospitals from mani pulating their data for display purposes. We believe that requiring a reliability score al so 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 s upport our movement away from reimbursement for volume of957 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 pr ovide to patients and to report data reliably on measures of quality. After consideration of th e public comments we receive d, we are finalizing our proposal to codify at § 4 19.46(e) of our regulations our existing policies regarding validation of patient encounters at selected participating hospitals. b. Targeting Criteria for Data Valida tion Selection for the CY 2015 Payment Determination and Subsequent Years We refer readers to the CY 2013 OPPS/A SC 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/A SC final rule with comment period (77 FR 68486) for a discussion of our met hodology 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 Reque sts for Validation and Validation Score Calculation for the CY 2015 Payment Determination and Subsequent Years We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68486 through 68487) for a discussion of our procedures for requesting medical record documentation for validation and va lidation score calculation. In the CY 2014958 OPPS/ASC proposed rule ( 78 FR 43657), we did not propose any changes to our procedures regarding me dical 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 meas ures 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 c ontractor, 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 hosp ital must submit the supporting medical record documentation to CMS or its contractor with in 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 requiremen t with respect to a fiscal year if it achieves at least a 75-percent reliabil ity score, as determined by CMS. We invited public comment on our pr oposal to codify these procedures. We did not receive any public comment on our proposal to codify medical record documentation requests and validation and va lidation score calculation procedures. Therefore, we are finalizing our proposal to codify thes e procedures at §§ 419.46(e)(1) and (e)(2).959 I. Hospital OQR Reconsider ation and Appeals Procedur es for the CY 2015 Payment Determination and Subsequent Years We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68487) for a discussion of our r econsideration and ap peals procedures. In the CY 2014 OPPS/ASC proposed rule (78 FR 43657 through 43658), we proposed one change to the reconsideration reque st 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 dead line by which participating hospitals may submit requests for reconsid eration at § 419.46(f) of our regulations. A hospital seeking reconsid eration 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 th e CY 2014 payment determination would be required on February 3, 2014, which is a Monday, b ecause 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 pa yment determinations as examples, we proposed this policy for the CY 2014 payment de termination and subsequent years. The960 other requirements of the form would rema in unchanged. We requested public comment on this proposal. We also proposed to codify this pr ocess by which participating hospitals may submit requests for reconsidera tion, including our proposal to change the reconsideration request deadline at § 419.46(f). Under thes e proposed procedures, the hospital must submit to CMS via QualityNet, a reconsidera tion 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 Cert ification Number (CCN);

● The name of the hospital;

● The CMS-identified reason for not mee ting 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 rec onsideration. The ho spital must identify its specific reason(s) for belie ving it should not be subject to the reduced annual payment update;

● The hospital-designated personnel c ontact 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; and961

● If the hospital is requesting recons ideration on the basis that CMS has determined it did not meet an affected payment determination year’s validation requirement, the hospital must provide a writ ten 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 th at a hospital that is dissatisfied with a decision made by CMS on its reconsideration request may file an appeal with the Provider Re imbursement 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 desi gnated hospital personne l notifying them that the hospital’s request has been received.

● Provides a formal response to the hospital-designated pe rsonnel, using the contact information provided in the reconsid eration 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 fail ed 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 elemen ts were classified as mismatches, we only962 consider the hospital’s request if the hosp ital 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 reco rd 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), t hus resulting in a zer o 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 me dical 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 reque sted medical record documentation to the CMS contractor within the 45 calendar day ti meframe, 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 medi cal record documentation, we abstract data elements from the medical record documentation submitted by the hospital and compute963 a validation score for the hospita l. 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) a nd in proposed § 419.46(e)(1) (78 FR 43704). If a hospital is dissatisfied with th e result of a Hospital OQR reconsideration decision, the hospital is able to file anappeal 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 proce dures to ensure our deadline for reconsideration requests will always fall on a business day. Response : We appreciate these commenters’ support. After consideration of th e public comments we receive d, we are finalizing our proposal to: (1) change the deadline by which participating hospitals may submit requests for reconsideration; and, (2) c odify this deadline and our procedural requirements for requesting a reconsider ation at § 419.46(f) of our regulations.964 J. Extraordinary Circumstances Extens ion 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 require ments due to extraordinary circumstances that are not within their contro l. It is our goal to not pe nalize 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/A SC 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 ru le (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 qua lity data when there are extraordinary circumstances beyond the control of the hospita l. Specifically, we proposed that we may grant a waiver or extens ion to hospitals if we determine that a systemic problem with one of our data collection systems directly or indi rectly affected the ability of hospitals to submit data. Because we do not anticipate thatsuch 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 pr oposal 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 extraordin ary circumstances beyond the control of the965 hospital such as when an act of nature affect s an entire region or locale or a systemic problem with one of CMS’ data collection sy stems directly or indirectly affects data submission. CMS may grant an extension or waiver as follows:

● Upon request by the hospital. Specif ic requirements for submission of a request for an extension or waiver ar e available on the QualityNet Web site.

● At the discretion of CMS. CMS may gr ant waivers or extensions to hospitals that have not requested them when CMS determines that an extraordinary circumstance has occurred. For the hospital to request considerati on for an extension or waiver of the requirement to submit quality data or medi cal record documentation for one or more quarters, a hospital would follow specific re quirements for submission of a request available on QualityNet. While we did not pr opose 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 pe rsonnel 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 request ing an extension or waiver;

● Evidence of the impact of the extrao rdinary circumstances, including but not limited to photographs, newspaper and other media articles; and966

● A date when the hospital believes it would again be able to submit Hospital OQR data and/or medical record documentati on, 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 fo rm is required to be submitted within 45 days of the date that the extrao rdinary 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 cont act that the hospital’s request has been received; and, (2) If we make the determination to gran t a waiver or extensi on 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 th e public comments we receive d, 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 ex tension 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-ba sed purchasing program (the Hospital Value-Based Purchasing (VBP) Pr ogram) under which va lue-based incentive payments are made in a fiscal year to hospitals that meet performance standards established for a performance period for su ch fiscal year. Both the performance standards and the performance period for a fi scal 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 Secretar y 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 Ac t) 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 th e Act, section 1878 of the Act, or otherwise of the following: (1) the methodology used to de termine 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 sect ion 1886(o)(7)(A) of the Act and the payment reduction under section 1886(o)(7)(B)(i) of the Act; (3) the estab lishment of the performance968 standards under section 1886( o)(3) of the Act and the pe rformance period under section 1886(o)(4) of the Act; (4) the measures specifi ed under section 1886(b)(3 )(B)(viii) of the Act and the measures selected under sect ion 1886(o)(2) of the Act; (5) the methodology developed under section 1886(o )(5) of the Act that is us ed to calculate hospital performance scores and the calculation of su ch scores; or (6) th e validation methodology specified in section 1886(b )(3)(B)(XI) of the Act. In the FY 2013 IPPS/LTCH PPS final ru le (77 FR 53581), we finalized an administrative appeals process and codi fied that proce ss 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 inde pendent CMS review that will be an additional appeal process available to hospitals, beyond the existing review and corrections process (77 FR 53578 thr ough 53581 and 76 FR 74544 through 74547) and appeal process codified at § 412.167. We pr oposed that a hospital would be able to request this additional indepe ndent CMS review only if it first completes the appeal process at § 412.167(b) and is diss atisfied 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 independ ent 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 calenda r days following the re ceipt of a hospital’s independent review request. We also proposed to codify this policy in our regulations at969 § 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 appeal s and independent review process. Response : We appreciate the commenters’ supp ort and note that our intention is to provide hospitals with a decision on an independent review re quest as quickly as possible. We also appreciate the comment ers’ 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 impactthe actual completion timeframe. We also strongly encourage hospitals to request this additional inde pendent 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’ sugge stion that we align the Hospital VBP Program with the Physician Value-Based Pa yment Modifier Program, we are currently970 examining how we might be able to align various quali ty reporting and pay-for-performance programs. After consideration of th e public comments we received, we are finalizing the independent CMS review process as proposed. We also are finaliz ing 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/LTC H 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 Netw ork (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 th rough 27611), we inadvertently did not make FY 2016 performance and baseline peri od 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 m easures so that we would have enough time to consider and respond to public comments befo re 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 meas ure 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 we971 adopted an 11-month performance period fo r 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’ perf ormance and baseline periods with other domains’ performance and base line 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 perfor mance, 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 supporte d 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 itis inappropriate to penalize hospitals more than once for the same measure, and th at two programs adopting the same measures may be confusing for hospitals and patients, especially because the two programs calculate performance differently. Other comm enters 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’ inpu t. However, the proposals in the CY 2014 OPPS/ASC proposed rule were lim ited 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 fi nal 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 pub lic comments we received on the substance of these measures to be outside the sc ope of the CY 2014 OPPS/ASC proposed rule.
Comment : Some commenters note d that the CAUTI, CLABSI, and SSI measures underwent changes between the proposed ba seline period of CY 2012 and the proposed performance period of CY 2014. The commen ters 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 considerdata 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 proce ss hospitals use to identify h ealthcare-associated infections (HAIs) and reflect operational practices al ready 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 to973 significantly impact the measure rates. In addition, our own clinically based qualitative review of the measure definition change s indicate that these measure definition refinements will not substantially change natio nal and hospital performance rates used in our FY 2016 measure rate and score calculati ons 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 cl inical 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 measurem ent of relevant clin ical 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 al so believe that the CAUTI, CLABSI, and SSI measures provide information critical to th is quality improvement effort by tracking infection events.
Comment : Numerous commenters supporte d the proposals and stated that adopting the calendar year makes more sens e than the finalized 11-month performance period for the CLABSI measure for FY 2015. Response : We appreciate the commenters’ support.974 After consideration of th e public comments we received, we are finalizing the FY 2016 performance and baseline periods fo r 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 Pr ogram 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 th is 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 co mment period (73 FR 68780), the CY 2010975 OPPS/ASC final rule with comment peri od (74 FR 60656), and the CY 2011 OPPS/ASC final rule with comment period (75 FR 72109) , we did not implement a quality data reporting program for ASCs. We determined th at it would be more appropriate to allow ASCs to acquire some experience with the revised ASC payment system, which was implemented for CY 2008, before implemen ting new quality reporting requirements. However, in these rules, we indicated that we intended to implement a quality reporting program for ASCs in the future. In prepar ation 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 pro pose 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 th e Act for ASCs, and submitted a report to Congress entitled “Medicare Ambulatory Su rgical 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 Afford able Care Act as added by section 10301(a) of the Affordable Care Act. The re port is found on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/Dow nloads/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-bas ed 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 issu e proposals for administrative re quirements, data validation and completeness requirements, and rec onsideration proces ses 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 co llection 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 rec onsideration process. For a complete discussion of these policies, we refer readers to th e 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 selecti ng 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/A SC final rule with comment period (77 FR 68493 through 68494) for a detailed disc ussion of the consider ations we use for the selection of ASCQR Pr ogram quality measures.
Comment : A few commenters recommended th at CMS ensure that the proposed measures are specified to provide anopportunity for stakeholders input. Response : We note that all the proposed m easures are fully specified and we provide the links to the detailed measure sp ecifications which were submitted to NQF by the measure stewards. We believe that these measure specifications provided the detailed information needed for the public to understa nd the measures being proposed and to be able to provide meaningful comments on the proposed measures during the rulemaking process. Proposed measures are not in cluded 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 ge neral policy is to provi de six months lead time between Specifications Manual publication and the start date of collection so that ASCs have adequate time to prep are for new reporting requirements.978 2. ASCQR Program Qualit y 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 Pati ent, 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 correspondi ng HCPCS codes are located at: http://qualitynet.org/dcs/Cont entServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1 2 ASC- 8: Influenza Vaccination C overage 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 pa yment determination and subsequent years based on our approach for future measure se lection and development finalized in the CY 2013 OPPS/ASC final rule with co mment period (77 FR 68493 through 68494), which includes, among other considerations , aligning the ASCQR Program measures with our efforts in other clin ical care settings and taking in to account the views of the Measures Application Partnership (MAP). We stated that we believe that ASCs a nd HOPDs are similar in their delivery of surgical and related nonsurgi cal 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 pe rformed 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, whic h, 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 the980 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 us e 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 rega rding 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 Decembe r 1, 2012” in compliance with section 1890A(a)(2) of the Act, and the measures we re 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/Publicatio ns/2013/02/MAP_Pre-Rulemaking_Report_- _February_2013.aspx . We considered the input a nd recommendations provided by the MAP in selecting measures to propose for the ASCQR Program. As part of the MAP’s input and re commendations in its 2013 Pre-Rulemaking Report, the MAP also supports: (1) HHS’ ef forts 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 across981 health care settings (page 35, MAP Pr e-Rulemaking Report: 2013 Recommendations on Measures Under Consideration by HHS). For the CY 2016 payment determination a nd 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 Da ys following Cataract Surgery Requiring Additional Surgical Procedures (NQF #0564); (b) Endoscopy/Polyp Surveillance: Appropriate follow-up interval for normal co lonoscopy in average risk patients (NQF #0658); (c) Endoscopy/Polyp Surveillance: Co lonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoida nce 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, r ead together, require the Secr etary, 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 feas ible and practicable, that include measures set forth by one or more national consensus bui lding entities. As stated in the CY 2012 OPPS/ASC final rule with comment peri od (76 FR 74465 and 74505), we believe that consensus among affected parties can be reflected through mean s 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 submi ssion time frames. We proposed to collect aggregate data (numerators, denominators, a nd exclusions) on all AS C patients for these four proposed chart-abstracted measures vi a 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 fo r 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 in formation regarding this proposed method of collection was provided in sec tion 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 minimi zing burden for ASCs, we also sought public comment on alternative data coll ection strategies for th ese four proposed measures. In particular, we sought comment on collection of patient-level data through regist ries or other third party data aggregators, and via certified electronic hea lth 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 re gistry-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 si mplify and streamline the process of data983 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 thes e 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 info rmation on the quality measures that we have adopted in this program. Should registry-b ased reporting of the ASC quality measures become available in the future, we will expl ore further the viability of incorporating a registry-based reporting mech anism in the ASCQR Program. Regarding the use of EHR systems for reporting quality data, we agree that reporting by this method could reduce reporti ng burden. However, we are not aware of quality measures for ASCs that have been sp ecified for electronic re porting. 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 previ ous environmental scan, which included an assessment of the readiness of ASC to elec tronically report quality data, we found low levels of EHR use by ASCs. We are in the process of updating the e nvironmental 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 no984 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 or ganized the document by first summarizing and responding to these general comments that are applicable to a ll the four proposed measures, and then summarizing and responding to measure-specific comments and describing our final policy.
Comment : Many commenters stated that AS Cs only render the facility for ophthalmologists to perform cataract surgery and that follow-up visits, post-operative visual assessments and tracki ng 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. Co mmenters noted that ASCs do not have long term relationships with patients and Federa l regulations do not permit ASCs to provide postoperative follow-up care; therefore, the pa tient would not visit the ASC, but rather another site, for post-operative care a nd identification of complications. Many commenters perceived the four proposed chart- abstracted measures as “Clinician Office” setting measures designed to measure ophtha lmologist and other physician performance and not ASC performance. Commenters gave as examples ophthalmologists who assess post-operative visual function and patient out comes, and determine whether additional surgical procedures are necessary, and phys icians who receive pathology reports and determine the colonoscopy interv als for their patients. Ther efore, commenters believed985 these four measures are better suited as Physician Quality Reporting System (PQRS) measures. Commenters considered the meas ures as duplicative of the PQRS measures. Some commenters expre ssed concerns that the measures are neither NQF-endorsed nor field tested fo r the facility setting. Othe r 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 ac tivities 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 disc ussed below) are NQFendorsed for the “Ambulatory Care: Ambulat ory 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 ch art-abstracted measures should be respecified and field-tested, we note that all three measures that we are finalizing (as986 discussed below) were specified for the ASC se tting and field tested at the ASC facility setting level by the measure steward. Further, we do not believe these measur es are duplicative of PQRS measures because even though the measure indicators are the same, the level of analysis (facility versus physician) is different. The meas ure 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 car e across outpatient providers and suppliers, as reflected in these measures. We also do not agree that the four pr oposed 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 collaborati on 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 cost s associated with hos pitalization. More and more procedures are done sa fely and effectively in an ambulatory care setting and we expect such trend will continue . Hence, we believe that a ssessing care coordination is a very important aspect of evaluating the ove rall quality of the care furnished by ASCs.987 We stress that real clinical integration is evidenced by effective pa tient coordination of care across health care settings, providers, and suppliers and is best shown when there is a structure in place that is patient-focuse d and where clinicians collaborate on best practices in an effort to furn ish higher quality care that th ey 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 th e ASCQR Program for the CY 2016 payment determination and subsequent years: (1) Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Col onoscopy in Average Risk Patients; (2) Endoscopy/Polyp Surveillance: Colonoscopy In terval for Patients with a History of Adenomatous Polyps – Avoidance of In appropriate Use; and (3) Cataracts – Improvement in Patient’s Visual Function W ithin 90 Days Following Cataract Surgery. The adoption of these measures in the hospi tal outpatient and ASC settings will further align measures across outpatient and ambul atory settings which furnish many similar services to beneficiaries. The availabilityof identical outcome measures at HOPDs and ASCs enable beneficiaries to compare f acilities 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 colonosc opy procedures due to complications may occur at two different AS Cs. In addition, commenters also believed988 that obtaining patient informa tion from the ophthalmologist’s or other physician’s office would be an intrusive viol ation of patient privacy. Response : Our overarching goal for adopting th e three proposed measures is to encourage the coordination of care across health care settings, provide rs, 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 a nd commercial relationships with the ophthalmologists or other physicians that perf orm procedures and ar e paid for services rendered at their facilities. As such, ASCs ha ve the ability to deve lop 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 proce dures at an ASC is further discussed in section XVI.D.5.c. of this fina l rule with comment period Regarding the issue of patient priv acy, we note that ASCs and referring physicians are generally subject to the HIP AA Privacy, Security, and Breach Notification Rules, and are required to protect the priv acy 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 providi ng 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 concer n 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’ concer ns that it could be difficult or burdensome for ASCs to retrieve from physicia n 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 exch ange 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 fi nalizing for the measur es and subsequent release of specifications and implementati on guidance in the ASCQR Specifications Manual will address some of the concerns about feasibility of data collection raised by the commenters. To further reduce burde n, 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 fina lizing. 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. As990 mentioned previously, we will be conducti ng 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 incl uding an EHR-based reporting mechanism for the ASCQR Program. We received specific comments on the indi vidual proposed measures and they are discussed below in the sections addr essing each of the proposed measures. a. Complications within 30 Days Follo wing Cataract Surger y Requiring Additional Surgical Procedures It is uncommon to have complications that may result in a permanent loss of vision following cataract surgery. Cataract su rgery 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 a nnual volume of 2.8 million cataract surgeries in the United States, a 2 percent rate is signi ficant and translates to over 36,000 surgeries associated with complications. 11 Therefore, for the CY 2016 payment dete rmination and subsequent years, we proposed to adopt the Complications with in 30 Days Following Cataract Surgery Requiring Additional Surgical Procedures measure, which assesses the “[p]ercentage of patients aged 18 years and older with a dia gnosis of uncomplicated cataract who had cataract surgery and had any of a specified li st of surgical proce dures 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=2798 1&search=complications+within+30+days+followin g+cataract+surgery

.991 following cataract surgery whic h would indicate the occurren ce of any of the following major complications: retained nuclear frag ments, endophthalmitis, dislocated or wrong power IOL, retinal detachment, or wound dehi scence.” 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 inthe care being provided. Th e 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 fo r 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 c onditions 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 commonl y performed in ASCs and, as discussed992 above, can signify important issues in the ca re being provided in ASCs. Further, this measure reflects consensus among affected pa rties as it has been endorsed by NQF for the “Ambulatory Care: Clinic” setting. We beli eve 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 per cent complication rate, we believe it is important for us to include this measure in the ASCQR Program meas ure 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 bu ilding entity. Furthe r, section 1833(i)(7)(B) of the Act states that sect ion 1833(t)(17) of the Act a pplies 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 Pr ogram and noted that this measure “[a]ddresses a high impact condition not adequately addre ssed in the program measure set.” Currently, the NQF endorse ment for this measure is time-limited. We invited public comment on this proposal.
Comment : Many commenters believed that th is measure is not a good measure to include in the ASCQR Program measure set b ecause complications from cataract surgery are rare, data collection would be very burde nsome, and the volume of cataract surgery performed at ASCs is huge. Commenters adde d that this measure requires very detailed information about not only specific complicatio ns that may have occurred, but also data993 on any additional follow-up surgical procedur es to accurately report data for this measure. A few commenters stated that subsequent surgical procedures due to complications from the previous cataract surg ery 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 lis t 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 O PPS/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 compli cations following cataract surgery which would require additional surgical procedures are important to measure. However, after consideration of the public comments we re ceived, we agree that this measure as specified imposes a significant burden on an AS C to collect the required data that far exceeds the burden we believe accompanies the ot her chart-abstracted measures that we proposed in the CY 2014 OPPS/ASC proposed rule. We have emphasized that we believe that care coordination be tween 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 AS C would be required to acquire far more information than the more fundamental follo w up information that accompanies the other994 measures (such as the patient survey data for ASC-11, which basically involves collecting information on a patient’s percep tions about visual improvement following cataract surgery). In contrast, there is far more information necessary for this measure and the nature of that inform ation is more detailed, comp licated 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 th e potential development of a claims-based risk-adjus ted outcome measure of catarac t complications, which would address the same quality issues as this meas ure, 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 AS C 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.995 b. Endoscopy/Polyp Surveillance: Appropr iate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658) The American Cancer Society’s cu rrent guidelines recommend colonoscopy screening at 10-year intervals 12 for the average risk population ( http://www.cancer.org/cancer/colonandrec tumcancer/moreinformation/colonandrectumc ancerearlydetection/colorectal-can cer-early-detection-acs-recommendations ). For the CY 2016 payment determination a nd subsequent years, we proposed to adopt the Endoscopy/Polyp Surveillance: A ppropriate follow-up interval for normal colonoscopy in average risk patients meas ure, which assesses th e “[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 colonos copy 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 numb er of “[p]atients who had a recommended follow-up interval of at least 10 years fo r 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 scr eening 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 th an 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 qualityof care furnished by ASCs. We also believe it meets the consensus requirement and the requirement th at 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 di rection 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. Co mmenters stated that CMS should only finalize measures fully supported by the MAP. Response : We take into account all MA P input when deciding on which measures to adopt for the program. We not e 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 ca regivers 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 the997 highest caliber measures are selected. We st ress, 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 addresse s 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 Specificat ions Manual will addr ess concerns about feasibility of data collection raised by the MAP. After consideration of th e public comments we receiv ed, we are adopting this measure for the CY 2016 payment determina tion 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, colonosc opy screening is recommended ba sed on risk factors. One such factor is a history of adenomatous pol yps. 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/colonandrec tumcancer/moreinformation/colonandrectumc ancerearlydetection/colorectal-can cer-early-detection-acs-recommendations ).998 A randomized trial of 699 patients showed that after newly diagnosed adenomatous polyps have been removed by colonoscopy, fo llow-up colonoscopy at 3 years detects important colonic lesions as effectively as follow-up col onoscopy at both 1 and 3 years. 13 For the CY 2016 payment determination a nd subsequent years, we proposed to adopt the Endoscopy/Polyp Surveillance: Co lonoscopy Interval fo r Patients with a History of Adenomatous Polyps – Avoidan ce of Inappropriate Use measure, which assesses the “[p]ercentage of patients aged 18 years and ol der receiving a surveillance colonoscopy, with a history of a prior co lonic 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 th e number of “[p]atients who ha d an interval of 3 or more years since their last colonoscopy.” The denomin ator for this measure is the total number of “[p]atients aged 18 years a nd older receiving a surveillanc e colonoscopy with a history of a prior colonic polyp in a previous col onoscopy.” This measure excludes patients with: (1) documentation of medical reason(s) for an interv al of less than 3 years since the last colonoscopy (for example, last co lonoscopy incomplete, last colonoscopy had inadequate prep, piecemeal removal of aden omas, or last colonoscopy found greater than 10 adenomas); or (2) documentation of a syst em reason(s) for an interval of less than 3 years since the last colonoscopy (for exam ple, 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 re port was incomplete). The sp ecifications 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 furnishe d by ASCs. We also believe it meets the consensus requirement and the requirement th at 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 di rection 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 th at the MAP’s “Support Direction” recommendation means the measure is not, in the MAP’s opinion, ready for implementation in the ASCQR Program. Co mmenters 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 re spect 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 Interval1000 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 subs equent colorectal cancer incidence, after newly diagnosed adenomatous polyps have been removed by colonoscopy. Because colonoscopies are performed so often at AS Cs, 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 a nd implementation guidance in the Specifications Manual will address concerns about feasibili ty of data collection raised by the MAP. After consideration of th e public comments we receiv ed, we are adopting this measure for the CY 2016 payment determina tion 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 im prove a patient’s vision and associated functioning. This outcome is achieved consisten tly with careful atten tion to the accurate measurement of axial length and corneal pow er and the appropriate selection of an intraocular lens (IOL). Failure to achieve improved visual functioning after surgery in eyes without comorbid ocular conditions th at 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 cataract1001 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 a nd 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 patie nts aged 18 years and older who had cataract surgery and had improve ment in visual function achieved within 90 days following the catara ct 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 ac hieved within 90 da ys following cataract surgery, based on completing a pre-operat ive and post-operative visual function instrument.” The measure denominator is th e total number of “[p]atients aged 18 years and older in sample who had cataract su rgery.” 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 Measur e Evaluation available on the Web site at: http://www.qualityforum.org/WorkArea/li nkit.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.ahr q.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 in clusion of this measure in the ASCQR Program and noted that this measure “[a]ddresses a high-impact condition not adequately addresse d in the program measure set.” We invited public comment on this proposal.
Comment : One commenter stated that the meas ure requires patients to complete a pre-operative and a post-operative visual f unction questionnaire. The follow-up survey may occur in intervals of one day, two w eeks or one month post-op. The pre- and post-surgery surveys are conducted in the phys ician 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 introduc tion of bias and this administrative cost would impose a new burden for ASCs. Response : This measure collects standard cl inical follow-up information. We would expect that physicians responsible for post-operative cataract surgery care to have standard operating procedures in plac e under which physicians would conduct these visual assessments. We do not believe a th ird party administrator to process survey information for ASC interpretation is necessary because we expect that ASCs would obtain the outcome information necessary fo r 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 catar act surgery patient should have these results). We believe that no bias would be introduced or associated1003 administrative cost imposed because outcome interpretation would not be done at the ASC. Finally, we believe that includi ng this measure in the ASCQR Program is important because, as the MAP stated and we be lieve, 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 rece ived on the burden associated with the chart-abstracted measures we are finaliz ing, we have modified our implementation strategy in a manner that we believe will si gnificantly minimize collection and reporting burden. We detail these procedures for and fu rther 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 th e public comments we receiv ed, 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 a dopt three chart-abstracted measures: (1) Endoscopy/Polyp Surveillance: Appropr iate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients; (2 ) Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a Hi story of Adenomatous Polyps – Avoidance of Inappropriate Use; and (3) Cataracts: Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery. We will collect aggregate data (numerators, denominators, and exclusions) on all ASC patie nts for these three finalized chart-abstracted measures via an online Web-based tool that will be made available to ASCs via the QualityNet1004 Web site. Data submission requirements for th ese 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 Pa tient’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 subsequentyears 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 Patien t, Wrong Procedure, Wrong Implant* ASC-4 Hospital Transfer/Admission* ASC-5 Prophylactic Intrave nous (IV) Antibiotic Timing* ASC-6 Safe Surgery Checklist Use** ASC-7 ASC Facility Volume Data on Selected ASC Surgical Procedures** Procedure categories and correspondi ng HCPCS codes are located at: http://qualitynet.org/dcs/ContentSer ver?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: Colonos copy Interval for Patients with a History of Adenomatous Polyps-A voidance of Inappropriate Use***1005 ASC Program Measure Set for the CY 2016 Payment Determination and Subsequent Years Measure Name ASC-11 Cataracts: Improvement in Pati ent’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 Topi cs for Future Consideration We seek to develop a comprehensive set of quality measures to be available for widespread use for informed decision-ma king and quality improvement in the ASC setting. Through future rulemaking, we inte nd to propose new measures that address clinical quality of care, patient safety, car e coordination, patient experience of care, surgical outcomes, surgical complications, complications of anesthesia, and patient reported outcomes of care. We invited pub lic comment on these measurement topics.
Comment : Commenters presented the followi ng suggestions for future measure topics:

● Equipment Reprocessing;

● Sedation Safety;

● Post-Discharge Emergency Depart ment 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 futu re measure topics for the ASCQR Program. 5. Technical Specification U pdates and Data Publication In the CY 2012 OPPS/ASC final rule w ith comment period, we finalized our proposal to follow the same process for upda ting 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 pr ocess provided it is a nonsubstantive change. We make the determin ation of what constitutes a substantive versus a nonsubstantive cha nge 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 Specifica tions Manual so that it clearly identifies the updates and provide links to where a dditional information on the updates can be found. We also will pos t 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 co llection systems would be necessary. We generally release the Specif ications Manual every 6 mont hs and release addenda as necessary. This release schedule provides at least 3 months of advance notice for nonsubstantive changes such as changes to IC D-10, CPT, and HCPCS codes, and at least1007 6 months of advance notice for changes to da ta elements that woul d 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 meas ure becomes more stringent (for example, changes in acceptable timing of medication, proc edure/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 adequate ly balances our need to incorporate nonsubstantive updates to ASCQR Program meas ures 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 l onger the same measure that we originally adopted. We also note that the NQF endorse ment process incorporat es an opportunity for public comment and engagement in the meas ure maintenance process. These policies regarding what is considered substantive versus n onsubstantive apply to all measures in the ASCQR Program. As noted above, we finalized our propos al to follow the same process for updating the ASCQR Program measures that we adopt ed 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 clarif ication regarding the ASCQR Program policy in the context of the previously finalized Hospital OQR program policy in the CY 20131008 OPPS/ASC final rule with co mment period. We refer readers to the CY 2013 OPPS/ASC final rule with comment period for a disc ussion 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 comment er requested clarific ation regarding the publication, preview, and comment period fo r 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 measur es utilize ICD-9 codes to define numerators, denominators, exclusions, and othe r data elements for the measures. To the extent that we adopt any fu ture ASCQR measures that ut ilize ICD-9 codes in measure data elements, we will crosswalk those IC D-9 codes to ICD-10 prior to including the measures in the ASCQR Specifications Manual to inform data collect ion. We note that we do not consider updating codes from IC D-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 AS Cs 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 ve rsus publicly reported rates. Response : We thank the commenters for ra ising these issues. In the CY 2012 OPPS/ASC final rule with comment peri od (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 oppor tunity 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 meas ures in accordance with paragraph (7).” Paragraph (7) contains subparagraphs (A) a nd (B). Subparagraph (A) of paragraph (7) states the Secretary may provide that an AS C that does not submit “data required to be submitted on measures selected under this pa ragraph with respect to a year” to the Secretary in accordance with this paragraph wi ll 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 a nnual increase factor for a subsequent year.1010 Subparagraph (B) of paragra ph (7) makes many of the pr ovisions 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 (i v) [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 st ates 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 conversi on 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 consumer s (CPI-U), which curre ntly is the annual update for the ASC payment system, minus th e MFP adjustment. As discussed in the CY 2011 MPFS final rule with comment period (75 FR 73397), if the CPI-U is a negative1011 number, the CPI-U would be held to zer o. 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 secti on XII.G. of this fina l 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 fact ors: a full update convers ion 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 th e application of the MFP adjustment. The ASC conversion factor is used to cal culate the ASC payment rate for services with the following payment indicators (liste d in Addenda AA and BB to this final rule with comment period, which are available via the Internet on the CM S Web site): “A2,” “G2,” “P2,” “R2,” “Z2,” as well as the serv ice portion of device- intensive procedures identified by “J8.” We finalized our proposal that payment for all services assigned the1012 payment indicators listed above would be subject to the reduc tion 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 assi gned status indicators other than payment indicators “A2,” “G2,” “J8,” “P2,” “R2,” and “Z2.” These services include separately payable drugs and biologicals, pass-thr ough devices that are contractor-priced, brachytherapy sources that are paid base d on the OPPS payment rates, and certain office-based procedures and ra diology 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 ra tes for these services would not be reduced for failure to meet the ASCQR Program requirements because the payment rates for these services are not cal culated using the ASC conversion factor and, therefore, not affected by reductions to the annual update. Office-based surgical procedures (perform ed more than 50 percent of the time in physicians’ offices) and separately paid radi ology services (excluding covered ancillary radiology services involving certa in nuclear medicine procedur es 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-facil ity PE RVU-based amounts and the standard ASC ratesetting methodology. We finalized our proposal that the standard ASC ratesetting methodology for this comparison w ould use the ASC conve rsion factor that has been calculated using the full ASC upda te adjusted for productivity. This is1013 necessary so that the resulting ASC pa yment indicator, based on the comparison, assigned to an office-based orradiology procedure is cons istent 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. Ther efore, 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 ot her applicable adju stments 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 adjustme nts would apply to the reduced national unadjusted payment rates: the wage index adjustment, the multiple procedure adjustment, the interrupted procedure adju stment, and the adjustment for devices furnished with full or partial credit or without cost. We be lieve that these adjustments continue to be equally app licable to payment for ASCs that do not meet the ASCQR Program requirements.1014 In the CY 2014 OPPS/ASC proposed ru le (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 administ rator; we are referring to this role in this rulemaking as the QualityNet security admi nistrator, which emphasizes the security function of this role and aligns terminol ogy for the ASCQR Program with the Hospital IQR and OQR Programs. While the main purpos e of a QualityNet security administrator is to serve as a point of c ontact 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 repo rting, such as creati ng, approving, editing, and terminating QualityNet user accounts within an organization, and monitoring QualityNet usage to maintain proper security and confid entiality measures. Therefore, we highly recommend that ASCs have and maintain a QualityNet security administrator. In the FY 2013 IPPS/LTCH PPS final ru le (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 da ta warehouse for the CY 20141015 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 Manua l and educational materials. As finalized in the CY 2012 OPPS/AS C 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 pa ge. As set forth in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53638 through 53639), to ente r 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 pe riod, we required that ASCs have a QualityNet security administrator at the tim e 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 admi nistrator prior to this date, but it was not required. We noted that there are necessary maili ng and processing proce dures 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 re quire significant time to complete. We1016 strongly cautioned ASCs to not wait un til the deadline to apply; instead, we recommended allowing a minimum of 2 w eeks, 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 y ears, we proposed that, similar to the requirement for the CY 2015 payment determinat ion, ASCs would be required to have a QualityNet security administrator for the pur poses 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 QualityNe t 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 for1017 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 en try 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 administra tor throughout the year would unnecessarily increase burden on ASCs. As noted previously, there are necessa ry mailing and processing procedures for having a QualityNet security administrator as signed by CMS separate from completion of the forms by the ASC that can require signi ficant 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 prio r 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 th is 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 (FIC AM) Roadmap and Implementation Guidance (version 2, 12/08/2011). We invited public comment on these proposals. We did not receive any public comment s regarding our proposals on QualityNet account and security administrator requireme nts 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 th e QualityNet Web site if this had not been completed previously or no current user acc ounts were available and that ASCs will be required to have an active account by any speci fied data entry deadline in order to submit required data for the CY 2016 payment de termination 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 would1019 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 partic ipation 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 s ubmit any QDCs for the CY 2014 payment determination, but submitted quality m easure data for the CY 2015 payment determination, the ASC would be consider ed participating in the ASCQR Program starting with the CY 2015 payment determin ation 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 hospi tals, but decided agai nst this approach because we were concerned about the burde n on ASCs. We believe these requirements will reduce burden on ASCs while accomplishi ng the purpose of notifying us of an ASC’s participation inthe 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 policy1020 allows us to provide information on th e quality of care provided to Medicare beneficiaries which promotes transparency. Once an ASC submits quality measure da ta indicating its participation in the ASCQR Program, an ASC must complete and submit an online form indicating withdrawal in order to withdraw from the AS CQR 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 withdr awal applies. We es tablished 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 withdraw ing 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 paymen t 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 subseque nt 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 wh en they are participating. We established that an ASC can withdr aw from the ASCQR Program at any time up to August 31, 2013 for the CY 2014 payment dete rmination. We antic ipated that this1021 would be the latest date possible to a llow 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 a ny 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 requirement s 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 determin ation, 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 qu ality data for the CY 2014 payment determination. For the CY 2015 payment determina tion, we established that program requirements would apply to all ASCs designa ted 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 withdraw1022 from the ASCQR Program at any time up to and including August 31 of the year preceding a payment determination. We anticip ate 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 w ithdraw 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 reduc tion in their annual payment update and it would not be possible to reinstate partic ipation status for that year. For the CY 2016 payment determination a nd subsequent years, we proposed that all program requirements would apply to al l 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 pa yment 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 provi de 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 re garding participation status under the ASCQR Program and we are finalizing our pr oposals without modification. Specifically, we are finalizing that, for the CY 2016 paymen t determination and subsequent years, an ASC can withdraw from the ASCQR Program at any time up to and including August 311023 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 colle ction 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 meas ures 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 fina lized the data collection period for the CY 2014 payment determination, as the Medi care fee-for-service ASC claims submitted for services furnished between Octobe r 1, 2012 and December 31, 2012. ASCs will add the appropriate QDCs on thei r 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 furnishe d between October 1, 2012 and December 31, 2012 paid by the administrative contractor by Apr il 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 processi ng 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 comple te data on individual claims-based quality measures through a claims-based reporti ng 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 calenda r year paid by the administrative contractor by April 30 of the following year of the e nding data collection time period would be included in the data used for the payment de termination year. Therefore, for example, only claims for services furnishe d in CY 2013 (January 1, 2013 through December 31, 2013) paid by the administrativ e 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 ru le (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 da ta 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 appropr iate QDCs with the number of claims that would meet measure specifications, but di d 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 determin ation years that the minimum threshold for successful reporting be that at leas t 50 percent of claims meeting measure specifications contain QDCs. We believe that 50 percent is a reasonable minimum threshold for the initial implementation year s 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 mo re time to set up reporting systems. We stated in that final rule th at we intend to propose to in crease 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 pr ior to January 1, 2013 could be rejected1026 for invalid codes. Because it is not po ssible 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) thatdata completeness for claims-based quality measures for the CY 2015 payment de termination and subsequent years will be determined by comparing the number of Medicare claims (where Medicare is the primary or secondary payer) meeting measure specifi cations 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 ini tial implementation years of the ASCQR Program. Because ASCs cannot re-submit cl aims for the sole purpose of adding QDCs (such claims are rejected by administrative contractors as duplicate claims), we believe1027 maintaining this minimum as the program matures is reasonable. We intend to propose to increase this percentage for future paym ent 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 dete rmined 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 sec ondary 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 Me dicare claims. Therefore, for the CY 2016 payment determination and subsequent year s, 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 woul d not be required to participate in the ASCQR Program for the subs equent 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 Decem ber 31, 2013 (data submitted on claims during this year would be applied to CY 2015 paym ent determinations), the ASC would not be required to participate in the ASCQR Progr am for the CY 2016 payment determination1028 (which would use data submitted on claims during the January 1, 2014 to December 31, 2014 calendar year). We propos ed a minimum case threshold to exempt smaller facilities where program implementa tion 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 polic y 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 thei r 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 meas ures using the QDC reporting mechanism were not specified, tested, or NQF-endor sed for claims-based reporting. Response : We thank the commenters for thei r understanding of how the use of QDCs can limit burden and that this is an impor tant consideration. Regarding the use of1029 QDCs submitted on claims for ASC-1 th rough ASC-5, the NQF has endorsed ASC-1 through ASC-5 as appropriate for the ASC settin g and data collection of case information has been tested in this set ting. 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 in formation 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 successf ully 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-Prescrib ing Incentive Program. Therefore, we do not see a need to also test th e ability of ASCs to submit da ta for these measures via QDCs placed on Medicare claims.
Comment : Several commenters suggested th at measure-level exemptions for ASC-5, Prophylactic Intravenous (IV) Antibiotic Timing would be appropriate. These commenters argued that single-specialty ASCs that provid e gastrointestinal endoscopies or ophthalmic procedures do not administer IV prophylaxis and that not having an exemption method created undue burden. S uggested exemption methods included an attestation form or the developm ent of a QDC indicating non-use. Response : We thank the commenters for th ese ideas and agree that single specialty ASCs would rarely, if at all, use IV prophylaxis. We ha ve investigated using1030 administrative claims data as a means to excl ude 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 bl anket exemption from reporting measure data based upon the completion of a form or one-t ime reporting of a QDC without any ability to assess the veracity of the basis for exem ption. At issue is a means to independently verify that an ASC does not ev er administer IV prophylaxis. We remain open to various means of reducing burden, includ ing the potential use of meas ure-level exemptions if an evidence-based solution can be developed. Howe ver, we note that this particular measure does not place any more burden on ASCs co mpared 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 expect ed to have low numbers of events.
Comment : Some commenters agreed with th e proposal to have a minimum case volume, but indicated that it was not clear how the 240-clai m 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 suggestedthe 10 percent target woul d be reached with a lower claim threshold. Some commenters agreed that implementation of a minimum threshold policy was important, but expres sed concern that some ASCs may “fall in and out” of being required to participat e and encouraged CMS to issu e 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 threshol d value. In selecting the 240-claim threshold, we utili zed the October 1, 2012 to D ecember 31, 2012 claims data submitted for the CY 2014 payment determination. Based upon this analysis, approximately 10 percent of ASCs fell be low the 60 claims per quarter, which we extrapolated to 240 claims per year threshol d. 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 AS Cs to monitor their claims volume via CMS-supplied reports. We agree that annual remi nders 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 require d to do so for ASCQR Program purposes, we did not make any proposals that would prohibit ASCs from re porting data. Therefor e, 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 pr ogram 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 withcomment period. We clarify here that ASCs that are exempt from all requirements due to low Medicare case volume1032 would not be subject to a reduction in thei r annual payment update if they voluntarily report data. After consideration of th e public comments we receive d, we are finalizing our proposals without modification. Specifical ly, 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 per cent 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 Progr am. ASCs that have fewer than 240 Medicare claims per year during a re porting period for a payment determination year will not be required to participate in the ASCQR Program for the subsequent reporting period for that subseque nt 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 w ith comment period, we finalized two measures with data submission required us ing an online measure submission Web page available at http://www.qualitynet.org beginning with the CY 2015 payment determination: Safe Surgery Checklist Us e 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 determ ination, ASCs would report data for these two measures between July 1, 2013 and Augus t 15, 2013 for services furnished between January 1, 2012 and December 31, 2012.1033 b. Requirements for the CY 2016 Payment De termination 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 pr ior to the payment determination year and that data would be submitted during the January 1 to Augus t 15 time period in the year prior to the payment determination. Theref ore, for the CY 2016 payment determination, the data collection time period for thes e measures would be calendar year 2014 (January 1, 2014 to December 31, 2014) and th e data submission time period would be January 1, 2015 to August 15, 2015. We propos ed 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 retrospe ctive 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 se rvices performed in the January 1, 2012 to1034 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 servic es furnished during the calendar year two years prior to the payment determination ye ar, 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 submi ssion 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 Surgi cal Procedures measures. Some of these commenters cautioned that, while they supported the shifting of the data collection time period, they believed the alignment will resu lt in a significant amountof confusion and that extensive educational outreach would be necessary. Response : We thank the commenters for thei r support of our proposals; we agree that aligning data collection periods and data submission time frames for these measures across payment determination years are appr opriate and beneficial changes for the ASCQR Program. We appreciate the cautioni ng of possible confus ion with the data1035 collection timeframes. We believe that, since th ere 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 th e public comments we receive d, we are finalizing our proposals regarding data colle ction and submission requireme nts for the Safe Surgery Checklist Use and ASC Facility Volume Data on Selected ASC Surgical Procedures measures for the CY 2016 payment determinatio n 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 duri ng 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 th e data collection time periods for the claims-based and Web-based measures, and resu lt 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 AS C Surgical Procedures measures. No data will be collected for calendar year 2013 (J anuary 1, 2013 to December 31, 2013) for the Safe Surgery Checklist Use and ASC FacilityVolume Data on Selected ASC Surgical Procedures measures because the CY 2015 pa yment determination will use data from services performed in the January 1, 2 012 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 De termination and Subsequent Years for New Measures with Data Submissi on 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, a nd exclusions) on all AS C 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) Complicati ons within 30 Days following Cataract Surgery Requiring Additional Surgical Pro cedures; (2) Endoscopy/Polyp Surveillance: Appropriate follow-up interval for normal colonoscopy in average risk patients; (3) Endoscopy/Polyp Surveillance: Colonoscopy In terval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropria te Use; and (4) Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery. We describe our timeframes and process for measure specif ications 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 wh ere data are submitted via a Web-based tool on a CMS Web site under our quality data re porting programs by the type of measure, that is, structural measures (measures con cerned with attributes of where care occurs, such as material resources, human resources, and organizational structure 15 ), not all quality measures where data are submitted via a Web-based tool on a CMS Web site are

15 Maintz, J. Defining and Classify ing Clinical Indicators for Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-530.1037 structural measures. For example, the f our proposed new measures proposed are not structural measures. Theref ore, we have refined our te rminology and now refer to the mode of data submission, Web-based, ra ther 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 meas ures, 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 woul d be the calendar year (January 1 to December 31) 2 years prior to the affect ed 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 a ffected payment determination year. Therefore, for the CY 2016 payment de termination, the datacollection time period would be January 1, 2014 to December 31, 2014 and the data submission time period for the collected data would be Ja nuary 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 collecti on and submission time frames for measures already adopted for the ASCQR Program where data is subm itted 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 colle ction 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 burde nsome to retrieve timely the data from the physician or ophthalmologist offices and such da ta 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 reco rds. In addition, commenters noted that the initial and subsequent surgical cataract and colonoscopy pro cedures due to complications may occur at more than one facility. Some commenters strongly beli eved 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’ c oncerns 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 be lieve that this will be an undue or insurmountable burden. Regarding the abil ity to obtain follow-up information, we believe that ASCs have prof essional and commercial relati onships with the physicians that perform surgical proce dures and are paid for those services rendered at their1039 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 procedur e would have or is expected to have the information necessary to repor t on the measure. For the Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Co lonscopy in Average Risk Patient measure, standard medical practice is that the physician pe rforming 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 In terval for Patients with a History of Adenomatous Polyps – Avoidance of Ina ppropriate Use measure, the physician performing the procedure would have the info rmation of whether a patient had a history of adenomatous polyps and for Medicare cl aims, 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 Ca taracts: Improvement in Pati ent’s Visual Function within 90 Days Following Cataract Surgery measur e, patients undergoing cataract surgery are often co-managed with preopera tive care, intraoperative servi ces, and post-operative care (90 days) stages identified by Medicare. Co-management of cataract care requires a written transfer agreement between the su rgeon and receiving doctor(s) with all physicians involved retaining the results of th e first post-operative vi sit 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 fina l 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 collecti on of information on all eligible patients. Sampling is a process of sele cting a representative part of a population in order to estimate the ASC’s performance, without collecti ng 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 wi ll reduce burden significantly for ASCs with high volume because the number of cases th at must have data reported will be significantly reduced. We have provided the option of sampling in other quality reporting programs when we have determined th at 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 statisticallyvalid sample and the cu rrent sampling methodology and requirements for these measures, will be included in the ASCQR Specifications Manual, which will be made available on the QualityNe t Web site in December 2013. We believe that the improved clinical patient outcomes th at can result from these measures outweigh any remaining burden that ASCs may incur fr om 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 co llection mechanism can be used to reduce1041 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 co ncern about the limited amount of time that ASCs would have to respond to a nd 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 collec tion 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 mi nimum of 6 months of advance notice should be extended for any new measures. In additi on, 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 us e for new measures. However, due to the importance of the new measures being fina lized in this rulemaking, we believe the proposed timeframes for these activities are ju stifiable 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 of1042 this final rule with comment period to time when the data would actually have to be submitted. After consideration of th e public comments we receive d, 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 Interv al for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use; and, (3) Ca taracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Su rgery. Specifically, we are finalizing that ASCs must submit aggregate data (numerator s, 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 permitti ng ASCs to collect information on a sample of eligible patients, with minimal case num ber 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 s ite in December 2013. We are also finalizing, as proposed without modificati on, that beginning with the CY 2016 payment determination (and for all subsequent payment determination years), the data collection time period will be the cale ndar year (January 1 to December 31) 2 years prior to the affected payment determin ation year, and the data collected will be1043 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 tim e 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 Meas ure 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 determinati on, we finalized the adoption of the Influenza Vaccination Coverage among Health care Personnel (NQF #0431), a process of care, healthcare-associated infection (HA I) 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 vi a the NHSN from October 1, 2014 to March 31, 2015 and that details for data submissi on 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 proce dures that have been set forth by CDC for NHSN participation in general and for submi ssion of this measure to NHSN. We refer readers to the CDC’s NHSN Web site (f or detailed procedures for enrollment ( http://www.cdc.gov/nhsn/ambul atory-surgery/enroll.html ), set-up ( http://www.cdc.gov/nhsn/ambul atory-surgery/setup.html ), and reporting ( https://sdn.cdc.gov (data certificate insta llation is required to acce ss this site)). We1044 stated in the proposed rule th at 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 ac count 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 requi rements 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. Th ese commenters cautioned that CMS and CDC should plan to make significan t investments of time, personn el, and other resources to support initial enrollment and reporting to ensure successful implementation of NHSN1045 reporting by ASCs. These commenters also su ggested 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 “facili ty”, simplifying set-up instructions, and continuance of the planned e limination 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 agr ee that resources will be required to ensure successful implementation of ASC reporti ng 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 ar e 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 modificati on; that is, to use those procedures that have been set forth by CDC for NHSN particip ation in general and for submission of this
measure to NHSN. We believe ASCs have sufficien t time to set up NHSN accounts and to become familiar with all reporting procedur es 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 dead lines within the ASCQR Program was a sensible approach that would limit confusion. Some of these commenters noted that an1046 earlier deadline served no useful AS CQR 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 c onsistent 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 di fferent 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 15 th deadline proposed for two other CMS quality data reporting programs, the Hospital IQR and Hospital OQR Programs. Some of these commenters believed that providi ng ASCs with a later deadli ne would provide an unfair advantage because ASCs would have longer to submit their data. Other commenters believed that having a differing da te for ASCs than other faci lities 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 ge nerally 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 proposals1047 regarding a 2015 data submission deadline fo r this measure in the CY 2015 OPPS/ASC proposed rule. After consideration of the public comments receive d, we are finalizing our proposal to use the data submission and repor ting standard procedures set forth by CDC for NHSN participation for the ASCQR Program without modification. As stated above, we are not finalizing our pr oposal regarding an August 15, 2015 data submission deadline for ASC-8 due to concerns expressed by co mmenters. We intend to issue proposals regarding a 2015 data submission deadline fo r 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 pr ograms, we did not require validation of claims-based measures (beyond the usual cl aims validation activities conducted by our administrative contractors) or structural (W eb-based) measures for the ASCQR Program. We also do not require validation of clai ms-based or Web-based measures under the Hospital IQR and OQR Programs. We noted that with regard to the curr ent 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 situa tion, any random selection of cases would require a burdensome sample size. Further, we exp ect 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 associat ed with a data validation process which1048 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 e xperience with the ASCQR Program, we will reassess whether a data validation proce ss 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 re ported data given the inexperience that ASCs have with reporting quality data to CM S coupled with the low incidence of cases for the claims-based measures. 8. Extraordinary Circumstances Extensi ons 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 require ments due to extraordinary circumstances that are not within their contro l. It is our goal to not pe nalize 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 circ umstance extension or waiver requests for the submission of information required under th e 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 ru le (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 systema tic 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 frequentl y. If we make the determination to grant a waiver or extension, we pr oposed to communicate this d ecision 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 a nd expressed their appreciation for CMS’ proposal to grant waiver s or extensions for data s ubmission requirements if we determine a systematic problem with any data collection system dire ctly or indirectly affected the ability of ASCs to submit data. Response : We thank the commenters for supporting our proposal. After consideration of th e public comments we receive d, we are finalizing our proposal without modification to grant waiv ers 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 abil ity of ASCs to submit data.1050 If we make the determination to grant a wa iver or extension, we will communicate this decision through listserv notice and pos ting 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 reporti ng program payment determinations for the Hospital IQR Program and the Hospital OQR Pr ogram. We believe these reconsideration processes have been effective in the hos pital quality reporting programs and such a process would be effective for ASC qualityreporting. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53643 th rough 56344), we adopted an informal reconsideration process for the ASCQR Progr am for the CY 2014 payment determination and subsequent years modeled after the rec onsideration 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 proces s. However, we clarified some aspects of the informal reconsideration review pro cess 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 reconsider ation request, the1051 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 specifi ed 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 AS CQR Program payment determination. XVI. Final Rule: Changes to the Condi tions for Coverage (CfCs) for Organ Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G) A. Background The Organ Procurement Organization Ce rtification 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 Secret ary to establish regulations governing the certification and/or recertifi cation 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 certific ation and/or recertifi cation process, which (1) “rely on outcome and process performan ce 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 progr ams 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 th e Public Health Service Act and meets the1052 performance-related standards prescribed by the Secretary, as provided for in section 1138(b) of the Social Security Act. The final rules implementing these stat utory requirements and setting out the Conditions for Coverage (CfCs) for OP Os (OPO CfCs) were published in the Federal Register on May 31, 2006 (71 FR 30982). The OPO Cf Cs are codified at 42 CFR Part 486 and set forth the certifica tion and recertification pro cesses for OPOs. OPOs are required to meet their CfCs, which incl ude both outcome and process performance

measures. In general, with the exception of OPOs operating exclusively in noncontiguous States, Commonwealths, Territories, or possess ions, the three outcome measures are: (1) a donation rate of el igible 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 follo wing three outcome measures be met: (i) the number of organs transplanted per standa rd criteria donor, (ii) the numbe r of organs transplanted per expanded criteria donors, and (iii) the number of organs us ed for research per donor. For OPOs that operate exclusively in nonconti guous States, Commonwealth s, Territories, and possessions, the three outcome measures are: (1) a donati on 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, whic h 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 include1053 pancreata used for islet cell tr ansplantation 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 sec ond outcome measure is calculated by the Scientific Registry of Tran splant 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 mustmeet two out of the three outcome measures to be recertified. We were concerned about the requirement to au tomatically decertify OPOs if they fail to meet all three of th e 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 thre e outcome measures. We noted that the majority of OPOs were meeting all three of the outcome measures. Based on our experience, we observed that ma ny 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 requiremen ts 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 so lely on their failure to meet one outcome measure. This belie f 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 pa ragraphs (a)(1) and (b) of §§ 486.316 and the introductory text of paragraphs (a) and (b) of § 486.318 of the re gulations to require that OPOs meet at least two out of the thre e 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 fo r OPOs that might be used in the future. Most of the commenters opposed this propos al. The commenters indicated that the proposal did not address th e problems with the curre nt outcome measures and recommended that CMS develop a different strategy for the upcoming recertification cycle. Some of the commenters expresse d concerns about the outcome measures and requested additional changes so that an OPO co uld 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 th e 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 d ecertified under the current outcome measures requirement. Response : We appreciate these comments. We believe that modifying the outcome measure requirement so that OPOs mu st 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 th at the proposed revisions were insufficient to address their numerous con cerns 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 rega rding these concerns, which are addressed in more detail below. We acknowledge that th e provisions set forth in this final rule do not address all of the specifi c 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 th e health care system, and we understand the challenge OPOs face in developing relati onships with hospitals and health care professionals, as well as in obtaining consent from families to procure organs. However, Congress required the Secretary to create outco me and process performance measures to encourage OPOs to improve their performance. The OPO CfCs are designed to encourage OPOs to be more efficient in procur ing organs in order to save more lives. We also note that the current outcome measur es 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 meet1056 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 requi rement, CMS take a two-part approach concerning the outcome measures and recertific ation. First, the commenters suggested a revision to 42 CFR 486.312(c) to state that CMS “may” vol untarily not renew an OPO’s agreement if it failed to meet the performan ce 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, esse ntially changing the regulatory language from “will not voluntarilyrenew” 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 improve ment process, comparable to the process currently used for tr ansplant centers. Response : We appreciate the concerns expr essed by the commenters. However, we believe that the commenters’ recommende d approach would be inconsistent with section 1138(b)(1)(C) of the Act that permits payment for or gan procurement costs “only if” the OPO meets “performance-related standards prescribed by the Secretary.” In addition, we note that the Organ Procurem ent Organization Cert ification Act of 2000 required the Secretary to establish through rulemaking multiple outcome measures based upon empirical evidence, obtaine d through reasonable effort s, of organ donor potential and other related factors in each service area of qualified OPOs and that these measures1057 must be used as part of the recertification process. Consistent with the statute, the Secretary developed the sta ndards 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 meaningf ul empirically based standards for the recertification process. We believe that the suggested chan ge would be contrary to the plain language of the relevant statutes; therefore, we are notable to adopt the suggested change. We also believe that it would be cont rary to Congress’ expre ss intent to recertify an OPO that failed to meet the outcome and performance measures during the past performance period. OPO performance is a crit ical element of the organ transplantation system in the United States. An OPO that is efficient in procuri ng 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 co ncerns about the “limited appeals process” available to OPOs that are decertified due to the outcome measures. The commenters also indicated that “CMS noted re peatedly that no a ppeal on ‘substantive’ issues may be allowed.”1058 Response : The OPO CfCs set forth at 42 CF R 486.314 specifically state that “the OPO may appeal the de-certific ation on substantive and proce dural 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 con cerns about problems that the commenters believed were inherently related to the ex isting outcome measures. Some commenters asserted that the measures are flawed because there were significan t problems with how the outcome measures were initially develope d and the validity of the outcome measures has not been established. They also stat ed 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 th at represents all OPOs (71 FR 30999). The first outcome m easure allows us to assess an OPO’s conversion rate of potential donors to actua l 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 OP Os. The second outcome measure uses the statistical methodology developed by the SRTR for determining an expected donation1059 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 fulf ills 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 believ e 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 a ddition, 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 woul d anticipate that the number of OPOs that would not succe ssfully meet this requirement would be much higher. Therefore, while we acknowledge that ther e 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 requ irements. Each measure is empirical; that is, based upon observation or sta tistically derived from data.1060 Comment : Some commenters believe the existi ng regulatory standards are flawed because the data upon which the outcome meas ures are based are self-reported and are not verified by another source; therefore, th e accuracy of the data cannot be verified. Response : We disagree with the comment ers’ premise that the reported information cannot be verified. All OPOs are required to provide spec ific 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; th e number of eligible donors; the number of organs transplanted, by organ t ype; and the results of death record reviews. In addition, the data that are to be used for recertificat ion purposes must be reported to the OPTN of all deaths in all hospitals and critical access hospitals (C AHs) in the OPO’s DSA, unless a particular hospital or CAH has been grante d a waiver and is work ing with another OPO (42 CFR 486.328(c)). We are able to independently aud it 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 coul d 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 th e definitions of “eligible death” and “donor” are being interprete d 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 accura tely 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 interpre t and implement all of the CfCs, including the definitions, and report their data in good fait h. We adopted the definition of “eligible deaths” using the OPTN definition of th at term in response to public comments (71 FR 30985). We note that the commenter doe s not criticize the de finitions per se, but instead focuses on how some OPOs are applyi ng those definitions. Considering the very divergent circumstances present with donors, we acknowledge that there may be times that different OPOs would disagree about whet her a particular indivi dual’s death should be classified as an “eligible death” and s ubsequently whether the donor is an “eligible donor.” While some variation is possible, we be lieve 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 thei r 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 decertifica tion 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 re sulting in fewer, rather than more, organs being recovered for transplantation. One commenter gave the example of a potential donor with multiple comorbiditie s 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 di sincentive to pursue th at donor because they would likely only recover a single organ. Response : We disagree. While our empi rically based outcome measures do measure various aspects of the OPOs performa nce, the measures specifically encourage OPOs to fulfill their ultimate mission, which is the recovery of transplantable organs and placement with transplant centers for transplant ation for patients, as well as for research
purposes. Comment : Some commenters suggested that there are conflict s between the OPO CfCs and the transplant center (TC) Conditions of Participation (C oPs). The commenters stated that the OPO CfCs incentivize OPOs to pursue as many donors as possible and procure as many transplantable organs as pos sible. 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 concer ns related to these outcome measures may cause some transplant su rgeons 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 so me organs procured1063 by OPOs not being transplanted, which w ould negatively impact the third (yield)

measure. Response : As explained in the proposed rule and in the background section above, our regulations with respect to outcome s measures for OPOs reflect the specific standards Congress required the Secretary to develop for measuring OPO performance under the Organ Procurement Organization Cer tification Act of 2000. Our rules are fully consistent with those statutory directives. Tr ansplant centers, in c ontrast, are not required to meet regulatory standards that are based on the OPO statute. However, we will examine our standards in an attempt to dete rmine if greater syner gy is possible in the future.
Comment : Many commenters noted that they agreed with the DHHS Secretary’s Advisory Committee on Organ Transplanta tion’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, in cludes 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 an d 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/le gislation/acotrecs55.html ). Response : We are interested in continui ng to improve our standards and are currently conducting a comprehensive review of the OPO CfCs and will consider these1064 public comments in any future rulemaking. Ho wever, we believe it would be unfair to OPOs to develop new standards at this time a nd to apply those standa rds retroactively for past periods. After consideration of th e 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 requi re 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 st ated 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 a nd not against a national average. In the proposed rule, we stated that when compari ng 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 meas ure proves to be a more accurate reflection of performance as measured by the organs tr ansplanted for each donor in each individual1065 DSA (as it is accepted by HRSA and the OPO community), this may provide an alternative outcome measure that could be adopt ed 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 measur es and that it should be considered by CMS. However, these commenters also noted th at there were issues with this measure. One commenter noted that the OPTN meas ure 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 commen ts 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 P eer Review Program was originally established by sections 142 and 143 of the Ta x 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 Organiza tions.” 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 organizat ions 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 result ed in any substantial changes in how the program operates. However, in section 261 of the recently enac ted Trade Adjustment Assistance Extension Act of 2011 (TAAEA) (Pub. L. 112-40), Congress authorized numerous changes to the original legislation that m odernize and improve the QIO Program and included additional flexibility for the Secretary in the administ ration 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 contro l peer review organization” with “quality improvement organization” in relevant provisions of the Act). Specifically, section 261 of the TAAEA incr eased 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 contract s 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 include s provisions that spec ifically govern the types of organizations eligible to become QI Os. The regulations that implement section 1154 of the Act and much of the work performed by QIOs are codified at 42 CFR Part1067 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 wi th 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 pr ovide 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 certa in limitations specified in sections 1152 and 1153 of the Act that appear in severa l 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 th e CY 2014 OPPS/ASC propos ed 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 ge ographic area in which a QIO must perform its different functions. As amended, the st atute authorizes the establis hment of “such local, State, regional, national or other ge ographic areas as the Secretar y determines appropriate” for QIO contract awards. We also proposed revi sions to existing regul ation text regarding the eligibility of a health care facility association to be a QIO and revisions to eliminate1068 provisions at § 475.106 regarding the eligibility of payor organizations to be QIOs based on the proposed revisions to eliminate obsol ete text and to codify the eligibility provisions for payor organizations in a different section. Th e statutory amendments also include a change in the contra ct 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 di d 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 propos ed 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 ensu ring 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 we re intended to allow organizations that currently perform QIO work to comp ete for new QIO contracts, while expanding eligibility to additional en tities under the new authority granted by the TAAEA. We stated that we will focus contract determin ations on the ability of organizations to perform QIO functions as stat ed in the RFP. In the proposed rule, we solicited public comments on whether our proposed regulation te xt 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 redesi gnate paragraphs (a) through (d ) in the definition of “Five1069 percent or more owner” as paragraphs (1) through (4). The specific proposed changes and corrections are explained in mo re detail in the following sections. QIOs work at the grassroots level of American health care delivery systems in all 50 States, the District of Colu mbia, and most U.S. Territories in order to improve care for Medicare beneficiaries. QI Os originally reviewed Medicare services to determine whether they were reasonable and medically necessary, met professionally recognized standards of care, and were provided in th e appropriate setting. However, the QIO contract has evolved over the course of the years as the literatur e supports the concept that defects in the health care process are rarely related to th e performance of one individual but to a system of care with mu ltiple opportunities for fa ilure. 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 th e result through data driven pr ocesses, 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 expe rtise from disciplines such as physicians, nurses, other clinicians, health care leaders, ex perts 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 th e health care industry that are not licensed physicians or certified practitioners in connect ion with quality improvement initiatives or1070 other activities that do not, by law, require use of licensed physi cians 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 a ny other nonphysician or nonpractitioner professional that CMS or the QIO deems appropriate for the successful performance of QIO functions. Patients and thei r 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 organiza tions eligible to provide multidisciplinary support in quality improvement. As indica ted 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 flexibilityafforded by the TAAEA. This will help us ensure that we can administer the QIO Progr am in a manner that reflects contemporary practices and allows us to in clude the appropriate individua ls and entities in working toward improving care processes. As described in section 1154 of the Ac t, 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 activities1071 the Secretary determines may be necessary for the purpose of improving the quality of Medicare services. Based on this authority, QI Os 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 respectiv e geographic areas but to focus on particular tasks of QIO work. For example, one QIO mi ght be required to offer to a variety of stakeholders the knowledge and resources fo r 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 require d to generate reliable data about clinical performance. QIOs may also serve as independent, objectiv e, and collaborative partners that support CMS’ mission to improve health care quality in the Medicare progr am (which, in turn, has the potential to greatly benefit the broa der health care commun ity) by leveraging the best efforts of all health care stakeholders, including beneficiaries and their families. While the goal of the QIOs is to benefit Me dicare beneficiaries, the work of the QIOs may also, as a secondary matter, benefit othe r patients and residents who receive medical care. In this context, we are seeking to ensure that the regulations governing QIO eligibility reflect contemporar y practices and permit the inclusion of organizations that1072 can help to improve care processes for Medicare beneficiaries. We proposed to do so by removing restrictions that are no longer st atutorily 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 engagementand patient and family inclusion in case reviews and quality improvement initiatives. We believe that the TAAEA legislation allo ws us a great deal of flexibility in how we restructure the work that QIOs perform and the types of orga nizations qualified to perform that work. We intend to conti nually examine methods for providing care to beneficiaries in a way that maximizes effi ciency, eliminates waste, decreases harm, lowers costs through improvement, and engage s 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 requiremen ts best fit the conti nually evolving science related to driving quality improvement. Th e 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 hea lth 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 for1073 determining eligibility. These responsibili ties are case review (which includes the statutory minimum standards) and quality im provement initiatives. As stated in the proposed rule, we believe that the eligibility and contracting standa rds 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 defini tions and standards governing eligibility and the award of contracts to QIOs. We pr oposed 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 substant ive provisions in Part 475, Subpart C; and revise, add, and replace some substantiv e 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 discussi on. 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 in1074 § 475.101 below, although some commenters ra ised 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 ch anges made through health care reform since 2010, there have been very few programmatic changes made in this particular area of health care quality impr ovement. The science of quality improvement has changed significantly over the last few d ecades and we believe that these proposed regulatory changes, which allow flexibility fo r any number of possible configurations, are long overdue. Further, the substantial changes made by the TAAEA are generally effective with QIO contracts awarded af ter 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 th ese 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 re gulations with the nomenclat ure changes made by section 261 of the TAAEA, we proposed nomenc lature changes where necessary in 42 CFR Part 475. For example, we proposed to revise the heading of Subpart C of Part1075 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 no menclature where appropriate. In addition, Part 476 is currently en titled “Utilization and Quality Control Review,” and Subpart C of Part 476 is enti tled “Review Responsibil ities of Utilization and Quality Control Quality Improvement Orga nizations (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 pr oposed to revise the tit le of Part 476 to read: “Part 476—Quality Improvement Organiza tion 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 CM S’ 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 nomenclat ure in the title and te xt 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 w ithout changing the definition or function of the QIOs. We have made changes in this fina l rule to reflect the program’s shift from a compliance-oriented focus to one emphasi zing quality improvement in addition to completing the nomenclature changes made by the TAAEA, modernizing and improving the QIO Program, and changing the e ligibility requirements for QIOs.1076 After consideration of the public co mment we received on the nomenclature changes, we are finalizing these propos ed 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 term s that will be used to describe QIOs and their quality improvement work. In connecti on 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 improve ment initiative”, and revise the definition of “physician” under § 475.1 and § 476.1, as discussed below. Further, we proposed a technical revision to the defin ition 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 re views; 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 ot her provisions in Chapte r IV of Title 42 of the Code of Federal Regulations require ad ditional 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 comme nts on the proposed definition of “case review” and proposed amendments to the defini tion of “five percent or more owner”. We are finalizing the technical revi sion to the definition of “five percent or more owner”. We are finalizing the proposed definition of “cas e review” with one slight modification to eliminate the word “including” in paragraph (5) to avoid the sugges tion that appeals and DRG validation reviews are the only types of medical necessity review. As with the proposed definition, the final rule provides a non exhaustive list of types of case reviews. We proposed to expand the definitio n of “physician” beyond the existing definition under § 475.1 and § 476.1 to reflect th e definition in section 1861(r) of the Act, as well as to cover several additional characte ristics 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 osteopa thy, a doctor of dental surgery or dental medicine, a doctor of podiatry, a doctor of opt ometry, or a chiroprac tor as described in section 1861(r) of the Act; (2) An intern, re sident, or Federal Government employee authorized under State or Federal law to pr actice as a doctor as de scribed 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 elim inate references in paragraphs (1) and (2) of the existing defin ition to physicians licensed in the State in which the QIO is located, in order to reflectthe fact that a QIO’s contract area may no1078 longer be limited to one State. In additi on, we proposed to amend paragraph (3) of the existing definition so that it no longer applie s to only American Samoa, the Northern Mariana Islands, and the Trust Te rritory of the Pacific Island s. 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 th e terms “practitione r” and “quality improvement initiative” for purposes of Part 475 by cro ss-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 supporte d 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 ac tions of doctors of medicine and osteopathy by other “limited” licensed practitioners a nd recommended that physicians should only be subject to review by other physicians, pr eferably practicing physicians in the same specialty or a peer level match. Commenters requested that CMS clarify that the proposed changes are not intended to repla ce peer review by QIOs with reviews of physicians’ decisions by nonphysician provide rs. Another commenter was concerned1079 with the potential impact the broad definition of “physician” will have with respect to its use in § 476.98. Response : We appreciate the commenters’ re sponses 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 th e peer conducting the re view may not always be licensed in the same State where the car e 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 do ctor 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 “physic ian” 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 suppor t 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 th at there are safeguards in the statute and regulations to ensure that, during case revi ew, there is a peer-to-peer match whenever possible and that physic ian decisions will not be reviewed by nonphysician providers. We also note that ou r subregulatory guidance, such as the definition of “peer reviewer” in the QIO Ma nual, emphasizes the requirement to use a1080 specialty match whenever possible. The QIO Manual can be found on our Web site at:http://www.cms.gov/Regulations-andGuidance/Guidance/Manua ls/Downloads/qio110c05.pdf . The QIO Manual stipulates that a peer reviewer is “a reviewer who is e ither a physician or other practitioner who matches, as closely as possible, the variable s of licensure, specialt y, 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 anot her physician reviewer without the same expertise.” After consideration of the public comments we rece ived, 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, th e terminology related to the geographic area in which a QIO must perf orm its different functions. Before our proposal in the CY 2014 OPPS/AS C proposed rule, the regulations in Part 475 did not define this area but did refer to a QIO’s “rev iew 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 ar ea 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 CM S contract directs the QIO to1081 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 accomplishi ng 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 us e 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 op tions 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 re gional proposals in the RFI as part of their comments on the proposed rule. Under the current QIO Program, although th ere are State-based contract awards, some QIOs share corporate pa rents and several QIOs subcontract to other QIOs for QIO work. The regulatory proposal was not to regi onalize QIOs but to adopt a definition of “QIO area” that would apply if the contracts were awarded on a regional basis or a1082 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 contrac ting process will finali ze 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 em phasize 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 sc ope 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 be st equipped to provide a specific set of services. Other commenters indicated that the rapidly ch anging requirements make it increasingly difficult for every QIO to have the requisite ex pertise and specializati on in order to be a subject matter expert on all QIO initiatives and activities. These commenters stated that a regional QIO approach has grea t potential to ensure every State has the same level of expert support and is consisten tly receiving the same information.1083 Response : We appreciate the comments in s upport of the expanded definition of “QIO area” and the general approach underp inning our proposal that would allow specific QIOs to focus and develop expertis e in a single area of quality improvement. The QIO Program has expanded beyond case re views and the changes proposed reflect the array of tasks that QIOs are currently performing. We agree that the increased flexibility is beneficial and pl an 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 variet y of geographic options available under the statute and the regulation as fi nalized in this final rule.
Comment : Several commenters stated that many practicing physicians have spent years building relationships w ith their local QIOs and sugge sted that these State-based QIOs have a degree of credibility with local Medicare beneficiaries and providers. In addition, commenters stated th at the State-based QIOs ar e 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 re spective State-based QIO and indicated that this relationship has resulted in sustaine d quality improvements for their Medicare beneficiaries. These commenters further stat ed that valuable time and resources would be lost as relationships and trust would n eed to be forged again to ensure provider engagement in educational opportunities. One commenter stated that, although some function-specific QIOs may address unmet need s, these QIOs should not be established at1084 the expense of State-based QIOs. This co mmenter recommended th at a cost effective alternative would be for CMS to give hi gh-performing existing QIOs the option to expand their portfolio of quality improvement activities during c ontract 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 flex ibility afforded to the Secretary by the statutory changes made through the TAAEA, we will consider several factors. For example, under the current stru cture of the QIO Program, th ere already exists a multiState subcontracting structure for the appeal case reviews. There also are several multiState corporate QIO management structures that have operated su ccessfully for many scopes of work. These structures have been able to capitalize on the strengths and the expertise of part icular entities. In addition, we believe that, for some functions, QIO contract s that cross State lines would create economies of scale and standardization of processes and eliminate duplicative administrative and management ove rhead. This potential structure would improve communication between CMS and the QIOs and decrease the contracting and administrative burden currently faced by both entitie s. Further, to the extent that quality improvement initiatives are designed in connection with nationwide quality measurements or quality improvement pr ograms, QIOs would not be hampered by serving larger QIO areas. We are aware th at 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 QI O 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 betweenproviders 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 progr am expertise in the best inte rests of beneficiaries and are consistent with our efforts to continually stri ve 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. T hose provisions do not list exhaustive factors for consideration in awarding QIO contracts a nd we may include addi tional 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 beneficiar ies. 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 su ch 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 demons trating more cost effective strategies for delivering services. This commenter al so supported CMS’ proposal to expand the1086 definition of a QIO area that would allow a QI O to serve in more than one State. The commenter indicated that regional QIOs (f ormed 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 economi es of scale and efficiencies may occur but indicated its concern that a “dramatic change to manda ted multi-State [QIO ] contracts” would introduce the possibility that some States may be left w ithout a local source for quality improvement technical assistance. Some commenters recognized the effici encies and effectiveness that may be achieved to the QIO Program and recommended th at, in situations where successful work has been demonstrated through QIOs that c over 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 a nd 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 regi onalized 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 unde rtaken with little cons ultation with either the national or local practiti oner community of their respective States. Some commenters maintained that the proposed changes inthe 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 their1087 administrative duties in order to interact wi th a separate organizat ion 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 ru le and this final rule do not require regionalization but rather perm it the creation of contract ar eas 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 re gional structure, we acknowledge that the proposed rule, once finali zed, would accommodate that structure. We believe that having the flexibility to adopt a different QIO contra ct structure, if we choose to establish one, would enable the QIO Program to benefit from the lessons already learned through the multi-State corpor ate structure of many QIOs. There are currently 10 corporations th at have coordinated separa te QIO contracts to cover 26 States. In addition to the multi-State corpor ate structure, some QIOs have established subcontracting relationships with other QIOs for conflict of intere st or administrative efficiency purposes that have also gene rated savings. Based on the QIO Program’s history with these subcontracting and corpor ate 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 expertis e that is so important will be maintained.1088 As an example, the requiremen ts in § 475.102(a) of this final rule make it clear that, in determining eligibility for performing case revi ew, we will take into consideration “the organization’s proposed involvement of and acce ss to physicians and practitioners in the QIO area with the appropriate expertise and sp ecialization in the ar eas of health care related to case reviews” and “the organization’s ability to take into consideration urban versus rural, local, and regiona l characteristics in the health care setting where care under review is provided.” Furthermore, the RFI i ssued 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 practitio ners and providers, which we considered as part of this rulemaking. In addition to th ese opportunities to comment a nd present their views, we anticipate that providers and practitioners wi ll 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 demons trated the ability to perform case review or quality improvement initiatives as a QI O. We intend to interpret and apply the provisions in Part 475 as finalized in this rule to ensure local expe rience and expertise are available, maintained, and utilized by a ll QIOs in connection with case reviews and where necessary for quality improvement initiatives. After consideration of th e public comments we received, we are finalizing the proposed definition, without modification, of th e term “QIO area” to mean “the defined1089 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 initia tive” in § 475.1 to § 476.1 a nd 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 “quali ty improvement initiative” under § 476.1 was finalized in the CY 2013 OPPS/ ASC final rule with comment period (77 FR 68559). The regulations as amende d 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 fina lizing 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 de finition without modification. 3. Scope and Applicability of Subpart C of Part 4751090 We believe that the scope and appl icability 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 regulat ory language in § 475.100 with new language that explicitly acknowledges that the regula tions in Subpart C implement sections 1152 and 1153(b) and (c) of the Act as am ended 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 115 2 of the Act as setting minimum eligibility requirements for an entity to hold a QIO contract. Our re gulatory 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 appr eciate the vital role of physicians in the work of the QIOs but also believe that so me of the functions of the QIOs necessitate a multidisciplinary approach to quality improvement, inclusive of expertise from a wide breadth of disciplines. With the eliminati on of the requirement that a QIO be sponsored by or have access to physicians in a specifi c organizational structure, we proposed to delete the eligibility requirements in§§ 475.101 through 476.104 related to the concepts of “physician-sponsored organization” and “phy sician-access organization.” In light of the current multidisciplinary approach to QI O activities, we believe that expanding the1091 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 ex ists 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 appropr iately 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 specificall y identified regulation sections as part of the comment, we have grouped the comments by topic. a. Eligibility to be Award ed 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 l onger reference “physician-sponsored organizations” and “physician- access organizations,” would include a requirement that the governing body of the QIO include at leas t one consumer representative, and would include new eligibility standards for an orga nization to be awarded a QIO contract based on the TAAEA amendments to section 1152 of th e Act. First, in paragraph (a), we proposed that a QIO must have a governing body that includes at l east one representative of health care providers and one repr esentative of consumers as required by1092 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 Me dicare program by requiring that an organization demonstrate the ability to meet eligibility requirements and perform the functions of a QIO. Our proposal characteri zed the functions of a QIO as the activities that are built into the request for proposals us ed to award QIO contracts and the ability to perform case reviews and/or quality improveme nt 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 prim ary functions are based on the statutory requirements for the functions QIOs must pe rform and our current approach of using quality improvement initiatives to improve the quality of care pr ovided to Medicare beneficiaries. By referenci ng the contractual requirements set forth in the requests for proposals, we proposed to incorporate the flex ibility provided in se ction 1154(a) of the1093 Act to require a QIO to perform one or mo re of the listed QIO functions and section 1154(a)(18) of the Act for the inclusion of a dditional activities for QIOs to perform when such additional activities are determined n ecessary 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 initiativ es. Although this is not a specifically required qualification for a QIO under secti ons 1152 and 1153 of the Act, we proposed this requirement because it reflects the multid isciplinary 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 ca re 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. Ou r inclusion of the requirement that a QIO have the ability to actively engage beneficiar ies, 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 pu blic comments on whether our proposal sufficiently incorporated the statutory fl exibility, identified the goals of the QIO eligibility requirements, and provided guidance on how organi zations will be determined eligible for QIO contracts.
Comment : One commenter suggested that th ese 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 ab out how the proposal appeared to lower standards for QIOs. We recognize th at our proposal would establish, in § 475.101, the “minimum level of resour ces and skills” an organizati on 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 eval uate organizations reque sting 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 interp reted as an e xhaustive 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 a ll providers within a region and questioned how CMS will assure “equal access and assist ance” will be provided to all providers, regardless of membership stat us in the potential associa tion being responsible for or involved in working with provide rs on quality initiatives. Th is commenter believed that1095 if a trade or professional a ssociation were to become a QIO, that QIO would show preference to those providers who are me mbers 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 genera l requirement changes are best discussed together with the comments specifically addr essing our proposed eligibility changes in § 475.101. We also appreciate the concer n 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 stat utory 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 a nd a trusted relationshi p with practitioners when engaging in quality improvement initiativ es, 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 demonstr ate fairness and serve as an objective party. To address these concerns, we have adde d final language at § 475.101(d), a requirement that QIO organizations be able to “Demonstrat e the ability to perform the functions of a QIO with objectivity and impartiality and in a fair and neutral manner.”
Comment : Some commenters were con cerned 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 impr ovement initiatives. These commenters asked for further clarification as to how CMS envisions incorporating patients and families into the case review function. Some commenters a sserted that it is appr opriate to consider how patients and families can be of assistance in areas such as patient perception of care, patient decision-making, patient safety, a nd 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 dem onstrate 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 Stat es. The purpose of this project is to1097 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 effo rt 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 wi ll provide strategies and results that can be available for all QIOs to use. We also believe that the beneficiary complaint, and beneficiary appeal processe s are excellent opport unities 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 h ealth care community to require that QIOs incorporate Patient and Family Engagementtechniques in their contract proposals, strategies, and techniques. Because curre nt information regarding evaluation and measurement of Patient and Family Engage ment is limited, we intend use evaluation strategies and benchmarks su ccessfully adopted by the Hosp ital 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 measuri ng 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 support ed the proposed change s 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 re quire hospitals to potentially work with many different QIO contractors. One commenter argued that bifurcati ng case review and quality improvement initiatives would increase administrativ e 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 re quested 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 resu lts in areas where pr oviders need quality improvement assistance. The commenter also stated that fragmenting the functions would increase administrative burdens on pr oviders because they would be required to1099 act with multiple entities, and this woul d impede relationships between QIOs and facilities that are essential to quality impr ovement. Another commenter stated that CMS should consider a mechanism for linking quality improvement and case review contractors for the purpose of information shar ing 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 initi atives 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 ta sk will be beneficial to that QIO in becoming a stronger subject-matter expert. Th e more expertise a QIO achieves, the more likely it will be that the QIO w ill 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 th e division of these functions.
Comment : Some commenters supported CMS’ proposal to ensure that QIO governance includes representatives of cons umers and health care providers. The1100 commenters believed that including these repr esentatives would ensure that the CMS envisioned multidisciplinary and multi-sta keholder approach to QIO activities is implemented. One commenter agreed with the importance of ensuring that e ssential 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 l east one consumer and one provider representative on the QIO’s governance board is a statutory require ment from section 1152 of the Act. Therefore, we have no aut hority 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 properl y involved in QIO governance level decision-making. However, to ensure that we are not too prescr iptive in our governance requirements, we did not propose additional re quirements or details beyond the statutory mandate. For example, we did not require th at beneficiaries also be represented as members of the board. Instead, in § 475.101( c), we chose to re quire that a QIO demonstrate its ability to actively engage th ese 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 insulate d 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 QI Os. Although some commenters believed that the RFI provided limited opportunity to comment on the overall changes CMS is considering, we knew that the public woul d have ample opportunity to comment on our proposal for revisions to the regulations to im plement the statutory amendments that were created by the TAAEA through this regulati on comment process. We understand the commenters’ concern that QI Os 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 contempor ary quality improvement should involve a multidisciplinary team of practitioners. A lthough the revisions do allow for additional for-profit entities (health car e associations) to be QIOs , there has never been a requirement that QIO organiza tions be nonprofit organizations.
Comment : One commenter expressed concern that because quality improvement initiatives require complete trust in the part icipating organizations, it may be difficult for providers to separate the poten tial conflict that would exis t between a payor organization that is both paying for services and pr oviding assistance in improving quality and efficiency. The commenter st ated 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 th e payor organization. Some commenters requested that CMS revise the pr oposed regulatory language changes in the final rule to exclude provider and payor organizations from QIO eligibility1102 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 th at provider and payor organizations are advocates for their paying members and believe d 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 un dertaking quality initiatives with its own members. In addition, the comm enters stated that th ese proposed changes may undermine conflict-of-interest safegua rds currently in place because these organizations have professiona l and financial relationships that they believe may hinder their ability to be independent and neutral. Response : We agree with the commenters th at 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 si milar language to that of proposed § 475.102(c), which requires that State Medicaid agencies demonstrate that they can act with independence and objectivity from thei r 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 pot ential conflicts of interest that may arise from our proposal in § 475.105 about the elig ibility 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 th is criterion should be applied to all QIO1103 functions. We also agree that an organiza tion should be free from any conflicts of interest and be able to se rve as an objective party. To address these concerns, we are finalizing proposed § 475.101 by adding a new paragraph (d) that requires al l QIOs to “[d]emonstrate the ab ility 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 inde pendence 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 pr ovisions 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 fi nalizing a minor technica l 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 imp rovement 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 Pe rform Case Reviews and Quality Improvement Initiatives (§ 475.102 and § 475.103) In the CY 2014 OPPS/ASC proposed rule (78 FR 43676), we pr oposed to list the various factors CMS may use to determine th at an organization has demonstrated its ability to perform case reviews. We stated that we do not consid er this list to be1104 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, shoul d be, or should have been provided based on the facts of a particular case, concerning a pa rticular 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 pa tterns 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. Th ese patterns of care can reflect problems that might impact large segments of the populat ion 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 issu e. We proposed to revise §§ 475.102 and 475.103 to provide that CMS will de termine if an organization is capable of performing case reviews and quality impr ovement initiatives, respectively, using an illustrative list of similar factors and includi ng the same constraints on Medicaid agencies serving as QIOs (with the one additional re quirement that these agencies demonstrate objectivity and independence from the Medi caid program). Because the proposals at §§ 475.102 and 475.103 are similar, we discuss th ese proposals, the public comments we received, and the fina l 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 or ganization has demonstrated the ability to1105 perform case reviews or quality improvement initiatives based on factors related to how the QIO work will be performed and the underl ying capabilities necessary for performing well. We do not consider thes e lists to be comprehensive, but an indicatio n 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 woul d consider virtually identical factors such as: (1) the organization’s proposed pr ocesses, capabilities, quantitative and/or qualitative performance objectives, and me thodology for performing case reviews or quality improvement initiatives; and (2) th e organization’s proposed involvement of and access to physicians and practitioners in th e QIO area with appropriate expertise and specialization in the areas of health care re lated 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 organizat ion’s ability to take into consideration urban versus rural, and regional characterist ics in the health care setting where the care under review was provided; and the organizatio n’s ability to take into consideration evidence-based national clini cal guidelines and professiona lly recognized standards of care. Under § 475.103(a)(3), with respect to performing quality improvement initiatives, we proposed that CMS would consider the or ganization’s access to professionals with appropriate knowledge of quality improveme nt methodologies and practices. Our proposals at § 475.102(a)(5) and § 475.103(a)(3) included the us e 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), we1106 solicited comment on whether th e regulation text should inco rporate the standards for QIOs that we proposed to use and the factor s 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, indetermining QIO eligibility as a result of the proposed changes, CMS consider how case review types, such as beneficiary complaints and general quality of care review s, may be more effective when carried out by a local QIO organization rather than a re gional model. In addition, as noted above, several other commenters raised concerns abou t 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 reviewtypes that involve direct contact with beneficiaries would suffer under a regional m odel. We believe that an established subcontracting relationship thatone QIO currently has with 20 other QIOs to perform appeals work for them during the weekends se rves 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 appeal s during their weekend downtime to direct those cases to a single entity. This arrangement has genera ted 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 QIO1107 contracts for case review functions. Howeve r, 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 de monstrated 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 orga nization as part of this determination about the ability to perform, respectively, case re views and quality improvement initiatives.
Comment : Although some commenters support ed CMS’ proposed criteria, many commenters suggested additional or revise d criteria for determining whether an organization has demonstrated the ability to perform case reviews. Some commenters indicated that CMS should add to its evalua tion 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 Qu ality, 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 anobjective 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 quality1108 improvement activities. These commenters sugge sted that CMS add: (1) ability to foster a relationship of trust and engagement with clinicians and executive leaders; (2) demonstrated capability to convene and es tablish effective working relationship with various stakeholders, because QIOs should support coordina ted care and breaking down silos and building a more coordinated infrastr ucture; (3) demonstrated capacity to collect, analyze, and share data with providers thatspurs improvement because data collection and sharing data are critical in quality im provement; (4) ability to complement and not duplicate quality improvement efforts alrea dy underway through St ate, regional, and Federal programs; (5) ability to access a nd include others, especially those with performance improvement experience; (6) expe rience 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) demonstr ated ability to be a neutral, independent organization and provide objective assistance to providers without favoritism or conflict of interest, specifically because failing to ach ieve 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 ne utrality and fairness should be applied to all QIO f unctions. 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 to1109 qualify for QIO contracts beyond physic ian-sponsored and physician-access organizations and we intend to make our qua lification criteria fair for all potential organizations who qualify, we will interpret and implement §§ 475.102 and 475.103 as providing illustrative and nonexha ustive criteria for consider ation. We do not plan to unreasonably limit evidence an organization may present to demonstrate its capability to perform QIO functions to specif ic QIO experience and agree that information such as that identified by the commenters may be rele vant. We particular ly appreciate the recommendation that we require that all QIO or ganizations have a form al internal quality management system and a staff with quality credentials, and although th e 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 th e 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 orde r 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 reque sting QIO contracts. The RFP will include detailed information that will be used in eval uating each offeror and, if we decide to use a weighted evaluation methodology, th e 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 ge ographic location, size, and prior experience, that CMS finds relevant, of an organiza tion in order to determine whether the organization has the capability to perform cas e 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 usi ng a regional approach to conduct case reviews. However, the commenters urge d CMS to make sure that contractors have mechanisms in place to ensure that they co mprehend and consider regional characteristics of providers. Another commenter argued th at case reviews would be more effective when done locally rather than by a centralized or regional orga nization because it is more effective for a local QIO to uncover breakdow ns 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 p hysicians with appropriate expertise and our addition of local characteristic s to the list of what a QIO mu st 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 St ate lines verifies that case review can be performed effectively and efficiently through a more regionalized structure. To the extent that the geographic lo cation of an organization is a barrier or enhancement to1111 successful performance, the regulation as pr oposed and as finalized would permit CMS to consider the location. The final rule provides the flexibility th at is necessary to consider all relevant facts about the geographic locati on 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 considerati on 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 prio r 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 recommendati on 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 co mmenter’s suggestion that CMS consider relevant quality improvement initiative experience and whether it achieved successful results. Finally, we proposed to include in a re vised version of pa ragraph (c) of § 475.102 clarifications to the text th at reflect the existing regulat ory 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 qua lify as a QIO. Under our proposal, § 475.102 would be revised to apply this additional requ irement in connection with case reviews. Similarly, as proposed, the provision at § 475.103(c) includes the re quirements that a State government must meet to qualify as a QIO that performs quality improvement1112 initiatives. While both §§ 475.102(c) and 475.1 03(c), with respect to State governments that administer a Medicaid program, maintain th e substance of the existing rule, each of this makes it clear that the sc ope of the review will be limited to case review and quality improvement initiatives, respec tively. In order to do th is, in § 475.102(c), we proposed to replace the term “utilization and quality re view functions” with th e term “case review” and in § 475.103(c), we proposed to replace th e same term with “quality improvement initiatives.” We proposed to revise th e language in § 475.102(c) and § 475.103(c) to clarify that the objectivity and independence me ntioned in the existing regulation relate to objectivity and independence from the Medica id 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 di d 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 paragr aphs of those sections. We address those public comments below.
Comment : Commenters stated that QIOs s hould 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 assist ance or to implement quality improvement1113 initiatives through approaches a nd techniques if they are determined to be the best for the population in the QIO area.
Comment : Commenters suggested that CM S allow hospitals to work with multiple QIOs because different QIOs ma y have various types of subject-matter expertise. However, commenters also noted that managing multiple contracts may be difficult for small or resource-strapped hospita ls, 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 a nd 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 pa rtnerships with provi ders 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 be neficiaries. 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 stat es that in determining eligibility for performing quality1114 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 improveme nt initiatives. A lthough case review concerns care that was given at one specifi c place, quality improvement initiatives may address national or regional i ssues. 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 revision s to § 475.102 and § 475.103 also raised the topic of objectivity and impartiality of the QI O. These public comments are addressed above in connection with the genera l eligibility requirements in § 475.101. After consideration of the public comments we r eceived, 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 characte ristics 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 inte rpreted 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 these1115 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 qua lity 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 affi liates in paragraph (a)(3) to paragraph (a)(2), and to crea te 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 c ontracting 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 coul d perform as a QIO if the Secretary determined that there were no other entities av ailable for a QIO area. These restrictions were implemented in the existing regulat ions codified at §§ 475.105(b) and 475.106. The TAAEA amendments left unchanged the prohib ition 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 avai lable 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 en tity meets all other requirements and standards in the QIO statute. We read this pr ovision 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 qualif y as a QIO so long as all other eligibility criteria are met. We reflect ed 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 gene ral objectivity requirement for all QIOs. In addition to that, under § 475.105(a)(3), we ar e finalizing specific pr ovisions for payor organizations that serve as QIOs which stat e 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 QI O activities,” the payor organization will act with complete objectivity and independence fr om its payor program (now specified in § 475.105(a)(3)(ii)). The existing paragraph (b) of § 475.105 pr ohibits 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 prop osed to remain largely unchanged except1117 for a minor terminology update to clarify in th e 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 ac tivities” to indicate our separation of case review functions from quality improvement initia tives. 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 a nd reserve all of § 4 75.106 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 orga nizations to lead the quality improvement functions of QIOs as evidenced thro ugh the achievements made through the HEN initiative. Therefore, the commenters reque sted that CMS revise the language of the proposed changes in the final rule so that hea lth care facility affilia tes would be eligible for QIO contracts that focus on quality improve ment efforts. In a ddition, the commenters indicated that if CMS were not to make this suggested revision, then CMS would preclude some of the entit ies 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 test ed and that have appr opriate safeguards to1118 protect against any real or perceived conflict of intere st among QIOs, providers, and beneficiaries. Section 1153(b)(3) of the Act e xpressly prohibits a heal th 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 c onnection with this prohibition. We believe that the restriction under secti on 1153(b)(3) of the Act prohibits CMS from entering into QIO contracts with health care a ffiliates, as reflected in this final rule, means that some current quality contractors (such as some HENs participating in the Partnership for Patients initiative, fo r 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 modifi cation: 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 th at a payor organization will be considered ineligible for QIO contracts unless a payor or ganization 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 pa yor 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 a ssignment of bonus points. We proposed to delete the portions of existing § 475.107(c) pertaining to the assignment of up to 101119 percent of available bonus points to physician-sponsor ed 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 sec tion 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 th e regulatory language that requires CMS to identify proposals that meet the requirements of § 475.101 (proposed § 475.107(a)) and to identify thos e proposals that set forth mi nimally 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 th e regulatory language addressing the length of QIO contracts. The existing § 475.107(d) st ates that the contract for a given QIO area to the selected organization cannot exceed 2 year s, which is inconsistent with the current statutory provision at section 1153(c)(3) of th e 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 amende d by section 261 of the TAAEA. We received public comments related to these topics and discuss them below.
Comment : Some commenters stat ed that CMS’ proposal that QIO contract awards be based on the selection of an or ganization from all pr oposals that set forth minimally acceptable plans may be construed to limit the contract award determination to a “lowest price technically acceptable standa rd” (LPTA). In addition, the commenters1120 discouraged CMS from applying LPTA eval uation criteria and proposed that CMS continue its current policies and make selec tion based on a determination of best value using a “tradeoff” evaluation process in which technical quality is the primary consideration and all other evaluation fact ors are more important than cost/price. One commenter also noted that ensuring the highest quality services should be considered the ultimate criterion in sele cting a quality improvement organization. Another commenter noted the va lue 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 selecti ng 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 pri ce technically acceptable, an offeror whose experience is “unknown” is considered “acceptable” for contract award. These commenters asserted that CM S’ proposed changes (to us e lowest price technically acceptable and consider past performance) ar e conflicting and reiterates that, if prior experience/past performance is important, lowe st 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 to1121 demonstrate its capability to perform as a QIO and we proposed at § 475.107(a) and (b) that CMS identify the proposal s that meet the standards described in §§ 475.101 through 475.103. However, we did not intend for the factor s listed in those sec tions to be the only criteria in our evaluation of organizations requesting QIO contracts or the ultimate decision to award a QIO contract. In addi tion 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 interp reted as an e xhaustive list. We do not intend to change our evalua tion methodology to begin using the lowest price technically acceptable standard and did no t 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 tech nical 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 oversigh t, we are confident that organizations applying to receive QIO c ontracts will be adequately informed of the evaluation criteria and methods used to award co ntracts and that it is in the best interest of the QIO Program for the regula tory standards to be flexible. We are finalizing text at§ 475.107(a) that we believe more clearly communicates that CMS will ensure compliance with th e 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 restric tions at § 475.105. In addition, we1122 believe that the text as finalized preserves the statutory flexibility provided for the contracting process consistent with the in tent 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 a nd subject to the prohibitions in § 475.105.
Comment : Many commenters supported CMS’ proposed changes of extending the contracting period from 3 years to 5 year s. Some commenters stated that this proposal may allow for an improvement in th e QIO’s review activiti es 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 organi zation is capable of performing the tasks in an acceptable manner. Response : We appreciate the commenters’ suppor t of the change in contract term to 5 years. We agree that the 5-year contra ct 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 s horter base period with option years may allow for us to make contract changes if a new organizati on is having difficulty with the contract requirements. However, section 1153(c)(3) of th e Act requires that the contract “shall be1123 for an initial term of five years and shall be renewable for terms of five years thereafter.” Therefore, we are finalizing th e proposed language that extends the QIO contract term to 5 years. After consideration of the public comments we rece ived, 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 mi sinterpretation 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-Se rvice Electronic Health Record (EHR) Incentive Program A. Incentive Payments for Eligible Profe ssionals (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 am ount, 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 to1124 5 years. In addition, in accordance with sec tion 1848(o)(1)(A)(ii) of the Act, there shall be no incentive payments made w ith 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 type s 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 meet s 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 site s of service identified by th e codes used in the HIPAA standard transaction as an inpatient hosp ital 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 percen tage of covered professional services is calculated for Medicare for purposes of the payment years a nd payment adjustment years, respectively. We note a discrepancy between the regulation te xt for this definition and the final policy1125 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) th e 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 adjust ment 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 th e 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 pa yment adjustment year. The introductory text of the definition also incorrect ly references either of the 2 years before such payment adjustment year. In the CY 2014 OPPS/ASC proposed rule (78 FR 43678), we indicated thatwe were taking this opportunity to make a technical correction to paragraph (1)(ii) and the introductory text ofthe definition of “hospitalbased EP” at § 495.4 to conform to the polic y 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 paragr aph (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 definiti on 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 “hospita l-based EP” in § 495.4 of the regulations. Therefore, we are finalizing these techni cal corrections as proposed. Specifically, (1) paragraph (1)(ii)(A) of the definition of “hospital-ba sed EP” in § 495.4 is revised to read “The Federal fiscal year 2 years be fore the payment adjustment year; or” and paragraph (1)(ii)(B) of the defi nition 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 professi onal 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, s ection 1848(o)(1)(B) of the Act provides that the incentive payment for an EP for a give n payment year shall not exceed the following

amounts:1127

• For the EP’s first payment year, fo r 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)(i v) of the Act, for EPs who predominantly furnish services in a geographic HPSA (as de signated by the Secretary under section 332(a)(1)(A) of the Public H ealth Service Act), the incentive payment limitation amounts for each payment year are increased by 10 perc ent. Section 1848(o)(1)(B)(iii) of the Act also provides for a phased reduction in pa yment 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 th e HITECH Act, provides that the incentive payments may be disbursed as a single conso lidated payment or in periodic installments as the Secretary may specify. We make a si ngle, consolidated, a nnual incentive payment to EPs. Payments are made on a rolling basi s, as soon as we ascer tain that an EP has demonstrated meaningful use for the applicab le reporting period (tha t is, 90 days for the first year or a calendar year for subseque nt years), and reached the threshold for maximum payment. Section 1848(o)(1)(A) of the Act prov ides that “with respect to covered professional services provided by an eligible professional,” the incentive payment “shall1128 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 allo wed 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 gov erning reassignments (75 FR 44445). Section 495.10(f) of the regu lations permits EPs to reassign their incentive payments to an employer or to an entity with which they have a contractual arrangement, consistent with all ru les governing reassignments, including 42 CFR Part 424, Subpart F. Section 495.10(f) al so 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 Re assigning Benefits to Method II CAHs Since we implemented the EHR Incen tive Program, we have received many requests from CAHs billing under Method II (Method II CAHs), members of Congress, and hospital associations reque sting that we make it possible for EPs who assign their reimbursement and billing to a Method II C AH to participate in the program. Under1129 section 1834(g)(2) of the Act, a CAH may elect to receive a cost-based payment for the facility costs of providing outpatient serv ices, plus 115 percent of the fee schedule amount for professional services included with in 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 C AHs. The statute also provides that, as a condition for applying this provision, the Secr etary may not require that each physician or other practitioner providing pr ofessional services in a CAH must assign billing rights for such services to the CAH. Physicians a nd other practitioners who do not assign such rights to their Method II CAH c ontinue to receive payment fo r their professional services directly under the appropriat e professional fee schedule. Since the inception of the EHR Incentiv e Program, we have been unable to account for the services furnished by EPs in Method II CAH outpatient departments (including emergency department s) due to limitations in our information systems. Specifically, our information systems have not been capable of receiving and storing line-level rendering EP identifying informa tion for these Method II CAH claims for services furnished by EPs in outpatient depart ments. 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 fo rmat. 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 furnished1130by 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 am ount 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 servic es 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 th e 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 system s would be able to receive and store line-level rendering EP identifying information for these Method II CAH claims. We were able to implement thes e information systems changes effective for claims submitted on or after October 1, 2012 (i n 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 clai ms 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 hospi tal-based determinations for EPs for the1131 2013 payment year are based on FY 2012 claims data that do not in clude Method II CAH claims. The earliest that we would be able to include such claims under the existing regulations would be for the hospital-base d determinations for the 2014 payment year, which are based on FY 2013 claims data. As we discussed in the CY 2014 O PPS/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 setti ngs. Therefore, we proposed to add a provision to the definition of “hospital-based EP” at § 495.4 unde r new paragraph (3) to provide a special methodology for making hospital-based determ inations 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 ci rcumstances 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 re gulations. 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 th e Method II CAH claims with the line-level furnishing EP identifying informa tion 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 pa yment year 2013. Any EP determined to be nonhospital-based on the basis of FY 2013 claims data would be eligible to demonstrate1132 meaningful use for the relevant EHR reporti ng period and potentially qualify for an EHR incentive payment for payment year 2013. We i ndicated in the proposed rule that an EP who believes that he or she would be de termined to be nonhospital-based under this proposed provision and wishes to qualify fo r the EHR incentive payment for payment year 2013 should not wait for the determina tion to implement Certified EHR Technology and begin meaningful use for an EHR reporti ng 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 incen tive 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 ha ve a contractual arrangement, consistent with the rules governing reassignmen ts. 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 nonhospita l-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 protec t EPs who were initially determined nonhospital-based at the beginning of paymen t year 2013 under the existing regulation. We do not believe those EPs who were dete rmined nonhospital-based under the existing regulation should have those determinations reversed by later (although more complete)1133 FY 2013 claims data. This hold-harmless provi sion would preserve th e 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 de termined to be hosp ital-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 nonhosp ital-based status on the basis of the more complete FY 2013 data. We stated that it wa s important to note that , due to the systems limitations described above, we were unabl e 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 abil ity 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 th ey appreciated the agency’s proposal to allow physicians who provide services in the outpatient depa rtments 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 unfort unate that CMS’ information systems have, until now, unfairly prevented these physicians from participating in the EHR Incentive Program because they could not use data fr om the UB-04 claims to identify services provided by the physician, they urged CMS to adopt both the proposed approach to identifying eligible physicia ns using 2013 claims data s ubmitted on the UB-04 and the1134 proposed hold harmless policy fo r those physicians who are de termined 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 th e public comments we receive d, we are finalizing our proposal concerning hospital-ba sed 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 a nd 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 unde r new paragraph (3) to provide a special methodology for making hospital-based determ inations 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 de terminations 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 informa tion 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 reporti ng period and potentially qualify for an EHR1135 incentive payment for payment year 2013. As we indicated in the proposed rule, an EP who believes that he or she would be de termined to be nonhospital-based under this proposed provision and wishes to qualify fo r the EHR incentive payment for payment year 2013 should not wait for the determina tion to implement Certified EHR Technology and begin meaningful use for an EHR reporti ng 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 incen tive 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 ha ve 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 hospita l-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 cl aims 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 nonhos pital-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 St age 1 of the EHR Incentive Program, we established the cost report periods from which we would dr aw the requisite data (for1136 example, hospital acute care inpatient disc harges 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) th at we would make final EHR incentive payments to hospitals based on discharge and ot her relevant data from the hospital’s first 12-month cost reporting period th at begins on or after the firs t 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 requir es that a “12-month period se lected by the Secretary” be employed for purposes of determining the discha rge related amount. As we also stated in that final rule (77 FR 44452), we believe th at the requirement for using 12-month cost reporting periods for purposes of determin ing preliminary and final payments is important to avoid the use of nonstandard co st 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, ev en if methods were to be adopt ed 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 co st reporting period for an eligible hospital1137 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 it s 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-m onth cost reporting peri od 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 unders tood 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 resu lt is preferable to re sorting to a nonstandard cost reporting period because a 12-month peri od is required by the statute to determine the discharge related amount and such peri ods tend, for reasons discussed in the EHR Incentive Program Stage 1 final rule, to be unr epresentative 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 re porting period that be gins on or after the beginning of a payment year, we will use th e 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 Reimbur sement Determinations and Appeals: Final Rule A. Matters Not Subject to Ad ministrative or Judicial Review (§ 405.1804) 1. Background Section 1878(a) of the Act addresse s appeals of certain Medicare payment determinations to the Provider Reimbursement Review Board (the “Board”). Below we briefly discuss the prospectiv e payment system (PPS) under which payments for certain Medicare inpatient hosp ital 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 pa yment 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 retros pective 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 e ach hospital discharge.1139 The Social Security Amendments of 1983 also added section 1886(e)(1) to the Act, which required that, for cost repor ting periods beginning in FYs 1984 and 1985, the IPPS result in aggregate program reimburse ment equal to “what would have been payable” under the reasonable cost-based re imbursement 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 pr ojected aggregate payments fo r the hospital-specific portion should equal the comparable share of estimat ed reimbursement under prior law. Section 1886(e)(1)(B) of the Act requir ed that projected aggregate reimbursement for the Federal portion of the prospective payment rates eq ual the corresponding share of estimated amounts payable prior to the pa ssage 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 pr ospective 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 re gulations at Subpart R of 42 CFR Part 405, the Board has the authority to adjudi cate certain reimbursement appeals by providers. The Board’s decisi ons are subject to review by the Administrator of CMS under section 1878(f)(1) of the Act, as impl emented 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 Stat es District Court. 2. Technical Conforming Change As we discussed in the CY 2014 O PPS/ASC proposed rule (78 FR 43680 through 43681), certain matters affecting payment to hospitals under the IPPS are not subject to1140 administrative or judicial review. For exam ple, section 1886(d)(7) of the Act precludes administrative and judicial review of the budge t neutrality adjustment effected pursuant to section 1886(e)(1) of the Act. This preclus ion of review is also reflected in section 1878(g)(2) of the Act (which states that “det erminations and other de cisions described in section 1886(d)(7) sh all not be reviewed by the Board or any other court . . . .”). The existing regulatory text at § 405.1804(a) prov ides that there is no administrative or judicial review of “any budget neutrality adju stment in the prospective payment rates.” The language of § 405.1804(a) was promul gated as part of the implementing regulations (48 FR 39785 and 39835) for th e 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 ad ministrative or judi cial 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 inthe 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 ov erly 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 neutrality1141 adjustments other than the adjust ment in section 1886(e)(1) of th e Act. To the extent that the existing § 405.1804(a) refers to “any” budget neutrality adjustment, we believe that this regulatory text is not cons istent with the current statut e. 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 admi nistrative 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 ot her budget neutrality adjustments under the
IPPS. We did not receive any public comment s 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 repo rt to a fiscal intermediary (currently referred to as a Medicare Admi nistrative 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 to tal amount of reimbursement due to a provider for its cost reporting period. This constitutes an “inter mediary determination,” as defined in § 405.1801(a). In accordance with § 405.1803, an in termediary determination is set forth in a notice of program reimbursement (NPR), which explains the intermediary’s final1142 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 NP R explain any differences between the intermediary determination and the amount of program reimbursement claimed by the provider. Such differences may be attribut able to specific provisions of the Medicare statute, regulations, CMS rulings, or program instructions. In addi tion, the intermediary determination may reflect specif ic findings of fact by the intermediary that differ from the provider’s understa nding of the facts. The factual underpinnings of a speci fic 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 reporte d 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 fo r 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 i n, or be determined for, a different fiscal period than the cost reporting period unde r review. We refer to these factual determinations as “predicate f acts.” Some of the factual unde rpinnings of determinations of reasonable cost reimbursement under section 1861(v) of the Act ar e subject to review1143 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 curre nt costs of the indivi dual provider, rather than costs of a past period” (42 CFR 413.5(a)). For example, reimbursement for a provider’s bad debts arising fr om unpaid Medicare deductibles and coinsurance may be denied under 42 CFR 413.89 in the first fiscal period it is claimed be cause the collection effort on the account has not ceased and the ac count 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 ea ch 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 r eevaluated annually to determine whether they support a determinati on 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 updatin g factor or otherwise. For example, the determination of an IPPS-exe mpt hospital’s target amount (t hat is, per-discharge (case) limitation) or rate-of-increase ceiling under sec tion 1886(b) of the Act and regulations at § 413.40 depends on: (1) the hospital’s allowabl e net inpatient operating costs for a base period of at least 12 months before the first cost reporting period subject to the1144 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 peri od that is subject to the target amount because such base period costs figure in the de termination of the hospital’s first target amount. The target amount for each co st reporting period after the base period itself is a “predi cate fact” for the following co st reporting period. We refer readers to section 1886(b)(3)(A) of the Act (f or 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 app licable update factor). A provider may challenge an intermedia ry determination by filing an appeal within 180 days of the NPR to the Boar d (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 office r(s) (under § 405.1811). Alternatively, in accordance with § 405.1885, the provider may reque st that the intermediary reopen its NPR. In addition, the intermediary ma y 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 determina tion 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 require ments 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 determinatio n that is appealed. We refer readers to section 1878(a) of the Act and current regul ations at §§ 405.1835(a)(1) and (b) (Board appeals) and §§ 405.1811(a)(1) and (b) (intermedi ary hearing officer a ppeals). Similarly, § 405.1885(a)(1) provides that the intermediary determination may be reopened “for findings on matters at issue in a determin ation.” We also re fer readers to § 405.1887, which provides that a notice of reopening a nd any revised intermediary determination must specify the findings on matte rs at issue to be reopened a nd the particular findings to be revised through reopening, respectivel y, and § 405.1889(b), which provides that a provider’s appeal rights after re opening are limited to the specific matters altered in the revised intermediary determination. In many instances, when a factual matter aris es in, or is determined for, the same fiscal period as the cost re porting period at issue, such a factual determination may be appealed or reopened as part of that period’s intermediary de termination. 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, th e hospital would have to request, or the intermediary would have to initiate on its own motion, the reopening of the hospital’s1146 2010 DSH patient day count within 3 year s of the NPR for the 2010 cost reporting period. When the specific matter at issue is a pr edicate fact that first arose in, or was determined for, an earlier fiscal period a nd 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 pertin ent provisions of the statute and regulations provide for review and potential redeterminati on 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 th e intermediary to determine reimbursement. For example, assuming base period costs ca lculated for the peri od 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 ch allenges the determination of its 2008 cost reporting period target amount, the hospital c ould 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 re porting periods. These are the only fiscal periods in which the hospital could or seek re opening of its base period costs. Of course, if the hospital’s base period costs were later redetermined through appeal or reopening of1147 its 2001 or 2002 NPRs, then the hospital coul d appeal or request reopening of those determinations. In additi on, 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 th e reopening of the determination of its 2008 cost reporting period ta rget amount within 3 years of th e 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 reope ning of its 2008 target amount. Many reimbursement formulas require the us e 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 peri od 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 whic h 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 so me instances, a reimbursement statute may necessitate the use of data from a fiscal pe riod 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 whic h 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 whena particular lega l provision (of the Medicare statute, regulations , or CMS rulings) authorizes , as part of a specific1148 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), authoriz es 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 reope ning under § 405.1885. We refer readers to the decision in Regions Hospital v. Shalala , 522 U.S. 448 (1998), which sust ained the lawf ulness of the reaudit regulation (then designated as § 413.86(e)). As discussed above, we also recognize that not all facts occurri ng in prior fiscal periods are “predicate facts” in the same sens e, 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 revi ew, 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-describ ed interpretation of our rule s regarding the appeal and reopening of predicate facts furthers the inte rests of both providers and the agency in maintaining the finality of intermediary de terminations. The alternative, of allowing appeal and reopening of a predicate fact af ter the expiration of the 3-year reopening1149 period, may result in inconsistent intermedia ry determinations on a reimbursement matter recurring in different fiscal periods for the same provider. An alternative approach of allowing appeal and reopening of a predicat e fact beyond the 3-year reopening period could also result in intermediary determinati ons that are contrary to Medicare law and policy regarding a specific re imbursement matter. As with the target amount example discussed above, reimbursement for various items is premised on a base period cost determination that could affect reimbursemen t for a given item fo r many cost reporting periods thereafter. If a provi der disputes such a base pe riod 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 differe nt finding about the same predicate fact for purposes of determining reimburse ment in later fiscal periods. Under our longstanding interpretation a nd practice, once the 3-year reopening period has expired, neither the provider nor th e 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 intermed iary. Further, the us e 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 predicat e fact was first used (or applied) by the intermediary to determine the reimbursem ent 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 st atute, regulation, or other legal provision permitting reauditing, revi sing, or similar actions changing predicate facts: (1) a predicat e fact is subject to change only through a timely appeal or reopening of the NPR for the fiscal period in which the pr edicate 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 thr ough a timely appeal or reopening of the NPR for the fiscal period in which the fact was fi rst used (or applied) by the intermediary to determine the provider’s reimbursement. As disc ussed earlier, this “fir st 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 conflic ts with our settled interpretation of the regulations for provider appeals a nd cost report reopenings. In Kaiser Foundation Hospitals v. Sebelius , 708 F.3d 226 (D.C. Cir. 2013), the co urt held that providers could appeal predicate facts used to determine thei r reimbursement in late r fiscal periods even though such predicate facts were not timely appealed or reop ened 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 peri ods in which such facts were first used (or applied) by the intermediary to determine the providers’ reimburse ment. The predicate facts at issue in this case were the teaching hospitals’ full-time equi valent (FTE) resident counts for their 1996 cost reporti ng periods, which, as required by section 1886(h)(4)(F)(i) of the Act, were used to calcula te the statutory cap on residents for direct GME reimbursement for the firs t time in the hospitals’ 1998 cost reporting1151 periods. The providers could have challeng ed their FTE resident counts through timely appeals or reopening of their 1996 fiscal pe riod NPRs, and they could have challenged the calculation of their resident caps thr ough timely appeals or reopening of their 1998 fiscal period NPRs, the first time the cap s were applied. Instead, the hospitals appealed their resident caps as applied to later cost reporting periods. The court held that the definition of “intermediary determ ination” 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 pr oviders made no attempt to challenge their direct GME reimbursement for their 1996 or 1998 fiscal pe riods due to the expiration of the 180-day appeal period and the 3-year period for re opening. Because the providers were not challenging the total amount of program re imbursement for their 1996 or 1998 fiscal periods, the court concluded that the intermed iary determinations for those periods were not at issue and thus the 3-year lim itation on reopening was not applicable. We disagree with the court’s decisio n, which we believe is contrary to our reopening regulations at § 405.1885(a), and the correspond ing 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 in clude factual findings for one fiscal period that are predicate facts for later fiscal periods. The general 3-year reopening period applies to findings about su ch 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 reimbursement1152 determinations, and not only to direct GME payment, whic h 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 th at it be effective for any intermediary determination issued on or after the effective da te of the final rule, and for any appeals or reopenings (or requests for reope ning) 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 th e law, especially in an unsettled or confusing area of the law, is not a substantive change in th e 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 retroactiv e application of a substantive change to a regulation if the Secretary determines that such retroactive application is necessary to comply with statutory requireme nts or that failure to apply the change retroactively would be contrary to the pub lic interest. We have determined that retroactive application of the proposed re vision to § 405.1885 is necessary to ensure compliance with various statutory provisi ons such as the target amount (under1153 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 fo r 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 (inc luding requests for reopening) that are pending on or after the effective date of the final rule. No t 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 Me dicare program and Me dicare providers in the finality of reimbursement determinati ons, 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 gove rning 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 Boar d, 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 th e reopening rule would undermine the accuracy of reimbursement determinations when a provi der or the Medicare program learned of the inaccuracy after the 3-year period for reope ning had expired. Other commenters opposed1154 the change because it would prevent teaching hospitals from challenging their IME or direct GME resident caps if th ey have not already done so. Response : We disagree with the commenters that the revisions to the reopening rules would materially undermine the accur acy of Medicare reimbursement because a provider could still seek revi sions to a final intermediary determination by filing an appeal or requesting reopening and the interm ediary could still initiate reopening on its own motion, and those appeal and reopening procedures are avai lable over a lengthy period under the statute and regul ations. Even before the ap peal and reopening periods begin, providers have 5 months after the cl ose 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. Th erefore, an NPR may be reopened many years after a fact arises during the cost repor ting 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, resul ting 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 interest s of both the provider and the Medicare1155 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 pe riod for fraud or similar fault by a party to the final intermediary determination. With respect to the IME and direct GM E resident caps, we established in an August 1997 interim final rule that we woul d determine those caps in the course of settling cost reports starti ng on or after October 1, 1997 (f or direct GME) or with discharges on or after Octobe r 1, 1997 (for IME), thereby pu tting teaching hospitals on notice that their caps would be determ ined at that time (62 FR 45966, 46003 through 46005 (August 29, 1997)). This is consistent wi th 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 reside nts for the cost reporting period ending on or before December 31, 1996, for cost reporting peri ods (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 ch allenge the 1996 FTE resident cap except through a timely appeal or reopening of the NP R 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 pe riod in order to correct per ceived 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 w ould support the proposed revisions if they bound CMS to accept as final a determinat ion of predicate fact that had not been timely appealed or reopened, but which the provider now recognized had been determined inaccurately. According to th e 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 fo r 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 classifi cation 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 th e 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 th ere had been no change in circumstances. The commenter asked whether the proposed revi sions to the reopening rules, which apply to pending appeals, would govern its pending Bo ard appeal challengi ng the recovery of reimbursement for past fiscal periods.1157 Response : Without passing judgment on the me rits of the commenter’s pending Board appeal, this would appear to pres ent a situation wher e, 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 woul d be material to initi al SCH designations and if providers fail to disclose these fact s, their SCH status will be cancelled.
Comment : One commenter asked if the pr oposed 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 reope ning the NPR for the fiscal period in which such facts are used to calculate payment, wh ich 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 Medica re 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 reopeni ng 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 a1158 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 subs equent cost year, espe cially 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 ma tters at issue in a final intermediary determination, and program ma nual instructions incl ude 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 al ways encompassed specific findings about predicate facts, and we see no basis for limiti ng the intermediary’s discretion whether to reopen particular findings of predicate fact. As the Supr eme 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 practi cal realities of the Medicare program where “the few dozen [intermediarie s] often need 3 year s within which to discover overpayments in the tens of thousands of NPRs that they issue, while each of the tens of thousands of sophist icated Medicare-prov ider recipients of these NPRs is generally capable of identif ying 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 st atutory jurisdictiona l minimum of $10,000 for1159 Board appeals, § 405.1811 of the regulations give s 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 dete rmination, in addition to requesting reopening of a predicate fact within 3 years of such determinations.
Comment : One commenter suggested that a pplication of the proposed revisions be limited to findings of fact that had not b een appealed, instead of applying to issues on which the provider had received an adverse fi nding on the merits. For those issues, the commenter believed that it had the right to br ing successive challenges to the finding of predicate fact after an adve rse 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 predicat e facts that have not been a ppealed. We believe that the proposed revisions should also apply to i ssues on which the provider has received an adverse final decision on the merits. Ind eed, § 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 n ecessary. Moreover, settled rules of issue preclusion, including the requireme nt that the issue be litig ated on the merits by opposing parties, would apply to a final decision on the merits of the disputed predicate facts after exhaustion of administrative re medies and judicial review. We note that because appeals of an NPR sometime are not resolved finally before NPRs are issued for later fiscal1160 periods, providers that wish to preserve their rights to admini strative and j udicial review sometimes will challenge predicate facts in successive appeals and actions for judicial review until the first ap peal 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 pr oposed revisions to the reopening rules because the commenters were concerne d 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 we re also concerned that the Medicare program would interpret reimbursement provis ions in the Medicare statute to authorize the revision of predicate fact s 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 count ered by a statutory pr ovision or a specific regulation on reimbursement of the matter at issue. This statement acknowledges that the proposed revisions cannot override a contrary statutory provision, a nd that revisions to the generally applicable reope ning rules are not intended to trump the provisions of a specific reimbursement regulation. Instead, th e proposed revisions to the reopening rules reflect the Medicare program’s longstanding policy not to re visit 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 necessa ry to adjust cost re port data for use in later fiscal periods as a base year or cap after the 3-year reopeni ng period has expired, the1161 Medicare program has relied on statutory authority to make such adjustments and used notice and comment rulemaking to alert provider s 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 revi sions to the reopening rules. However, in light of the comments we r eceived, we are limiting the scope of this final rule to “predicate facts” that are de termined 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 fi nal 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 fashi on 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 annu al evaluation of certain predicate facts in the determination of reasonable cost reim bursement can increase the provider’s reimbursement in later fiscal periods. For ex ample, if a provider incurs a Medicare bad debt in 2002, but the debt is not deemed unc ollectable until 2009, the bad debt would be reimbursable in 2009 if all the requ irements of § 413.89 were satisfied.
Comment : Several commenters took issue w ith CMS’ characterization of the proposed revisions as codifying longstanding po licy. Instead, the commenters pointed to the decisions cited in the D.C. Circuit’s Kaiser Foundation Hospitals decision as1162 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 comment ers’ assertion that the proposed revisions do not reflect our l ongstanding interpretation of th e reopening regulations. The reopening rules, which were first promulgate d 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 reim bursement. The reimbursement effect of a specific reopening is determined by the govern ing law and the factual circumstances of the matter at issue. Moreover, we disagree with the commenter s’ 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 reimburse ment regulation allowed reexamination of predicate facts so long as the underlying amount of reimbursement was not changed beyond the 3-year reopening period. For exam ple, 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 syst em 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 th e reexamination of predicate facts beyond1163 the 3-year reopening period, as the commenters suggested, then there would have been no need for the above-referenced regula tions on GME reauditing and TEFRA limit adjustments to operating costs. Contrary to the commenters’ assertio ns, the Medicare program has applied its reopening rules to determinati ons of predicate facts to th e benefit of providers. For example, when a provider received an advers e 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 inte rmediaries 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. Sim ilarly, we have instructed intermediaries not to attempt to change in correctly calculated hi gh direct GME or IME resident caps for fiscal periods th at 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), concerne d 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 reex amination 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 regul ations. The facts associated with these expenses, like bad debt arising from non-payment of Medicare deductibles and coinsurance, are not determined once and appl ied thereafter to determine reimbursement1164 in subsequent fiscal periods. They are not within the scope of the proposed revisions, as we have revised it in re sponse 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 cour t held that recalculat ion of the provider’s hospital specific rate did not violate the finality provisions of §§ 412.71 and 412.72; rather, the intermediary properly reopened th e determination to correct an administrative error. If anything, the finality provisi ons of §§ 412.71(d) and 412.72(b) are consistent with our position that once a pred icate 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 thatCMS 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 Medicar e 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 accura cy of reimbursement determinations. One commenter also stated that it would be contrary to the public interest to apply th e 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 disc ussion of decisions in1165 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 a ddress 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 statutor y right to appeal to the Boar d, and the regulatory process for reopening, by invoking an alleged right to se ek revisions to pred icate 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 rule s 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 re opening of predicate facts to the 3-year reopening period. We continue to believe that applicati on of the revised rules to intermediary determinations issued on or after the effectiv e date of this final rule, and to appeals and reopenings (including requests for reopening) that are pendi ng on or after the same effective date, is not impermissibly retroactiv e in effect. Any findi ng of a predicate fact inherently has a degree of re troactivity because Congress (o r the Medicare program) has assigned a future reimbursement consequence to provider actions that have already taken place, usually before the enactment of the rele vant reimbursement statute. For example,1166 when Congress enacted the direct GME and IM E resident cap statut e in 1997, and used a base year that ended no later than Decem ber 31, 1996, it assigned future consequences (the resident cap) to actions that were alr eady completed (the provi der’s employment of residents during the 1996 cost reporting period). We believe that this is a form of “s econdary retroactivity” inasmuch as future consequences are attached to past actions , but such secondary retroactivity does not violate due process or, in the case of regulati ons, the Administrative Procedure Act, if the regulation is not unreasonable. Fo r 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 de terminations, appeals, and reopenings will not affect the amount of reimbursement a pr ovider received for the cost reporting period in which the predicate fact first arose or wa s determined. Nor woul d such application of the proposed changes to the reopening rules invalidate any revisions to predicate facts that were finalized prior to the effective da te of this final rule . Instead, the revised reopening rules govern only the timing of permi ssible revisions to pred icate 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 revise d reopening rules also does not undermine providers’ settled expectations. A provider ca nnot reasonably expect to be allowed to revise a predicate fact after the 180-day f iling period for an appeal after the right has expired, when the only remaining means of securing such reli ef is through the1167 discretionary reopening process. We refer readers to Bergerco Canada v. U.S. Treasury Dept. , 129 F.3d 189, 194-95 (D.C. Cir. 1997) (c hanges 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 elap sed, a provider has no reasonable expectation of securing revisions to predicate facts. While one of the commenters suggested that the Kaiser decision effectively esta blished the governing law, the decision is of such recent vintage that fe w providers could have relied on it as a basis for changing predicate facts af ter expiration of the 3-year reopening period. Moreover, the strictures against retroac tivity 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 d eemed a retroactive application of a substantive change to a regulation, we continue to believe that section 1871(e)(1)(A) of the Act permits retroact ive application because it is necessary to ensure compliance with various statutory pa yment 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 sectio ns 1886(h)(4)(F) and 1886(d)(5)( B)(v) of the Act); the 180-day filing period for appeals to the Boar d (under section 1878(a)(3 ) of the Act); and the 3-year period for reopening (under §§ 405.18 85(b)(1), and (b)(2) of the regulations). In addition, we continue to beli eve that retroactive application furthers the public interest in safeguarding the 3-year limit on reope ning and the interest s of both Medicare providers and the Medicare program in pr eserving the finality of reimbursement1168 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 intere sts of administrative finality by ensuring that both Medicare provi ders 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 w itnesses may no longer be available. After consideration of the public comments we rece ived, 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 fact s for later fiscal periods with the following modifications: We are adding language to paragr aph (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 determ ination 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, re gulation, or other legal provision permitting reauditing, revising, or similar act ions changing predicate facts: (1) a predicate fact is subject to change only through a timely appe al 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 is1169 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 reopeni ng period applies to findings about such predicate facts and the reopeni ng period is calculated separa tely for each finding about each predicate fact. At this time, we have decided not to make similar changes regarding predicate facts to the regul ations governing intermedia ry appeals at § 405.1811 and appeals to the Board at § 405.1835.

XX. Files Available to th e Public via the Internet In the CY 2014 OPPS/ASC proposed rule (78 FR 43684), w e proposed to create new Addendum P--Proposed OPPS Items and Servi ces That Will Be Packaged for CY 2014. We did not receive any public comments related to the propos ed 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 CM S 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 “Adde ndum EE” at the bottom of the page.1171 XXI. Collection of Information Requirements A. Legislative Requirement s 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 commen t before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information 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 collecti on and its usefulness in carrying out the proper functions of our agency.

● The accuracy of our estimate of the information collection burden.

● The quality, utility, and clarity of the information to be collected.

● Recommendations to minimize the information collection burden on the affected public, including auto mated collection techniques. In the CY 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 outcom e measures in that section or they are1172 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 a nd 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 s ecure a reversal of the decertification. The ICRs that an OPO would be re quired to expend would depend upon how it chose to handle the decertification. An OP O may choose to not engage in the appeals process and merge with another OPO prior to th e effective date of the decertification. Other OPOs would likely choose to take adva ntage of the appeals process, which would begin with reconsideration at the regional admi nistrator level. It is likely that an OPO would expend considerable resources duri ng the reconsiderati on and, if that was unsuccessful, a hearing before a CMS heari ng officer. We believe both would require considerable time and other resources from th e OPO’s senior staff a nd legal counsel. We also believe that those OPOs that went onto a hearing w ould expend considerably more resources than those that received a reversal of their decertific ation 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 confid ent that these OPOs would sustain a1173 significantly positive effect from not being automatically de-certified as is currently required under the OPO CfCs. In additi on, 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 benef its 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 us ed 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 Me dicare 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 secti on XVIII. of this document. These final policies do not modify or increase the in formation 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 discu ssed in the regulation1174 text contained in the proposed rule. The fo llowing is a discussion of those requirements, any public comments we received, and ourresponses 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 ge nerally modeled after the quality data reporting program for the Hospital IQR Progr am. We refer readers to the CY 2011 OPPS/ASC final rule with comment pe riod (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 comme nt 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 fo r the CY 2015 Payment Determination and Subsequent Years We refer readers to the CY 2013 OPPS/A SC 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 propos ed rule, we did not propose to add any additional measures for the CY 2015 paymen t determination and subsequent years; therefore, there will not be an incr ease in our previous burden estimate. We note that we had previously suspe nded data collection for the OP-19 measure and deferred data collection for the OP-24 meas ure. In this final rule with comment period, we are finalizing our pr oposal to remove the OP-19 and OP-24 measures from the1175 Hospital OQR Program for the CY 2015 paymen t determination and subsequent years (78 FR 43646 through 43647, 78 FR 43653). We refe r readers to secti on XIII.C.2. of this final rule with comment period for our discus sion 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 th e reconsideration proce ss. Because we are only codifying existing policies (including finalizing a clarif ication 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 th ese 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-abst racted measures that require HOPDs to collected data from chart-abstraction, and s ubmit 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 ru le, 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. For1176 the new measures, this resulted in burden esti mates 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 correct ed this error and se parated 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 pro cedures 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 thei r chart-abstraction burden is estimated, and in section XXI.C.1.c., where we es timate their Web submission burden. We believe there is a burden associated with successful participation in the Hospital OQR Program, where successful partic ipation results in a full annual payment update (APU) for a particular payment dete rmination. This burden would include, but not be limited to: maintaining familiarity with the Hospital OQR Program requirements (for example, participating in the monthl y educational webinars, reading information available at the QualityNet Web site https://qualitynet.org , checking feedback reports to indicate a facility’s current status or pe rformance, 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 environmen t, etc.); and commu nicating how program1177 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 ope rations (20 hours) The burden for one hospital is therefor e the sum of these 3 areas above and therefore estimated at 42 hours. We calcula te 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 colle ct 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 estimat ed the financial burden for all hospitals to collect and submit data using our estim ate 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 exclud es 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, or1178 approximately 509 cases per year per hospital. However, hospitals will vary greatly on the number of cases per HOPD due to speci alization. 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-abstract ed measures with Web-based submission. These three measures will add to the burde n. 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 inst ructions we provide to indicate appropriate sampling methodology ba sed on hospital’s volume, this is a basis for us to calculate a maximum burden estim ate. 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 th e 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 support1179 quarterly sample sizes of 96 cases, for a to tal of 384 cases (96 cas es per quarter x 4 quarters) to be abstracted by each ho spital 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 pe r case) based on chart-abstraction time less the time to submit Web-based meas ures in aggregate (0.583 hours - 0.167 hours = 0.417 hours per measure). For the approximate ly 3,300 reporting hospitals, we therefore estimate the total maximum burden asso ciated is 1,584,000 hours (3,300 hospitals x 0.417 hours per hospital x 1,152 cases). We estim ate the maximum financial burden for all hospitals to collect and submit data via th e 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 asso ciated with chart ab straction and data submission for these non-Web-based measures, which requires that HOPDs submit patient-level data directly to CMS. We es timated 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 Dir ectly 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 thes e five measures, four are chart-abstracted1180 measures requiring that HOPDs submit patient-level data di rectly to CMS using a Webbased tool, with data collection beginni ng in CY 2014. Based on public comment we received regarding burden, we are not finali zing proposed measure OP-28 as part of the Hospital OQR Program measure set. Therefore, we are only finalizi ng three of the four chart-abstracted measures that we proposed. We refer readers to se ction XIII.E.2 of this final rule with comment period for a discus sion of public comments regarding OP-28. We also refer readers to sect ion XIII.G.2.f. of this final rule with comment period for our discussion of specific data coll ection requirements we finalized, which serves as the basis of our estimates of burden described. For previously finalized Web-base d 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 fi nalized Web-based measures (OP-29, OP-30, and OP-31). We estimated the burden of chart- abstraction for the subs et of the four of these measures that are also chart-abstract ed (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-abstract ed. Our estimate in this section is based on the chart-abstraction for th ese four measures being comp lete by the hospital at the time of Web-based entry. Each particip ating hospital would spend 10 minutes per measure per year to collect and submit the da ta. 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 We b-based tool. The estimated annual burden associated with1181 these measures is 4,409 hours (3,300 hospita ls 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 woul d be $132,264 (3,300 hospitals x $30.00 per hour x 0.167 hours per measure x 8 measures). Of thes e eight measures, 4 ar e 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 propos ed rule (78 FR 43685), we used an estimate of 10 vaccinations per outpatient hospita l. Since then, we have obtained a more accurate estimate for the number of vaccinati ons per hospital and have reflected that in our calculations below. Using data from th e 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 all1182 hospitals is 640,360. We estimate 640,360 resp onses for a total burden of 106,940 hours (0.167 hours per response x 640,360 responses). HOPDs will incur a financial burden a ssociated with data submission for this measure. Using the total of all Outpatient Ca re 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 burde n associated with the information collection requirements for the chart-abstra cted measures, the Web-based measures submitted directly to CMS, and the measur e submitted via CDC’s NHSN. We did not receive any comments on the burden associated with information collection requirements. Therefore, we are finaliz ing our burden estimates. e. Hospital OQR Program Validation Requirements for the CY 2015 Payment Determination and Subsequent Years We use a sampling methodology, which involv es 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 valida tion procedures for the CY 2015 payment determination is the same as previous ly finalized for CY 2014 in the CY 20131183 OPPS/ASC final rule with co mment period (77 FR 68531). We estimated that it would take each of the 500 sampled hospitals approx imately 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, wh ich 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 hospita ls x 12 hours per hospital). HOPDs will incur a financial burden associ ated with the required data abstraction and data submission for the validation process. We estimated that the financial burden associated with validation woul d 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 burde n 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 Reconsid eration and Appeals Procedures In section XIII.I. of the proposed rule a nd 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 reconsidera tion request process to ensure our deadline for these requests will always fall on a busin ess day. We also proposed and are finalizing our proposal to codify our reconsideration re quest process at 42 CFR 419.46(h).1184 While there is burden associated wi th 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 appeal s 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 requireme nts for the five claims-based measures (four outcome measures and one process meas ure) 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 partic ipated 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 Me dical Quality Assurance, Inc. and Health Services Advisory Group: Ambulatory Surgic al Center Environmental Scan (July 2008)1185 (Contract No. GS - 10F - 0096T)). We estim ated 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 per cent 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 requi re prophylactic antibiotic administration. We invited public comment on the burde n 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 requireme nts 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 adde d two structural, Web-based, measures: Safe Surgery Checklist Use and ASC FacilityVolume Data on Selected ASC Surgical Procedures (76 FR 74504 through 74509). Fo r 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 AS Cs reporting, there would be an average of 11.8 events per year. Therefore, we estimat ed the burden to report QDCs on this number of claims per year for the first four claims-b ased outcome measures to be nominal due to the small number of cases (approximately on e 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-base d 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 y ear to collect and submit the required data, making the estimated annual burden associat ed 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 annua l 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 fina lizing 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 servi ces furnished between January 1, 2014 and1187 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 th e 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 determin ation, 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 w ith 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 Personne l, we estimated that the total annual burden associated with this measure for ASCs, including NHSN re gistration (5,260 ASCs x 0.083 hour per facility = 437 hours) and da ta 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) a nd reported numbers for the average number of workers per ASC. For the CY 2016 payment determinati on, 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 comme nt period, we are fina lizing the adoption of three of these four measures. For the chart- abstracted measures, we estimated that each participating ASC would spend 35 minutes pe r 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 st ated that ASCs would incur a financial burden associated with chart abstraction a nd 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 cas e, 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 measur es and requiring data submissi on. We also invited public comment on the burden associated with th ese information collection requirements. For the previously finalized Web-base d Safe Surgery Checklist Use and ASC Facility Volume Data on Selected ASC Surg ical Procedures meas ures for the CY 2016 payment determination, we received public co mments that increasing the data submission time period was an appropriate and beneficial change that did not in crease burden. These comments are discussed in section XV.D.5.b of this final rule with comment period. For the claims-based measures, we receiv ed public comments that data collection via claims was a way to reduce burde n. 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 receive d on burden associated with data collection for the NHSN HAI measure: Influenza Vaccination Coverage among Healthcare Personnel in sect ion XV.D.6.b. of this final rule with comment period.1189 We discuss public comments we recei ved 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 th e 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 consid er an ASC to be participa ting in the ASCQR Program for the CY 2014 payment determination if the AS C includes QDCs specified for the program on their CY 2012 claims relating to the finalized measures. In the FY 2013 IPPS/LTCH PPS final ru le, we finalized, for the CY 2015 payment determination and subsequent year s, 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 indicati ng 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 a dditional 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 a nd 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 or der to set up accounts necessary to enter structural measure data. We estimated th at, based upon previous experience with the Hospital OQR Program, it would take an AS C 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 m eet 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, a nd submit the request. The bu rden 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 exte nsion or waiver and1191 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 bil ling and claims processing issues. We also adopted a reconsideration pr ocess that would apply to the CY 2014 payment determination and subsequent pa yment determination years under the ASCQR Program. While there is burden associated wi th an ASC filing a reconsideration request, the regulations at 5 CFR 1320.4 for the Pape rwork Reduction Act of 1995 exclude data collection activities dur ing the conduct of administrative actions. We invited public comment on the burde n associated with these information collection requirements. We did not receive any public co mments on our burden discussion in the proposed rule and are finalizing th ese 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 a nd corrections proce ss (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 § 13 20.4 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 burde n associated with these information collection requirements. We did not receive any public co mments 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 acknowle dge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this final rule with comment 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 fi nal rule with comment period and the final rules in this document as required by Ex ecutive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executiv e Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), th e 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 Fe deralism (August 4, 1999), and the Contract with America Advancement Act of 1996 (Pub. L. 104-121) (5 U.S.C. 804(2)). This1193 section of the final rule with comment pe riod contains the impactand other economic analyses for the provisions that we are finalizing. Executive Orders 12866 and 13563 direct agenci es to assess all costs and benefits of available regulatory alterna tives and, if regulation is n ecessary, to select regulatory approaches that maximize net benefits (inc luding potential economi c, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both co sts and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This final rule with comment period has been designated as an econo mically significant rule under section 3(f)(1) of Executive Order 12866 and a major rule under the Cont ract 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 abilit y, 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 comment s 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 ch anges 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 factor1194 used to determine the payment rates fo r APCs. We also are required under section 1833(t)(9)(A) of the Act to review, not less often than a nnually, and revise the groups, the relative payment weights, and th e 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 a nnually. We are revising the APC relative payment weights using claims data for serv ices furnished on and after January 1, 2012, through and including December 31, 2012, a nd updated cost report information. For CY 2014, we are continuing the curre nt 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) hos pitals that fail to meet quality reporting requirements under the Hospital OQR Program in cur 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 cove red ancillary services that are performed in an ASC in CY 2014. Because the ASC paym ent 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 refl ect annual changes to the OPPS relative payment weights. In addition, because the se rvices provided in ASCs are identified by HCPCS codes that are reviewed and revised either quarter ly or annually, depending on1195 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 sec tion 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. S ections 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 fi nal 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 wi th 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 significan t as measured by the $100 million threshold, we have prepared this regulatory impact analys is 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 conve rsion factor and othe r adjustments (not including the effects of outli er payments, the pass-through es timates, 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 O PPS 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 outsi de 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 im pact analysis of the changes to the ASC payment system that, to the best of our abi lity, presents the costs and benefits of this portion of the final rule with comment period. Tables 56 and Table 57 of this final rule1197 with comment period display the redistribu tional 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 Change s in this Final Rule with Comment Period (1) Limitations of Our Analysis The distributional impacts presented here are the proj ected 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 estimat ed payments for CY 2014 with the other supporting documentation for this final ru le 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 hos pital-specific file layout and the hospital-specific file are listed with the other supporting documentation for this final rule with comment period. We show hospital-specific data only for hosp itals whose claims we re used for modeling the impacts shown in Table 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 discussi on of the hospitals whose claims we do not use for ratesetting and impact purposes.1198 We estimate the effects of the indivi dual policy changes by estimating payments per service, while holding all other payment policies constant. We use the best data available, but do not attempt to predict behavi oral responses to our policy changes. In addition, we do not make adjustments for futu re changes in variables such as service volume, service-mix, or number of enc ounters. In the CY 2014 OPPS/ASC proposed rule (78 FR 43687 through 43688), we solicite d public comment and information about the anticipated effects of our proposed ch anges on providers and our methodology for estimating them. Any public comments that we received are addresse d in the applicable sections of this final rule with comment period that discuss the specific policies.
Comment : Numerous comments raised concer ns about the lack of transparency created by introducing multiple policies into a complex payment system that was created by insufficient guidance on how proposed pa yment rates were developed, technical errors, insufficient policy details, and a l ack of detailed impact analyses for each proposal. Response : With regard to the lack of deta iled impact analyses, we believe that our approach of modeling the overall imp act of the payment system on classes of hospitals is one aspect of fostering transp arency. However, assessing the impacts of a specific policy also relies on clear discu ssion of proposed change s 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 thei r specific product(s) or set of services.1199 We make numerous separate summary da ta files and public use files available, along with a discussion of our m odeling processes, and we belie ve that this is the best means to foster robust public data-relat ed 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 recei ved numerous thoughtful comments supported by detailed data analyses suggesting that co mmenters have modeled the data to draw detail on their specific policy interest. Fi nally, individual faciliti es have more recent internal data on the mix of serv ices that they provide than th e 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 th e impact table, which estimates the change in payments to all facilities, has always incl uded 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 CM HCs in our weight scaler estimate. We now include a second line for all hospita ls, excluding permanently held harmless hospitals and CMHCs. We present separate impacts for CM HCs in Table 55 and we discuss them separately below, because CMHCs are paid on ly for partial hospitaliz ation services under the OPPS and are a different provider type from hospitals. In CY 2014, we are1200 continuing to pay CMHCs under APC 0172 (Level I Partial Hospitali zation (3 services) for CMHCs) and APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), and we are paying hospitals for pa rtial hospitalization services under APC 0175 (Level I Partial Hospitaliz ation (3 services) for hospi tal-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 disc ussion of the hospital impacts. The estimated increase in the total paym ents made under the OPPS is determined largely by the increase to th e 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 update d annually by the OPD f ee 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 incr ease applicable under se ction 1886(b )(3)(B)(iii) of the Act, which we refer to as the IPPS ma rket 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 secti on 1886(b)(3)(B)(xi) (II) of the Act, which is 0.5 percentage points for FY 2014 (which is al so 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 fu rther reduce the market basket percentage increase by 0.3 percentage points, resulting in the OPD fee schedule increase factor of 1.7 percent, which1201 we are using in the calculation of the CY 2014 OPPS conversion factor. Section 10324 of the Affordable Care Act, as amende d by HCERA, further authorized additional expenditures outside budget neutrality for hospita ls in certain frontier States that have a wage index less than 1.00. The amounts attri butable to this frontier State wage index adjustment are incorporated in the CY 2014 estimates in Table 55. To illustrate the impact of the CY 20 14 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 reclas sifications, and the final CY 2013 conversion factor. Table 55 shows the estimated redistri bution of the proposed increase in payments for CY 2014 over CY 2013 payments to hos pitals 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 a nd 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 increas e 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 th e estimated impact taking into account all1202 payments for CY 2014 relative to all paym ents 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 neutrali ty 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 (inc luding 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 (f or example, how the AP Cs for the hospital’s most frequently furnished services will change), and the impact of the wage index changes on the hospital. However, total paym ents made under this system and the extent to which this final rule with commen t period will redist ribute 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, resu lting in a 1.8 percent estimated increase in Medicare payments. Removing payments to can cer 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 percent1203 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 numbe r of facilities (4,068), including designated cancer a nd 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 entit ies that are not paid under the OPPS. The latter entities include CAHs, all-inclusiv e hospitals, and hospita ls located in Guam, the U.S. Virgin Islands, Northern Mariana Is lands, American Samoa, and the State of Maryland. This process is discussed in greater detail in section II.A. of this final rule with comment period. At this time, we are unable to calculate a di sproportionate share (DSH) variable for hospitals not participating in the IPPS. Hospitals for which we do not have a DSH variable are grouped separate ly and generally include freestanding psychiatric hospitals, rehabil itation hospitals, and long-term care hospitals. We show the total number of OPPS hosp itals (3,905), excluding th e hold-harmless cancer and children’s hospitals and CMHCs, on the second line of the table. We excluded cancer and children’s hospitals because section 1833(t)(7)(D) of the Act permanently holds harmless cancer hospitals and children’s hos pitals to their “pre-BBA amount” as specified under the terms of the statute, and therefore, we removed them from our impact1204 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 prev iously paid under the clinical laboratory fee schedule into the OPPS. These final policies incl ude packaging drugs, biologicals, and radiopharmaceuticals that func tion 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 s ubstitutes), certain pro cedures described by add-on codes, and device removal procedures; new cost report data for estimating CT and MRI relative weights; and revisions to c oding and APC structure for stereotactic radiosurgery. This column also reflects r eclassification 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 recalibrati on 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 attribut able to adoption of a single payment for clinic visits. Reductions fo r 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 for1205 partial hospitalization, and APC recalibration reduces the relative weight for partial hospitalization for CY 2014. Column 3: APC Recalibration Due to P ackaging 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 compar es the estimated CY 2014 OPPS payments with the addition of packag ed laboratory services to CY 2014 OPPS payment in Column 2 plus payment for laboratory se rvices at CY 2013 CLFS payment rates. Packaging laboratory services modestly redu ces payment to rural hospitals who no longer receive separate payment for common laborat ory tests. Relative weights for visits, x-rays, and the small set of common servic es 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. Colu mn 4 also reflects any changes in multiple procedure discount patterns or c onditional packaging that occu r 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 expe rience a decrease of 0.4 percent, with the1206 impact ranging from an increase of 0.5 percent to a decrease of 1.7 percent depending on the number of beds. Major teaching hospita ls 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 hos pitals experience modest increases. Column 5: New Wage Indices and the E ffect of the Rural and Cancer Hospital Adjustments Column 5 demonstrates the combined budge t neutral impact of APC recalibration; updating the wage indexes with the final fisc al year (FY) 2014 IPPS post-reclassification wage indexes; the rural adjustment; and th e cancer hospital payment adjustment. We modeled the independent effect of the budge t neutrality adjustments and the OPD fee schedule increase factor by usi ng 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 effect s of the updated wage indices, including the application of budget neutrali ty for the rural floor policy ona 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 mode l 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 th e rural payment adjustment of 7.1 percent1207 to rural SCHs for CY 2014, as described in se ction II.E. of this fi nal 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 adju stment 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 hos pitals receive about $24 million less under the CY 2014 adjustment, which appears as a 0.1 increase for the gene ral hospital population in row 2 of Column 5, All Hospitals (exc luding 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 conversi on factor of 1.7 percent. It shows the estimated cumulative impact of the budget neutral adjust ments 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 Middl e Atlantic, we estimate that the addition of the 1.7 percent market basket alleviates negative impact s on payments for CY 2014 created by budget neutrality made in Columns 4 and 5 for paymen ts made to most hospitals. Overall, these1208 changes increase payments to urban hospita ls by 1.9 percent and to rural hospitals by 1.1 percent. Most classes of hospitals will r eceive an increase in line with the 1.7 percent overall increase after the update is app lied to the budget neutrality adjustments. Column 7: All Adjustments with th e 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 f actor, and the nonbudget neutral impact of applying the CY 2014 frontier State wage adju stment (that is, the frontier State wage index change in addition to all changes reflecte d 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 Cent ral and Mountain States experience increases in payment of 3.2 and 2.3 percent, re spectively, as a result of the frontier State wage index adjustment, while urban hospitals in those States e xperience 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 cha nges for CY 2014 and comparing them to all estimated payments in CY 2013. Column 8 sh ows the combined budget neutral effects of Column 4 and 5; the OPD fee schedule increas e; 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 with1209 comment period); and the difference in tota l OPPS payments dedicated to transitional pass-through payments. Of those hospitals that failed to m eet 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 hos pitals 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 paym ents 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 pa yments 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 infl ation 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 pe rcent of total payments. The estimated current outlier payments of 1.1 percent are in corporated in the comparison in Column 8. We used the same set of claims and a char ge inflation factor of 9.69 percent (1.0969) and1210 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 to tal payments using a multiple threshold of 1.75 and a fixed-dollar threshold of $2,900. We estimate that the anticipated ch ange 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 ru le with comment period inCY 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 per cent 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 fr ontier 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 ar e 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 in crease 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 of1211 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 es timate that the impacts resulting from the combined effects of all changes will in clude an increase of 1.4 percent for major teaching hospitals and 1.8 percent for nonteach ing hospitals. Minor teaching hospitals will experience an estimated increase of 2.3 percent. In our analysis, we also have categori zed hospitals by type of ownership. Based on this analysis, we estimate that voluntary hospitals will experience an increase of 2.0 percent, proprietary hosp itals will experience an in crease of 2.0 percent, and governmental hospitals will experience an increase of 1.1 percent.12121213TABLE 55.—ESTIMATED IMPACT OFTHE CY 2014 CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVEPAYMENTS SYSTEM(1) (2) (3) (4) (5) (6) (7) (8)Number ofHospitalsAPCRecalibration(PoliciesOther thanOutpatientLaboratoryServices) (%)APCRecalibration(OutpatientLaboratoryServicesPackagingPolicy) (%)APCRecalibration (allchanges)(%)New WageIndex andProviderAdjustments(%)CombinedCols 4, 5withMarketBasketUpdate (%)Column 6with FrontierState WageIndexAdjustment(%)AllChanges(%)ALL FACILITIES *4,068 0.0 0.0 0.00.0 1.7 1.8 1.8ALL HOSPITALS3,905 0.0 0.0 0.00.1 1.8 1.9 1.9(excludes hospitals permanently held harmless and CMHCs)URBAN HOSPITALS 2,959 0.00.2 0.1 0.11.9 2.0 2.0LARGE URBAN 1,612 0.0 0.2 0.3 0.2 2.1 2.1 2.2(GT 1 MILL.)OTHER URBAN 1,347 -0.10.1 0.0 0.01.7 1.9 1.7(LE 1 MILL.)RURAL HOSPITALS 946 0.4 -0.8-0.4 -0.2 1.1 1.4 1.1SOLE COMMUNITY 391 0.5 -0.5 0.0 -0.2 1.5 1.9 1.6OTHER RURAL 555 0.3 -1.0 -0.8 -0.2 0.7 0.8 0.8BEDS (URBAN)0 - 99 BEDS 1,037 -0.5 0.4 -0.1 0.0 1.7 1.8 1.7100-199 BEDS 843 0.0 0.20.2 0.0 1.9 2.0 2.0200-299 BEDS 458 0.0 0.30.3 0.1 2.1 2.3 2.2300-499 BEDS 410 0.1 0.30.4 0.1 2.1 2.3 2.2500 + BEDS 211 -0.1 -0.2 -0.3 0.2 1.6 1.6 1.6BEDS (RURAL)1214(1) (2) (3) (4) (5) (6) (7) (8)Number ofHospitalsAPCRecalibration(PoliciesOther thanOutpatientLaboratoryServices) (%)APCRecalibration(OutpatientLaboratoryServicesPackagingPolicy) (%)APCRecalibration (allchanges)(%)New WageIndex andProviderAdjustments(%)CombinedCols 4, 5withMarketBasketUpdate (%)Column 6with FrontierState WageIndexAdjustment(%)AllChanges(%)0 - 49 BEDS 363 0.9 -2.5 -1.7-0.5 -0.5 -0.3 -0.650- 100 BEDS 346 0.6 -1.1 -0.5 -0.1 1.1 1.3 1.0101- 149 BEDS 133 0.2 -0.2 0.1 -0.2 1.6 1.8 1.6150- 199 BEDS 60 0.0 -0.6 -0.6 -0.1 1.0 1.5 1.0200 + BEDS 44 0.1 0.40.5 0.0 2.1 2.1 2.3VOLUME (URBAN)LT 5,000 Lines 523 -1.9 1.0 -0.9 0.0 0.9 1.1 0.65,000 - 10,999 Lines 124 -1.5 1.7 0.1 -0.2 1.6 2.1 1.711,000 - 20,999 Lines 121-1.3 1.4 0.1 0.0 1.8 2.0 1.821,000 - 42,999 Lines 232 -0.5 1.6 1.1 -0.2 2.6 2.6 2.642,999 - 89,999 Lines 480-0.2 1.4 1.2 0.1 3.0 3.0 3.0GT 89,999 Lines1,479 0.0 0.0 0.00.1 1.8 1.9 1.9VOLUME (RURAL)LT 5,000 Lines 34 -1.0 1.8 0.8 -0.4 2.1 6.8 2.25,000 - 10,999 Lines 28 2.4 -2.8 -0.5 -0.8 0.4 0.4 0.111,000 - 20,999 Lines 546.5 -2.1 4.2 -0.8 5.1 5.1 5.021,000 - 42,999 Lines 1631.0 -0.8 0.1 -0.2 1.6 2.4 1.5GT 42,999 Lines 667 0.3 -0.8 -0.5 -0.2 1.1 1.3 1.1REGION (URBAN)NEW ENGLAND 152 0.2 -1.2-1.0 0.6 1.2 1.2 1.2MIDDLE ATLANTIC 351 0.1 -0.9 -0.7 0.7 1.7 1.7 1.7SOUTH ATLANTIC 453 -0.20.5 0.3 -0.3 1.7 1.7 1.9EAST NORTH CENT. 474 0.3 -0.3-0.1 -0.1 1.6 1.6 1.6EAST SOUTH CENT. 176 -0.20.7 0.5 -0.2 2.0 2.0 2.1WEST NORTH CENT. 198 0.11.1 1.2 -0.4 2.5 3.6 2.7WEST SOUTH CENT. 519 -0.6 0.5 -0.2 -0.4 1.2 1.2 1.3MOUNTAIN 198 -0.3 0.90.6 -0.6 1.7 2.1 1.8PACIFIC 389 0.2 0.70.9 1.0 3.6 3.6 3.51215(1) (2) (3) (4) (5) (6) (7) (8)Number ofHospitalsAPCRecalibration(PoliciesOther thanOutpatientLaboratoryServices) (%)APCRecalibration(OutpatientLaboratoryServicesPackagingPolicy) (%)APCRecalibration (allchanges)(%)New WageIndex andProviderAdjustments(%)CombinedCols 4, 5withMarketBasketUpdate (%)Column 6with FrontierState WageIndexAdjustment(%)AllChanges(%)PUERTO RICO 49 0.8 -0.8 0.0 0.5 2.1 2.1 2.2REGION (RURAL)NEW ENGLAND 25 0.4 -1.0-0.6 0.4 1.5 1.5 1.4MIDDLE ATLANTIC 69 1.0 -3.6 -2.6 0.2 -0.7 -0.7 -0.8SOUTH ATLANTIC 160 0.2 -0.1 0.1 -0.3 1.5 1.5 1.6EAST NORTH CENT. 127 0.4 -1.6-1.1 -0.3 0.3 0.3 0.4EAST SOUTH CENT. 171 0.2 -0.2 0.1 -0.5 1.2 1.2 1.3WEST NORTH CENT. 99 0.30.2 0.6 -0.2 2.1 3.2 2.1WEST SOUTH CENT. 200 0.5 -0.6 -0.1 -0.5 1.1 1.1 1.2MOUNTAIN 66 0.0 -1.2-1.1 0.2 0.8 2.3 0.2PACIFIC 29 0.5 0.30.8 1.1 3.6 3.6 3.5TEACHING STATUSNON-TEACHING 2,885 0.00.1 0.1 0.01.7 1.8 1.8MINOR 699 0.1 0.4 0.5 0.0 2.2 2.5 2.3MAJOR 321 0.0 -0.6 -0.6 0.3 1.3 1.3 1.4DSH PATIENT PERCENT0 11 2.8 1.3 4.10.1 5.9 5.9 5.6GT 0 - 0.10 350 -0.6 0.1 -0.5 0.1 1.3 1.4 1.40.10 - 0.16 341 -0.1 -0.1-0.2 0.1 1.6 1.7 1.70.16 - 0.23 685 0.2 -0.2-0.1 0.1 1.7 1.8 1.80.23 - 0.35 1,080 0.0 0.3 0.3 0.0 2.0 2.2 2.1GE 0.35 823 0.1 -0.10.0 0.1 1.8 1.9 1.8DSH NOT AVAILABLE ** 615 0.00.5 0.5 -0.1 2.1 2.1 2.4URBAN TEACHING/DSHTEACHING & DSH 923 0.00.0 0.0 0.11.9 2.0 1.9NO TEACHING/DSH 1,450 -0.10.4 0.3 0.02.0 2.0 2.0NO TEACHING/NO DSH 11 2.8 1.3 4.1 0.15.9 5.9 5.61216(1) (2) (3) (4) (5) (6) (7) (8)Number ofHospitalsAPCRecalibration(PoliciesOther thanOutpatientLaboratoryServices) (%)APCRecalibration(OutpatientLaboratoryServicesPackagingPolicy) (%)APCRecalibration (allchanges)(%)New WageIndex andProviderAdjustments(%)CombinedCols 4, 5withMarketBasketUpdate (%)Column 6with FrontierState WageIndexAdjustment(%)AllChanges(%)DSH NOT AVAILABLE** 575 -0.20.4 0.2 0.01.9 2.0 2.3TYPE OF OWNERSHIPVOLUNTARY 2,040 0.1 0.0 0.1 0.1 1.9 2.1 2.0PROPRIETARY 1,300 -0.5 0.9 0.4 -0.2 1.9 2.0 2.0GOVERNMENT 565 0.3 -0.7 -0.5 -0.2 1.1 1.1 1.1CMHCs101 -1.3 1.8 0.4 -0.4 1.7 1.7 1.8Column (1) shows total hospitals and/or CMHCs.Column (2) shows the additional impact of changes resulting fromthe reclassification of HCPCS codes among APC groups and otherdata changes as a result of including the CY 2014OPPS packaging policies (but excluding the packaging of outpatient laboratory services currently paid at CLFS rates).Column (3) shows the additional impact of changes resulting fromthe reclassification of HCPCS codes among APC groups and otherdata changes as a result of including the CY 2014OPPS 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 at CLFS rates).Column (5) shows the budget neutral impact of updating the wage index by applying the FY 2014 hospital inpatient wage index. The rural adjustment continues our current policy of 7.1percent so the budget neutrality factor is1. Similarly, the differential in estimated cancer hospital payments for the adjustment is limited and thus results in a budget neutrality factor of1.0005.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 0.5 percentage points for theproductivity adjustment and further reduced by 0.3 percentage point in order to satisfy statutory requirements set forth in theAffordable 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 conversionfactor resulting from a change in the pass-through estimate, adding estimated outlier payments, and applying payment wageindexes.*These 4,068 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. Paymentsfor laboratory services at CLFS rates, which we arepackaging 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.12171218

(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) se rvices under the OPPS. In CY 2013, CMHCs are paid under two APCs for these services : APC 0172 (Level I Pa rtial 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 Hospitalizati on (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 de rive 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 pr ovided to the beneficiary. Packaging outpatient laboratory tests re sults in a 1.8 percent payment increase to CMHCs, which is offset by a 1.3 percent de crease in payments fr om APC recalibration for policies other than packagi ng outpatient laboratory tests. Together with the market1219 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 imp act 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 CM HCs, will receive a 1.7 percent OPD fee schedule increase factor. Co lumn 6 shows that combin ing 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 incr ease 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 percen t. This reflects all ch anges 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 fo r 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 r eaders to section II.I. of this final rule with comment period. In all cases, the statut e limits beneficiary liability for copayment for a procedure to the hospita l inpatient deductible for the applicable year. The CY 2014 inpatient hospital deductible is $1,216.1220 We estimate that the aggregate benefici ary coinsurance percentage will be 21.7 percent for all services pa id under the OPPS in CY 2014. The estimated aggregate beneficiary coinsurance reflects the final polic y 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 pa ss-through payments, and changes in the cancer hospital payment adjustment. (5) Estimated Effects of OPPS Changes on Other Providers The relative payment weights and paym ent amounts established under the OPPS affect the payments made to ASCs as discusse d 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 furnishe d in CY 2014. The effect on the Medicaid program is expected to be limited to incr eased copayments that Medicaid may make on behalf of Medicaid recipients who are also Medicare beneficiaries. We refer readers to our discussion of the impact on beneficiaries in section XXIII.A . of this final rule with comment period. (7) Alternative OPPS Policies Considered1221 Alternatives to the OPPS changes we proposed and are making and the reasons for our selected alternatives are discussed th roughout this final rule with comment period. In this section, we discuss so me 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 prospe ctively pay for device-dependent hospital outpatient services associated with 121 HC PCS codes. We proposed to define a comprehensive APC as a classification for the provision of a primary service and all adjunct services provided to s upport 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 clai m as representing components of the comprehensive service, resulting in a single pr ospective 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 re presenting components of the comprehensive service, making a single payment for the co mprehensive service based on all charges on the claim, excluding only charges for services that cannot be covere d 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 bene ficiary copayment, up to the cap set at the level of the inpatient hospital deductible. We proposed this as a step that we be lieve 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 a nd supportive services delivered along with that procedure. We also believed the proposed polices would enhance beneficiary understanding and transp arency for the beneficiary, for physicians,1223 and for hospitals by creating a common refere nce point with a similar meaning for all three groups by using the comprehensive serv ice concept that alr eady identifies these services when they are furnished to a hospital inpatient. We considered implementing this po licy for CY 2014 as proposed, but in response to public comments we received a nd because we are providing significantly greater detail on the comprehensive AP C 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 finalizi ng our comprehensive APC policy effective CY 2015, we also are inviting additional public comment because there is significant additional informati on on the comprehensive APC policy in the preamble of this final rule with comment peri od. 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 wh en 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 othe r services in the APC. We have created a complexity adjustment to assign certain ot her subsets of complex procedur es to different APCs than the simpler versions of those services. We have reassigned the composite cardiac1224 ablation APC to the comprehensive APC fo r 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 iden tification 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. Fina lly, we are not finalizing our proposal to include costs from certain inpatient room a nd board cost centers for comprehensive APC ratesetting because the outpatient costs associ ated 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 paymen t 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 propos ed, but did not do so because we believe we should provide an opportunity for additiona l public comment as well as a longer time period for operational implementation by CMS contractors and other stakeholders. We considered but did not implement comprehens ive APCs as originally proposed. Although we believe that an averaged payment systemsimilar to the IPPS with a single payment for a primary or comprehensive service is our goal and would be feas ible, 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 procedur es, has worked well in the IPPS for almost 30 years, we determined that a complexity adjustment as recommended by commenters could reduce1225 the spread of costs and ease the transition as hospitals explore mechanisms to increase efficiencies if their mean costs of a specifi c complex procedure exceed the average cost. We considered but did not implement recommendations to eliminate certain proposed APCs from conversion to comprehe nsive 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, afte r applying our usual processes of modeling coding changes, and after developing and a pplying a complexity adjustment for high volume complex services with a high cost variance from the mean payment, we determined that these processes applied equa lly well to the various APCs and no sets of services stood out as inappr opriate for conversion on the ba sis of coding changes or the basis of multiple component procedures that could not have any poten tial adverse impact mitigated. We considered but did not implement a multiple procedure adjustment to the comprehensive APC payment. As an altern ative to the complexity adjustment, we considered a multiplier to be applied whentwo or more individual procedures were performed during the same comprehensive servi ce. However we did not consider that, in our current year analyses, a single multiplier re flected 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 compre hensive service representing a single entire service to a beneficiary. However we will continue to explore other options to account1226 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 opti ons after receiving comme nts, 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 visi t 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 ar e 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 repres enting 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 T ype 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 coul d 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 we ll 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 a ny change in ED visit coding while we further consider the most appropria te payment structure for Type A and Type B ED visits. We also considered replacing the current fi ve levels of visit c odes for each clinic, Type A ED, and Type B ED visit with si x new alphanumeric Level II HCPCS codes representing two levels (lower level and hi gher level) of payment for each of the three types of visits. The lower-level alphanumer ic 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 r econfigured APCs with CY 2014 OPPS payment rates based on the total mean costs of Leve l 1 and 2 visit codes obtained from CY 20121228 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 Le vel 3 through Level 5 visit codes, respectively, and would be assigne d to newly created or reconfigured APCs with CY 2014 OPPS payment rates based on th e 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 c ould 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 vis it 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; a nd 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 implemen t guidelines to differentiate the levels of service would continue to exist. Also, wh ile the two-level visit payment structure may provide incentives for hospitals to be effici ent, the incentives may not be so great as under a single-level visit payment structure. Fo r ED visits, we believe it is best to delay any change in ED visit coding while we cons ider further the most appropriate payment structure for Type A and Type B ED visits, for the reasons stated earlie r 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 levels1229 each of clinic visits. We are not finalizi ng our proposal to create two new alphanumeric Level II HCPCS codes to describe all le vels of Type A and Type B ED visits, respectively, rather than continue to recogni ze five levels each of Type A and Type B ED visits. b. Estimated Effects of CY 2014 AS C 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 th e 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 re lative payment weights on payment rates are varied and are reflected in the estima ted 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 productiv ity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity (MFP) (as projecte d 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 applicati on of a 2.0 percentage point reduction to the annual update factor, which currently is th e CPI-U. We calculated the CY 2014 ASC1230 conversion factor by adjusting the CY 2013 ASC conversion factor by 1.0009 to account for changes in the pre-floor and pre-reclassi fied hospital wage i ndices between CY 2013 and CY 2014 and by applying the CY 2014 M FP-adjusted CPI-U update factor of 1.2 percent (projected CPI-U update of 1.7 percent minus a project ed 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 effect s of the changes for CY 2014 on Medicare payment to ASCs. A key limitation of our analys is is our inability to predict changes in ASC service-mix between CY 2012 and CY 2014 w ith 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 ch anges may have differential effects across surgical specialty groups as ASCs continue to adjust to the payment rates based on the policies of the revised ASC payment system. We are unable to accurately project 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 rang e 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 de pend on a number of factors, including, but not limited to, the mix of services the ASC pr ovides, the volume of specific services1231 provided by the ASC, the percentage of its pa tients who are Medicare beneficiaries, and the extent to which an ASC provides diffe rent services in the coming year. The following discussion presents tables that disp lay estimates of the impact of the CY 2014 updates to the ASC payment syst em 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 ancillar y items and services group by comparing estimated CY 2013 paymen ts 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 code s 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 des cending order by estimated Medicare program payment to ASCs. The following is an expl anation of the information presented in Table 56.

● Column 1—Surgical Specialty or Anc illary Items and Services Group indicates the surgical specialty into which ASC proce dures are grouped and the ancillary items and services group which includes all HCPCS codes for covered an cillary items and services. To group surgical procedures by surgical specialty, we used the CPT code range1232 definitions and Level II HCPCS codes and Category III CPT codes as appropriate, to account for all surgical procedures to wh ich the Medicare pr ogram payments are attributed.

● Column 2—Estimated CY 2013 ASC Payments were calculated using CY 2012 ASC utilization (the most recent fu ll year of ASC utilization) and CY 2013 ASC payment rates. The surg ical specialty and ancillary items and services groups are displayed in descending order base d on estimated CY 2013 ASC payments.

● Column 3—Estimated CY 2014 Percent Change is the aggregate percentage increase or decrease in Medicare program pa yment to ASCs for each surgical specialty or ancillary items and services group that are at tributable 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 increas e in aggregate payment amounts for eye and ocular adnexa procedures, an 5 percent increase in aggr egate payment amounts for digestive system procedures, and a 3 percent decrease in a ggregate payment amounts for nervous system procedures. Generally, for the surgical specialty gr oups that account for less ASC utilization and spending, we estimate that the payment effects of the CY 2014 update are variable. For instance, we estimate that, in the aggr egate, payment for musculoskeletal system procedures will not change, whereas paymen t for genitourinary system procedures, integumentary system procedures and respirat ory system procedures will increase by 3 to 14 percent under the CY 2014 rates.1233 An estimated increase in aggregate pa yment for the specialty group does not mean that all procedures in the group will experience increased pa yment rates. For example, the estimated increase for CY 2014 for digestiv e 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) wh ere estimated payment will increase by 6 percent for CY 2014. Also displayed in Table 56 is a separa te estimate of Medicare ASC payments for the group of separately payable covered an cillary items and serv ices. The payment estimates for the covered surgical procedures include the costs of packaged ancillary items and services. 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 AGGR EGATE 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 pro cedures receiving the greatest estimated CY 2013 aggregate Medicare payments to AS Cs. 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 paym ents 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 refl ects our CY 2014 policy to package the payment for CPT codes 64636, 29826, and 64484
(3) Estimated Effects of ASC Paym ent 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 procedur es 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 comp ly with sections 1833( a)(1) and (b) of the Act, the ASC coinsurance rate for all procedures is 20 percent. This contrasts with procedures performed in HOPDs, where the be neficiary is responsible for copayments that range from 20 percent to 40 percent of th e procedure payment. Second, in almost all cases, the ASC payment rates under the 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. (T he only exceptions would be if the ASC coinsurance amount exceeds the inpatient de ductible. The statute requires that copayment amounts under the OPPS not exceed th e inpatient deductible .) Beneficiary coinsurance for services migrating from phys icians' offices to ASCs may decrease or increase under the revised AS C payment system, depending on the particular service and the relative payment amounts for that servi ce in the physician's office compared to the ASC. However, for those addi tional procedures that we ar e designating as office-based in CY 2014, the beneficiary coinsurance amount will be no greater than the beneficiary1237 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 specifi c 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 Circul ar A-4 (available on the Office of Management and Budget Web Site at: http://www.whitehouse.gov/sites/default/file s/omb/assets/regulatory_matters_pdf/a4.pdf), we have prepared two accounting statements to illustrate the im pacts of this final rule with comment period. The first account ing statement, Table 58 (below) illustrates the classification of expenditures for th e 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 st atement, Table 59 (below) illustrates the classification of expenditures associated w ith the 1.2 percent CY 2014 update to the ASC payment system, based on the provisions of th is final rule with comment period and the baseline spending estimates for ASCs in th e 2013 Trustee’s Report. The third accounting statement, Table 60 (below), illustrates the cl assification of expenditures associated with the revision to the definition of hospita l-based EP in payment year 2013 for EPs1238 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 OP D FEE SCHEDULE INCREASE

Category Transfers Annualized Monetized Transfers $600 million From Whom to Whom Federal Govern ment to outpatient hospitals and other providers who r eceive payment under the hospital OPPS Total $600 million

TABLE 59.--ACCOUNTING STATEM ENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2013 TO CY 2014 AS A RESULT OF THE FINAL CY 2014 UPDATE TO TH E 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 STATEM ENT: 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 Gove rnment 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 w ith comment period, we are adopting policies affecting the Hospital OQR Program.1239 Out of 3,352 hospitals that met eligibility requiremen ts, 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 th e full OPD fee schedule increase factor in
CY 2016. In section XVI.E.3.a. of the CY 2010 O PPS/ASC final rule with comment period (74 FR 60647 through 60650), for the CY 2011 payment update, as part of the validation process, we required hospitals to submit pape r copies of requested medical records to a designated contractor within the required timeframe. Failure to submit requested documentation could result in a 2.0 percentage point reduction to a hospital’s CY 2011 OPD fee schedule increase factor, but the fail ure to attain a validation score threshold would not. In section XVI.D.3.b of the CY 2011 OPPS/ ASC final rule with comment period, we finalized our proposal to validate data submitted by 800 hospitals of the approximately 3,200 participating hospitals for purposes of the CY 2012 Hospital OQR Program payment determination. We stated our belief that this approach was suitable for the CY 2012 Hospital OQR Program because it w ould: produce a more reliable estimate of whether a hospital’s submitted data have been abstracted accurately; provide more statistically reliable estimates of the quality of care delivered in each selected hospital as1240 well as at the national level; and reduce ove rall hospital burden becau se most hospitals would not be selected to undergo validati on each year. We adopted a threshold of 75 percent as the threshold for the validation score because we believed this level was reasonable for hospitals to achieve while still ensuring accuracy of the data. In addition, this level is consistent with what we a dopted 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 num ber of hospitals that would not meet all program requirements. In the CY 2012 OPPS/ASC final rule w ith 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 y ears, we made some modifications to administrative requirements in extending a dead line to submit a Notice of Participation as well as to extraordinary circumstance waiver or extension and rec onsideration processes to broaden the scope of personnel who can si gn these requests. However, we did not make any modifications to our validation requirements. We e xpect these policies to have minimal impact on the program.1241 In this CY 2014 OPPS/ASC final ru le 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 measur es from the Hospital OQR Program. As stated above, we are unable to estima te the number of hospitals that may not receive the full OPD fee schedule increase fa ctor in CY 2016. We also are unable to estimate the number of hospitals that woul d 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 re cord 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 w ith comment period, for the ASCQR Program, we are adopting three additional qual ity measures for the CY 2016 payment determination and subsequent years. Data collection for these proposed measures will begin in CY 2014. We will collect aggregat e 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 We b page. We also are adopting for the CY 2016 payment determination and subsequent years requirements for a QualityNet account and security administrator, facili ty 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 fo r 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 outco me measures requirement that OPOs meet all three outcome measures se t forth in § 486.318 to a requirem ent that they meet two out of the three outcome measures. Our revised po licy will result in those OPOs that fail1243 only one outcome measures avoiding automa tic 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 d ecertification, it is very difficult to quantify the impact of this policy change. As discu ssed under section XXI.C. of this final rule with comment period relating to the ICR require ments, 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 re sult of our policy change to the outcome measures requirement, we are unable to provid e a specific estimate of that cost savings. g. Effects of Revisions of the QIO Regulations In section XVII. of this final rule w ith 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 legi slation and included additional flexibility for the Secretary in the admi nistration of the QIO program. Currently, 42 CFR Part 475 includes definitions and standa rds 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 fo llowing: (1) replace nomenclature that has1244 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 th e Secretary’s authorityfor the program and update the contracting requirements to align with c ontemporary quality improvement. We estimate the effects of the QIO Program changes to be consistent with the Congressional Budget Office’s 2011 Cost Estim ate of the Trade Bill (H.R. 2832) which included a reduction in spending of $330 m illion over the 2012-2021 period. According to the CBO Estimate, the Act and subsequent ly the regulatory changes “would modify the provisions under which CMS contracts with independent entities called [“]Quality Improvement Organizations [(QIOs)”] in Medi care. QIOs, generally staffed by health care professionals, review medical care, help beneficiaries with complaints about the quality of care, and implement care improve ments. H.R. 2832 would make several changes to the composition and operation of QIOs, and would harmonize QIO contracts with requirements of the Federal Acquisi tion 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 t hose 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 Profe ssionals (EPs) Reassigning Benefits to Method
II CAHs1245 As discussed in section XV III.A. of this final rule with comment period, we are revising the regulations to pr ovide, during payment year 2013 alone, a special method for determining the hospital-based status of EP s who reassign their be nefits to Method II CAHs. It is difficult to determine with precisi on the cost impact of this policy change. We lack specific information on key factor s affecting this imp act, including the number of EPs who reassign their bene fits to Method II CAHs, th e proportion of those EPs who will be determined to be nonhospital-ba sed 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 nece ssary 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 estim ates 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 w ithin 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 fac ilities, we understand1246 that many of them have fairly substantial outpa tient clinics. At the same time, we have also been informed that they rely largel y on nonphysician practitione rs (nurses and nurse practitioners) to staff these outpatient clinics. Therefore, we will assume that the typical outpatient department in a Method II CAH ha s a relatively small number of physicians, between 5 and 10, on staff and billing for profe ssional 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) fo r the Medicare Electronic Health Record Incentive Program, we determined that about14 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-ba sed. Because CAHs have relatively small inpatient hospital facilities, we believe that the physicians practici ng in these facilities will bill for somewhat fewer inpatient serv ices 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-base d EPs reassigning benefits to Method II CAHs, some propor tion 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, we1247 estimate that between 3,240 and 6,480 non-hospita l-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 ingeneral and for the present purposes in particular . Consistent with the estima tes 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 w ill actually qualify to re ceive Medicare EHR incentive payments in 2013. As we have pr eviously discussed, s ection 1848(o)(1)(B) of the Act provides that the incentive payment fo r an EP for a given payment year shall not exceed the following amounts:

• For the EP’s first payment year, fo r 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; and1248

• 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 fo r 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 beenmaking in 2013. Despite the uncertainties of the assumptions that we have employed in de veloping 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 ther e is no 12-month cost reporting period that begins on or after the be ginning of a payment year, we will use the most recent 12-month cost reporting period avai lable at the time of final settlement in order to determine final EHR incentive paymen ts 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 b een able to make a determination of final payments because there is no hospital cost re port that meets the existing requirements of the regulations. Therefore, we do not expectthis to have any financial impact. This1249 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 signi ficant impact on a substantial nu mber of small entities. For purposes of the RFA, we estimate that most hospitals, ASCs and CMHCs are small entities as that term is used in the RFA. For purposes of the RFA, most hospitals are considered small businesses according to th e Small Business Administration’s size standards with total revenues of $35.5 million or less in any single year. Most ASCs and most CMHCs are considered small businesse s with total revenues of $10 million or less in any single year. We estimate that this final rule with comment period may have a significant impact on approximately 2,040 hospi tals with voluntary ownership. For details, see the Small Business Administ ration’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 opera tions 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 th e Act, we define a small rural hospital as a hospital that is located outside of a metr opolitan 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 sm all 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 i ssuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $141 million. This final rule with comment period does not manda te 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 pe riod will affect all classes of hospitals paid under the OPPS and will affect both CMHCs and ASCs. We estimate that most classes of hospitals pa id under the OPPS will experience a modest increase or a minimal decrease in paymen t for services furnished under the OPPS in CY 2013. Table 55 demonstrates the estimateddistributional 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, afte r considering all of the changes to APC reconfiguration and recalibrati on, as well as the OPD fee sche dule increase factor, wage index changes, including the frontier State wage index adju stment, estimated payment for outliers, and changes to the pass-through paym ent 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 provide s a different set of procedures in the coming year. Table 56 demonstrates the estimated distributional impact among AS C 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 requ irements that an agency must meet when it promulgates a proposed rule (and subseq uent final rule) that imposes substantial direct costs on State and local governments , preempts State law, or otherwise has Federalism implications. We have examin ed 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 wi ll 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 hospita ls (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 ha ve provided in this sec tion of this final rule with comment period, in conjunction with the remainder of this document, demonstrate1252 that this final rule with comment period is consistent with the regulatory philosophy and principles identified in Execu tive Order 12866, the RFA, and s ection 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 fo r 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 th e effective date of final rules after the date they are issued. The 60-day delay in e ffective 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 fi ndings and its reasons in the rule issued. We believe it would be c ontrary to the public interest to delay the effective date of the OPPS and ASC paymen t 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) a nd 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 syst ems final rule with comment period by November 1 of each year to both comply w ith 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 th e 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 AS C payment system, respectively. We also believe it would be contrary to the public interest to delay the effective date of the Hospital VBP Program perfor mance and baseline period policies being finalized in this document. These policies ar e 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. Thes e 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 effectiv e 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 contra ry to the public interest to delay the effective date of the revisions to the provi der reimbursement determ inations 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 fina lity 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 dela yed 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 th at our waiver of the delayed effective date only applies to the OPPS and ASC payment sy stem policies (including the Hospital OQR and the ASCQR Program policies), the Hospita l VBP Program performance and baseline period policies, and the revisions to the provider reimbursement determinations and appeals regulations at 42 CF R 405.1885, that are adopted in th is final rule with comment period and in the applicable final rules. Th e delayed effective date for all other policies in the final rules in this document is not waived, and these polici es will be effective on [insert 60 days after date of public displ ay at the Office of the Federal Register].1255 List of Subjects 42 CFR Part 405 Administrative practice a nd procedure, Health facili ties, Health professions, Kidney diseases, Medicare, Reporting a nd recordkeeping, Rural areas, X-rays. 42 CFR Part 410 Health facilities, Health professions, La boratories, Medicare, Rural areas, X-rays. 42 CFR Part 412 Administrative practice and procedure, Health facilitie s, Medicare, Puerto Rico, Reporting and recordkeeping requirements. 42 CFR Part 419 Hospitals, Medicare, Reporting an d recordkeeping requirements. 42 CFR Part 475 Grant programs-health, Health care, H ealth professions, Quality Improvement Organization (QIO) 42 CFR Part 476 Health care, Health pr ofessional, Health record, Quality Improvement Organization (QIO), Penalt ies, Privacy, Reporting and recordkeeping requirements. 42 CFR Part 486 Grant programs-health, Health facilities, Medicare, Reporting and recordkeeping requirements, X-rays. 42 CFR Part 4951256 Computer technology, Electronic health reco rds, Electronic transactions, Health, Health care. Health information technology, Hea lth insurance, Health records, Hospitals, Laboratories, Medicaid, Medicare, Privacy, Reporting and recordkeeping requirements, Public health, Security. For reasons stated in the preamble of th is document, the Centers for Medicare & Medicaid Services is amending 42 CFR Chapter IV as set forth below: 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 admini strative and judicial review under prospective payment system. * * * * * (a) The determination of the requir ement, or the proportional amount, of the budget neutrality adjustment in the prosp ective payment rates required under section 1886(e)(1) of the Social Security Act.
* * * * * 3. Section 405.1885 is amended by re vising 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 interm ediary 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 de termination or decision, by CMS (with respect to Secretary determinations), by the inte rmediary (with respect to intermediary determinations), or by the re viewing entity that made th e 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 report ing 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 fi rst 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 th is 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 para graphs (b)(2)(i) throu gh (b)(2)(iii) of this section applies to, and is calculated separate ly for, each specific finding on a matter at issue (as described in paragraphs (a)(1)(i) th rough (a)(1)(iv) of this section, but not to such findings when made as part of a dete rmination 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 th e 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 practi tioner’s service: Conditions. (a) Medicare Part B pays for therapeu tic hospital or CAH services and supplies furnished incident to a physician’s or nonphysician practitioner’s service, which are1259 defined as all services and s upplies furnished to hospital or CAH outpatients that are not diagnostic services and that aid the p hysician or nonphysician practitioner in the treatment of the patient, including drug s and biologicals which are not usually self-administered, if— (1) * * * (v) In accordance with applicable State law.
* * * * * PART 412—PROSPECTIVE PAYM ENT 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 redesi gnating 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 se ction, the hospital may request an independent CMS review of that decision.
* * * * * PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL OUTPATIENT DEPARTMENT SERVICES1260 8. The authority citation for part 419 continues to read as follows: Authority: Secs. 1102, 1833(t), and 1871 of the So cial Security Act (42 U.S.C. 1302, 1395l(t), and 1395hh). 9. Section 419.2 is amended by revising para graphs (b) introducto ry 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 ho spital 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-rel ated costs that are integral, ancillary, s upportive, dependent, or adjunctiv e to performing a procedure or furnishing a service on an outpatient basis. Ingeneral, 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 th e payment for the related procedures or services.
* * * * * (3) Observation services;
* * * * * (11) Implantable and insertable me dical 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 suppl ies directly related to colostomy care), including replacement of these devices;1261 * * * * * (13) Image guidance, processing, supe rvision, and interp retation services; (14) Intraoperative items and services; (15) Drugs, biologicals, and radiopharm aceuticals that function as supplies when used in a diagnostic test or procedure (including but not limited to, diagnostic radiopharmaceuticals, contrast agen ts, and pharmacologi c stress agents; (16) Drugs and biological that function as supplies when used in a surgical procedure (including, but not limited to, skinsubstitutes and similar products that aid wound healing and implantable biological); (17) Certain clinical dia gnostic 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 outp atient prospective payment system (except when packaged as a part of a bundled payment):
* * * * * (j) Except as provided in § 419.2(b)(11), prosthetic devices, pr osthetic 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 pr oductivity adjustment (as determined by CMS) and 0.3 percentage point.
* * * * * 12. Section 419.46 is added to S ubpart 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 Ac t 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 paragrap h (a)(1) of this section; and1263 (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 shar e 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 fo r the participation form are described in paragraphs (a)(3)(i) and (ii) of this secti on, and are based on the date identified as a hospital’s Medicare acceptance date. (i) If a hospital has a Medicare acceptan ce date before January 1 of the year prior to the affected annual payment update, the hos pital must complete and submit to CMS a completed Hospital OQR Notice of Participa tion Form by July 31 of the calendar year prior to the affected annual payment update. (ii) If a hospital has a Me dicare acceptance date on or after January 1 of the year prior to the affected annual payment upda te, the hospital must submit a completed participation form no later than 180 days fr om 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 annual1264 payment updates. A withdrawn hospital will not be able to later sign up to participate in that payment update, is subject to a reducedannual payment update as specified under § 419.43(h), and is required to submit a new part icipation 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 th is section, hospitals that participate in the Hospital OQR Program must submit to CMS data on measur es selected under section 1833(17)(C) of the Act in a form and manner, a nd at a time, specified by CMS. (2) Submission deadlines. Submission deadlines by m easure 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 Ho spital OQR Program. (i) If a hospital has a Medicare acceptance date before January 1 of the year prior to th e affected annual payment update, the hospital must submit data beginning with encounters occurring during the firs t calendar quarter of the year prior to the affected annual payment update, in addition to submitting a completed Hospital OQR Notice of Participatio n Form under paragraph (a)(3)(i) of this section. (ii) If a hospital has a Me dicare acceptance date on or after January 1 of the year prior to the affected annual payment update, th e hospital must submit data for encounters beginning with the first full quarter followi ng submission of the completed Hospital OQR Notice of Participation Form under para graph (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 upda te 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 th e event of extraord inary circumstances beyond the control of the hospital, such as whenan 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 subm ission. 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 ar e 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 sect ion 1833(17)(C) of the Act by reviewing documentation of patient encounters submitted by se lected participating hospitals. (1) Upon written request by CMS or its contractor, a hospital must submit to CMS supporting medical record documentation thatthe 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 hosp ital must submit the supporting medical record documentation to CMS or its contractor with in 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 requireme nt with respect to a fiscal year if it achieves at least a 75-percent reliabil ity score, as determined by CMS. (f) Reconsiderations and appeal s of Hospital OQR Program decisions. (1) A hospital may request reconsider ation 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 th is 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 mustcontain 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 request ing 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-designat ed personnel contact inform ation, including name, email address, telephone number, and mailing addre ss (must include physical mailing address, not just a post office box); (vi) The hospital-design ated personnel’s signature;1267 (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 requesti ng 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 dissatisfi ed 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 pa ragraph (b)(3) to read as follows: § 419.66 Transitional pass-through payments: Medical devices. * * * * * (b) * * * (3) The device is an integral part of th e service furnished, is used for one patient only, comes in contact with human tissue, a nd 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 Se curity Act (42 U.S.C. 1302 and 1395hh). 15. Section 475.1 is amended by— a. Redesignating paragra phs (a) through (d) in the defi nition 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 review s that QIOs are authorized to perform. Such reviews in clude, 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, includ ing appeals and DRG validation reviews; and (5) Admission and discharge reviews.
* * * * * Physician means:1269 (1) A doctor of medicine or osteopat hy, a doctor of dental surgery or dental medicine, a doctor of podiatry, a doctor of opt ometry, or a chiroprac tor as described in section 1861(r) of the Act; (2) An intern, resident, or Federal G overnment employee authorized under State or Federal law to practice as a doctor as descri bed 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 provide d in § 476.1 of this chapter. QIO area means the defined geographic area, su ch as the State(s), region(s), or community(ies), in which the CMS cont ract directs the QIO to perform. Quality improvement initiative has the same meaning as provided in § 476.1 of this chapter. 16. Subpart C is revise d 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 heal th care facilities, a ffiliates, 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 a nd 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 organiza tions that are eligible to become Quality Improvement Organizations (QIOs) and desc ribes certain steps CMS will take in selecting QIOs. § 475.101 Eligibility requiremen ts for QIO contracts. In order to be eligible for a QIO contr act, an organization must meet the following requirements: (a) Have a governing body that include s at least one individual who is a representative of health care providers and at least one indi vidual who is a representative of consumers. (b) Demonstrate the ability to perf orm 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 se t forth in § 475.103.1271 (c) Demonstrate the ability to activel y engage beneficiaries, families, and consumers, as applicable, in case review s as set forth in § 475.102, and/or quality improvement initiatives as set forth in § 475.103. (d) Demonstrate the ability to perfor m 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 or ganization has demonstrated the ability to perform case review, CMS will take into consideration factors such as: (1) The organization’s proposed processe s, capabilities, quantitative, and/or qualitative performance objectives a nd methodology to perform case reviews; (2) The organization’s proposed invol vement of and access to physicians and practitioners in the QIO area wi th the appropriate expertise a nd specialization in the areas of health care related to case reviews; (3) The organization’s ability to take in to consideration urban versus rural, local, and regional characteristics inthe 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 a ccess to qualified informati on 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 considers1272 relevant to performing case reviews; such pr ior experience may include prior similar case review experience. (c) A State government that administer s 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 or ganization has demonstrated the ability to perform quality improvement initiatives, CMS w ill take into consideration factors such

as: (1) The organization’s proposed processe s, capabilities, quantitative, and/or qualitative performance objectives, and methodology to perform quality improvement initiatives; (2) The organization’s proposed invol vement of and access to physicians and practitioners in the QIO area wi th the appropriate expertise a nd specialization in the areas of health care concerning the quality improvement initiatives; (3) The organization’s access to prof essionals with appr opriate knowledge of quality improvement methodologies and practices; and (4) The organization’s a ccess to qualified informati on 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 considers1273 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 administer s a Medicaid program will be considered incapable of performing quality improvement initiative functions in an effective manner, unless the State demonstrates to the satisfac tion 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 paragra ph (a)(3) of this section, the following are not eligible for QIO contracts: (1) A health care faci lity 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 owne r, 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; or1274 (ii) A payor organization is a more qualif ied 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 sa tisfaction of CMS that, in performing QIO activities, the payor organization will act with complete objectiv ity and independence from its payor program. (b) [Reserved] (c) Subcontracting . A QIO must not subcontract w ith a health care facility to perform any case review activities except fo r the review of th e quality of care. § 475.106 [Reserved] § 475.107 QIO contract awards. Subject to the provisi ons of § 475.105, CMS will-- (a) Ensure that all awardees m eet 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 IMPROVEMEN T 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 revi sed 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 paragr aphs (1) though (4) an d 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 optom etry, or a chiropractor, as described in section 1861(r) of the Act; (2) An intern, resident, or Federal G overnment employee authorized under State or Federal law to practice as a doctor as descri bed 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 Qu ality Improvement Organizations (QIOs) PART 486—CONDITIONS FOR COVERAGE OF SPECIALIZED SERVICES FURNISHED BY SUPPLIERS 21. The authority citation of part486 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 P ublic Health Service Act (42 U.S.C. 273).1276 22. Section 486.316 is amended by revising pa ragraphs (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 th is section or the requirements described in paragraph (a)(2) of th is section, the OPO is de-certified. If the OPO does not appeal or the OPO appeals a nd the reconsideration official and CMS hearing officer uphold the de-c ertification, the OPO’s serv ice area is opened for competition from other OPOs. The de-certifie d OPO is not permitted to compete for its open area or any other open area. An OP O 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 OP O took to overcome them, and the results.
* * * * * 23. Section 486.318 is amended by revising paragraph (a) intr oductory text and paragraph (b) introductory text to read as follows: § 486.318 Condition: Outcome measures. (a) With the exception of OPOs opera ting 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 y ear, 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; and1278 (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 year s before the payment adjustment year. (2) For Medicaid, it is at the State’s di scretion 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 desc ribed in § 413.70(b)(3) of this chapter) is considered to be hospital-based if 90 percen t 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 hospita l 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 hospi tal acute care inpatient discharges, Medicare Part A acu te 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 fo r 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 Assistan ce Program No. 93.773, Medicare—Hospital Insurance; Program No. 93.774, Medicare—Suppl ementary Medical Insurance Program; and Program No. 93.778 (M edical Assistance) Dated: November 14, 2013

______________________________ Marilyn Tavenner, Administrator, Centers for Medicare & Medicaid Services

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Dated: November 20, 2013

___________________________ Kathleen Sebelius, Secretary

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BILLING CODE 4120-01-PCMS-1601-FC

[FR Doc. 2013-28737 Filed 11/27/2013 at 4:15 pm; Publication Date: 12/10/2013]