42170 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 410, 411, 416, 419, 489, 

and 495 

[CMS–1525–P] 

RIN 0938–AQ26 

Medicare and Medicaid Programs: 

Hospital Outpatient Prospective 

Payment; Ambulatory Surgical Center 

Payment; Hospital Value-Based 

Purchasing Program; Physician SelfReferral; and Provider Agreement 

Regulations on Patient Notification 

Requirements 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

revise the Medicare hospital outpatient 

prospective payment system (OPPS) to 

implement applicable statutory 

requirements and changes arising from 

our continuing experience with this 

system. In this proposed rule, we 

describe the proposed changes to the 

amounts and factors used to determine 

the payment rates for Medicare hospital 

outpatient services paid under the 

OPPS. These proposed changes would 

be applicable to services furnished on or 

after January 1, 2012. 

In addition, this proposed rule would 

update the revised Medicare ambulatory 

surgical center (ASC) payment system to 

implement applicable statutory 

requirements and changes arising from 

our continuing experience with this 

system. In this proposed rule, we set 

forth the proposed relative payment 

weights and payment amounts for 

services furnished in ASCs, specific 

HCPCS codes to which these proposed 

changes would apply, and other 

proposed ratesetting information for the 

CY 2012 ASC payment system. These 

proposed changes would be applicable 

to services furnished on or after January 

1, 2012. 

We are proposing to revise the 

requirements for the Hospital 

Outpatient Quality Reporting (IQR) 

Program, add new requirements for ASC 

Quality Reporting System, and make 

additional changes to provisions of the 

Hospital Inpatient Value-Based 

Purchasing (VBP) Program. 

We also are proposing to allow 

eligible hospitals and CAHs 

participating in the Medicare Electronic 

Health Record (EHR) Incentive Program 

to meet the clinical quality measure 

reporting requirement of the EHR 

Incentive Program for payment year 

2012 by participating in the 2012 

Medicare EHR Incentive Program 

Electronic Reporting Pilot. 

In addition, we are proposing to make 

changes to the rules governing the 

whole hospital and rural provider 

exceptions to the physician self-referral 

prohibition for expansion of facility 

capacity and changes to provider 

agreement regulations on patient 

notification requirements. 

DATES: Comment Period: To be assured 

consideration, comments on all sections 

of this proposed rule must be received 

at one of the addresses provided in the 

ADDRESSES section no later than 5 p.m. 

EST on August 30, 2011. 

ADDRESSES: In commenting, please refer 

to file code CMS–1525–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (no duplicates, please): 

1. Electronically. You may (and we 

encourage you to) submit electronic 

comments on this regulation to http:// 

www.regulations.gov. Follow the 

instructions under the ‘‘submit a 

comment’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1525–P, P.O. Box 8013, Baltimore, 

MD 21244–1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments via express 

or overnight mail to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1525–P, Mail Stop C4–26–05, 

7500 Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal Government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call the telephone number (410) 

786–7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this 

document. 

For information on viewing public 

comments, we refer readers to the 

beginning of the SUPPLEMENTARY

INFORMATION section. 

FOR FURTHER INFORMATION, CONTACT: 

Paula Smith, (410) 786–0378, Hospital 

outpatient prospective payment 

issues. 

Char Thompson, (410) 786–0378, 

Ambulatory surgical center issues. 

Michele Franklin, (410) 786–4533, and 

Jana Lindquist, (410) 786–4533, 

Partial hospitalization and 

community mental health center 

issues. 

James Poyer, (410) 786–2261, Reporting 

of Hospital Outpatient Quality 

Reporting (OQR) and ASC Quality 

Reporting Program issues. 

Teresa Schell, (410) 786–8651, 

Physician Ownership and Investment 

in Hospitals issues. 

Georganne Kuberski, (410) 786–0799, 

Patient Notification Requirements 

issues. 

James Poyer, (410) 786–2261, and 

Ernessa Brawley (410) 786–2075, 

Hospital Value-Based Purchasing 

(VBP) Program issues. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

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Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 42171 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection, 

generally beginning approximately 3 

weeks after publication of the rule, at 

the headquarters of the Centers for 

Medicare & Medicaid Services, 7500 

Security Boulevard, Baltimore, MD 

21244, on Monday through Friday of 

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

To schedule an appointment to view 

public comments, phone 1–800–743– 

3951. 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

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

Government Printing Office. This 

database can be accessed via the 

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

Addenda Available Only Through the 

Internet on the CMS Web Site 

In the past, a majority of the Addenda 

referred to throughout the preamble of 

our OPPS/ASC proposed and final rules 

were published in the Federal Register 

as part of the annual rulemakings. 

However, beginning with this CY 2012 

rule, all of the Addenda will no longer 

appear in the Federal Register as part of 

the annual OPPS/ASC proposed and 

final rules to decrease administrative 

burden and reduce costs associated with 

publishing lengthy tables. Instead, these 

Addenda will be published and 

available only on the CMS Web site. The 

Addenda relating to the OPPS are 

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

HospitalOutpatientPPS. The Addenda 

relating to the ASC payment system are 

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

ASCPayment/. For complete details on 

the availability of the Addenda 

referenced in this proposed rule, we 

refer readers to section XVII. Readers 

who experience any problems accessing 

any of the Addenda that are posted on 

the CMS Web site identified above 

should contact Charles Braver at (410) 

786–0378. 

Alphabetical List of Acronyms 

Appearing in This Federal Register 

Document 

ACEP American College of Emergency 

Physicians 

AHA American Hospital Association 

AHIMA American Health Information 

Management Association 

AHRQ Agency for Healthcare Research and 

Quality 

AMA American Medical Association 

AMP Average Manufacturer Price 

AOA American Osteopathic Association 

APC Ambulatory Payment Classification 

ARRA American Recovery and 

Reinvestment Act of 2009, Pub. L. 111– 

5 

ASC Ambulatory Surgical Center 

ASP Average Sales Price 

AWP Average Wholesale Price 

BBA Balanced Budget Act of 1997, Pub. L. 

105–33 

BBRA Medicare, Medicaid, and SCHIP 

[State Children’s Health Insurance 

Program] Balanced Budget Refinement 

Act of 1999, Pub. L. 106–113 

BIPA Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection 

Act of 2000, Pub. L. 106–554 

BLS Bureau of Labor Statistics 

CAH Critical Access Hospital 

CAP Competitive Acquisition Program 

CBSA Core-Based Statistical Area 

CCN CMS Certification Number 

CCR Cost-to-Charge Ratio 

CDC Centers for Disease Control 

CERT Comprehensive Error Rate Testing 

CLFS Clinical Laboratory Fee Schedule 

CMHC Community Mental Health Center 

CMS Centers for Medicare & Medicaid 

Services 

CPT [Physicians’] Current Procedural 

Terminology, Fourth Edition, 2009, 

copyrighted by the American Medical 

Association 

CQM Clinical Quality Measure 

CR Cardiac Rehabilitation 

CY Calendar Year 

DFO Designated Federal Official 

DHS Designated Health Service 

DRA Deficit Reduction Act of 2005, Pub. L. 

109–171 

DSH Disproportionate Share Hospital 

EACH Essential Access Community 

Hospital 

E/M Evaluation and Management 

EHR Electronic Health Record 

ESRD End-Stage Renal Disease 

FACA Federal Advisory Committee Act, 

Pub. L. 92–463 

FAR Federal Acquisition Regulations 

FDA Food and Drug Administration 

FFS Fee-for-Service 

FSS Federal Supply Schedule 

FY Fiscal Year 

GAO Government Accountability Office 

HAC Hospital-Acquired Condition 

HAI Healthcare-Associated Infection 

HCAHPS Hospital Consumer Assessment of 

Healthcare Providers and Systems 

HCERA Health Care and Education 

Reconciliation Act of 2010, Pub. L. 111– 

152 

HCP Healthcare Personnel 

HCPCS Healthcare Common Procedure 

Coding System 

HCRIS Hospital Cost Report Information 

System 

HHA Home Health Agency 

HIPAA Health Insurance Portability and 

Accountability Act of 1996, Pub. L. 104– 

191 

HOPD Hospital OutPatient Department 

Hospital OQR Hospital Outpatient Quality 

Reporting 

ICR Intensive Cardiac Rehabilitation 

IDE Investigational Device Exemption 

IHS Indian Health Service 

I/OCE Integrated Outpatient Code Editor 

IOL Intraocular Lens 

IPPS [Hospital] Inpatient Prospective 

Payment System 

MAC Medicare Administrative Contractor 

MedPAC Medicare Payment Advisory 

Commission 

MIEA–TRHCA Medicare Improvements and 

Extension Act under Division B, Title I 

of the Tax Relief Health Care Act of 

2006, Pub. L. 109–432 

MIPPA Medicare Improvements for Patients 

and Providers Act of 2008, Pub. L. 110– 

275 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003, Pub. L. 108–173 

MMEA Medicare and Medicaid Extenders 

Act of 2010, Pub. L. 111–309 

MMSEA Medicare, Medicaid, and SCHIP 

Extension Act of 2007, Pub. L. 110–173 

MPFS Medicare Physician Fee Schedule 

MSA Metropolitan Statistical Area 

NCCI National Correct Coding Initiative 

NHSN National Healthcare Safety Network 

NCD National Coverage Determination 

NQF National Quality Forum 

NTIOL New Technology Intraocular Lens 

OIG [HHS] Office of the Inspector General 

OMB Office of Management and Budget 

OPD [Hospital] Outpatient Department 

OPPS [Hospital] Outpatient Prospective 

Payment System 

OQR Outpatient Quality Reporting 

PBD Provider-Based Department 

PHP Partial Hospitalization Program 

PPI Producer Price Index 

PPS Prospective Payment System 

PR Pulmonary Rehabilitation 

PRA Paperwork Reduction Act 

QAPI Quality Assessment and Performance 

Improvement 

QIO Quality Improvement Organization 

RAC Recovery Audit Contractor 

RFA Regulatory Flexibility Act 

Hospital IQR Hospital Inpatient Quality 

Reporting 

Hospital OQR Hospital Outpatient Quality 

Reporting 

RHHI Regional Home Health Intermediary 

SBA Small Business Administration 

SCH Sole Community Hospital 

SDP Single Drug Pricer 

SI Status Indicator 

TEP Technical Expert Panel 

TOPs Transitional Outpatient Payments 

VBP Value-Based Purchasing 

WAC Wholesale Acquisition Cost 

In this document, we address two 

payment systems under the Medicare 

program: The Hospital Outpatient 

Prospective Payment System (OPPS) 

and the Ambulatory Surgical Center 

(ASC) payment system. In addition, we 

are proposing to make changes to the 

rules governing limitations on certain 

physician referrals to hospitals in which 

physicians have an ownership or 

investment interest, the provider 

agreement regulations on patient 

notification requirements, and the rules 

governing the Hospital Inpatient ValueBased Purchasing (VBP) Program. The 

provisions relating to the OPPS are 

included in sections I. through XII. and 

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42172 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

section XIV. and sections XVII. through 

XXI. of this proposed rule. Addenda A, 

B, C, D1, D2, E, L, M, and N, which 

relate to the OPPS, are referenced in 

section XVII. of this proposed rule and 

are available via the Internet on the 

CMS Web site at the URL indicated in 

section XVII. The provisions related to 

the ASC payment system are included 

in sections XIII., XIV., and XVII. through 

XXI. of this proposed rule. Addenda 

AA, BB, DD1, DD2, and EE, which relate 

to the ASC payment system, are 

referenced in section XVII. of this 

proposed rule and are available via the 

Internet on the CMS Web site at the URL 

indicated in section XVII. The 

provisions relating to physician referrals 

to hospitals in which physicians have 

an ownership or investment interest and 

to the provider agreement regulations on 

patient notification requirements are 

included in section XV., and the 

provisions relating to the Hospital 

Inpatient VBP Program are included in 

section XVI. of this proposed rule. 

Table of Contents 

I. Background and Summary of the CY 2012 

OPPS/ASC Proposed Rule 

A. Legislative and Regulatory Authority for 

the Hospital Outpatient Perspective 

Payment System 

B. Excluded OPPS Services and Hospitals 

C. Prior Rulemaking 

D. Advisory Panel on Ambulatory Payment 

Classification (APC) Groups 

1. Authority of the APC Panel 

2. Establishment of the APC Panel 

3. APC Panel Meetings and Organizational 

Structure 

E. Summary of the Major Contents of This 

Proposed Rule 

1. Proposed Updates Affecting OPPS 

Payments 

2. Proposed OPPS Ambulatory Payment 

Classification (APC) Group Policies 

3. Proposed OPPS Payment for Devices 

4. Proposed OPPS Payment Changes for 

Drugs, Biologicals, and 

Radiopharmaceuticals 

5. Proposed Estimate of OPPS Transitional 

Pass-Through Spending for Drugs, 

Biologicals, Radiopharmaceuticals, and 

Devices 

6. Proposed OPPS Payment for Hospital 

Outpatient Visits 

7. Proposed Payment for Partial 

Hospitalization Services 

8. Proposed Procedures That Would Be 

Paid Only as Inpatient Procedures 

9. Proposed OPPS Policy Changes Relating 

to Supervision of Hospital Outpatient 

Services 

10. Proposed OPPS Payment Status and 

Comment Indicators 

11. OPPS Policy and Payment 

Recommendations 

12. Proposed Updates to the Ambulatory 

Surgical Center (ASC) Payment System 

13. Reporting Quality Data for Annual 

Payment Rate Updates 

14. Proposed Changes to EHR Incentive 

Program for Eligible Hospitals and CAHs 

Regarding Electronic Submission of 

Clinical Quality Measures (CQMs) 

15. Proposed Changes to Provisions 

Relating to Physician Self-Referral 

Prohibition and Provider Agreement 

Regulations on Patient Notification 

Requirements 

16. Proposed Changes to the Hospital IQR 

Program Hospital Inpatient VBP Program 

17. Economic and Federalism Analyses 

F. Public Comments Received on the CY 

2011 OPPS/ASC Final Rule With 

Comment Period 

II. Proposed Updates Affecting OPPS 

Payments 

A. Proposed Recalibration of APC Relative 

Weights 

1. Database Construction 

a. Database Source and Methodology 

b. Proposed Use of Single and Multiple 

Procedure Claims 

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

2. Proposed Data Development Process and 

Calculation of Median Costs 

a. Claims Preparation 

b. Splitting Claims and Creation of 

‘‘Pseudo’’ Single Procedure Claims 

(1) Splitting Claims 

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

Claims 

c. Completion of Claim Records and 

Median Cost Calculations 

d. Proposed Calculation of Single 

Procedure APC Criteria-Based Median 

Costs 

(1) Device-Dependent APCs 

(2) Blood and Blood Products 

(3) Allergy Tests (APCs 0370 and 0381) 

(4) Hyperbaric Oxygen Therapy (APC 0659) 

(5) Payment for Ancillary Outpatient 

Services When Patient Expires (APC 

0375) 

(6) Endovascular Revascularization of the 

Lower Extremity (APCs 0083, 0229, and 

0319) 

(7) Non-Congenital Cardiac Catheterization 

(APC 0080) 

(8) Cranial Neurostimulator and Electrodes 

(APC 0318) 

(9) Brachytherapy Sources 

e. Proposed Calculation of Composite APC 

Criteria-Based Median Costs 

(1) Extended Assessment and Management 

Composite APCs (APCs 8002 and 8003) 

(2) Low Dose Rate (LDR) Prostate 

Brachytherapy Composite APC (APC 

8001) 

(3) Cardiac Electrophysiologic Evaluation 

and Ablation Composite APC (APC 8000) 

(4) Mental Health Services Composite APC 

(APC 0034) 

(5) Multiple Imaging Composite APCs 

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

(6) Cardiac Resynchronization Therapy 

Composite APC (APCs 0108, 0418, 0655, 

and 8009) 

3. Proposed Changes to Packaged Services 

a. Background 

b. Packaging Issues 

(1) CMS Presentation of Findings 

Regarding Expanded Packaging at the 

February 28–March 1, 2011 APC Panel 

(2) Packaging Recommendations of the 

APC Panel at Its February 28–March 1, 

2011 Meeting 

(3) Other Packaging Proposals for CY 2012 

4. Proposed Calculation of OPPS Scaled 

Payment Weights 

B. Proposed Conversion Factor Update 

C. Proposed Wage Index Changes 

D. Proposed Statewide Average Default 

CCRs 

E. Proposed OPPS Payment to Certain 

Rural and Other Hospitals 

1. Hold Harmless Transitional Payment 

Changes Made by Pub. L. 110–275 

(MIPPA) 

2. Proposed Adjustment for Rural SCHs 

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

of the Act 

F. Proposed OPPS Payments to Certain 

Cancer Hospitals Described by Section 

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

1. Background 

2. Study of Cancer Hospital Costs Relative 

to Other Hospitals 

3. CY 2011 Proposed Payment Adjustment 

for Certain Cancer Hospitals 

4. Proposed CY 2011 Cancer Hospital 

Payment Adjustment That Was Not 

Finalized 

5. Proposed Payment Adjustment for 

Certain Cancer Hospitals for CY 2012 

G. Proposed Hospital Outpatient Outlier 

Payments 

1. Background 

2. Proposed Outlier Calculation 

3. Proposed Outlier Reconciliation 

H. Proposed Calculation of an Adjusted 

Medicare Payment From the National 

Unadjusted Medicare Payment 

I. Proposed Beneficiary Copayments 

1. Background 

2. Proposed OPPS Copayment Policy 

3. Proposed Calculation of an Adjusted 

Copayment Amount for an APC Group 

III. Proposed OPPS Ambulatory Payment 

Classification (APC) Group Policies 

A. Proposed OPPS Treatment of New CPT 

and Level II HCPCS Codes 

1. Proposed Treatment of New Level II 

HCPCS Codes and Category I CPT 

Vaccine Codes and Category III CPT 

Codes for Which We Are Soliciting 

Public Comment in this CY 2012 

Proposed Rule 

2. Proposed Process for New Level II 

HCPCS Codes and Category I and 

Category III CPT Codes for Which We 

Will Be Soliciting Public Comments on 

the CY 2012 OPPS/ASC Final Rule With 

Comment Period 

B. Proposed OPPS Changes—Variations 

Within APCs 

1. Background 

2. Application of the 2 Times Rule 

3. Proposed Exceptions to the 2 Times Rule 

C. Proposed New Technology APCs 

1. Background 

2. Proposed Movement of Procedures From 

New Technology APCs to Clinical APCs 

D. Proposed OPPS APC-Specific Policies 

1. Revision/Removal of Neurostimulator 

Electrodes (APC 0687) 

2. Computed Tomography of Abdomen and 

Pelvis (APCs 0331 and 0334) 

3. Placement of Amniotic Membrane (APCs 

0233 and 0244) 

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Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 42173 

4. Upper Gastrointestinal Services (APCs 

0141, 0419, and 0422) 

5. Pulmonary Rehabilitation (APC 0102) 

6. Insertion/Replacement/Repair of AICD 

Leads, Generator, and Pacing Electrodes 

(APC 0108) 

IV. Proposed OPPS Payment for Devices 

A. Proposed Pass-Through Payments for 

Devices 

1. Expiration of Transitional Pass-Through 

Payments for Certain Devices 

a. Background 

b. Proposed CY 2012 Policy 

2. Proposed Provisions for Reducing 

Transitional Pass-Through Payments To 

Offset Costs Packaged Into APC Groups 

a. Background 

b. Proposed CY 2012 Policy 

B. Proposed Adjustment to OPPS Payment 

for No Cost/Full Credit and Partial Credit 

Devices 

1. Background 

2. Proposed APCs and Devices Subject to 

the Adjustment Policy 

V. Proposed OPPS Payment Changes for 

Drugs, Biologicals, and 

Radiopharmaceuticals 

A. Proposed OPPS Transitional PassThrough Payment for Additional Costs of 

Drugs, Biologicals, and 

Radiopharmaceuticals 

1. Background 

2. Proposed Drugs and Biologicals With 

Expiring Pass-Through Status in CY 2012 

3. Proposed Drugs, Biologicals, and 

Radiopharmaceuticals With New or 

Continuing Pass-Through Status in CY 

2012 

4. Proposed Provisions for Reducing 

Transitional Pass-Through Payments for 

Diagnostic Radiopharmaceuticals and 

Contrast Agents To Offset Costs 

Packaged into APC Groups 

a. Background 

b. Proposed Payment Offset Policy for 

Diagnostic Radiopharmaceuticals 

c. Proposed Payment Offset Policy for 

Contrast Agents 

B. Proposed OPPS Payment for Drugs, 

Biologicals, and Radiopharmaceuticals 

Without Pass-Through Status 

1. Background 

2. Proposed Criteria for Packaging Payment 

for Drugs, Biologicals, and 

Radiopharmaceuticals 

a. Background 

b. Proposed Cost Threshold for Packaging 

of Payment for HCPCS Codes That 

Describe Certain Drugs, Nonimplantable 

Biologicals, and Therapeutic 

Radiopharmaceuticals (‘‘ThresholdPackaged Drugs’’) 

c. Proposed Packaging Determination for 

HCPCS Codes That Describe the Same 

Drug or Biological But Different Dosages 

d. Proposed Packaging of Payment for 

Diagnostic Radiopharmaceuticals, 

Contrast Agents, and Implantable 

Biologicals (‘‘Policy-Packaged’’ Drugs 

and Devices) 

3. Proposed Payment for Drugs and 

Biologicals Without Pass-Through Status 

That Are Not Packaged 

a. Proposed Payment for Specified Covered 

Outpatient Drugs (SCODs) and Other 

Separately Payable and Packaged Drugs 

and Biologicals 

b. Proposed Payment Policy 

c. Proposed Payment Policy for 

Therapeutic Radiopharmaceuticals 

4. Proposed Payment for Blood Clotting 

Factors 

5. Proposed Payment for Nonpass-Through 

Drugs, Biologicals, and 

Radiopharmaceuticals With HCPCS 

Codes, But Without OPPS Hospital 

Claims Data 

VI. Proposed Estimate of OPPS Transitional 

Pass-Through Spending for Drugs, 

Biologicals, Radiopharmaceuticals, and 

Devices 

A. Background 

B. Proposed Estimate of Pass-Through 

Spending 

VII. Proposed OPPS Payment for Hospital 

Outpatient Visits 

A. Background 

B. Proposed Policies for Hospital 

Outpatient Visits 

1. Clinic Visits: New and Established 

Patient Visits 

2. Emergency Department Visits 

3. Visit Reporting Guidelines 

VIII. Proposed Payment for Partial 

Hospitalization Services 

A. Background 

B. Proposed PHP APC Update for CY 2012 

C. Proposed Separate Threshold for Outlier 

Payments to CMHCs 

IX. Proposed Procedures That Would Be Paid 

Only as Inpatient Procedures 

A. Background 

B. Proposed Changes to the Inpatient List 

X. Proposed Policies on the Supervision 

Standards for Outpatient Services in 

Hospitals and CAHs 

A. Background 

B. Issues Regarding the Supervision of 

Hospital Outpatient Therapeutic 

Services Raised by Hospitals and Other 

Stakeholders 

1. Independent Review Process 

2. Conditions of Payment and Hospital 

Outpatient Therapeutic Services 

Described by Different Benefit Categories 

C. Proposed Policies on Supervision 

Standards for Outpatient Therapeutic 

Services in Hospitals and CAHs 

1. Selection of Review Entity 

2. Review Process 

3. Evaluation Criteria 

4. Conditions of Payment and Hospital 

Outpatient Therapeutic Services 

Described by Different Benefit Categories 

5. Technical Corrections to the Supervision 

Standards for Hospital Outpatient 

Therapeutic Services Furnished in 

Hospitals or CAHs 

6. Summary 

XI. Proposed OPPS Payment Status and 

Comment Indicators 

A. Proposed OPPS Payment Status 

Indicator Definitions 

1. Proposed Payment Status Indicators To 

Designate Services That Are Paid Under 

the OPPS 

2. Proposed Payment Status Indicators To 

Designate Services That Are Paid Under 

a Payment System Other Than the OPPS 

3. Proposed Payment Status Indicators To 

Designate Services That Are Not 

Recognized Under the OPPS But That 

May Be Recognized by Other 

Institutional Providers 

4. Proposed Payment Status Indicators To 

Designate Services That Are Not Payable 

by Medicare on Outpatient Claims 

B. Proposed Comment Indicator 

Definitions 

XII. OPPS Policy and Payment 

Recommendations 

A. MedPAC Recommendations 

B. APC Panel Recommendations 

C. OIG Recommendations 

XIII. Proposed Updates to the Ambulatory 

Surgical Center (ASC) Payment System 

A. Background 

1. Legislative Authority for the ASC 

Payment System 

2. Prior Rulemaking 

3. Policies Governing Changes to the Lists 

of Codes and Payment Rates for ASC 

Covered Surgical Procedures and 

Covered Ancillary Services 

B. Proposed Treatment of New Codes 

1. Proposed Process for Recognizing New 

Category I and Category III CPT Codes 

and Level II HCPCS Codes 

2. Proposed Treatment of New Level II 

HCPCS Codes and Category III CPT 

Codes Implemented in April and July 

2011 

3. Proposed Process for New Level II 

HCPCS Codes and Category I and 

Category III CPT Codes for Which We 

Will Be Soliciting Public Comments in 

the CY 2012 OPPS/ASC Final Rule With 

Comment Period 

C. Proposed Update to the List of ASC 

Covered Surgical Procedures and 

Covered Ancillary Services 

1. Covered Surgical Procedures 

a. Proposed Additions to the List of ASC 

Covered Surgical Procedures 

b. Proposed Covered Surgical Procedures 

Designated as Office-Based 

(1) Background 

(2) Proposed Changes for CY 2012 to 

Covered Surgical Procedures Designated 

as Office-Based 

c. Proposed ASC Covered Surgical 

Procedures Designated as DeviceIntensive 

(1) Background 

(2) Proposed Changes to List of Covered 

Surgical Procedures Designated as 

Device-Intensive for CY 2012 

d. ASC Treatment of Surgical Procedures 

Proposed for Removal from the OPPS 

Inpatient List for CY 2012 

2. Covered Ancillary Services 

D. Proposed ASC Payment for Covered 

Surgical Procedures and Covered 

Ancillary Services 

1. Proposed Payment for Covered Surgical 

Procedures 

a. Background 

b. Proposed Update to ASC-Covered 

Surgical Procedure Payment Rates for CY 

2012 

c. Proposed Adjustment to ASC Payments 

for No Cost/Full Credit and Partial Credit 

Devices 

d. Proposed Payment for the Cardiac 

Resynchronization Therapy Composite 

2. Proposed Payment for Covered Ancillary 

Services 

a. Background 

b. Proposed Payment for Covered Ancillary 

Services for CY 2012 

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42174 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

E. New Technology Intraocular Lenses 

(NTIOLs) 

1. NTIOL Cycle and Evaluation Criteria 

2. NTIOL Application Process for Payment 

Adjustment 

3. Requests To Establish New NTIOL 

Classes for CY 2012 and Deadline for 

Public Comments 

4. Proposed Payment Adjustment 

F. Proposed ASC Payment and Comment 

Indicators 

1. Background 

2. Proposed ASC Payment and Comment 

Indicators 

G. ASC Policy and Payment 

Recommendations 

H. Calculation of the Proposed ASC 

Conversion Factor and the Proposed ASC 

Payment Rates 

1. Background 

2. Proposed Calculation of the ASC 

Payment Rates 

a. Updating the ASC Relative Payment 

Weights for CY 2012 and Future Years 

b. Updating the ASC Conversion Factor 

With Application of a Productivity 

Adjustment to the Update Factor 

3. Display of Proposed CY 2012 ASC 

Payment Rates 

XIV. Hospital Outpatient Quality Reporting 

Program Updates and ASC Quality 

Reporting 

A. Background 

1. Overview 

2. Statutory History of Hospital Outpatient 

Quality Reporting (Hospital OQR) 

Program 

3. Technical Specification Updates and 

Data Publication 

a. Maintenance of Technical Specifications 

for Quality Measures 

b. Publication of Hospital OQR Program 

Data 

B. Proposed Revision to Measures 

Previously Adopted for the Hospital 

OQR Program for the CY 2012, CY 2013, 

and CY 2014 Payment Determinations 

1. Background 

2. Proposed Revision to Hospital OQR 

Program Measures Previously Adopted 

for the CY 2013 Payment Determination 

C. Proposed New Quality Measures for the 

CY 2014 and CY 2015 Payment 

Determinations 

1. Considerations in Expanding and 

Updating Quality Measures Under 

Hospital OQR Program 

2. Proposed New Hospital OQR Program 

Quality Measures for the CY 2014 

Payment Determination 

a. Proposed New National Healthcare 

Safety Network (NHSN) Healthcare 

Associated Infection (HAI) Measure for 

the CY 2014 Payment Determination: 

Surgical Site Infection (NQF #0299) 

b. Proposed New Chart—Abstracted 

Measures for CY 2014 Payment 

Determination 

(1) Diabetes: Hemoglobin A1c Management 

(NQF #0059) 

(2) Diabetes Measure Pair: A. Lipid 

Management: Low Density Lipoprotein 

Cholesterol (LDL–C) <130, B. Lipid 

Management: LDL–C <100 (NQF #0064) 

(3) Diabetes: Blood Pressure Management 

(NQF #0061) 

(4) Diabetes: Eye Exam (NQF #0055) 

(5) Diabetes: Urine Protein Screening (NQF 

#0062) 

(6) Cardiac Rehabilitation: Patient Referral 

From an Outpatient Setting (NQF #0643) 

c. Proposed New Structural Measures 

(1) Safe Surgery Checklist Use 

(2) Submission of Hospital Outpatient 

Department Volume for Selected 

Outpatient Surgical Procedures 

3. Proposed Hospital OQR Program 

Measures for the CY 2015 Payment 

Determination 

a. Proposed Retention of CY 2014 Hospital 

OQR Measures for the CY 2015 Payment 

Determination 

b. Proposed New NHSN HAI Measure for 

the CY 2015 Payment Determination 

D. Possible Quality Measures Under 

Consideration for Future Inclusion in the 

Hospital OQR Program 

E. Proposed Payment Reduction for 

Hospitals That Fail To Meet the Hospital 

OQR Requirements for the CY 2012 

Payment Update 

1. Background 

2. Proposed Reporting Ratio Application 

and Associated Adjustment Policy for 

CY 2012 

F. Extraordinary Circumstances Extension 

or Waiver for CY 2012 and Subsequent 

Years 

G. Proposed Requirements for Reporting of 

Hospital OQR Data for CY 2013 and 

Subsequent Years 

1. Administrative Requirements for CY 

2013 and Subsequent Years 

2. Form, Manner, and Timing of Data 

Submission for CY 2013 and Subsequent 

Years 

a. Proposed CY 2013 and CY 2014 Data 

Submission Requirements for ChartAbstracted Data Submission 

b. Proposed Encounter Threshold for 

Allowance of Sampling for CY 2013 and 

Subsequent Years 

c. Proposed Population and Sampling Data 

Requirements Beginning With the CY 

2013 Payment Determination 

d. Proposed Claims-Based Measure Data 

Requirements for the CY 2013 Payment 

Determination 

e. Proposed Structural Measure Data 

Requirements for the CY 2013 and CY 

2014 Payment Determinations 

f. Proposed Data Submission Deadlines for 

the Proposed NHSN HAI Surgical Site 

Infection Measure for the CY 2014 

Payment Determination 

g. Proposed Data Submission Requirements 

for ED—Patient Left Before Being Seen 

Measure Data for the CY 2013 and CY 

2014 Payment Determinations 

3. Hospital OQR Validation Requirements 

for Chart-Abstracted Data Submitted 

Directly to CMS: Proposed Data 

Validation Approach for the CY 2013 

Payment Determination 

a. Randomly Selected Hospitals 

b. Proposed Use of Targeting Criteria for 

Data Validation Selection for CY 2013 

(1) Background 

(2) Proposed Targeting Criteria for Data 

Validation Selection for CY 2013 

c. Encounter Selection 

d. Validation Score Calculation 

4. Additional Data Validation Conditions 

Under Consideration for CY 2014 and 

Subsequent Years 

H. Proposed Hospital OQR Reconsideration 

and Appeals Procedures for CY 2013 and 

Subsequent Years 

I. Electronic Health Records (EHRs) 

J. 2012 Medicare EHR Incentive Program 

Electronic Reporting Pilot for Hospitals 

and CAHs 

1. Background 

2. Proposed Medicare EHR Incentive 

Program Electronic Reporting Pilot for 

Eligible Hospitals and CAHs 

3. CQM Reporting Under the Electronic 

Reporting Pilot 

K. Proposed ASC Quality Reporting 

Program 

1. Background 

2. ASC Quality Reporting Program Measure 

Selection 

a. Proposed Timetable for Selecting ASC 

Quality Measures 

b. Considerations in the Selection of 

Measures for the ASC Quality Reporting 

Program 

3. Proposed Quality Measures for ASCs for 

CY 2014 Payment Determination 

a. Proposed Claims-Based Measures 

Requiring Submission of Quality Data 

Codes (QDCs) Beginning January 1, 2012 

(1) Patient Burns (NQF #0263) 

(2) Patient Falls (NQF #0266) 

(3) Wrong Site, Wrong Side, Wrong Patient, 

Wrong Procedure, Wrong Implant (NQF 

#0267) 

(4) Hospital Transfer/Admission (NQF 

#0265) 

(5) Prophylactic IV Antibiotic Timing (NQF 

#0264) 

(6) Ambulatory Patient with Appropriate 

Method of Surgical Hair Removal (NQF 

#0515) 

(7) Prophylactic Antibiotic Selection for 

Surgical Patients (NQF #0528) 

b. Surgical Site Infection Rate (NQF #0299) 

4. Proposed ASC Quality Measures for the 

CY 2015 Payment Determination 

a. Retention of Measures Adopted for the 

CY 2014 Payment Determination in the 

CY 2015 Payment Determination 

b. Proposed Structural Measures for the CY 

2015 Payment Determination 

(1) Safe Surgery Checklist Use 

(2) ASC Facility Volume Data on Selected 

ASC Surgical Procedures 

5. Proposed ASC Quality Measures for the 

CY 2016 Payment Determination 

a. Retention of Measures Adopted for the 

CY 2015 Payment Determination in the 

CY 2016 Payment Determination 

b. Proposed HAI Measure: Influenza 

Vaccination Coverage among Healthcare 

Personnel (HCP) (NQF #0431) 

6. ASC Measure Topics for Future 

Considerations 

7. Technical Specification Updates and 

Data Publication for the CY 2014 

Payment Determination 

a. Maintenance of Technical Specifications 

for Quality Measures 

b. Publication of ASC Quality Reporting 

Program Data 

8. Proposed Requirements for Reporting of 

ASC Quality Data for the CY 2014 

Payment Determination 

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a. Proposed Data Collection and 

Submission Requirements for the 

Proposed Claims-Based Measures 

b. Proposed Data Submission Deadlines for 

the Proposed Surgical Site Infection Rate 

Measure 

XV. Proposed Changes to Whole Hospital and 

Rural Provider Exceptions to the 

Physician Self-Referral Prohibition: 

Exception for Expansion of Facility 

Capacity; and Proposed Changes to 

Provider Agreement Regulations on 

Patient Notification Requirements 

A. Background 

B. Changes Made by the Affordable Care 

Act 

1. Changes Relating to Exception to 

Ownership and Investment Prohibition 

(Section 6001(a) of the Affordable Care 

Act) 

2. Provisions of Section 6001(a)(3) of the 

Affordable Care Act 

C. Proposed Changes Relating to the 

Process for an Exception to the 

Prohibition on Expansion of Facility 

Capacity 

1. Applicable Hospital 

a. Percentage Increase in Population 

b. Inpatient Admissions 

c. Nondiscrimination 

d. Bed Capacity 

e. Bed Occupancy 

2. High Medicaid Facility 

a. Number of Hospitals in County 

b. Inpatient Admissions 

c. Nondiscrimination 

3. Procedures for Submitting a Request 

4. Community Input 

5. Permitted Increase 

a. Amount of Permitted Increase 

b. Location of Permitted Increase 

6. Decisions 

7. Limitation on Review 

8. Frequency of Request 

D. Proposed Changes Related to Provider 

Agreement Regulations on Patient 

Notification Requirements 

XVI. Additional Proposals for the Hospital 

Inpatient Value-Based Purchasing 

(Hospital VBP) Program 

A. Hospital VBP Program 

1. Legislative Background 

2. Overview of the Hospital Inpatient VBP 

Program Final Rule 

3. Proposed Additional FY 2014 Hospital 

VBP Program Measures 

4. Proposed Minimum Number of Cases 

and Measures for the Outcome Domain 

for the FY 2014 Hospital VBP Program 

a. Background 

b. Proposed Minimum Number of Cases for 

Mortality Measures, AHRQ Composite 

Measures, and HAC Measures 

c. Proposed Minimum Number of Measures 

for Outcome Domain 

5. Proposed Performance Periods and 

Baseline Periods for FY 2014 Measures 

a. Proposed Clinical Process of Care 

Domain and Patient Experience of Care 

Domain Performance Periods and 

Baseline Periods 

b. Proposed Outcome Domain Performance 

Periods and Baseline Periods 

6. Proposed Performance Standards for the 

FY 2014 Hospital VBP Program 

a. Background 

(1) Mortality Measures 

(2) Proposed Medicare Spending per 

Beneficiary 

b. Proposed Clinical Process of Care and 

Patient Experience of Care FY 2014 

Performance Standards 

c. AHRQ Measures 

d. HAC Measures 

7. Proposed FY 2014 Hospital VBP 

Program Scoring Methodology 

a. Proposed FY 2014 Domain Scoring 

Methodology 

b. Proposed HAC Measure Scoring 

Methodology 

8. Ensuring HAC Reporting Accuracy 

9. Proposed Domain Weighting for FY 2014 

Hospital VBP Program 

B. Proposed Review and Correction Process 

under the Hospital VBP Program 

1. Background 

2. Proposed Review and Correction of Data 

Submitted to the QIO Clinical 

Warehouse on Chart-Abstracted Process 

of Care Measures and Measure Rates 

3. Proposed Review and Correction Process 

for Hospital Consumer Assessment of 

Healthcare Providers and Systems 

(HCAHPS) 

a. Phase One: Review and Correction of 

HCAHPS Data Submitted to the QIO 

Clinical Warehouse 

b. Phase Two: Review and Correction of 

the HCAHPS Scores for the Hospital VBP 

Program 

XVII. Files Available to the Public via the 

Internet 

A. Information in Addenda Related to the 

Proposed CY 2012 Hospital OPPS 

B. Information in Addenda Related to the 

Proposed CY 2012 ASC Payment System 

XVIII. Collection of Information 

Requirements 

A. Legislative Requirements for 

Solicitation of Comments 

B. Requirements in Regulation Text 

1. ICRs Regarding Basic Commitments of 

Providers (§ 489.20) 

2. ICRs Regarding Exceptions Process 

Related to the Prohibition of Expansion 

of Facility Capacity (§ 411.362) 

C. Proposed Associated Information 

Collections Not Specified in Regulatory 

Text 

1. Hospital Outpatient Quality Reporting 

(Hospital OQR) Program 

2. Hospital OQR Program Measures for the 

CY 2012, CY 2013, CY 2014, and CY 

2015 Payment Determinations 

a. Previously Adopted Hospital OQR 

Program Measures for the CY 2012, CY 

2013, and CY 2014 Payment 

Determinations 

b. Additional Proposed Hospital OQR 

Program Measures for CY 2014 

c. Proposed Hospital OQR Program 

Measures for CY 2015 

3. Proposed Hospital OQR Program 

Validation Requirements for CY 2013 

4. Proposed Hospital OQR Program 

Reconsideration and Appeals Procedures 

5. ASC Quality Reporting Program 

6. Proposed 2012 Medicare EHR Incentive 

Program Electronic Reporting Pilot for 

Hospitals and CAHs 

7. Additional Topics 

XIX. Response to Comments 

XX. Economic Analysis 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impacts for Proposed OPPS and 

ASC Provisions 

4. Detailed Economic Analysis 

a. Effects of Proposed OPPS Changes in 

This Proposed Rule 

(1) Limitations of Our Analysis 

(2) Estimated Effects of This Proposed Rule 

on Hospitals 

(3) Estimated Effects of This Proposed Rule 

on CMHCs 

(4) Estimated Effect of This Proposed Rule 

on Beneficiaries 

(5) Estimated Effects on Other Providers 

(6) Estimated Effects on the Medicare and 

Medicaid Programs 

(7) Alternative Considered 

b. Effects of Proposed ASC Payment 

System Changes in This Proposed Rule 

(1) Limitations of Our Analysis 

(2) Estimated Effects of This Proposed Rule 

on Payments to ASCs 

(3) Estimated Effect of This Proposed Rule 

on Beneficiaries 

(4) Alternatives Considered 

c. Accounting Statements and Tables 

d. Effect of Proposed Requirements for the 

Hospital Outpatient Quality Reporting 

(OQR) Program 

e. Effects of Proposed Changes to Physician 

Self-Referral Regulations 

f. Effects of Proposed Changes to Provider 

Agreement Regulations on Patient 

Notification Requirements 

g. Effect of Additional Proposed Changes to 

the Hospital VBP Program Requirements 

h. Effects of Proposed Medicare EHR 

Incentive Program Reporting Pilot 

B. Regulatory Flexibility Act (RFA) 

Analysis 

C. Unfunded Mandates Reform Act 

Analysis 

D. Conclusion 

XXI. Federalism Analysis 

Regulation Text 

I. Background and Summary of the CY 

2012 OPPS/ASC Proposed Rule 

A. Legislative and Regulatory Authority 

for the Hospital Outpatient Prospective 

Payment System 

When Title XVIII of the Social 

Security Act (the Act) was enacted, 

Medicare payment for hospital 

outpatient services was based on 

hospital-specific costs. In an effort to 

ensure that Medicare and its 

beneficiaries pay appropriately for 

services and to encourage more efficient 

delivery of care, the Congress mandated 

replacement of the reasonable costbased payment methodology with a 

prospective payment system (PPS). The 

Balanced Budget Act of 1997 (BBA) 

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

to the Act authorizing implementation 

of a PPS for hospital outpatient services. 

The OPPS was first implemented for 

services furnished on or after August 1, 

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42176 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

2000. Implementing regulations for the 

OPPS are located at 42 CFR part 419. 

The Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act of 

1999 (BBRA) (Pub. L. 106–113) made 

major changes in the hospital OPPS. 

The following Acts made additional 

changes to the OPPS: the Medicare, 

Medicaid, and SCHIP Benefits 

Improvement and Protection Act of 

2000 (BIPA) (Pub. L. 106–554); the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) (Pub. L. 108–173); the 

Deficit Reduction Act of 2005 (DRA) 

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

8, 2006; the Medicare Improvements 

and Extension Act under Division B of 

Title I of the Tax Relief and Health Care 

Act of 2006 (MIEA–TRHCA) (Pub. L. 

109–432), enacted on December 20, 

2006; the Medicare, Medicaid, and 

SCHIP Extension Act of 2007 (MMSEA) 

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

29, 2007; the Medicare Improvements 

for Patients and Providers Act of 2008 

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

July 15, 2008; and most recently the 

Patient Protection and Affordable Care 

Act (Pub. L. 111–148), enacted on 

March 23, 2010, as amended by the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152), enacted on March 30, 2010. (These 

two public laws are collectively known 

as the Affordable Care Act, and most 

recently the Medicare and Medicaid 

Extenders Act of 2010 (MMEA, Pub. L. 

111–309).) 

Under the OPPS, we pay for hospital 

outpatient services on a rate-per-service 

basis that varies according to the 

ambulatory payment classification 

(APC) group to which the service is 

assigned. We use the Healthcare 

Common Procedure Coding System 

(HCPCS) (which include certain Current 

Procedural Terminology (CPT) codes) to 

identify and group the services within 

each APC group. The OPPS includes 

payment for most hospital outpatient 

services, except those identified in 

section I.B. of this proposed rule. 

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

for payment under the OPPS for 

hospital outpatient services designated 

by the Secretary (which includes partial 

hospitalization services furnished by 

community mental health centers 

(CMHCs)) and hospital outpatient 

services that are furnished to inpatients 

who have exhausted their Part A 

benefits, or who are otherwise not in a 

covered Part A stay. 

The OPPS rate is an unadjusted 

national payment amount that includes 

the Medicare payment and the 

beneficiary copayment. This rate is 

divided into a labor-related amount and 

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

differences using the hospital inpatient 

wage index value for the locality in 

which the hospital or CMHC is located. 

All services and items within an APC 

group are comparable clinically and 

with respect to resource use (section 

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

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

subject to certain exceptions, items and 

services within an APC group cannot be 

considered comparable with respect to 

the use of resources if the highest 

median cost (or mean cost, if elected by 

the Secretary) for an item or service in 

the APC group is more than 2 times 

greater than the lowest median cost for 

an item or service within the same APC 

group (referred to as the ‘‘2 times rule’’). 

In implementing this provision, we 

generally use the median cost of the 

item or service assigned to an APC 

group. 

For new technology items and 

services, special payments under the 

OPPS may be made in one of two ways. 

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

for temporary additional payments, 

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

more than 3 years for certain drugs, 

biological agents, brachytherapy devices 

used for the treatment of cancer, and 

categories of other medical devices. For 

new technology services that are not 

eligible for transitional pass-through 

payments, and for which we lack 

sufficient data to appropriately assign 

them to a clinical APC group, we have 

established special APC groups based 

on costs, which we refer to as New 

Technology APCs. These New 

Technology APCs are designated by cost 

bands which allow us to provide 

appropriate and consistent payment for 

designated new procedures that are not 

yet reflected in our claims data. Similar 

to pass-through payments, an 

assignment to a New Technology APC is 

temporary; that is, we retain a service 

within a New Technology APC until we 

acquire sufficient data to assign it to a 

clinically appropriate APC group. 

B. Excluded OPPS Services and 

Hospitals 

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

authorizes the Secretary to designate the 

hospital outpatient services that are 

paid under the OPPS. While most 

hospital outpatient services are payable 

under the OPPS, section 

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

payment for ambulance, physical and 

occupational therapy, and speechlanguage pathology services, for which 

payment is made under a fee schedule. 

It also excludes screening 

mammography, diagnostic 

mammography, and effective January 1, 

2011, an annual wellness visit providing 

personalized prevention plan services. 

The Secretary exercised the authority 

granted under the statute to also exclude 

from the OPPS those services that are 

paid under fee schedules or other 

payment systems. Such excluded 

services include, for example, the 

professional services of physicians and 

nonphysician practitioners paid under 

the Medicare Physician Fee Schedule 

(MPFS); laboratory services paid under 

the Clinical Laboratory Fee Schedule 

(CLFS); services for beneficiaries with 

end-stage renal disease (ESRD) that are 

paid under the ESRD composite rate; 

and services and procedures that require 

an inpatient stay that are paid under the 

hospital inpatient prospective payment 

system (IPPS). We set forth the services 

that are excluded from payment under 

the OPPS in 42 CFR 419.22 of the 

regulations. 

Under § 419.20(b) of the regulations, 

we specify the types of hospitals and 

entities that are excluded from payment 

under the OPPS. These excluded 

entities include: Maryland hospitals, but 

only for services that are paid under a 

cost containment waiver in accordance 

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

critical access hospitals (CAHs); 

hospitals located outside of the 50 

States, the District of Columbia, and 

Puerto Rico; and Indian Health Service 

(IHS) hospitals. 

C. Prior Rulemaking 

On April 7, 2000, we published in the 

Federal Register a final rule with 

comment period (65 FR 18434) to 

implement a prospective payment 

system for hospital outpatient services. 

The hospital OPPS was first 

implemented for services furnished on 

or after August 1, 2000. Section 

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

Secretary to review certain components 

of the OPPS, not less often than 

annually, and to revise the groups, 

relative payment weights, and other 

adjustments that take into account 

changes in medical practices, changes in 

technologies, and the addition of new 

services, new cost data, and other 

relevant information and factors. 

Since initially implementing the 

OPPS, we have published final rules in 

the Federal Register annually to 

implement statutory requirements and 

changes arising from our continuing 

experience with this system. These rules 

can be viewed on the CMS Web site at: 

http://www.cms.gov/ 

HospitalOutpatientPPS/. The CY 2011 

OPPS/ASC final rule with comment 

period appears in the November 24, 

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2010 Federal Register (75 FR 71800). In 

that final rule with comment period, we 

revised the OPPS to update the payment 

weights and conversion factor for 

services payable under the CY 2011 

OPPS on the basis of claims data from 

January 1, 2009, through December 31, 

2009, and to implement certain 

provisions of the Affordable Care Act. In 

addition, we responded to public 

comments received on the provisions of 

the CY 2010 final rule with comment 

period (74 FR 60316) pertaining to the 

APC assignment of HCPCS codes 

identified in Addendum B to that rule 

with the new interim (‘‘NI’’) comment 

indicator, and public comments 

received on the August 3, 2010 OPPS/ 

ASC proposed rule for CY 2011 (75 FR 

46170). 

D. Advisory Panel on Ambulatory 

Payment Classification (APC) Groups 

1. Authority of the Advisory Panel on 

Ambulatory Payment Classification 

(APC) Groups (the APC Panel) 

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

amended by section 201(h) of Public 

Law 106–113, and redesignated by 

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

requires that we consult with an outside 

panel of experts to review the clinical 

integrity of the payment groups and 

their weights under the OPPS. The Act 

further specifies that the panel will act 

in an advisory capacity. The APC Panel, 

discussed under section I.D.2. of this 

proposed rule, fulfills these 

requirements. The APC Panel is not 

restricted to using data compiled by 

CMS, and it may use data collected or 

developed by organizations outside the 

Department in conducting its review. 

2. Establishment of the APC Panel 

On November 21, 2000, the Secretary 

signed the initial charter establishing 

the APC Panel. This expert panel, which 

may be composed of up to 15 

representatives of providers (currently 

employed full-time, not as consultants, 

in their respective areas of expertise) 

subject to the OPPS, reviews clinical 

data and advises CMS about the clinical 

integrity of the APC groups and their 

payment weights. The APC Panel is 

technical in nature, and it is governed 

by the provisions of the Federal 

Advisory Committee Act (FACA). Since 

its initial chartering, the Secretary has 

renewed the APC Panel’s charter five 

times: on November 1, 2002; on 

November 1, 2004; on November 21, 

2006; on November 2, 2008 and 

November 12, 2010. The current charter 

specifies, among other requirements, 

that: the APC Panel continues to be 

technical in nature; is governed by the 

provisions of the FACA; may convene 

up to three meetings per year; has a 

Designated Federal Official (DFO); and 

is chaired by a Federal Official 

designated by the Secretary. 

The current APC Panel membership 

and other information pertaining to the 

APC Panel, including its charter, 

Federal Register notices, membership, 

meeting dates, agenda topics, and 

meeting reports, can be viewed on the 

CMS Web site at: http:// 

www.cms.hhs.gov/FACA/05_

AdvisoryPanelonAmbulatory

PaymentClassification

Groups.asp#TopOfPage. 

3. APC Panel Meetings and 

Organizational Structure 

The APC Panel first met on February 

27 through March 1, 2001. Since the 

initial meeting, the APC Panel has held 

multiple meetings, with the last meeting 

taking place on February 28–March 1, 

2011. Prior to each meeting, we publish 

a notice in the Federal Register to 

announce the meeting and, when 

necessary, to solicit nominations for 

APC Panel membership and to 

announce new members. 

The APC Panel has established an 

operational structure that, in part, 

includes the use of three subcommittees 

to facilitate its required APC review 

process. The three current 

subcommittees are the Data 

Subcommittee, the Visits and 

Observation Subcommittee, and the 

Subcommittee for APC Groups and 

Status Indicator (SI) Assignments 

(previously known as the Packaging 

Subcommittee). 

The Data Subcommittee is responsible 

for studying the data issues confronting 

the APC Panel and for recommending 

options for resolving them. The Visits 

and Observation Subcommittee reviews 

and makes recommendations to the APC 

Panel on all technical issues pertaining 

to observation services and hospital 

outpatient visits paid under the OPPS 

(for example, APC configurations and 

APC payment weights). The 

Subcommittee for APC Groups and SI 

Assignments advises the Panel on the 

following issues: the appropriate SIs to 

be assigned to HCPCS codes, including 

but not limited to whether a HCPCS 

code or a category of codes should be 

packaged or separately paid; and the 

appropriate APCs to be assigned to 

HCPCS codes regarding services for 

which separate payment is made. 

Each of these subcommittees was 

established by a majority vote from the 

full APC Panel during a scheduled APC 

Panel meeting, and the APC Panel 

recommended that the subcommittees 

continue at the February/March 2011 

APC Panel meeting. We accept those 

recommendations of the APC Panel. All 

subcommittee recommendations are 

discussed and voted upon by the full 

APC Panel. 

Discussions of the other 

recommendations made by the APC 

Panel at the February/March 2011 APC 

Panel meeting are included in the 

sections of this proposed rule that are 

specific to each recommendation. For 

discussions of earlier APC Panel 

meetings and recommendations, we 

refer readers to previously published 

hospital OPPS/ASC proposed and final 

rules, the CMS Web site mentioned 

earlier in this section, and the FACA 

database at: http://fido.gov/faca

database/public.asp. 

E. Summary of the Major Contents of 

This CY 2012 OPPS/ASC Proposed Rule 

In this proposed rule, we set forth 

proposed changes to the Medicare 

hospital OPPS for CY 2012 to 

implement statutory requirements and 

changes arising from our continuing 

experience with the system. In addition, 

we set forth proposed changes to the 

revised Medicare ASC payment system 

for CY 2012, including proposed 

updated payment weights, covered 

surgical procedures, and covered 

ancillary items and services based on 

the proposed OPPS update. In addition, 

we are proposing to make changes to the 

rules governing limitations on certain 

physician referrals to hospitals in which 

physicians have an ownership or 

investment interest, provider agreement 

regulations on patient notification 

requirements, and the rules governing 

the Hospital Inpatient Value-Based 

Purchasing (VBP) Program. 

The following is a summary of the 

major changes that we are proposing to 

make for CY 2012: 

1. Proposed Updates Affecting OPPS 

Payments 

In section II. of this proposed rule, we 

set forth— 

• The methodology used to 

recalibrate the proposed APC relative 

payment weights. 

• The proposed changes to packaged 

services. 

• The proposed update to the 

conversion factor used to determine 

payment rates under the OPPS. In this 

section, we are proposing changes in the 

amounts and factors for calculating the 

full annual update increase to the 

conversion factor. 

• The proposed retention of our 

current policy to use the IPPS wage 

indices to adjust, for geographic wage 

differences, the portion of the OPPS 

payment rate and the copayment 

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standardized amount attributable to 

labor-related cost. 

• The proposed update of statewide 

average default CCRs. 

• The proposed application of hold 

harmless transitional outpatient 

payments (TOPs) for certain small rural 

hospitals, extended by section 3121 of 

the Affordable Care Act. 

• The proposed payment adjustment 

for rural SCHs. 

• The proposed calculation of the 

hospital outpatient outlier payment. 

• The calculation of the proposed 

national unadjusted Medicare OPPS 

payment. 

• The proposed beneficiary 

copayments for OPPS services. 

2. Proposed OPPS Ambulatory Payment 

Classification (APC) Group Policies 

In section III. of this proposed rule, 

we discuss— 

• The proposed additions of new 

HCPCS codes to APCs. 

• The proposed establishment of a 

number of new APCs. 

• Our analyses of Medicare claims 

data and certain recommendations of 

the APC Panel. 

• The application of the 2 times rule 

and proposed exceptions to it. 

• The proposed changes to specific 

APCs. 

• The proposed movement of 

procedures from New Technology APCs 

to clinical APCs. 

3. Proposed OPPS Payment for Devices 

In section IV. of this proposed rule, 

we discuss the proposed pass-through 

payment for specific categories of 

devices and the proposed adjustment for 

devices furnished at no cost or with 

partial or full credit. 

4. Proposed OPPS Payment Changes for 

Drugs, Biologicals, and 

Radiopharmaceuticals 

In section V. of this proposed rule, we 

discuss the proposed CY 2012 OPPS 

payment for drugs, biologicals, and 

radiopharmaceuticals, including the 

proposed payment for drugs, 

biologicals, and radiopharmaceuticals 

with and without pass-through status. 

5. Proposed Estimate of OPPS 

Transitional Pass-Through Spending for 

Drugs, Biologicals, 

Radiopharmaceuticals, and Devices 

In section VI. of this proposed rule, 

we discuss the estimate of CY 2012 

OPPS transitional pass-through 

spending for drugs, biologicals, and 

devices. 

6. Proposed OPPS Payment for Hospital 

Outpatient Visits 

In section VII. of this proposed rule, 

we set forth our proposed policies for 

the payment of clinic and emergency 

department visits and critical care 

services based on claims data. 

7. Proposed Payment for Partial 

Hospitalization Services 

In section VIII. of this proposed rule, 

we set forth our proposed payment for 

partial hospitalization services, 

including the proposed separate 

threshold for outlier payments for 

CMHCs. 

8. Proposed Procedures That Would Be 

Paid Only as Inpatient Procedures 

In section IX. of this proposed rule, 

we discuss the procedures that we are 

proposing to remove from the inpatient 

list and assign to APCs for payment 

under the OPPS. 

9. Proposed Policies on Supervision 

Standards for Outpatient Services in 

Hospitals and CAHs 

In section X. of this proposed rule, we 

discuss proposed policy changes 

relating to the supervision of outpatient 

services furnished in hospitals and 

CAHs. 

10. Proposed OPPS Payment Status and 

Comment Indicators 

In section XI. of this proposed rule, 

we discuss our proposed changes to the 

definitions of status indicators assigned 

to APCs and present our proposed 

comment indicators. 

11. OPPS Policy and Payment 

Recommendations 

In section XII. of this proposed rule, 

we address recommendations made by 

the Medicare Payment Advisory 

Commission (MedPAC) in its March 

2011 report to Congress, by the Office of 

Inspector General (OIG), and by the APC 

Panel regarding the OPPS for CY 2012. 

12. Proposed Updates to the Ambulatory 

Surgical Center (ASC) Payment System 

In section XIII. of this proposed rule, 

we discuss the proposed updates of the 

revised ASC payment system and 

payment rates for CY 2012. 

13. Reporting Quality Data for Annual 

Payment Rate Updates 

In section XIV. of this proposed rule, 

we discuss the proposed measures for 

reporting hospital outpatient quality 

data for the OPD fee schedule increase 

factor for CY 2013 and subsequent 

calendar years; set forth the 

requirements for data collection and 

submission; and discuss the reduction 

to the OPPS OPD fee schedule increase 

factor for hospitals that fail to meet the 

Hospital OQR Program requirements. 

We also discuss proposed measures for 

reporting ASC quality data for the 

annual payment update factor for CYs 

2014, 2015, and 2016; and set forth the 

requirements for data collection and 

submission for the annual payment 

update. 

14. Proposed Changes to EHR Incentive 

Program for Eligible Hospitals and 

CAHs Regarding Electronic Submission 

of Clinical Quality Measures (CQMs) 

In section XIV.J. of this proposed rule, 

we are proposing to allow eligible 

hospitals and CAHs participating in the 

Medicare EHR Incentive Program to 

meet the CQM reporting requirement of 

the EHR Incentive Program for payment 

year 2012 by participating in the 2012 

Medicare EHR Incentive Program 

Electronic Reporting Pilot. 

15. Proposed Changes to Provisions 

Relating to Physician Self-Referral 

Prohibition and Provider Agreement 

Regulations on Patient Notification 

Requirements 

In section XV. of this proposed rule, 

we present our proposed exception 

process for expansion of facility 

capacity under the whole hospital and 

rural provider exceptions to the 

physician self-referral law, and 

proposed changes to the provider 

agreement regulations on patient 

notification requirements. 

16. Additional Proposed Changes 

Relating to the Hospital Inpatient VBP 

Program 

In section XVI. of this proposed rule, 

we present our proposed requirements 

for the FY 2014 Hospital Inpatient VBP 

Program. 

17. Economic and Federalism Analyses 

In sections XX. and XXI. of this 

proposed rule, we set forth an analysis 

of the regulatory and federalism impacts 

that the proposed changes would have 

on affected entities and beneficiaries. 

F. Public Comments Received on the CY 

2011 OPPS/ASC Final Rule With 

Comment Period 

We received approximately 43 timely 

pieces of correspondence on the CY 

2011 OPPS/ASC final rule with 

comment period that appeared in the 

Federal Register on November 24, 2010 

(75 FR 71800), some of which contained 

multiple comments on the interim APC 

assignments and/or status indicators of 

HCPCS codes identified with comment 

indicator ‘‘NI’’ in Addendum B to that 

final rule with comment period. We will 

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present summaries of those public 

comments on topics open to comment 

in the CY 2012 OPPS/ASC final rule 

with comment period and our responses 

to them under appropriate headings. 

II. Proposed Updates Affecting OPPS 

Payments 

A. Proposed Recalibration of APC 

Relative Weights 

1. Database Construction 

a. Database Source and Methodology 

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

requires that the Secretary review and 

revise the relative payment weights for 

APCs at least annually. In the April 7, 

2000 OPPS final rule with comment 

period (65 FR 18482), we explained in 

detail how we calculated the relative 

payment weights that were 

implemented on August 1, 2000 for each 

APC group. 

For the CY 2012 OPPS, we are 

proposing to recalibrate the APC relative 

payment weights for services furnished 

on or after January 1, 2012, and before 

January 1, 2013 (CY 2012), using the 

same basic methodology that we 

described in the CY 2011 OPPS/ASC 

final rule with comment period. That is, 

we are proposing to recalibrate the 

relative payment weights for each APC 

based on claims and cost report data for 

hospital outpatient department (HOPD) 

services, using the most recent available 

data to construct a database for 

calculating APC group weights. For the 

purpose of recalibrating the proposed 

APC relative payment weights for CY 

2012, we used approximately 138 

million final action claims (claims for 

which all disputes and adjustments 

have been resolved and payment has 

been made) for hospital outpatient 

department services furnished on or 

after January 1, 2010, and before January 

1, 2011. (For exact counts of claims 

used, we refer readers to the claims 

accounting narrative under supporting 

documentation for this proposed rule on 

the CMS Web site at: http:// 

www.cms.gov/HospitalOutpatientPPS/ 

HORD/.) 

Of the 138 million final action claims 

for services provided in hospital 

outpatient settings used to calculate the 

proposed CY 2012 OPPS payment rates 

for this proposed rule, approximately 

105 million claims were the type of bill 

potentially appropriate for use in setting 

rates for OPPS services (but did not 

necessarily contain services payable 

under the OPPS). Of the 105 million 

claims, approximately 3 million claims 

were not for services paid under the 

OPPS or were excluded as not 

appropriate for use (for example, 

erroneous cost-to-charge ratios (CCRs) or 

no HCPCS codes reported on the claim). 

From the remaining approximately 102 

million claims, we created 

approximately 100 million single 

records, of which approximately 67 

million were ‘‘pseudo’’ single or ‘‘single 

session’’ claims (created from 

approximately 23 million multiple 

procedure claims using the process we 

discuss later in this section). 

Approximately 888,000 claims were 

trimmed out on cost or units in excess 

of ±3 standard deviations from the 

geometric mean, yielding approximately 

99 million single bills for median 

setting. As described in section II.A.2. of 

this proposed rule, our data 

development process is designed with 

the goal of using appropriate cost 

information in setting the APC relative 

weights. The bypass process is 

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

proposed rule. This section discusses 

how we develop ‘‘pseudo’’ single 

procedure claims (as defined below), 

with the intention of using more 

appropriate data from the available 

claims. In some cases, the bypass 

process allows us to use some portion 

of the submitted claim for cost 

estimation purposes, while the 

remaining information on the claim 

continues to be unusable. Consistent 

with the goal of using appropriate 

information in our data development 

process, we are proposing to only use 

claims (or portions of each claim) that 

are appropriate for ratesetting purposes. 

Ultimately, we were able to use for CY 

2012 ratesetting some portion of 

approximately 94 percent of the CY 

2010 claims containing services payable 

under the OPPS. 

The proposed APC relative weights 

and payments for CY 2012 in Addenda 

A and B to this proposed rule (which 

are referenced in section XVII. of this 

proposed rule and available via the 

Internet on the CMS Web site) were 

calculated using claims from CY 2010 

that were processed before January 1, 

2011, and continue to be based on the 

median hospital costs for services in the 

APC groups. Under the proposed 

methodology, we select claims for 

services paid under the OPPS and 

match these claims to the most recent 

cost report filed by the individual 

hospitals represented in our claims data. 

We continue to believe that it is 

appropriate to use the most current full 

calendar year claims data and the most 

recently submitted cost reports to 

calculate the median costs 

underpinning the APC relative payment 

weights and the CY 2012 payment rates. 

b. Proposed Use of Single and Multiple 

Procedure Claims 

For CY 2012, in general, we are 

proposing to continue to use single 

procedure claims to set the medians on 

which the APC relative payment 

weights would be based, with some 

exceptions as discussed below in this 

section. We generally use single 

procedure claims to set the median costs 

for APCs because we believe that the 

OPPS relative weights on which 

payment rates are based should be 

derived from the costs of furnishing one 

unit of one procedure and because, in 

many circumstances, we are unable to 

ensure that packaged costs can be 

appropriately allocated across multiple 

procedures performed on the same date 

of service. 

It is generally desirable to use the data 

from as many claims as possible to 

recalibrate the APC relative payment 

weights, including those claims for 

multiple procedures. As we have for 

several years, we are proposing to 

continue to use date of service 

stratification and a list of codes to be 

bypassed to convert multiple procedure 

claims to ‘‘pseudo’’ single procedure 

claims. Through bypassing specified 

codes that we believe do not have 

significant packaged costs, we are able 

to use more data from multiple 

procedure claims. In many cases, this 

enabled us to create multiple ‘‘pseudo’’ 

single procedure claims from claims 

that were submitted as multiple 

procedure claims spanning multiple 

dates of service, or claims that 

contained numerous separately paid 

procedures reported on the same date 

on one claim. We refer to these newly 

created single procedure claims as 

‘‘pseudo’’ single procedure claims. The 

history of our use of a bypass list to 

generate ‘‘pseudo’’ single procedure 

claims is well documented, most 

recently in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 71811 

through 71822). In addition, for CY 

2008, we increased packaging and 

created the first composite APCs. We 

have continued our packaging policies 

and the creation of composite APCs for 

CY 2009, 2010, and 2011, and we are 

proposing to continue them for CY 

2012. Increased packaging and creation 

of composite APCs also increased the 

number of bills that we were able to use 

for median calculation by enabling us to 

use claims that contained multiple 

major procedures that previously would 

not have been usable. Further, for CY 

2009, we expanded the composite APC 

model to one additional clinical area, 

multiple imaging services (73 FR 68559 

through 68569), which also increased 

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the number of bills we were able to use 

to calculate APC median costs. We have 

continued the composite APCs for 

multiple imaging services for CYs 2010 

and 2011, and we are proposing to 

continue to create them for CY 2012. We 

refer readers to section II.A.2.e. of this 

proposed rule for discussion of the use 

of claims to establish median costs for 

composite APCs. 

We are proposing to continue to apply 

these processes to enable us to use as 

much claims data as possible for 

ratesetting for the CY 2012 OPPS. This 

methodology enabled us to create, for 

this proposed rule, approximately 67 

million ‘‘pseudo’’ single procedure 

claims, including multiple imaging 

composite ‘‘single session’’ bills (we 

refer readers to section II.A.2.e.(5) of the 

proposed rule for further discussion), to 

add to the approximately 33 million 

‘‘natural’’ single procedure claims. For 

this proposed rule, ‘‘pseudo’’ single 

procedure and ‘‘single session’’ 

procedure bills represented 

approximately 67 percent of all single 

procedure bills used to calculate median 

costs. 

For CY 2012, we are proposing to 

bypass 460 HCPCS codes for CY 2012 

that are identified in Addendum N to 

this proposed rule (which is referenced 

in section XVII. of this proposed rule 

and available via the Internet on the 

CMS Web site). Since the inception of 

the bypass list, which is the list of codes 

to be bypassed to convert multiple 

procedure claims to ‘‘pseudo’’ single 

procedure claims, we have calculated 

the percent of ‘‘natural’’ single bills that 

contained packaging for each HCPCS 

code and the amount of packaging on 

each ‘‘natural’’ single bill for each code. 

Each year, we generally retain the codes 

on the previous year’s bypass list and 

use the updated year’s data (for CY 

2012, data available for the February 

28–March 1, 2011 APC Panel meeting 

from CY 2010 claims processed through 

September 30, 2010, and CY 2009 

claims data processed through June 30, 

2010, used to model the payment rates 

for CY 2011) to determine whether it 

would be appropriate to propose to add 

additional codes to the previous year’s 

bypass list. For CY 2012, we are 

proposing to continue to bypass all of 

the HCPCS codes on the CY 2011 OPPS 

bypass list because they continue to 

meet the established empirical criteria 

for the bypass list. We updated HCPCS 

codes on the CY 2011 bypass list that 

were mapped to new HCPCS codes for 

CY 2012 ratesetting by evaluating data 

for the replacement codes under the 

empirical criteria described below and 

also removing the HCPCS codes that we 

are proposing to be deleted for CY 2012, 

which are listed in Table 1 of this 

proposed rule. We also are proposing to 

remove HCPCS codes that are not 

separately paid under the OPPS because 

the purpose of the bypass list is to 

obtain more data for those codes 

relevant to ratesetting. None of these 

deleted codes were ‘‘overlap bypass 

codes’’ (those HCPCS codes that are 

both on the bypass list and are members 

of the multiple imaging composite 

APCs). We also are proposing to add to 

the bypass list for CY 2012 all HCPCS 

codes not on the CY 2011 bypass list 

that, using either the CY 2011 final rule 

data (CY 2009 claims) or the February 

28–March 1, 2011 APC Panel data (first 

9 months of CY 2010 claims), met the 

empirical criteria for the bypass list that 

are summarized below. The entire list 

proposed for CY 2012 (including the 

codes that remain on the bypass list 

from prior years) is open to public 

comment. Because we must make some 

assumptions about packaging in the 

multiple procedure claims in order to 

assess a HCPCS code for addition to the 

bypass list, we assumed that the 

representation of packaging on 

‘‘natural’’ single procedure claims for 

any given code is comparable to 

packaging for that code in the multiple 

procedure claims. The proposed criteria 

for the bypass list are: 

• There are 100 or more ‘‘natural’’ 

single procedure claims for the code. 

This number of single procedure claims 

ensures that observed outcomes are 

sufficiently representative of packaging 

that might occur in the multiple claims. 

• Five percent or fewer of the 

‘‘natural’’ single procedure claims for 

the code have packaged costs on that 

single procedure claim for the code. 

This criterion results in limiting the 

amount of packaging being redistributed 

to the separately payable procedures 

remaining on the claim after the bypass 

code is removed and ensures that the 

costs associated with the bypass code 

represent the cost of the bypassed 

service. 

• The median cost of packaging 

observed in the ‘‘natural’’ single 

procedure claims is equal to or less than 

$55. This criterion also limits the 

amount of error in redistributed costs. 

During the assessment of claims against 

the bypass criteria, we do not know the 

dollar value of the packaged cost that 

should be appropriately attributed to the 

other procedures on the claim. 

Therefore, ensuring that redistributed 

costs associated with a bypass code are 

small in amount and volume protects 

the validity of cost estimates for low 

cost services billed with the bypassed 

service. 

In response to comments to the CY 

2010 OPPS/ASC proposed rule 

requesting that the packaged cost 

threshold be updated, we considered 

whether it would be appropriate to 

update the $50 packaged cost threshold 

for inflation when examining potential 

bypass list additions. As discussed in 

the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60328), the real 

value of this packaged cost threshold 

criterion has declined due to inflation, 

making the packaged cost threshold 

more restrictive over time when 

considering additions to the bypass list. 

Therefore, adjusting the threshold by 

the market basket would prevent 

continuing decline in the threshold’s 

real value. For CY 2011, based on CY 

2009 claims data, we proposed to apply 

the final market basket of 3.6 percent 

published in the CY 2009 OPPS/ASC 

final rule with comment period (73 FR 

26584) to the $50 packaged cost 

threshold used in the CY 2010 OPPS/ 

ASC final rule with comment period (74 

FR 60325). This calculation led us to a 

proposed packaged cost threshold for 

bypass list additions for CY 2011 of $50 

($51.80 rounded to $50). We stated that 

we believe that applying the market 

basket from the year of claims data to 

the packaged cost threshold, rounded to 

the nearest $5 increment, would 

appropriately account for the effects of 

inflation when considering additions to 

the bypass list because the market 

basket increase percentage reflects the 

extent to which the price of inputs for 

hospital services has increased 

compared to the price of inputs for 

hospital services in the prior year. We 

are proposing for CY 2012, based on the 

same rationale described for the CY 

2011 OPPS/ASC final rule with 

comment period (75 CFR 71812), to 

continue to update the packaged cost 

threshold by the market basket. By 

applying the final CY 2011 market 

basket increase of 1.85 percent to the 

prior non-rounded dollar threshold of 

$51.80 (75 FR 71812), we determined 

that the threshold increases for CY 2012 

to $55 ($52.76 rounded to $55, the 

nearest $5 increment). Therefore, we are 

proposing to set the median packaged 

cost threshold on the CY 2010 claims at 

$55 for a code to be considered for 

addition to the CY 2012 OPPS bypass 

list. 

• The code is not a code for an 

unlisted service. 

In addition, we are proposing to 

continue to include, on the bypass list, 

HCPCS codes that CMS medical 

advisors believe have minimal 

associated packaging based on their 

clinical assessment of the complete CY 

2012 OPPS proposal. Some of these 

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codes were identified by CMS medical 

advisors and some were identified in 

prior years by commenters with 

specialized knowledge of the packaging 

associated with specific services. We 

also are proposing to continue to 

include on the bypass list certain 

HCPCS codes in order to purposefully 

direct the assignment of packaged costs 

to a companion code where services 

always appear together and where there 

would otherwise be few single 

procedure claims available for 

ratesetting. For example, we have 

previously discussed our reasoning for 

adding HCPCS code G0390 (Trauma 

response team associated with hospital 

critical care service) and the CPT codes 

for additional hours of drug 

administration to the bypass list (73 FR 

68513 and 71 FR 68117 through 68118). 

As a result of the multiple imaging 

composite APCs that we established in 

CY 2009, the program logic for creating 

‘‘pseudo’’ single procedure claims from 

bypassed codes that are also members of 

multiple imaging composite APCs 

changed. When creating the set of 

‘‘pseudo’’ single procedure claims, 

claims that contain ‘‘overlap bypass 

codes’’ (those HCPCS codes that are 

both on the bypass list and are members 

of the multiple imaging composite 

APCs) were identified first. These 

HCPCS codes were then processed to 

create multiple imaging composite 

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

containing HCPCS codes from only one 

imaging family, thus suppressing the 

initial use of these codes as bypass 

codes. However, these ‘‘overlap bypass 

codes’’ were retained on the bypass list 

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

single processing logic, we reassessed 

the claims without suppression of the 

‘‘overlap bypass codes’’ under our 

longstanding ‘‘pseudo’’ single process to 

determine whether we could convert 

additional claims to ‘‘pseudo’’ single 

procedure claims. (We refer readers to 

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

further discussion of the treatment of 

‘‘overlap bypass codes.’’) This process 

also created multiple imaging composite 

‘‘single session’’ bills that could be used 

for calculating composite APC median 

costs. ‘‘Overlap bypass codes’’ that are 

members of the proposed multiple 

imaging composite APCs are identified 

by asterisks (*) in Addendum N to this 

proposed rule (which is referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site). 

Addendum N to this proposed rule 

includes the proposed list of bypass 

codes for CY 2012. The list of bypass 

codes contains codes that were reported 

on claims for services in CY 2010 and, 

therefore, includes codes that were in 

effect in 2010 and used for billing but 

were deleted for CY 2011. We retained 

these deleted bypass codes on the 

proposed CY 2012 bypass list because 

these codes existed in CY 2010 and 

were covered OPD services in that 

period, and CY 2010 claims data are 

used to calculate 2012 payment rates. 

Keeping these deleted bypass codes on 

the bypass list potentially allowed us to 

create more ‘‘pseudo’’ single procedure 

claims for ratesetting purposes. 

‘‘Overlap bypass codes’’ that were 

members of the proposed multiple 

imaging composite APCs are identified 

by asterisks (*) in the third column of 

Addendum N to this proposed rule. 

HCPCS codes that we are proposing to 

add for CY 2012 are identified by 

asterisks (*) in the fourth column of 

Addendum N. 

Table 1 below contains the list of 

codes that we are proposing to remove 

from the CY 2012 bypass list because 

these codes were either deleted from the 

HCPCS before CY 2010 (and therefore 

were not covered OPD services in 

CY2010) or were not separately payable 

codes under the proposed CY 2012 

OPPS because these codes are not used 

for ratesetting (and therefore would not 

need to be bypassed). None of these 

proposed deleted codes were ‘‘overlap 

bypass’’ codes. 

TABLE 1—HCPCS CODES PROPOSED

TO BE REMOVED FROM THE CY 

2012 BYPASS LIST

HCPCS Code HCPCS Short descriptor 

29220 ............. Strapping of low back 

78350 ............. Bone mineral, single photon 

90816 ............. Psytx, hosp, 20–30 min 

90818 ............. Psytx, hosp, 45–50 min 

90826 ............. Intac psytx, hosp, 45–50 min 

99241 ............. Office consultation 

99242 ............. Office consultation 

99243 ............. Office consultation 

99244 ............. Office consultation 

99245 ............. Office consultation 

0144T ............ CT heart wo dye; qual calc 

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

For CY 2012, we are proposing to 

continue to use the hospital-specific 

overall ancillary and departmental CCRs 

to convert charges to estimated costs 

through application of a revenue codeto-cost center crosswalk. To calculate 

the APC median costs on which the 

proposed CY 2012 APC payment rates 

are based, we calculated hospitalspecific overall ancillary CCRs and 

hospital-specific departmental CCRs for 

each hospital for which we had CY 2010 

claims data from the most recent 

available hospital cost reports, in most 

cases, cost reports beginning in CY 

2009. For the CY 2012 OPPS proposed 

rates, we used the set of claims 

processed during CY 2010. We applied 

the hospital-specific CCR to the 

hospital’s charges at the most detailed 

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

hierarchy of CCRs used to estimate costs 

from charges for each revenue code. 

That crosswalk is available for review 

and continuous comment on the CMS 

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

HospitalOutpatientPPS/ 

03_crosswalk.asp#TopOfPage. 

To ensure the completeness of the 

revenue code-to-cost center crosswalk, 

we reviewed changes to the list of 

revenue codes for CY 2010 (the year of 

the claims data we used to calculate the 

proposed CY 2012 OPPS payment rates). 

For CY 2010, the National Uniform 

Billing Committee added revenue codes 

860 (Magnetoencephalography (MEG); 

general classification) and 861 

(Magnetoencephalography (MEG)). For 

purposes of applying a CCR to charges 

reported under revenue codes 860 and 

861, we are proposing to use 

nonstandard Medicare cost report cost 

center 3280 (Electrocardiogram (EKG) 

and Electroencephalography (EEG)) as 

the primary cost center and to use 

standard cost center 5400 

(Electroencephalography (EEG)) as the 

secondary cost center. We believe that 

MEG, which evaluates brain activity, is 

similar to EEG, which also evaluates 

brain activity, and that the few hospitals 

that furnish MEG are likely to furnish it 

in the same department of the hospital 

in which they furnish EEG services. 

Therefore, we believe that the CCRs that 

we apply to the EEG revenue codes are 

more likely to result in a more accurate 

estimated cost for MEG than would the 

application of the hospital-specific 

overall ancillary CCR. For hospitals that 

report charges under revenue code 860 

or 861 but do not report costs on their 

cost report under cost center 3280 or 

5400, we are proposing to apply the 

hospital-specific overall CCR to the 

charges reported under revenue code 

860 or 861 for purposes of estimating 

the cost of these services. We note that 

revenue codes with effective dates in CY 

2011 are not relevant to this process 

because these new revenue codes were 

not applicable to claims for services 

furnished during CY 2010. 

In accordance with our longstanding 

policy, we calculated CCRs for the 

standard and nonstandard cost centers 

accepted by the electronic cost report 

database. In general, the most detailed 

level at which we calculated CCRs was 

the hospital-specific departmental level. 

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For a discussion of the hospital-specific 

overall ancillary CCR calculation, we 

refer readers to the CY 2007 OPPS/ASC 

final rule with comment period (71 FR 

67983 through 67985). One 

longstanding exception to this general 

methodology for calculation of CCRs 

used for converting charges to costs on 

each claim is the calculation of median 

blood costs, as discussed in section 

II.A.2.d.(2) of this proposed rule and 

which has been our standard policy 

since the CY 2005 OPPS. 

For the CCR calculation process, we 

used the same general approach that we 

used in developing the final APC rates 

for CY 2007 and thereafter, using the 

revised CCR calculation that excluded 

the costs of paramedical education 

programs and weighted the outpatient 

charges by the volume of outpatient 

services furnished by the hospital. We 

refer readers to the CY 2007 OPPS/ASC 

final rule with comment period for more 

information (71 FR 67983 through 

67985). We first limited the population 

of cost reports to only those for 

hospitals that filed outpatient claims in 

CY 2010 before determining whether the 

CCRs for such hospitals were valid. 

We then calculated the CCRs for each 

cost center and the overall ancillary 

CCR for each hospital for which we had 

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

Report Information System (HCRIS). We 

used the most recent available cost 

report data, in most cases, cost reports 

with cost reporting periods beginning in 

CY 2009. For this proposed rule, we are 

using the most recently submitted cost 

reports to calculate the CCRs to be used 

to calculate median costs for the 

proposed CY 2012 OPPS payment rates. 

If the most recent available cost report 

was submitted but not settled, we 

looked at the last settled cost report to 

determine the ratio of submitted to 

settled cost using the overall ancillary 

CCR, and we then adjusted the most 

recent available submitted, but not 

settled, cost report using that ratio. We 

then calculated both an overall ancillary 

CCR and cost center-specific CCRs for 

each hospital. We used the overall 

ancillary CCR referenced in this section 

II.A.1.c. of this proposed rule for all 

purposes that require use of an overall 

ancillary CCR. We are proposing to 

continue this longstanding methodology 

for the calculation of median costs for 

CY 2012. 

Since the implementation of the 

OPPS, some commenters have raised 

concerns about potential bias in the 

OPPS cost-based weights due to ‘‘charge 

compression,’’ which is the practice of 

applying a lower charge markup to 

higher cost services and a higher charge 

markup to lower cost services. As a 

result, the cost-based weights may 

reflect some aggregation bias, 

undervaluing high-cost items and 

overvaluing low-cost items when an 

estimate of average markup, embodied 

in a single CCR, is applied to items of 

widely varying costs in the same cost 

center. 

To explore this issue, in August 2006, 

we awarded a contract to RTI 

International (RTI) to study the effects of 

charge compression in calculating the 

IPPS cost-based relative weights, 

particularly with regard to the impact 

on inpatient diagnosis-related group 

(DRG) payments, and to consider 

methods to better capture the variation 

in cost and charges for individual 

services when calculating costs for the 

IPPS relative weights across services in 

the same cost center. RTI issued a report 

in March 2007 with its findings on 

charge compression, which is available 

on the CMS Web site at: http:// 

www.cms.gov/reports/downloads/ 

Dalton.pdf. Although this report was 

focused largely on charge compression 

in the context of the IPPS cost-based 

relative weights, because several of the 

findings were relevant to the OPPS, we 

discussed that report in the CY 2008 

OPPS/ASC proposed rule (72 FR 42641 

through 42643) and discussed those 

findings again in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66599 through 66602). 

In August 2007, we contracted with 

RTI to evaluate the cost estimation 

process for the OPPS relative weights 

because its 2007 report had 

concentrated on IPPS DRG cost-based 

relative weights. The results of RTI’s 

analyses had implications for both the 

OPPS APC cost-based relative weights 

and the IPPS MS–DRG (Medicare 

severity) cost-based relative weights. 

The RTI final report can be found on 

RTI’s Web site at: http://www.rti.org/ 

reports/cms/HHSM-500-2005-0029I/ 

PDF/Refining_Cost_to_Charge_

Ratios_200807_Final.pdf. For a 

complete discussion of the RTI 

recommendations, public comments, 

and our responses, we refer readers to 

the CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68519 through 

68527). 

We addressed the RTI finding that 

there was aggregation bias in both the 

IPPS and the OPPS cost estimation of 

expensive and inexpensive medical 

supplies in the FY 2009 IPPS final rule. 

Specifically, we finalized our proposal 

for both the OPPS and IPPS to create 

one cost center for ‘‘Medical Supplies 

Charged to Patients’’ and one cost center 

for ‘‘Implantable Devices Charged to 

Patients,’’ essentially splitting the then 

current CCR for ‘‘Medical Supplies and 

Equipment’’ into one CCR for low-cost 

medical supplies and another CCR for 

high-cost implantable devices in order 

to mitigate some of the effects of charge 

compression. Accordingly, in 

Transmittal 20 of the Provider 

Reimbursement Manual, Part II (PRM– 

II), Chapter 36, Form CMS–2552–96, 

which was issued in July 2009, we 

created a new subscripted Line 55.01 on 

Worksheet A for the ‘‘Implantable 

Devices Charged to Patients’’ cost 

center. This new subscripted cost 

center, placed under the standard line 

for ‘‘Medical Supplies Charged to 

Patients,’’ is available for use for cost 

reporting periods beginning on or after 

May 1, 2009. A subscripted cost center 

is the addition of a separate new cost 

center line and description which bears 

a logical relationship to the standard 

cost center line and is located 

immediately following a standard cost 

center line. Subscripting a cost center 

line adds flexibility and cost center 

expansion capability to the cost report. 

For example, Line 55 of Worksheet A on 

Form CMS 2552–96 (the Medicare 

hospital cost report) is ‘‘Medical 

Supplies Charged to Patients.’’ The 

additional cost center, which isolates 

the costs of ‘‘Implantable Medical 

Supplies Charged to Patients’’, was 

created by adding subscripted Line 

55.01 to Worksheet A and is defined as 

capturing the costs and charges billed 

with the following UB–04 revenue 

codes: 0275 (Pacemaker); 0276 

(Intraocular lens); 0278 (other implants); 

and 0624 (FDA investigations devices) 

(73 FR 48458). 

In preparation for the FY 2012 IPPS 

proposed rule and this CY 2012 OPPS 

proposed rule, we have assessed the 

availability of data in the ‘‘Implantable 

Devices Charged to Patients’’ cost 

center. In order to develop a robust 

analysis regarding the use of cost data 

from the ‘‘Implantable Devices Charged 

to Patients’’ cost center, we believe that 

it is necessary to have a critical mass of 

cost reports filed with data in this cost 

center. The cost center for ‘‘Implantable 

Devices Charged to Patients’’ is effective 

for cost reporting periods beginning on 

or after May 1, 2009. We have checked 

the availability of CY 2009 cost reports 

in the December 31, 2010 quarter ending 

update of HCRIS, which is the latest 

upload of CY 2009 cost report data that 

we could use for this proposed rule. We 

have determined that there are only 437 

hospitals that have completed the 

‘‘Implantable Devices Charged to 

Patients’’ cost center (out of 

approximately 3,500 IPPS hospitals). 

We do not believe this is a sufficient 

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amount of data from which to generate 

a meaningful analysis. Therefore, we are 

not proposing to use data from the 

‘‘Implantable Devices Charged to 

Patients’’ cost center to create a distinct 

CCR for Implantable Devices Charged to 

Patients for use in calculating the OPPS 

relative weights for CY 2012. We will 

reassess the availability of data for the 

‘‘Implantable Devices Charged to 

Patients’’ cost center for the CY 2013 

OPPS rulemaking cycle. Because there 

is approximately a 3-year lag in the 

availability of cost report data for IPPS 

and OPPS ratesetting purposes in a 

given calendar year, we believe we may 

be able to use data from the revised 

Medicare hospital cost report form to 

estimate costs from charges for 

implantable devices for the CY 2013 

OPPS relative weights. For a complete 

discussion of the rationale for the 

creation of the new cost center for 

‘‘Implantable Devices Charged to 

Patients,’’ public comments, and our 

responses, we refer readers to the FY 

2009 IPPS final rule (73 FR 48458 

through 45467). 

In the CY 2009 OPPS/ASC final rule 

with comment period, we indicated that 

we would be making some other OPPSspecific changes in response to the RTI 

report recommendations. Specifically, 

these changes included modifications to 

the cost reporting software and the 

addition of three new nonstandard cost 

centers. With regard to modifying the 

cost reporting preparation software in 

order to offer additional descriptions for 

nonstandard cost centers to improve the 

accuracy of reporting for nonstandard 

cost centers, we indicated that the 

change would be made for the next 

release of the cost report software. These 

changes have been made to the cost 

reporting software with the 

implementation of CMS Transmittal 21, 

under Chapter 36 of the PRM–II, 

available on the CMS Web site at: 

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

PBM/, which is effective for cost 

reporting periods ending on or after 

October 1, 2009. 

We also indicated that we intended to 

add new nonstandard cost centers for 

‘‘Cardiac Rehabilitation,’’ ‘‘Hyperbaric 

Oxygen Therapy,’’ and ‘‘Lithotripsy.’’ 

We note that, in January 2010, CMS 

issued Transmittal 21 which updated 

the PRM–II, Chapter 36, Form CMS– 

2552–96. One of the updates in this 

transmittal established nonstandard cost 

centers for ‘‘Cardiac Rehabilitation,’’ 

‘‘Hyperbaric Oxygen Therapy,’’ and 

‘‘Lithotripsy’’ for use on Worksheet A. 

These three new nonstandard cost 

centers became available for cost 

reporting periods ending on or after 

October 1, 2009, and are included in the 

revenue code to cost center crosswalk 

we are proposing to use for calculating 

payment rates for CY 2012 OPPS. 

Specifically, the nonstandard cost 

centers are: 3120 (Cardiac 

Catheterization Laboratory); 3230 (CAT 

Scan); 3430 (Magnetic Resonance 

Imaging (MRI)). The revenue code to 

cost center crosswalk that we are 

proposing to use for purposes of 

estimating the median costs of items 

and services for the CY 2012 OPPS is 

available for review and continuous 

comment (outside of comment on this 

proposed rule) on the CMS Web site at: 

http://www.cms.gov/Hospital

OutpatientPPS/03_

crosswalk.asp#TopOfPage. 

Furthermore, in the FY 2011 IPPS/ 

LTCH PPS final rule (75 FR 50075 

through 50080), we finalized our 

proposal to create new standard cost 

centers for ‘‘Computed Tomography 

(CT),’’ ‘‘Magnetic Resonance Imaging 

(MRI),’’ and ‘‘Cardiac Catheterization,’’ 

and to require that hospitals report the 

costs and charges for these services 

under new cost centers on the revised 

Medicare cost report Form CMS 2552– 

10. As we discussed in the FY 2009 

IPPS/LTCH PPS and CY 2009 OPPS/ 

ASC proposed and final rules, RTI 

found that the costs and charges of CT 

scans, MRI, and cardiac catheterization 

differ significantly from the costs and 

charges of other services included in the 

standard associated cost center. RTI also 

concluded that both the IPPS and OPPS 

relative weights would better estimate 

the costs of those services if CMS were 

to add standard costs centers for CT 

scans, MRI, and cardiac catheterization 

in order for hospitals to report 

separately the costs and charges for 

those services and in order for CMS to 

calculate unique CCRs to estimate the 

cost from charges on claims data. (We 

refer readers to the FY 2011 IPPS/LTCH 

PPS final rule (75 FR 50075 through 

50080) for a more detailed discussion on 

the reasons for the creation of standard 

cost centers for CT scans, MRI, and 

cardiac catheterization.) The new 

standard cost centers for MRI, CT scans, 

and cardiac catheterization are effective 

for cost report periods beginning on or 

after May 1, 2010, on the revised cost 

report Form CMS–2552–10. CMS issued 

the new hospital cost report Form CMS– 

2552–10 on December 30, 2010. The 

new cost report form can be accessed at 

the CMS Web site at: https:// 

www.cms.gov/Manuals/PBM/

itemdetail.asp?filterType=

none&filterByDID=-99&

sortByDID=1&sortOrder=

ascending&itemID=

CMS021935&intNumPerPage=10. Once 

at this Web site, users should double 

click on ‘‘Chapter 40.’’ 

We believe that improved cost report 

software, the incorporation of new 

standard and nonstandard cost centers, 

and the elimination of outdated 

requirements will improve the accuracy 

of the cost data contained in the 

electronic cost report data files and, 

therefore, the accuracy of our cost 

estimation processes for the OPPS 

relative weights. We will continue our 

standard practice of examining ways in 

which we can improve the accuracy of 

our cost estimation processes. 

2. Proposed Data Development Process 

and Calculation of Median Costs 

In this section of this proposed rule, 

we discuss the use of claims to calculate 

proposed OPPS payment rates for CY 

2012. The hospital OPPS page on the 

CMS Web site on which this proposed 

rule is posted provides an accounting of 

claims used in the development of the 

proposed payment rates at: http:// 

www.cms.gov/HospitalOutpatientPPS. 

The accounting of claims used in the 

development of this proposed rule is 

included on the CMS Web site under 

supplemental materials for this CY 2012 

OPPS/ASC proposed rule. That 

accounting provides additional detail 

regarding the number of claims derived 

at each stage of the process. In addition, 

below in this section we discuss the file 

of claims that comprises the data set 

that is available for purchase under a 

CMS data use agreement. Our CMS Web 

site, http://www.cms.gov/

HospitalOutpatientPPS, includes 

information about purchasing the 

‘‘OPPS Limited Data Set,’’ which now 

includes the additional variables 

previously available only in the OPPS 

Identifiable Data Set, including ICD–9– 

CM diagnosis codes and revenue code 

payment amounts. This file is derived 

from the CY 2010 claims that were used 

to calculate the proposed payment rates 

for the CY 2012 OPPS. 

We used the methodology described 

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

this proposed rule to calculate the 

median costs we use to establish the 

relative weights used in calculating the 

proposed OPPS payment rates for CY 

2012 shown in Addenda A and B to this 

proposed rule (which are referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site). We refer readers to section 

II.A.4. of this proposed rule for a 

discussion of the conversion of APC 

median costs to scaled payment 

weights. 

a. Claims Preparation 

For this proposed rule, we used the 

CY 2010 hospital outpatient claims 

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processed before January 1, 2011, to 

calculate the median costs of APCs that 

underpin the proposed relative weights 

for CY 2012. To begin the calculation of 

the relative weights for CY 2012, we 

pulled all claims for outpatient services 

furnished in CY 2010 from the national 

claims history file. This is not the 

population of claims paid under the 

OPPS, but all outpatient claims 

(including, for example, critical access 

hospital (CAH) claims and hospital 

claims for clinical laboratory services 

for persons who are neither inpatients 

nor outpatients of the hospital). 

We then excluded claims with 

condition codes 04, 20, 21, and 77 

because these are claims that providers 

submitted to Medicare knowing that no 

payment would be made. For example, 

providers submit claims with a 

condition code 21 to elicit an official 

denial notice from Medicare and 

document that a service is not covered. 

We then excluded claims for services 

furnished in Maryland, Guam, the U.S. 

Virgin Islands, American Samoa, and 

the Northern Mariana Islands because 

hospitals in those geographic areas are 

not paid under the OPPS, and, therefore, 

we do not use claims for services 

furnished in these areas in ratesetting. 

We divided the remaining claims into 

the three groups shown below. Groups 

2 and 3 comprise the 105 million claims 

that contain hospital bill types paid 

under the OPPS. 

1. Claims that were not bill types 12X, 

13X (hospital bill types), 14X 

(laboratory specimen bill types), or 76X 

(CMHC bill types). Other bill types are 

not paid under the OPPS and, therefore, 

these claims were not used to set OPPS 

payment. 

2. Claims that were bill types 12X, 

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

and 13X are hospital outpatient claims. 

Claims with bill type 14X are laboratory 

specimen claims, of which we use a 

subset for the limited number of 

services in these claims that are paid 

under the OPPS. 

3. Claims that were bill type 76X 

(CMHC). 

To convert charges on the claims to 

estimated cost, we multiplied the 

charges on each claim by the 

appropriate hospital-specific CCR 

associated with the revenue code for the 

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

of this proposed rule. We then flagged 

and excluded CAH claims (which are 

not paid under the OPPS) and claims 

from hospitals with invalid CCRs. The 

latter included claims from hospitals 

without a CCR; those from hospitals 

paid an all-inclusive rate; those from 

hospitals with obviously erroneous 

CCRs (greater than 90 or less than 

0.0001); and those from hospitals with 

overall ancillary CCRs that were 

identified as outliers (3 standard 

deviations from the geometric mean 

after removing error CCRs). In addition, 

we trimmed the CCRs at the cost center 

(that is, departmental) level by removing 

the CCRs for each cost center as outliers 

if they exceeded +/¥3 standard 

deviations from the geometric mean. We 

used a four-tiered hierarchy of cost 

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

center to every possible revenue code 

appearing in the outpatient claims that 

is relevant to OPPS services, with the 

top tier being the most common cost 

center and the last tier being the default 

CCR. If a hospital’s cost center CCR was 

deleted by trimming, we set the CCR for 

that cost center to ‘‘missing’’ so that 

another cost center CCR in the revenue 

center hierarchy could apply. If no other 

cost center CCR could apply to the 

revenue code on the claim, we used the 

hospital’s overall ancillary CCR for the 

revenue code in question as the default 

CCR. For example, if a visit was 

reported under the clinic revenue code 

but the hospital did not have a clinic 

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

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

inspection and comment on the CMS 

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

HospitalOutpatientPPS. Revenue codes 

that we do not use to set medians or to 

model impacts are identified with an 

‘‘N’’ in the revenue code-to-cost center 

crosswalk. 

We applied the CCRs as described 

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

or 14X, excluding all claims from CAHs 

and hospitals in Maryland, Guam, the 

U.S. Virgin Islands, American Samoa, 

and the Northern Mariana Islands and 

claims from all hospitals for which 

CCRs were flagged as invalid. 

We identified claims with condition 

code 41 as partial hospitalization 

services of hospitals and moved them to 

another file. We note that the separate 

file containing partial hospitalization 

claims is included in the files that are 

available for purchase as discussed 

above. 

We then excluded claims without a 

HCPCS code. We moved to another file 

claims that contained nothing but 

influenza and pneumococcal 

pneumonia (PPV) vaccines. Influenza 

and PPV vaccines are paid at reasonable 

cost and, therefore, these claims are not 

used to set OPPS rates. 

We next copied line-item costs for 

drugs, blood, and brachytherapy sources 

to a separate file (the lines stay on the 

claim, but are copied onto another file). 

No claims were deleted when we copied 

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

mean and median cost and a per day 

mean and median cost for drugs and 

nonimplantable biologicals, therapeutic 

radiopharmaceutical agents, and 

brachytherapy sources, as well as other 

information used to set payment rates, 

such as a unit-to-day ratio for drugs. 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60517), we 

first adopted a policy to redistribute 

some portion of total cost of packaged 

drugs and biologicals to the separately 

payable drugs and biologicals as 

acquisition and pharmacy overhead and 

handling costs. As discussed further in 

section V.B.3. of this proposed rule, we 

are proposing to continue this policy for 

CY 2012. Therefore, we used the lineitem cost data for drugs and biologicals 

for which we had a HCPCS code with 

ASP pricing information to calculate the 

ASP+X values, first for all drugs and 

biologicals with HCPCS codes, whether 

separately paid or packaged, and then 

for separately payable drugs and 

biologicals and for packaged drugs and 

biologicals, respectively, by taking the 

ratio of total claim cost for each group 

relative to total ASP dollars (per unit of 

each drug or biological HCPCS code’s 

April 2011 ASP amount multiplied by 

total units for each drug or biological in 

the CY 2010 claims data). These values 

are ASP+11 percent (for all drugs and 

biologicals with HCPCS codes, whether 

separately paid or packaged), ASP–2 

percent (for drugs and biologicals that 

are separately paid), and ASP+188 

percent (for drugs and biologicals that 

have HCPCS codes and that are 

packaged), respectively. As we discuss 

in section V.B.3. of this proposed rule, 

we are proposing to redistribute $161 

million of the total cost in our claims 

data for coded packaged drugs and 

biologicals with an ASP to payment for 

separately payable drugs and 

biologicals. We also are proposing to 

redistribute an additional $54 million 

from the cost of uncoded packaged 

drugs billed under pharmacy revenue 

code series 025X (Pharmacy (also see 

063X, an extension of 025X)), 026X (IV 

Therapy), and 063X (Pharmacy— 

Extension of 025X). This total excludes 

the cost of diagnostic and therapeutic 

radiopharmaceuticals because they are 

not reported under pharmacy revenue 

codes or under the pharmacy cost center 

on the hospital cost report. Our CY 2012 

proposal to redistribute $215 million in 

estimated costs from coded and 

uncoded packaged drugs to separately 

payable drugs represents the $200 

million in total packaged drug costs 

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Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 42185 

redistributed from the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 71967), updated by the PPI for 

Pharmaceuticals for Human Use. 

Redistributing a total of $161 million 

in pharmacy overhead cost from 

packaged drugs and biologicals reduces 

the $705 million cost of packaged drugs 

and biologicals with HCPCS codes and 

ASPs to $544 million, approximately a 

23-percent reduction. Redistributing $54 

million from the cost of uncoded 

packaged drugs and biologicals reduces 

the $502 million cost of uncoded drugs 

and biologicals to $448 million, 

approximately an 11-percent reduction. 

To implement our proposed CY 2012 

policy to redistribute $161 million from 

the pharmacy overhead cost of coded 

packaged drugs and biologicals to 

separately payable drugs and biologicals 

and $54 million from the cost of 

uncoded packaged drugs, we multiplied 

the cost of each packaged drug or 

biological with a HCPCS code and ASP 

pricing information in our CY 2010 

claims data by 0.77, and we multiplied 

all uncoded packaged pharmacy drug 

costs in our CY 2010 claims data, 

excluding those for diagnostic 

radiopharmaceuticals, by 0.89. We also 

added the redistributed $215 million to 

the total cost of separately payable drugs 

and biologicals in our CY 2010 claims 

data, which increased the relationship 

between the total cost for separately 

payable drugs and biologicals and ASP 

dollars for the same drugs and 

biologicals from ASP¥2 percent to 

ASP+4 percent. We refer readers to 

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

a complete discussion of our proposed 

policy to pay for separately paid drugs 

and biologicals and pharmacy overhead 

for CY 2012. 

We then removed line-items that were 

not paid during claim processing, 

presumably for a line-item rejection or 

denial. The number of edits for valid 

OPPS payment in the Integrated 

Outpatient Code Editor (I/OCE) and 

elsewhere has grown significantly in the 

past few years, especially with the 

implementation of the full spectrum of 

National Correct Coding Initiative 

(NCCI) edits. To ensure that we are 

using valid claims that represent the 

cost of payable services to set payment 

rates, we removed line-items with an 

OPPS status indicator that were not paid 

during claims processing in the claim 

year, but have a status indicator of ‘‘S,’’ 

‘‘T,’’ ‘‘V,’’ or ‘‘X’’ in the proposed year’s 

payment system. This logic preserves 

charges for services that would not have 

been paid in the claim year but for 

which some estimate of cost is needed 

for the proposed year, such as services 

newly proposed to come off the 

inpatient list for CY 2011 that were 

assigned status indicator ‘‘C’’ in the 

claim year. It also preserves charges for 

packaged services so that the costs can 

be included in the cost of the services 

with which they are reported, even if 

the CPT codes for the packaged services 

were not paid because the service is part 

of another service that was reported on 

the same claim or the code otherwise 

violates claims processing edits. 

For CY 2012, we are proposing to 

continue the policy we implemented for 

CY 2011 to exclude line-item data for 

pass-through drugs and biologicals 

(status indicator ‘‘G’’ for CY 2010) and 

nonpass-through drugs and biologicals 

(status indicator ‘‘K’’ for CY 2010) 

where the charges reported on the claim 

for the line were either denied or 

rejected during claims processing. 

Removing lines that were eligible for 

payment but were not paid ensures that 

we are using appropriate data. The trim 

avoids using cost data on lines that we 

believe were defective or invalid 

because those rejected or denied lines 

did not meet the Medicare requirements 

for payment. For example, edits may 

reject a line for a separately paid drug 

because the number of units billed 

exceeded the number of units that 

would be reasonable and, therefore, is 

likely a billing error (for example, a line 

reporting 55 units of a drug for which 

5 units is known to be a fatal dose). As 

with our trimming in the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 71828) of line items with 

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

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

represent services that are invalidly 

reported and, therefore, should not be 

used for ratesetting. We believe that 

removing lines with valid status 

indicators that were edited and not paid 

during claims processing increases the 

accuracy of the single bills used to 

determine the mean unit costs for use in 

the ASP+X calculation described in 

section V.B.3. of this proposed rule with 

comment period. 

b. Splitting Claims and Creation of 

‘‘Pseudo’’ Single Procedure Claims 

(1) Splitting Claims 

We then split the remaining claims 

into five groups: single majors; multiple 

majors; single minors; multiple minors; 

and other claims. (Specific definitions 

of these groups follow below.) For CY 

2012, we are proposing to continue our 

current policy of defining major 

procedures as any HCPCS code having 

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

‘‘X;’’ defining minor procedures as any 

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

‘‘G,’’ ‘‘H,’’ ‘‘K,’’ ‘‘L,’’ ‘‘R,’’ ‘‘U,’’ or ‘‘N,’’ 

and classifying ‘‘other’’ procedures as 

any code having a status indicator other 

than one that we have classified as 

major or minor. For CY 2012, we are 

proposing to continue assigning status 

indicator ‘‘R’’ to blood and blood 

products; status indicator ‘‘U’’ to 

brachytherapy sources; status indicator 

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

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

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

codes that may be paid through a 

composite APC based on compositespecific criteria or paid separately 

through single code APCs when the 

criteria are not met. As discussed in the 

CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68709), we 

established status indicators ‘‘Q1,’’ 

‘‘Q2,’’ and ‘‘Q3’’ to facilitate 

identification of the different categories 

of codes. We are proposing to treat these 

codes in the same manner for data 

purposes for CY 2012 as we have treated 

them since CY 2008. Specifically, we 

are proposing to continue to evaluate 

whether the criteria for separate 

payment of codes with status indicator 

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

whether they are treated as major or 

minor codes. Codes with status 

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

through the data either with status 

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

meet the criteria for separate payment, 

they are given the status indicator of the 

APC to which they are assigned and are 

considered as ‘‘pseudo’’ single 

procedure claims for major codes. Codes 

assigned status indicator ‘‘Q3’’ are paid 

under individual APCs unless they 

occur in the combinations that qualify 

for payment as composite APCs and, 

therefore, they carry the status indicator 

of the individual APC to which they are 

assigned through the data process and 

are treated as major codes during both 

the split and ‘‘pseudo’’ single creation 

process. The calculation of the median 

costs for composite APCs from multiple 

procedure major claims is discussed in 

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

Specifically, we divided the 

remaining claims into the following five 

groups: 

1. Single Procedure Major Claims: 

Claims with a single separately payable 

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

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

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

one unit of a status indicator ‘‘Q1’’ code 

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

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

‘‘V,’’ or ‘‘X’’ on the same claim on the 

same date; or claims with one unit of a 

status indicator ‘‘Q2’’ code (‘‘Tpackaged’’) where there was no code 

with a status indicator ‘‘T’’ on the same 

claim on the same date. 

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2. Multiple Procedure Major Claims: 

Claims with more than one separately 

payable procedure (that is, status 

indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X,’’ which 

includes codes with status indicator 

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

procedure. These claims include those 

codes with a status indicator ‘‘Q2’’ code 

(‘‘T-packaged’’) where there was no 

procedure with a status indicator ‘‘T’’ 

on the same claim on the same date of 

service but where there was another 

separately paid procedure on the same 

claim with the same date of service (that 

is, another code with status indicator 

‘‘S,’’ ‘‘V,’’ or ‘‘X’’). We also include, in 

this set, claims that contained one unit 

of one code when the bilateral modifier 

was appended to the code and the code 

was conditionally or independently 

bilateral. In these cases, the claims 

represented more than one unit of the 

service described by the code, 

notwithstanding that only one unit was 

billed. 

3. Single Procedure Minor Claims: 

Claims with a single HCPCS code that 

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

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

not status indicator ‘‘Q1’’ (‘‘STVXpackaged’’) or status indicator ‘‘Q2’’ (‘‘Tpackaged’’) code. 

4. Multiple Procedure Minor Claims: 

Claims with multiple HCPCS codes that 

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

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

that contain more than one code with 

status indicator ‘‘Q1’’ (‘‘STVXpackaged’’) 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’’ (Tpackaged), or ‘‘Q2’’ and ‘‘Q1,’’ or more 

than one unit of a code with status 

indicator ‘‘Q2’’ but no code with status 

indicator ‘‘T’’ on the same date of 

service. 

5. Non-OPPS Claims: Claims that 

contain no services payable under the 

OPPS (that is, all status indicators other 

than those listed for major or minor 

status). These claims were excluded 

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

other fee schedules, for example, 

durable medical equipment or clinical 

laboratory tests, and do not contain a 

code for a separately payable or 

packaged OPPS service. Non-OPPS 

claims include claims for therapy 

services paid sometimes under the 

OPPS but billed, in these non-OPPS 

cases, with revenue codes indicating 

that the therapy services would be paid 

under the Medicare Physician Fee 

Schedule (MPFS). 

The claims listed in numbers 1, 2, 3, 

and 4 above are included in the data file 

that can be purchased as described 

above. Claims that contain codes to 

which we have assigned status 

indicators ‘‘Q1’’ (‘‘STVX-packaged’’) 

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

data for the single major file, the 

multiple major file, and the multiple 

minor file used in this proposed rule. 

Claims that contain codes to which we 

have assigned status indicator ‘‘Q3’’ 

(composite APC members) appear in 

both the data of the single and multiple 

major files used in this proposed rule, 

depending on the specific composite 

calculation. 

(2) Creation of ‘‘Pseudo’’ Single 

Procedure Claims 

To develop ‘‘pseudo’’ single 

procedure claims for this proposed rule, 

we examined both the multiple 

procedure major claims and the 

multiple procedure minor claims. We 

first examined the multiple major 

procedure claims for dates of service to 

determine if we could break them into 

‘‘pseudo’’ single procedure claims using 

the dates of service for all lines on the 

claim. If we could create claims with 

single major procedures by using dates 

of service, we created a single procedure 

claim record for each separately payable 

procedure on a different date of service 

(that is, a ‘‘pseudo’’ single). 

We also used the bypass codes listed 

in Addendum N to this proposed rule 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site) and 

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

proposed rule to remove separately 

payable procedures which we 

determined contained limited or no 

packaged costs or that were otherwise 

suitable for inclusion on the bypass list 

from a multiple procedure bill. As 

discussed above, we ignore the ‘‘overlap 

bypass codes,’’ that is, those HCPCS 

codes that are both on the bypass list 

and are members of the multiple 

imaging composite APCs, in this initial 

assessment for ‘‘pseudo’’ single 

procedure claims. The proposed CY 

2012 ‘‘overlap bypass codes’’ are listed 

in Addendum N to this proposed rule 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site). When 

one of the two separately payable 

procedures on a multiple procedure 

claim was on the bypass list, we split 

the claim into two ‘‘pseudo’’ single 

procedure claim records. The single 

procedure claim record that contained 

the bypass code did not retain packaged 

services. The single procedure claim 

record that contained the other 

separately payable procedure (but no 

bypass code) retained the packaged 

revenue code charges and the packaged 

HCPCS code charges. We also removed 

lines that contained multiple units of 

codes on the bypass list and treated 

them as ‘‘pseudo’’ single procedure 

claims by dividing the cost for the 

multiple units by the number of units 

on the line. Where one unit of a single, 

separately payable procedure code 

remained on the claim after removal of 

the 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.e.(5) of this proposed rule, 

were met. Where the criteria for the 

imaging composite APCs were met, we 

created a ‘‘single session’’ claim for the 

applicable imaging composite service 

and determined whether we could use 

the claim in ratesetting. For HCPCS 

codes that are both conditionally 

packaged and are members of a multiple 

imaging composite APC, we first 

assessed whether the code would be 

packaged and, if so, the code ceased to 

be available for further assessment as 

part of the composite APC. Because the 

packaged code would not be a 

separately payable procedure, we 

considered it to be unavailable for use 

in setting the composite APC median 

cost. Having identified ‘‘single session’’ 

claims for the imaging composite APCs, 

we reassessed the claim to determine if, 

after removal of all lines for bypass 

codes, including the ‘‘overlap bypass 

codes,’’ a single unit of a single 

separately payable code remained on 

the claim. If so, we attributed the 

packaged costs on the claim to the 

single unit of the single remaining 

separately payable code other than the 

bypass code to create a ‘‘pseudo’’ single 

procedure claim. We also identified 

line-items of overlap bypass codes as a 

‘‘pseudo’’ single procedure claim. This 

allowed us to use more claims data for 

ratesetting purposes. 

We also examined the multiple 

procedure minor claims to determine 

whether we could create ‘‘pseudo’’ 

single procedure claims. Specifically, 

where the claim contained multiple 

codes with status indicator ‘‘Q1’’ 

(‘‘STVX-packaged’’) on the same date of 

service or contained multiple units of a 

single code with status indicator ‘‘Q1,’’ 

we selected the status indicator ‘‘Q1’’ 

HCPCS code that had the highest CY 

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2011 relative weight, set the units to one 

on that HCPCS code to reflect our policy 

of paying only one unit of a code with 

a status indicator of ‘‘Q1.’’ We then 

packaged all costs for the following into 

a single cost for the ‘‘Q1’’ HCPCS code 

that had the highest CY 2011 relative 

weight to create a ‘‘pseudo’’ single 

procedure claim for that code: 

Additional units of the status indicator 

‘‘Q1’’ HCPCS code with the highest CY 

2011 relative weight; other codes with 

status indicator ‘‘Q1’’; and all other 

packaged HCPCS codes and packaged 

revenue code costs. We changed the 

status indicator for the selected code 

from the data status indicator of ‘‘N’’ to 

the status indicator of the APC to which 

the selected procedure was assigned for 

further data processing and considered 

this claim as a major procedure claim. 

We used this claim in the calculation of 

the APC median cost for the status 

indicator ‘‘Q1’’ HCPCS code. 

Similarly, where a multiple procedure 

minor claim contained multiple codes 

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

code with status indicator ‘‘Q2,’’ we 

selected the status indicator ‘‘Q2’’ 

HCPCS code that had the highest CY 

2011 relative weight, set the units to one 

on that HCPCS code to reflect our policy 

of paying only one unit of a code with 

a status indicator of ‘‘Q2.’’ We then 

packaged all costs for the following into 

a single cost for the ‘‘Q2’’ HCPCS code 

that had the highest CY 2011 relative 

weight to create a ‘‘pseudo’’ single 

procedure claim for that code: 

Additional units of the status indicator 

‘‘Q2’’ HCPCS code with the highest CY 

2011 relative weight; other codes with 

status indicator ‘‘Q2’’; and other 

packaged HCPCS codes and packaged 

revenue code costs. We changed the 

status indicator for the selected code 

from a data status indicator of ‘‘N’’ to 

the status indicator of the APC to which 

the selected code was assigned, and we 

considered this claim as a major 

procedure claim. 

Where a multiple procedure minor 

claim contained multiple codes with 

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

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

status indicator ‘‘Q2’’ HCPCS code that 

had the highest relative weight for CY 

2011 and set the units to one on that 

HCPCS code to reflect our policy of 

paying only one unit of a code with a 

status indicator of ‘‘Q2.’’ We then 

packaged all costs for the following into 

a single cost for the selected (‘‘T 

packaged’’) HCPCS code to create a 

‘‘pseudo’’ single procedure claim for 

that code: Additional units of the status 

indicator ‘‘Q2’’ HCPCS code with the 

highest CY 2011 relative weight; other 

codes with status indicator ‘‘Q2’’; codes 

with status indicator ‘‘Q1’’ (‘‘STVXpackaged’’); and other packaged HCPCS 

codes and packaged revenue code costs. 

We favor status indicator ‘‘Q2’’ over 

‘‘Q1’’ HCPCS codes because ‘‘Q2’’ 

HCPCS codes have higher CY 2011 

relative weights. If a status indicator 

‘‘Q1’’ HCPCS code had a higher CY 2011 

relative weight, it would become the 

primary code for the simulated single 

bill process. We changed the status 

indicator for the selected status 

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

from a data status indicator of ‘‘N’’ to 

the status indicator of the APC to which 

the selected code was assigned and we 

considered this claim as a major 

procedure claim. 

We then applied our process for 

creating ‘‘pseudo’’ single procedure 

claims to the conditionally packaged 

codes that do not meet the criteria for 

packaging, which enabled us to create 

single procedure claims from them, 

where they meet the criteria for single 

procedure claims. Conditionally 

packaged codes are identified using 

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

are described in section XI.A.1. of this 

proposed rule. 

Lastly, we excluded those claims that 

we were not able to convert to single 

procedure claims even after applying all 

of the techniques for creation of 

‘‘pseudo’’ single procedure claims to 

multiple procedure major claims and to 

multiple procedure minor claims. As 

has been our practice in recent years, we 

also excluded claims that contained 

codes that were viewed as 

independently or conditionally bilateral 

and that contained the bilateral modifier 

(Modifier 50 (Bilateral procedure)) 

because the line-item cost for the code 

represented the cost of two units of the 

procedure, notwithstanding that 

hospitals billed the code with a unit of 

one. 

We are proposing to continue to apply 

this methodology for the purpose of 

creating pseudo single procedure claims 

for CY 2012 OPPS. 

c. Completion of Claim Records and 

Median Cost Calculations 

We then packaged the costs of 

packaged HCPCS codes (codes with 

status indicator ‘‘N’’ listed in 

Addendum B to this proposed rule 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site) and the 

costs of those lines for codes with status 

indicator ‘‘Q1’’ or ‘‘Q2’’ when they are 

not separately paid), and the costs of the 

services reported under packaged 

revenue codes in Table 2 below that 

appeared on the claim without a HCPCS 

code into the cost of the single major 

procedure remaining on the claim. 

As noted in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 

66606), for the CY 2008 OPPS, we 

adopted an APC Panel recommendation 

that CMS should review the final list of 

packaged revenue codes for consistency 

with OPPS policy and ensure that future 

versions of the I/OCE edit accordingly. 

As we have in the past, we will 

continue to compare the final list of 

packaged revenue codes that we adopt 

for CY 2012 to the revenue codes that 

the I/OCE will package for CY 2012 to 

ensure consistency. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68531), we 

replaced the NUBC standard 

abbreviations for the revenue codes 

listed in Table 2 of the CY 2009 OPPS/ 

ASC proposed rule with the most 

current NUBC descriptions of the 

revenue code categories and 

subcategories to better articulate the 

meanings of the revenue codes without 

changing the proposed list of revenue 

codes. In the CY 2010 OPPS/ASC final 

rule with comment period (74 FR 60362 

through 60363), we finalized changes to 

the packaged revenue code list based on 

our examination of the updated NUBC 

codes and public comment to the CY 

2010 proposed list of packaged revenue 

codes. For CY 2012, as we did for CY 

2011, we reviewed the changes to 

revenue codes that were effective during 

CY 2010 for purposes of determining the 

charges reported with revenue codes but 

without HCPCS codes that we would 

propose to package for the CY 2012 

OPPS. We believe that the charges 

reported under the revenue codes listed 

in Table 2 below continue to reflect 

ancillary and supportive services for 

which hospitals report charges without 

HCPCS codes. Therefore, for CY 2012, 

we are proposing to continue to package 

the costs that we derive from the 

charges reported without HCPCS code 

under the revenue codes displayed in 

Table 2 below for purposes of 

calculating the median costs on which 

the CY 2012 OPPS are based. 

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TABLE 2—PROPOSED CY 2012 PACKAGED REVENUE CODES

Revenue code Description 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

0621 ............................................................................................................. Medical Surgical Supplies—Extension of 027X; Supplies Incident to 

Radiology. 

0622 ............................................................................................................. Medical Surgical Supplies—Extension of 027X; Supplies Incident to 

Other DX Services. 

0623 ............................................................................................................. Medical Supplies—Extension of 027X, Surgical Dressings. 

0624 ............................................................................................................. Medical Surgical Supplies—Extension of 027X; FDA Investigational 

Devices. 

0630 ............................................................................................................. Pharmacy—Extension of 025X; Reserved. 

0631 ............................................................................................................. Pharmacy—Extension of 025X; Single Source Drug. 

0632 ............................................................................................................. Pharmacy—Extension of 025X; Multiple Source Drug. 

0633 ............................................................................................................. Pharmacy—Extension of 025X; Restrictive Prescription. 

0681 ............................................................................................................. Trauma Response; Level I Trauma. 

0682 ............................................................................................................. Trauma Response; Level II Trauma. 

0683 ............................................................................................................. Trauma Response; Level III Trauma. 

0684 ............................................................................................................. Trauma Response; Level IV Trauma. 

0689 ............................................................................................................. Trauma Response; Other. 

0700 ............................................................................................................. Cast Room; General Classification. 

0710 ............................................................................................................. Recovery Room; General Classification. 

0720 ............................................................................................................. Labor Room/Delivery; General Classification. 

0721 ............................................................................................................. Labor Room/Delivery; Labor. 

0732 ............................................................................................................. EKG/ECG (Electrocardiogram); Telemetry. 

0762 ............................................................................................................. Specialty Services; Observation Hours. 

0801 ............................................................................................................. Inpatient Renal Dialysis; Inpatient Hemodialysis. 

0802 ............................................................................................................. Inpatient Renal Dialysis; Inpatient Peritoneal Dialysis (Non-CAPD). 

0803 ............................................................................................................. Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal 

Dialysis (CAPD). 

0804 ............................................................................................................. Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis (CCPD). 

0809 ............................................................................................................. Inpatient Renal Dialysis; Other Inpatient Dialysis. 

0810 ............................................................................................................. Acquisition of Body Components; General Classification. 

0819 ............................................................................................................. Inpatient Renal Dialysis; Other Donor. 

0821 ............................................................................................................. Hemodialysis—Outpatient or Home; Hemodialysis Composite or 

Other Rate. 

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

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

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

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TABLE 2—PROPOSED CY 2012 PACKAGED REVENUE CODES—Continued 

Revenue code Description 

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

Education/Training. 

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

Cardiac Rehabilitation. 

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

Pulmonary Rehabilitation. 

In accordance with our longstanding 

policy, we are proposing to continue to 

exclude: (1) Claims that had zero costs 

after summing all costs on the claim; 

and (2) claims containing packaging flag 

number 3. Effective for services 

furnished on or after July 1, 2004, the 

I/OCE assigned packaging flag number 3 

to claims on which hospitals submitted 

token charges less than $1.01 for a 

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

(a major separately payable service 

under the OPPS) for which the fiscal 

intermediary or MAC was required to 

allocate the sum of charges for services 

with a status indicator equaling ‘‘S’’ or 

‘‘T’’ based on the relative weight of the 

APC to which each code was assigned. 

We do not believe that these charges, 

which were token charges as submitted 

by the hospital, are valid reflections of 

hospital resources. Therefore, we 

deleted these claims. We also deleted 

claims for which the charges equaled 

the revenue center payment (that is, the 

Medicare payment) on the assumption 

that, where the charge equaled the 

payment, to apply a CCR to the charge 

would not yield a valid estimate of 

relative provider cost. We are proposing 

to continue these processes for the CY 

2012 OPPS. 

For the remaining claims, we then 

standardized 60 percent of the costs of 

the claim (which we have previously 

determined to be the labor-related 

portion) for geographic differences in 

labor input costs. We made this 

adjustment by determining the wage 

index that applied to the hospital that 

furnished the service and dividing the 

cost for the separately paid HCPCS code 

furnished by the hospital by that wage 

index. The claims accounting that we 

provide for the proposed and final rule 

contains the formula we use to 

standardize the total cost for the effects 

of the wage index. As has been our 

policy since the inception of the OPPS, 

we are proposing to use the prereclassified wage indices for 

standardization because we believe that 

they better reflect the true costs of items 

and services in the area in which the 

hospital is located than the postreclassification wage indices and, 

therefore, would result in the most 

accurate unadjusted median costs. 

In accordance with our longstanding 

practice, we also excluded single and 

pseudo single procedure claims for 

which the total cost on the claim was 

outside 3 standard deviations from the 

geometric mean of units for each HCPCS 

code on the bypass list (because, as 

discussed above, we used claims that 

contain multiple units of the bypass 

codes). 

After removing claims for hospitals 

with error CCRs, claims without HCPCS 

codes, claims for immunizations not 

covered under the OPPS, and claims for 

services not paid under the OPPS, 

approximately 102 million claims were 

left. Using these 102 million claims, we 

created approximately 100 million 

single and ‘‘pseudo’’ single procedure 

claims, of which we used slightly more 

than 99.5 million single bills (after 

trimming out approximately 888,000 

claims as discussed above in this 

section) in the proposed CY 2012 

median development and ratesetting. 

We used these claims to calculate the 

proposed CY 2012 median costs for each 

separately payable HCPCS code and 

each APC. The comparison of HCPCS 

code-specific and APC medians 

determines the applicability of the 2 

times rule. Section 1833(t)(2) of the Act 

provides that, subject to certain 

exceptions, the items and services 

within an APC group cannot be 

considered comparable with respect to 

the use of resources if the highest 

median (or mean cost, if elected by the 

Secretary) for an item or service in the 

group is more than 2 times greater than 

the lowest median cost for an item or 

service within the same group (the 2 

times rule). We note that, for purposes 

of identifying significant HCPCS for 

examination in the 2 times rule, we 

consider codes that have more than 

1,000 single major claims or codes that 

have both greater than 99 single major 

claims and contribute at least 2 percent 

of the single major claims used to 

establish the APC median cost to be 

significant (75 FR 71832). This 

longstanding definition of when a 

HCPCS code is significant for purposes 

of the 2 times rule was selected because 

we believe that a subset of 1,000 claims 

is negligible within the set of 

approximately 100 million single 

procedure or single session claims we 

use for establishing median costs. 

Similarly, a HCPCS code for which 

there are fewer than 99 single bills and 

which comprises less than 2 percent of 

the single major claims within an APC 

will have a negligible impact on the 

APC median. Unlisted codes are not 

used in establishing the percent of 

claims contributing to the APC, nor are 

their costs used in the calculation of the 

APC median. Finally, we reviewed the 

median costs for the services for which 

we are proposing to pay separately 

under this proposed rule, and we 

reassigned HCPCS codes to different 

APCs where it was necessary to ensure 

clinical and resource homogeneity 

within the APCs. Section III. of this 

proposed rule includes a discussion of 

many of the HCPCS code assignment 

changes that resulted from examination 

of the median costs and for other 

reasons. The APC medians were 

recalculated after we reassigned the 

affected HCPCS codes. Both the HCPCS 

code-specific medians and the APC 

medians were weighted to account for 

the inclusion of multiple units of the 

bypass codes in the creation of 

‘‘pseudo’’ single procedure claims. 

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

and II.A.2.e. and in section VIII.B. of 

this proposed rule, in some cases, APC 

median costs are calculated using 

variations of the process outlined above. 

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

proposed rule addresses the proposed 

calculation of single APC criteria-based 

median costs. Section II.A.2.e. of this 

proposed rule discusses the proposed 

calculation of composite APC criteriabased median costs. Section VIII.B. of 

this proposed rule addresses the 

methodology for calculating the 

proposed median costs for partial 

hospitalization services. 

APC Panel Recommendations 

Regarding Data Development: At the 

February 28–March 1, 2011 APC Panel 

Meeting, we provided the APC Panel 

Data Subcommittee with a list of all 

APCs fluctuating by greater than 10 

percent when comparing the CY 2011 

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42190 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

OPPS final rule median costs based on 

CY 2009 claims processed through June 

30, 2010, to those based on CY 2010 

OPPS/ASC final rule data (CY 2008 

claims processed through June 30, 

2009). We included explanatory data 

where possible to allow the Data 

Subcommittee to focus on APC median 

changes that required more 

investigation, based on its request (75 

FR 71834). The APC Panel Data 

Subcommittee reviewed the fluctuations 

in the APC median costs but did not 

express particular concerns with the 

median cost changes. 

We also provided the APC Panel Data 

Subcommittee with a summary of cost 

and CCR data related to the Myocardial 

Positron Emission Tomography (PET) 

imaging APC, APC 0307, as well as the 

associated diagnostic 

radiopharmaceutical, Rb82 rubidium, 

based on a request for data related to the 

decline in the APC median cost from the 

CY 2010 OPPS final rule to the CY 2011 

OPPS proposed rule. The Data 

Subcommittee noted a decline in the 

CCRs associated with the HCPCS codes 

in APC 0307, as well as declines in the 

line-item costs of the associated 

diagnostic radiopharmaceutical. 

At the February 28–March 1, 2011 

APC Panel Meeting, the APC Panel 

made a number of recommendations 

related to the data process. The Panel’s 

recommendations and our responses 

follow. 

Recommendation 1: The Panel 

commends the CMS staff for responding 

to the data requests of the Data 

Subcommittee. 

CMS Response to Recommendation 1: 

We appreciate this recommendation. 

Recommendation 2: The Panel 

recommends that the work of the Data 

Subcommittee continue. 

CMS Response to Recommendation 2: 

We are accepting this recommendation. 

Recommendation 3: The Panel 

recommends that Agatha Nolen, D.Ph., 

M.S., F.A.S.H.P., serve as acting 

chairperson for the winter 2011 meeting 

of the Data Subcommittee. 

CMS Response to Recommendation 3: 

We are accepting this recommendation. 

d. Proposed Calculation of Single 

Procedure APC Criteria-Based Median 

Costs 

(1) Device-Dependent APCs 

Device-dependent APCs are 

populated by HCPCS codes that usually, 

but not always, require that a device be 

implanted or used to perform the 

procedure. For a full history of how we 

have calculated payment rates for 

device-dependent APCs in previous 

years and a detailed discussion of how 

we developed the standard devicedependent APC ratesetting 

methodology, we refer readers to the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66739 through 

66742). Overviews of the procedure-todevice edits and device-to-procedure 

edits used in ratesetting for devicedependent APCs are available in the CY 

2005 OPPS final rule with comment 

period (69 FR 65761 through 65763) and 

the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68070 through 

68071). 

For CY 2012, we are proposing to use 

the standard methodology for 

calculating median costs for devicedependent APCs that was finalized in 

the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71834 through 

71837). (We refer readers to sections 

II.D.6. and II.A.e.6. of this proposed rule 

for detailed explanations of the 

proposed nonstandard methodology 

regarding cardiac resynchronization 

therapy.) This methodology utilizes 

claims data that generally represent the 

full cost of the required device. 

Specifically, we are proposing to 

calculate the median costs for devicedependent APCs for CY 2012 using only 

the subset of single procedure claims 

from CY 2010 claims data that pass the 

procedure-to-device and device-toprocedure edits; do not contain token 

charges (less than $1.01) for devices; do 

not contain the ‘‘FB’’ modifier signifying 

that the device was furnished without 

cost to the provider, supplier, or 

practitioner, or where a full credit was 

received; and do not contain the ‘‘FC’’ 

modifier signifying that the hospital 

received partial credit for the device. 

The procedure-to-device edits require 

that when a particular procedural 

HCPCS code is billed, the claim must 

also contain an appropriate device code, 

while the device-to-procedure edits 

require that a claim that contains one of 

a specified set of device codes also 

contain an appropriate procedure code. 

We continue to believe the standard 

methodology for calculating median 

costs for device-dependent APCs gives 

us the most appropriate median costs 

for device-dependent APCs in which the 

hospital incurs the full cost of the 

device. 

Table 3 below lists the APCs for 

which we are proposing to use our 

standard device-dependent APC 

ratesetting methodology (as explained in 

the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71834 through 

71837)) for CY 2012. We note that there 

are five proposed device-dependent 

APC title changes and one proposed 

deletion for CY 2012. As discussed in 

detail in section II.A.2.d.(6) of this 

proposed rule, we are proposing to 

change the title of APC 0083 from 

‘‘Coronary or Non-Coronary Angioplasty 

and Percutaneous Valvuloplasty’’ to 

‘‘Level I Endovascular Revascularization 

of the Lower Extremity’’; the title of 

APC 0229 from ‘‘Transcatheter 

Placement of Intravascular Shunt and 

Stents’’ to ‘‘Level II Endovascular 

Revascularization of the Lower 

Extremity’’; and the title of APC 0319 

from ‘‘Endovascular Revascularization 

of the Lower Extremity’’ to ‘‘Level III 

Endovascular Revascularization of the 

Lower Extremity.’’ We also are 

proposing to change the title of APC 

0040 from ‘‘Percutaneous Implantation 

of Neurostimulator Electrodes’’ to 

‘‘Level I Implantation/Revision/ 

Replacement of Neurostimulator 

Electrodes,’’ and the title of APC 0061 

from ‘‘Laminectomy, Laparoscopy, or 

Incision for Implantation of 

Neurostimulator Electrodes’’ to ‘‘Level II 

Implantation/Revision/Replacement of 

Neurostimulator Electrodes,’’ as 

discussed in section III.D.1. of this 

proposed rule. In addition, as discussed 

in section II.A.2.e.(6) of this proposed 

rule, we are proposing to delete APC 

0418 (Insertion of Left Ventricular 

Pacing Electrode) for CY 2012. 

As we discuss in detail in section 

III.D.6. of this proposed rule, we are 

proposing to limit the payment for 

services that are assigned to APC 0108 

to the proposed IPPS standardized 

payment amount for MS–DRG 227 

(Cardiac Defibrillator Implant without 

Cardiac Catheterization and without 

Medical Complications and 

Comorbidities) because we do not 

believe that it would be equitable to pay 

more under the OPPS for services 

assigned to APC 0108 than under the 

IPPS. In other words, we are proposing 

to pay APC 0108 at the lesser of the APC 

0108 median cost or the IPPS 

standardized payment rate for MS–DRG 

227. We are proposing to continue to 

apply the device edits and other 

standard features of the devicedependent APCs to APC 0108, but we 

are proposing to limit the payment 

amount under the OPPS to the amount 

of payment established for MS–DRG 227 

under the IPPS. 

We refer readers to Addendum A to 

this proposed rule (which is referenced 

in section XVII. of this proposed rule 

and available via the Internet on the 

CMS Web site) for the proposed 

payment rates for these APCs for CY 

2012. 

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TABLE 3—PROPOSED CY 2012 DEVICE-DEPENDENT APCS 

Proposed CY 2012 APC 

Proposed 

CY 2012 

status 

indicator 

Proposed CY 2012 APC title 

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

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

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

0082 .................................................................................. T Coronary or Non-Coronary Atherectomy. 

0083 .................................................................................. T Level I Endovascular Revascularization of the Lower Extremity. 

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

0085 .................................................................................. T Level II Electrophysiologic Procedures.

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

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

0090 .................................................................................. T Insertion/Replacement of Pacemaker Pulse Generator. 

0104 .................................................................................. T Transcatheter Placement of Intracoronary Stents. 

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

0107 .................................................................................. T Insertion of Cardioverter-Defibrillator. 

0108 * ................................................................................ T Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing 

Electrodes. 

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

0202 .................................................................................. T Level VII Female Reproductive Procedures. 

0227 .................................................................................. T Implantation of Drug Infusion Device. 

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

0259 .................................................................................. T Level VII ENT Procedures. 

0293 .................................................................................. T Level V Anterior Segment Eye Procedures. 

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

0318 .................................................................................. S Implantation of Cranial Neurostimulator Pulse Generator and Electrode. 

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

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

0385 .................................................................................. S Level I Prosthetic Urological Procedures. 

0386 .................................................................................. S Level II Prosthetic Urological Procedures. 

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

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

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

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

0648 .................................................................................. T Level IV Breast Surgery. 

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

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

0654 .................................................................................. T Insertion/Replacement of a Permanent Dual Chamber Pacemaker. 

0655 .................................................................................. T Insertion/Replacement/Conversion of a Permanent Dual Chamber 

Pacemaker. 

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

0674 .................................................................................. T Prostate Cryoablation. 

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

* OPPS CY 2012 payment for APC 0108 is proposed to be paid at the lesser of the APC 0108 median cost or the standardized payment rate 

for MS–DRG 227 under the IPPS. We refer readers to section III.D.6. of this proposed rule for more information. 

(2) Blood and Blood Products 

Since the implementation of the OPPS 

in August 2000, we have made separate 

payments for blood and blood products 

through APCs rather than packaging 

payment for them into payments for the 

procedures with which they are 

administered. Hospital payments for the 

costs of blood and blood products, as 

well as for the costs of collecting, 

processing, and storing blood and blood 

products, are made through the OPPS 

payments for specific blood product 

APCs. 

For CY 2012, we are proposing to 

continue to establish payment rates for 

blood and blood products using our 

blood-specific CCR methodology, which 

utilizes actual or simulated CCRs from 

the most recently available hospital cost 

reports to convert hospital charges for 

blood and blood products to costs. This 

methodology has been our standard 

ratesetting methodology for blood and 

blood products since CY 2005. It was 

developed in response to data analysis 

indicating that there was a significant 

difference in CCRs for those hospitals 

with and without blood-specific cost 

centers, and past public comments 

indicating that the former OPPS policy 

of defaulting to the overall hospital CCR 

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

underestimation of the true hospital 

costs for blood and blood products. 

Specifically, in order to address the 

differences in CCRs and to better reflect 

hospitals’ costs, we are proposing to 

continue to simulate blood CCRs for 

each hospital that does not report a 

blood cost center by calculating the ratio 

of the blood-specific CCRs to hospitals’ 

overall CCRs for those hospitals that do 

report costs and charges for blood cost 

centers. We would then apply this mean 

ratio to the overall CCRs of hospitals not 

reporting costs and charges for blood 

cost centers on their cost reports in 

order to simulate blood-specific CCRs 

for those hospitals. We calculated the 

median costs upon which the proposed 

CY 2012 payment rates for blood and 

blood products are based using the 

actual blood-specific CCR for hospitals 

that reported costs and charges for a 

blood cost center and a hospital-specific 

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simulated blood-specific CCR for 

hospitals that did not report costs and 

charges for a blood cost center. 

We continue to believe the hospitalspecific, blood-specific CCR 

methodology best responds to the 

absence of a blood-specific CCR for a 

hospital than alternative methodologies, 

such as defaulting to the overall hospital 

CCR or applying an average bloodspecific CCR across hospitals. Because 

this methodology takes into account the 

unique charging and cost accounting 

structure of each hospital, we believe 

that it yields more accurate estimated 

costs for these products. We believe that 

continuing with this methodology in CY 

2012 would result in median costs for 

blood and blood products that 

appropriately reflect the relative 

estimated costs of these products for 

hospitals without blood cost centers 

and, therefore, for these blood products 

in general. 

We refer readers to Addendum B to 

this proposed rule (which is referenced 

in section XVII. of this proposed rule 

and available via the Internet on the 

CMS Web site) for the proposed CY 

2012 payment rates for blood and blood 

products (which are identified with 

status indicator ‘‘R’’). For a more 

detailed discussion of the blood-specific 

CCR methodology, we refer readers to 

the CY 2005 OPPS proposed rule (69 FR 

50524 through 50525). For a full history 

of OPPS payment for blood and blood 

products, we refer readers to the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66807 through 

66810). 

(3) Allergy Tests (APCs 0370 and 0381) 

We are proposing to continue with 

our methodology of differentiating 

single allergy tests (‘‘per test’’) from 

multiple allergy tests (‘‘per visit’’) by 

assigning these services to two different 

APCs to provide accurate payments for 

these tests in CY 2012. Multiple allergy 

tests are currently assigned to APC 0370 

(Allergy Tests), with a median cost 

calculated based on the standard OPPS 

methodology. For CY 2012, we are 

proposing to continue to use the 

standard OPPS methodology to set the 

APC payment rate for APC 0370, which 

has a proposed APC median cost of 

approximately $97 based on 283 claims. 

We provided billing guidance in CY 

2006 in Transmittal 804 (issued on 

January 3, 2006) specifically clarifying 

that hospitals should report charges for 

the CPT codes that describe single 

allergy tests to reflect charges ‘‘per test’’ 

rather than ‘‘per visit’’ and should bill 

the appropriate number of units (as 

defined in the CPT code descriptor) of 

these CPT codes to describe all of the 

tests provided. Services assigned to APC 

0381 (Single Allergy Tests) reflect the 

CPT codes that describe single allergy 

tests in which CPT instructions direct 

providers to specify the number of tests 

performed, whereas the procedures in 

APC 0370 describe multiple allergy tests 

per encounter; therefore, for these 

procedures, only one unit of the service 

is billed even if multiple tests are 

performed. Our CY 2010 claims data 

available for this proposed rule for APC 

0381 do not reflect improved and more 

consistent hospital billing practices of 

‘‘per test’’ for single allergy tests. The 

median cost of APC 0381 calculated for 

this proposed rule according to the 

standard single claims OPPS 

methodology, is approximately $51, 

significantly higher than the CY 2011 

OPPS/ASC final rule median cost of 

approximately $33 that was calculated 

according to the ‘‘per unit’’ 

methodology, and greater than we 

would expect for these procedures that 

are to be reported ‘‘per test’’ with the 

appropriate number of units. Some 

claims for single allergy tests still 

appear to provide charges that represent 

a ‘‘per visit’’ charge, rather than a ‘‘per 

test’’ charge. Therefore, consistent with 

our payment policy for single allergy 

tests since CY 2006, we calculated a 

proposed ‘‘per unit’’ median cost for 

APC 0381, based upon 601 claims 

containing multiple units or multiple 

occurrences of a single CPT code. The 

proposed CY 2012 median cost for APC 

0381 using the ‘‘per unit’’ methodology 

is approximately $34. For a full 

discussion of the ‘‘per unit’’ 

methodology for APC 0381, we refer 

readers to the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 

66737). 

(4) Hyperbaric Oxygen Therapy (APC 

0659) 

Since the implementation of OPPS in 

August 2000, the OPPS has recognized 

HCPCS code C1300 (Hyperbaric oxygen 

under pressure, full body chamber, per 

30-minute interval) for hyperbaric 

oxygen therapy (HBOT) provided in the 

hospital outpatient setting. In the CY 

2005 final rule with comment period (69 

FR 65758 through 65759), we finalized 

a ‘‘per unit’’ median cost calculation for 

APC 0659 (Hyperbaric Oxygen) using 

only claims with multiple units or 

multiple occurrences of HCPCS code 

C1300 because delivery of a typical 

HBOT service requires more than 30- 

minutes. We observed that claims with 

only a single occurrence of the code 

were anomalies, either because they 

reflected terminated sessions or because 

they were incorrectly coded with a 

single unit. In the same rule, we also 

established that HBOT would not 

generally be furnished with additional 

services that might be packaged under 

the standard OPPS APC median cost 

methodology. This enabled us to use 

claims with multiple units or multiple 

occurrences. Finally, we also used each 

hospital’s overall CCR to estimate costs 

for HCPCS code C1300 from billed 

charges rather than the CCR for the 

respiratory therapy or other 

departmental cost centers. Our rationale 

for using the hospital’s overall CCR can 

be found in the CY 2005 OPPS final rule 

with comment period (69 FR 65758 

through 65759). The public comments 

on the CY 2005 OPPS proposed rule 

effectively demonstrated that hospitals 

report the costs and charges for HBOT 

in a wide variety of cost centers. Since 

CY 2005, we have used this 

methodology to estimate the median 

cost for HBOT. The median costs of 

HBOT using this methodology have 

been relatively stable for several years. 

For CY 2012, we are proposing to 

continue using the same methodology to 

estimate a ‘‘per unit’’ median cost for 

HCPCS code C1300. This methodology 

results in a proposed APC median cost 

of approximately $107 using 370,519 

claims with multiple units or multiple 

occurrences for HCPCS code C1300 for 

CY 2012. 

(5) Payment for Ancillary Outpatient 

Services When Patient Expires (APC 

0375) 

In the November 1, 2002 final rule 

with comment period (67 FR 66798), we 

discussed the creation of the new 

HCPCS modifier ‘‘–CA’’ to address 

situations where a procedure on the 

OPPS inpatient list must be performed 

to resuscitate or stabilize a patient 

(whose status is that of an outpatient) 

with an emergent, life-threatening 

condition, and the patient dies before 

being admitted as an inpatient. HCPCS 

modifier ‘‘–CA’’ is defined as a 

procedure payable only in the inpatient 

setting when performed emergently on 

an outpatient who expires prior to 

admission. In Transmittal A–02–129, 

issued on January 3, 2003, we instructed 

hospitals on the use of this modifier. For 

a complete description of the history of 

the policy and the development of the 

payment methodology for these 

services, we refer readers to the CY 2007 

OPPS final rule with comment period 

(71 FR 68157 through 68158). 

For CY 2012, we are proposing to 

continue to use our established 

ratesetting methodology for calculating 

the median cost of APC 0375 (Ancillary 

Outpatient Services When Patient 

Expires) and to continue to make one 

payment under APC 0375 for the 

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services that meet the specific 

conditions for using HCPCS modifier 

‘‘–CA.’’ That is, we are proposing to 

calculate the relative payment weight 

for APC 0375 by using all claims 

reporting a status indicator ‘‘C’’ 

(inpatient procedures)appended with 

HCPCS modifier ‘‘–CA.’’ For the history 

and detailed explanation of the 

methodology, we refer readers to the CY 

2004 OPPS final rule (68 FR 63467 

through 63468), We continue to believe 

that this established ratesetting 

methodology results in the most 

appropriate aggregate median cost for 

the ancillary services provided in these 

unusual clinical situations. 

We believe that hospitals are 

reporting the HCPCS modifier ‘‘–CA’’ 

according to the policy initially 

established in CY 2003. We note that the 

claims frequency for APC 0375 has been 

relatively stable over the past few years. 

We note that the median cost for APC 

0375 has decreased based on the CY 

2010 OPPS claims data used for the 

development of the proposed rates for 

CY 2012 compared to that for CY 2011. 

Variation in the median cost for APC 

0375 is expected because of the small 

number of claims and because the 

specific cases are grouped by the 

presence of the HCPCS modifier ‘‘–CA’’ 

appended to an inpatient only 

procedure and not according to the 

standard APC criteria of clinical and 

resource homogeneity. Cost variation for 

APC 0375 from year to year is 

anticipated and acceptable as long as 

hospitals continue judicious reporting 

of the HCPCS modifier ‘‘–CA.’’ Table 4 

below shows the number of claims, and 

the median costs for APC 0375 for CYs 

2007, 2008, 2009, 2010, and 2011, and 

the proposed median cost for APC 0375 

for CY 2012. For CY 2012, we are 

proposing a median cost of 

approximately $5,711 for APC 0375 

based on 155 claims. 

TABLE 4—CLAIMS FOR ANCILLARY

OUTPATIENT SERVICES WHEN PATIENT EXPIRES (–CA MODIFIER) FOR

CYS 2007 THROUGH 2012 

Prospective payment year Number of 

claims 

APC median cost 

CY 2007 ............ 260 $3,549 

CY 2008 ............ 183 4,945 

CY 2009 ............ 168 5,545 

CY 2010 ............ 182 5,911 

CY 2011 ............ 168 6,304 

CY 2012 ............ 155 5,711* 

*Proposed median cost. 

(6) Endovascular Revascularization of 

the Lower Extremity (APCs 0083, 0229, 

and 0319) 

For the CY 2011 update, the AMA’s 

CPT Editorial Panel created 16 new CPT 

codes in the Endovascular 

Revascularization section of the 2011 

CPT code book to describe endovascular 

revascularization procedures of the 

lower extremity performed for occlusive 

disease. In the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 71841 

through 71845), we discussed the 

process and methodology by which we 

assigned the new CY 2011 endovascular 

revascularization CPT codes to APCs 

that we believe are comparable with 

respect to clinical characteristics and 

resources required to furnish the 

services. Specifically, we were able to 

use the existing CY 2009 hospital 

outpatient claims data and most recent 

cost report data to create simulated 

medians for 12 of the 16 new separately 

payable codes for CY 2011. Because the 

endovascular revascularization CPT 

codes are new for CY 2011, we used our 

CY 2009 single and ‘‘pseudo’’ single 

claims data to simulate the new CY 

2011 CPT code definitions. As shown in 

Table 7 of the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 

71844), many of the new endovascular 

revascularization CPT codes were 

previously reported using a combination 

of CY 2009 CPT codes. In order to 

simulate median costs, we selected 

claims that we believe meet the 

definition for each of the new 

endovascular revascularization CPT 

codes. Table 7 showed the criteria we 

applied to select a claim to be used in 

the calculation of the median cost for 

the new codes (shown in Column A). As 

we stated in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71842), we developed these criteria 

based on our clinicians’ understanding 

of services that were reported by CY 

2009 CPT codes that, in various 

combinations, reflect the services 

provided that are described by the new 

CPT codes for CY 2011. 

After determining the simulated 

median costs for the procedures, we 

assigned each CPT code to appropriate 

APCs based on their clinical 

homogeneity and resource use. Of the 

16 new codes, we assigned 9 CPT codes 

to APC 0083 (Coronary or Non-Coronary 

Angioplasty and Percutaneous 

Valvuloplasty) and 5 CPT codes to APC 

0229 (Transcatheter Placement of 

Intravascular Shunts), and created new 

APC 0319 (Endovascular 

Revascularization of the Lower 

Extremity) for 2 CPT codes. Table 8 of 

the CY 2011 OPPS/ASC final rule with 

comment period displayed their final 

CY 2011 APC assignments and CPT 

median costs (75 FR 71845). We noted 

that because these CPT codes are new 

for CY 2011, they are identified with 

comment indicator ‘‘NI’’ in Addendum 

B to the CY 2011 OPPS/ASC final rule 

with comment period to identify them 

as a new interim APC assignment for the 

new year and subject to public 

comment. We specifically requested 

public comment on our methodology for 

simulating the median costs for these 

new CY 2011 CPT codes in addition to 

public comments on the payment rates 

themselves (75 FR 71845). 

At its February 28–March 1, 2011 

meeting, the APC Panel recommended 

that CMS provide data to allow the 

Panel to investigate and monitor the 

APC weights for the lower extremity 

revascularization procedures in light of 

CPT coding changes for CY 2011. We 

are accepting the APC Panel’s 

recommendation and will provide 

additional data to the Panel at an 

upcoming meeting. 

For CY 2012, we are proposing to 

continue with the CY 2011 methodology 

that was described previously in this 

section in determining the APC 

assignments for the CPT codes that 

describe endovascular revascularization 

of the lower extremity. The predecessor 

endovascular revascularization CPT 

codes were in existence prior to CY 

2011 and were assigned to APCs based 

on claims data and cost report data. 

Given that these data are available for 

the services described by the 

predecessor endovascular 

revascularization CPT codes, we are 

proposing to continue for CY 2012 to 

use the existing hospital outpatient 

claims and cost report data from the 

previous endovascular revascularization 

CPT codes to simulate an estimated 

median cost for the new endovascular 

revascularization CPT codes in 

determining the appropriate APC 

assignments. As has been our practice 

since the implementation of the OPPS 

in 2000, we review our latest claims 

data for ratesetting and, if necessary, 

revise the APC assignments for the 

upcoming year. In this case, review of 

the procedures with significant claims 

data in APC 0083 showed a 2 times rule 

violation. Specifically, APC 0083, as it 

was initially configured, showed that 

the range of the CPT median costs for 

the procedures with significant claims 

data was approximately between $3,252 

(for CPT code 35476 (Transluminal 

balloon angioplasty, percutaneous; 

venous)) and $7,174 (for CPT code 

37221 (Revascularization, endovascular, 

open or percutaneous, iliac artery, 

unilateral, initial vessel; with 

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transluminal stent placement(s), 

includes angioplasty within the same 

vessel, when performed)), resulting in a 

2 times rule violation. Because of its 

median cost, we believe that CPT code 

37221 would be more appropriately 

placed in APC 0229, which had an 

initial estimated median cost of 

approximately $8,606, based on the 

clinical and resource characteristics of 

other procedures also assigned to APC 

0229. Therefore, for CY 2012, we are 

proposing to revise the APC assignment 

for CPT code 37221, from APC 0083 to 

APC 0229, to accurately reflect the cost 

and clinical feature of the procedure. 

This proposed reassignment of CPT 

code 37221 from APC 0083 to APC 0029 

eliminates the 2 times rule violation for 

APC 0083 noted above. Based on this 

reconfiguration, the CY 2010 claims 

data available for this proposed rule 

were used to calculate a median cost of 

approximately $4,683 for APC 0083, 

approximately $8,218 for APC 0229, and 

approximately $14,556 for APC 0319. 

All three proposed median costs for CY 

2012 are significantly greater than the 

CY 2011 OPPS/ASC final rule median 

costs of approximately $3,740 for APC 

0083, approximately $7,940 for APC 

0229, and approximately $13,751 for 

APC 0319. 

In addition, we are proposing to 

revise the APC titles for APCs 0083, 

0229, and 0319 to better describe the 

procedures assigned to these APCs. 

Specifically, we are proposing to revise 

the APC title for APC 0083 from 

‘‘Coronary or Non-Coronary Angioplasty 

and Percutaneous Valvuloplasty’’ to 

‘‘Level I Endovascular Revascularization 

of the Lower Extremity’’; for APC 0229, 

from ‘‘Transcatheter Placement of 

Intravascular Shunt and Stents’’ to 

‘‘Level II Endovascular 

Revascularization of the Lower 

Extremity’’; and for APC 0319, from 

‘‘Endovascular Revascularization of the 

Lower Extremity’’ to ‘‘Level III 

Endovascular Revascularization of the 

Lower Extremity.’’ 

We are soliciting public comments on 

the proposed status indicators and APC 

assignments for the endovascular 

revascularization of the lower extremity 

CPT codes. Table 5 below lists the 

endovascular revascularization of the 

lower extremity CPT codes along with 

their proposed status indicator and APC 

assignments for CY 2012. 

TABLE 5—PROPOSED APCS TO WHICH ENDOVASCULAR REVASCULARIZATION OF THE LOWER EXTREMITY CPT CODES

WOULD BE ASSIGNED FOR CY 2012 

CY 2011 HCPCS 

code CY 2011 short descriptor CY 2011 SI CY 2011 APC Proposed CY 2012 SI 

Proposed 

CY 2012 APC 

37220 ........................ Iliac revasc ................................................................... T 0083 T 0083 

37221 ........................ Iliac revasc w/stent ...................................................... T 0083 T 0229 

37222 ........................ Iliac revasc add-on ...................................................... T 0083 T 0083 

37223 ........................ Iliac revasc w/stent add-on .......................................... T 0083 T 0083 

37224 ........................ Fem/popl revas w/tla ................................................... T 0083 T 0083 

37225 ........................ Fem/popl revas w/ather ............................................... T 0229 T 0229 

37226 ........................ Fem/popl revasc w/stent .............................................. T 0229 T 0229 

37227 ........................ Fem/popl revasc stnt & ather ...................................... T 0319 T 0319 

37228 ........................ Tib/per revasc w/tla ..................................................... T 0083 T 0083 

37229 ........................ Tib/per revasc w/ather ................................................. T 0229 T 0229 

37230 ........................ Tib/per revasc w/stent ................................................. T 0229 T 0229 

37231 ........................ Tib/per revasc stent & ather ........................................ T 0319 T 0319 

37232 ........................ Tib/per revasc add-on .................................................. T 0083 T 0083 

37233 ........................ Tibper revasc w/ather add-on ...................................... T 0229 T 0229 

37234 ........................ Revsc opn/prq tib/pero stent ....................................... T 0083 T 0083 

37235 ........................ Tib/per revasc stnt & ather .......................................... T 0083 T 0083 

(7) Non-Congenital Cardiac 

Catheterization (APC 0080) 

For CY 2011, the AMA CPT Editorial 

Panel deleted 19 non-congenital cardiac 

catheterization-related CPT codes and 

replaced them with 20 new CPT codes 

in the Cardiac Catheterization and 

Injection-Related section of the 2011 

CPT Code Book to describe more 

precisely the specific services provided 

during cardiac catheterization 

procedures. In particular, the CPT 

Editorial Panel deleted 19 noncongenital cardiac catheterizationrelated CPT codes from the 93500 series 

and created 14 new CPT codes in the 

93400 series and 6 in the 93500 series. 

We discussed these coding changes in 

detail in the CY 2011 OPPS/ASC final 

rule with comment period, along with 

the process by which we assigned the 

new CPT codes to APCs that we believe 

are comparable with respect to clinical 

characteristics and resources required to 

furnish the cardiac catheterization 

services described by the new CPT 

codes (75 FR 71846 through 71849). As 

discussed in the final rule with 

comment period, we were able to use 

the existing CY 2009 hospital outpatient 

claims data and the most recent cost 

report data to create simulated medians 

for the new separately payable CPT 

codes for CY 2011. Specifically, to 

estimate the hospital costs associated 

with the 20 new non-congenital cardiac 

catheterization-related CPT codes based 

on their CY 2011 descriptors, we used 

claims and cost report data from CY 

2009. Because of the substantive coding 

changes associated with the new noncongenital cardiac catheterizationrelated CPT codes for CY 2011, we used 

our CY 2009 single and ‘‘pseudo’’ single 

claims data to simulate the new CY 

2011 CPT code definitions. We stated 

that many of the new CPT codes were 

previously reported using multiple CY 

2009 CPT codes, and we provided a 

crosswalk of the new CY 2011 cardiac 

catheterization CPT codes mapped to 

the CY 2009 cardiac catheterization CPT 

codes in Table 11 of the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 71849). Table 11 showed the criteria 

we applied to select a claim to be used 

in the calculation of the median cost for 

the new codes (shown in column A). As 

we stated in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71847 through 71848), we developed 

these criteria based on our clinicians’ 

understanding of services that were 

reported by CY 2009 CPT codes that, in 

various combinations, reflect the 

services provided that are described in 

the new CPT codes. We used 

approximately 175,000 claims for the 

new non-congenital catheterizationrelated CPT codes, together with the 

single and ‘‘pseudo’’ single procedure 

claims for the remaining congenital 

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catheterization-related CPT codes in 

APC 0080, to calculate CPT level 

median costs and the median cost for 

APC 0080 of approximately $2,698. We 

noted that, because the CPT codes listed 

in Table 11 are new for CY 2011, they 

were identified with comment indicator 

‘‘NI’’ in Addendum B of that final rule 

with comment period to identify them 

as subject to public comment. We 

specifically requested public comment 

on our methodology for simulating the 

median costs for these new CY 2011 

CPT codes, in addition to public 

comments on the payment rates 

themselves (75 FR 71848). 

For CY 2012, we are proposing to 

continue with the CY 2011 methodology 

in determining the APC assignments for 

the cardiac catheterization CPT codes. 

The predecessor cardiac catheterization 

CPT codes were in existence prior to CY 

2011 and were assigned to APC 0080 

based on claims data and cost report 

data. Given that these data are available 

for the services described by the 

predecessor cardiac catheterization CPT 

codes, for CY 2012, we are proposing to 

continue to use the existing hospital 

outpatient claims and cost report data 

from the predecessor cardiac 

catheterization CPT codes to simulate 

an estimated median cost for the new 

cardiac catheterization CPT codes in 

determining the appropriate APC 

assignments. As has been our practice 

since the implementation of the OPPS 

in 2000, we review our latest claims 

data for ratesetting and, if necessary, 

revise the APC assignments for the 

upcoming year. Based on analysis of the 

CY 2010 claims data available for this 

proposed rule, the proposed median 

cost for APC 0080 is approximately 

$2,822 for CY 2012, which is slightly 

greater than the median cost of 

approximately $2,698 for the CY 2011 

OPPS/ASC final rule with comment 

period. For CY 2012, we are not 

proposing any changes to the CY 2011 

APC assignments of any of the codes 

assigned to APC 0080 because the 

claims data available for this proposed 

rule support continuation of these APC 

assignments. 

We are soliciting public comments on 

the proposed status indicators and the 

APC assignments for the CY 2012 

cardiac catheterization CPT codes. Table 

6 below lists the CY 2011 cardiac 

catheterization CPT codes along with 

their proposed status indicators, APC 

assignments, and payment rates for CY 

2012. 

TABLE 6—PROPOSED APCS TO WHICH NON-CONGENITAL CARDIAC CATHETERIZATION CPT CODES WOULD BE ASSIGNED

FOR CY 2012 

CY 2011 HCPCS 

Code CY 2011 short descriptor CY 2011 SI CY 2011 APC Proposed CY 2012 SI 

Proposed 

CY 2012 APC 

93451 ........................ Right heart cath ........................................................... T 0080 T 0080 

93452 ........................ Left hrt cath w/ventrclgrphy ......................................... T 0080 T 0080 

93453 ........................ R&l hrt cath w/ventriclgrphy ......................................... T 0080 T 0080 

93454 ........................ Coronary artery angio s&i ............................................ T 0080 T 0080 

93455 ........................ Coronary art/grft angio s&i .......................................... T 0080 T 0080 

93456 ........................ R hrt coronary artery angio ......................................... T 0080 T 0080 

93457 ........................ R hrt art/grft angio ....................................................... T 0080 T 0080 

93458 ........................ L hrt artery/ventricle angio ........................................... T 0080 T 0080 

93459 ........................ L hrt art/grft angio ........................................................ T 0080 T 0080 

93460 ........................ R&l hrt art/ventricle angio ............................................ T 0080 T 0080 

93461 ........................ R&l hrt art/ventricle angio ............................................ T 0080 T 0080 

93462 ........................ L hrt cath trnsptl puncture ........................................... T 0080 T 0080 

93463 ........................ Drug admin & hemodynmic meas ............................... N NA N NA 

93464 ........................ Exercise w/hemodynamic meas .................................. N NA N NA 

93563 ........................ Inject congenital card cath ........................................... N NA N NA 

93564 ........................ Inject hrt congntl art/grft ............................................... N NA N NA 

93565 ........................ Inject l ventr/atrial angio .............................................. N NA N NA 

93566 ........................ Inject r ventr/atrial angio .............................................. N NA N NA 

93567 ........................ Inject suprvlv aortography ........................................... N NA N NA 

93568 ........................ Inject pulm art hrt cath ................................................. N NA N NA 

(8) Cranial Neurostimulator and 

Electrodes (APC 0318) 

For CY 2011, the AMA CPT Editorial 

Panel created a new CPT code 64568 

(Incision for implantation of cranial 

nerve (e.g., vagus nerve) 

neurostimulator electrode array and 

pulse generator) and indicates that it 

describes the services formerly included 

in the combinations of (1) CPT code 

64573 (Incision for implantation of 

neurostimulator electrodes; cranial 

nerve) and CPT code 61885 (Insertion or 

replacement of cranial neurostimulator 

pulse generator or receiver, direct or 

inductive coupling; with connection to 

a single electrode array); or (2) CPT code 

64573 and CPT code 61886 (Insertion or 

replacement of cranial neurostimulator 

pulse generator or receiver, direct or 

inductive coupling; with connection to 

two or more electrode arrays). As we 

discussed in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71850), our standard process for 

assigning new CPT codes to APCs is to 

assign the code to the APC that we 

believe contains services that are 

comparable with respect to clinical 

characteristics and resources required to 

furnish the service. A new CPT code is 

given a comment indicator of ‘‘NI’’ to 

identify it as a new interim APC 

assignment for the first year and the 

APC assignment for the new code is 

then open to public comment. In some, 

but not all, cases, we are able to use the 

existing data from established codes to 

simulate an estimated median cost for 

the new code to guide us in the 

assignment of the new code to an APC. 

For CY 2011, in the case of the new 

neurostimulator electrode and pulse 

generator implantation CPT code, we 

were able to use the existing CY 2009 

claims and most current cost report data 

to create a simulated median cost. 

Specifically, to estimate the hospital 

costs of CPT code 64568 based on its CY 

2011 descriptor, we used CY 2009 

claims and the most recent cost report 

data, using the single and ‘‘pseudo’’ 

single claims within this data set to 

simulate the definition of this service. 

We selected claims with CPT code 

64573 on which CPT code 61885 or 

61886 was also present and consistent 

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with the description of the new CPT 

code 64568. We treated the summed 

costs on these claims as if they were a 

single procedure claim for CPT code 

64568. We created an estimated median 

cost of approximately $22,562 for CPT 

code 64568 from 298 single claims to set 

a final payment rate for CY 2011 for the 

new code. We created APC 0318 

(Implantation of Cranial 

Neurostimulator Pulse Generator and 

Electrode) for CY 2011, to which CPT 

code 64568 is the only procedure 

assigned. APC 0225 (Implantation of 

Neurostimulator Electrodes, Cranial 

Nerve), which contained only the 

predecessor CPT code 64573, was 

deleted effective January 1, 2011. We 

noted that, because CPT code 64568 is 

new for CY 2011, it was identified with 

comment indicator ‘‘NI’’ in Addendum 

B of the CY 2011 OPPS/ASC final rule 

with comment period to identify it as 

subject to public comment. We 

specifically requested public comment 

on our methodology for simulating the 

median costs for this new CY 2011 CPT 

code, in addition to public comments on 

the payment rate itself (75 FR 71850). 

For CY 2012, we are proposing to use 

the same methodology we used in CY 

2011 to estimate the hospital costs of 

CPT code 64568. We created an 

estimated median cost of approximately 

$24,267 for CPT code 64568 from 332 

single claims to set a proposed payment 

rate for APC 0318 for CY 2012. We are 

proposing to maintain CPT code 64568 

as the only code assigned to APC 0318 

for CY 2012. We continue to request 

public comment on our proposed 

methodology for simulating the median 

cost for this CPT code introduced in CY 

2011, in addition to public comments 

on the proposed payment rate itself. 

(9) Brachytherapy Sources 

(A) Background 

Section 1833(t)(2)(H) of the Act, as 

added by section 621(b)(2)(C) of Public 

Law 108–173 (MMA), mandated the 

creation of additional groups of covered 

OPD services that classify devices of 

brachytherapy consisting of a seed or 

seeds (or radioactive source) 

(‘‘brachytherapy sources’’) separately 

from other services or groups of 

services. The additional groups must 

reflect the number, isotope, and 

radioactive intensity of the 

brachytherapy sources furnished and 

include separate groups for palladium103 and iodine-125 sources. 

Section 1833(t)(16)(C) of the Act, as 

added by section 621(b)(1) of Public 

Law 108–173, established payment for 

brachytherapy sources furnished from 

January 1, 2004 through December 31, 

2006, based on a hospital’s charges for 

each brachytherapy source furnished 

adjusted to cost. Under section 

1833(t)(16)(C) of the Act, charges for the 

brachytherapy sources may not be used 

in determining any outlier payments 

under the OPPS for that period in which 

payment is based on charges adjusted to 

cost. Consistent with our practice under 

the OPPS to exclude items paid at cost 

from budget neutrality consideration, 

these items were excluded from budget 

neutrality for that time period as well. 

Subsequent to the MMA, various 

amendments to the Act were made that 

resulted in the extension of the payment 

period for brachytherapy sources based 

on a hospital’s charges adjusted to cost 

through December 31, 2009. The CY 

2011 OPPS/ASC final rule with 

comment period summarizes these 

amendments to the Act and our 

proposals to pay for brachytherapy 

sources at prospective payment rates 

based on their source specific median 

costs from CY 2007 through CY 2009 (75 

FR 71977 through 71981). 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60533 

through 60537), we adopted for CY 2010 

the general OPPS prospective payment 

methodology for brachytherapy sources, 

consistent with section 1833(t)(2)(C) of 

the Act, with payment rates based on 

source-specific median costs. For CY 

2011, we continued to use the general 

OPPS prospective payment 

methodology for brachytherapy sources, 

consistent with section 1833(t)(2)(C) of 

the Act (75 FR 71980). We also finalized 

our proposals to continue the policy we 

first implemented in the CY 2010 OPPS/ 

ASC final rule with comment period (74 

FR 60537 and 75 FR 71980) regarding 

payment for new brachytherapy sources 

for which we have no claims data, based 

on the same reasons we discussed in the 

2008 OPPS/ASC final rule with 

comment period (72 FR 66786; which 

was superseded by section 142 of Pub. 

L. 110–275). That policy is intended to 

enable us to assign future new HCPCS 

codes for new brachytherapy sources to 

their own APCs, with prospective 

payment rates set based on our 

consideration of external data and other 

relevant information regarding the 

expected costs of the sources to 

hospitals. 

Consistent with our policy regarding 

APC payments made on a prospective 

basis, for CYs 2010 and 2011, we 

finalized proposals to subject 

brachytherapy sources to outlier 

payments under section 1833(t)(5) of the 

Act, and also to subject brachytherapy 

source payment weights to scaling for 

purposes of budget neutrality (75 FR 

71980 through 71981 and 75 FR 60537). 

Hospitals could receive outlier 

payments for brachytherapy sources if 

the costs of furnishing brachytherapy 

sources meet the criteria for outlier 

payment. In addition, as noted in the CY 

2010 and CY 2011 OPPS/ASC final rules 

with comment period (74 FR 60534 and 

75 FR 71978 and 71979, respectively), 

implementation of prospective 

payments for brachytherapy sources 

provided opportunities for eligible 

hospitals to receive additional payments 

in CY 2010 and CY 2011 under certain 

circumstances through the 7.1 percent 

rural adjustment, as described in section 

II.E. of this final rule with comment 

period. 

(B) Proposed OPPS Payment Policy 

As we have stated previously (72 FR 

66780, 73 FR 41502, 74 FR 60533 

through 60534, and 75 FR 71978), we 

believe that adopting the general OPPS 

prospective payment methodology for 

brachytherapy sources is appropriate for 

a number of reasons. The general OPPS 

payment methodology uses median 

costs based on claims data to set the 

relative payment weights for hospital 

outpatient services. This payment 

methodology results in more consistent, 

predictable, and equitable payment 

amounts per source across hospitals by 

eliminating some of the extremely high 

and low payment amounts resulting 

from payment based on hospitals’ 

charges adjusted to cost. We believe that 

the OPPS prospective payment 

methodology, as opposed to payment 

based on hospitals’ charges adjusted to 

cost, would also provide hospitals with 

incentives for efficiency in the provision 

of brachytherapy services to Medicare 

beneficiaries. Moreover, this approach is 

consistent with our payment 

methodology for the vast majority of 

items and services paid under the OPPS. 

For CY 2012, we are proposing to use 

the median costs from CY 2010 claims 

data for setting the proposed CY 2012 

payment rates for brachytherapy 

sources, as we are proposing for most 

other items and services that will be 

paid under the CY 2012 OPPS. We are 

proposing to continue the other 

payment policies for brachytherapy 

sources we finalized and first 

implemented in the CY 2010 OPPS/ASC 

final rule with comment period (74 FR 

60537). We are proposing to pay for the 

stranded and non-stranded NOS codes, 

HCPCS codes C2698 and C2699, at a 

rate equal to the lowest stranded or nonstranded prospective payment rate for 

such sources, respectively, on a per 

source basis (as opposed, for example, 

to a per mCi), which is based on the 

policy we established in the CY 2008 

OPPS/ASC final rule with comment 

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period (72 FR 66785). The proposed 

payment methodology for NOS sources 

would provide payment to a hospital for 

new sources and, at the same time, 

encourage interested parties to quickly 

bring new sources to our attention so 

that specific coding and payment could 

be established. 

We also are proposing to continue the 

policy we first implemented in the CY 

2010 OPPS/ASC final rule with 

comment period (74 FR 60537) 

regarding payment for new 

brachytherapy sources for which we 

have no claims data, based on the same 

reasons we discussed in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 66786; which was 

superseded for a period of time by 

section 142 of Public Law 110–275). 

That policy is intended to enable us to 

assign new HCPCS codes for new 

brachytherapy sources to their own 

APCs, with prospective payment rates 

set based on our consideration of 

external data and other relevant 

information regarding the expected 

costs of the sources to hospitals. 

Consistent with our policy regarding 

APC payments made on a prospective 

basis, as we did for CY 2011, we are 

proposing to subject brachytherapy 

sources to outlier payments under 

section 1833(t)(5) of the Act, and also to 

subject brachytherapy source payment 

weights to scaling for purposes of 

budget neutrality. Hospitals can receive 

outlier payments for brachytherapy 

sources if the costs of furnishing 

brachytherapy sources meet the criteria 

for outlier payment. In addition, as 

noted in the CY 2010 and CY 2011 

OPPS/ASC final rules with comment 

period (74 FR 60534 and 75 FR 71978 

through 71979, respectively), 

implementation of prospective 

payments for brachytherapy sources 

would provide opportunities for eligible 

hospitals to receive additional payments 

in CY 2012 under certain circumstances 

through the 7.1 percent rural 

adjustment, as described in section II.E. 

of this proposed rule. 

Therefore, we are proposing to pay for 

brachytherapy sources at prospective 

payment rates based on their sourcespecific median costs for CY 2012. We 

refer readers to Addendum B to this 

proposed rule (which is referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site) for the proposed CY 2012 

payment rates for brachytherapy 

sources, identified with status indicator 

‘‘U.’’ For more detailed discussion of the 

legislative history surrounding 

brachytherapy sources and our 

proposed and final policies for CY 2004 

through CY 2011, we refer readers to the 

CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71977 through 

71981). 

We continue to invite hospitals and 

other parties to submit 

recommendations to us for new HCPCS 

codes to describe new brachytherapy 

sources consisting of a radioactive 

isotope, including a detailed rationale to 

support recommended new sources. 

Such recommendations should be 

directed to the Division of Outpatient 

Care, Mail Stop C4–05–17, Centers for 

Medicare and Medicaid Services, 7500 

Security Boulevard, Baltimore, MD 

21244. We will continue to add new 

brachytherapy source codes and 

descriptors to our systems for payment 

on a quarterly basis. 

e. Proposed Calculation of Composite 

APC Criteria-Based Median Costs 

As discussed in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66613), we believe it is important 

that the OPPS enhance incentives for 

hospitals to provide only necessary, 

high quality care and to provide that 

care as efficiently as possible. For CY 

2008, we developed composite APCs to 

provide a single payment for groups of 

services that are typically performed 

together during a single clinical 

encounter and that result in the 

provision of a complete service. 

Combining payment for multiple 

independent services into a single OPPS 

payment in this way enables hospitals 

to manage their resources with 

maximum flexibility by monitoring and 

adjusting the volume and efficiency of 

services themselves. An additional 

advantage to the composite APC model 

is that we can use data from correctly 

coded multiple procedure claims to 

calculate payment rates for the specified 

combinations of services, rather than 

relying upon single procedure claims 

which may be low in volume and/or 

incorrectly coded. Under the OPPS, we 

currently have composite APC policies 

for extended assessment and 

management services, low dose rate 

(LDR) prostate brachytherapy, cardiac 

electrophysiologic evaluation and 

ablation services, mental health 

services, and multiple imaging services. 

We refer readers to the CY 2008 OPPS/ 

ASC final rule with comment period for 

a full discussion of the development of 

the composite APC methodology (72 FR 

66611 through 66614 and 66650 through 

66652). 

For CY 2012, we are proposing to 

continue, with some modifications, our 

established composite APC policies for 

extended assessment and management, 

LDR prostate brachytherapy, cardiac 

electrophysiologic evaluation and 

ablation, mental health services, and 

multiple imaging services, as discussed 

in sections II.A.2.e.(1), II.A.2.e.(2), 

II.A.2.e.(3), II.A.2.e.(4), and II.A.2.e.(5), 

respectively, of this proposed rule. We 

also are proposing to create a new 

composite APC for cardiac 

resynchronization therapy services, as 

discussed in section II.A.2.e.(6) of this 

proposed rule. 

(1) Extended Assessment and 

Management Composite APCs (APCs 

8002 and 8003) 

For CY 2012, we are proposing to 

continue to include composite APC 

8002 (Level I Extended Assessment and 

Management Composite) and composite 

APC 8003 (Level II Extended 

Assessment and Management 

Composite) in the OPPS. For CY 2008, 

we created these two composite APCs to 

provide payment to hospitals in certain 

circumstances when extended 

assessment and management of a patient 

occur (an extended visit). In most 

circumstances, observation services are 

supportive and ancillary to the other 

services provided to a patient. In the 

circumstances when observation care is 

provided in conjunction with a high 

level visit or direct referral and is an 

integral part of a patient’s extended 

encounter of care, payment is made for 

the entire care encounter through one of 

two composite APCs as appropriate. 

As defined for the CY 2008 OPPS, 

composite APC 8002 describes an 

encounter for care provided to a patient 

that includes a high level (Level 5) 

clinic visit or direct referral for 

observation services in conjunction with 

observation services of substantial 

duration (72 FR 66648 through 66649). 

Composite APC 8003 describes an 

encounter for care provided to a patient 

that includes a high level (Level 4 or 5) 

Type A emergency department visit, a 

high level (Level 5) Type B emergency 

department visit, or critical care services 

in conjunction with observation services 

of substantial duration. HCPCS code 

G0378 (Observation services, per hour) 

is assigned status indicator ‘‘N,’’ 

signifying that its payment is always 

packaged. As noted in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 66648 through 66649), the 

Integrated Outpatient Code Editor (I/ 

OCE) evaluates every claim received to 

determine if payment through a 

composite APC is appropriate. If 

payment through a composite APC is 

inappropriate, the I/OCE, in conjunction 

with the OPPS Pricer, determines the 

appropriate status indicator, APC, and 

payment for every code on a claim. The 

specific criteria that must be met for the 

two extended assessment and 

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management composite APCs to be paid 

are provided below in the description of 

the claims that were selected for the 

calculation of the proposed CY 2012 

median costs for these composite APCs. 

We are not proposing to change these 

criteria for the CY 2012 OPPS. 

When we created composite APCs 

8002 and 8003 for CY 2008, we retained 

as general reporting requirements for all 

observation services those criteria 

related to physician order and 

evaluation, documentation, and 

observation beginning and ending time 

as listed in the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 

66812). These are more general 

requirements that encourage hospitals to 

provide medically reasonable and 

necessary care and help to ensure the 

proper reporting of observation services 

on correctly coded hospital claims that 

reflect the full charges associated with 

all hospital resources utilized to provide 

the reported services. We also issued 

guidance clarifying the correct method 

for reporting the starting time for 

observation services (sections 290.2.2 

through 290.5 in the Medicare Claims 

Processing Manual (Pub. 100–4), 

Chapter 4, through Transmittal 1745, 

Change Request 6492, issued May 22, 

2009 and implemented July 6, 2009). 

We are not proposing to change these 

reporting requirements for the CY 2012 

OPPS. 

For CY 2012, we are proposing to 

continue the extended assessment and 

management composite APC payment 

methodology for APCs 8002 and 8003. 

We continue to believe that the 

composite APCs 8002 and 8003 and 

related policies provide the most 

appropriate means of paying for these 

services. We are proposing to calculate 

the median costs for APCs 8002 and 

8003 using all single and ‘‘pseudo’’ 

single procedure claims for CY 2010 

that meet the criteria for payment of 

each composite APC. 

Specifically, to calculate the proposed 

median costs for composite APCs 8002 

and 8003, we selected single and 

‘‘pseudo’’ single procedure claims that 

met each of the following criteria: 

1. Did not contain a HCPCS code to 

which we have assigned status indicator 

‘‘T’’ that is reported with a date of 

service 1 day earlier than the date of 

service associated with HCPCS code 

G0378. (By selecting these claims from 

single and ‘‘pseudo’’ single claims, we 

had already assured that they would not 

contain a code for a service with status 

indicator ‘‘T’’ on the same date of 

service.); 

2. Contained eight or more units of 

HCPCS code G0378; and 

3. Contained one of the following 

codes: 

• In the case of composite APC 8002, 

HCPCS code G0379 (Direct referral of 

patient for hospital observation care) on 

the same date of service as HCPCS code 

G0378; or CPT code 99205 (Office or 

other outpatient visit for the evaluation 

and management of a new patient (Level 

5)); or CPT code 99215 (Office or other 

outpatient visit for the evaluation and 

management of an established patient 

(Level 5)) provided on the same date of 

service or one day before the date of 

service for HCPCS code G0378. 

• In the case of composite APC 8003, 

CPT code 99284 (Emergency department 

visit for the evaluation and management 

of a patient (Level 4)); CPT code 99285 

(Emergency department visit for the 

evaluation and management of a patient 

(Level 5)); CPT code 99291 (Critical 

care, evaluation and management of the 

critically ill or critically injured patient; 

first 30–74 minutes); or HCPCS code 

G0384 (Level 5 hospital emergency 

department visit provided in a Type B 

emergency department) provided on the 

same date of service or one day before 

the date of service for HCPCS code 

G0378. (As discussed in detail in the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68684), we 

added HCPCS code G0384 to the 

eligibility criteria for composite APC 

8003 for CY 2009.) 

As discussed further in section VII. of 

this proposed rule, and consistent with 

our CY 2008, CY 2009, CY 2010, and CY 

2011 final policies, when calculating the 

median costs for the clinic, Type A 

emergency department visit, Type B 

emergency department visit, and critical 

care APCs (0604 through 0617 and 0626 

through 0630), we utilize our 

methodology that excludes those claims 

for visits that are eligible for payment 

through the two extended assessment 

and management composite APCs, that 

is APC 8002 or APC 8003. We believe 

that this approach results in the most 

accurate cost estimates for APCs 0604 

through 0617 and 0626 through 0630 for 

CY 2012. 

At its February 28–March 1, 2011 

meeting, the APC Panel recommended 

that CMS consider expanding the 

extended assessment and management 

composite APCs for CY 2012. We are 

accepting this recommendation. 

Consistent with our acceptance of the 

APC Panel’s recommendation, we have 

examined various ways of potentially 

expanding the current extended 

assessment and management composite 

APCs to further limit the possibility that 

total beneficiary copayments would 

exceed the inpatient deductible during 

extended observation encounters. At 

this time, we have decided not to 

pursue for CY 2012 the expanded 

extended assessment and management 

composite APCs that we analyzed 

because, while the composites that we 

modeled would serve to further limit 

the number of beneficiaries with 

copayments that exceeded the inpatient 

deductible, the modeled composites 

also had the effect of possibly increasing 

copayments by a small amount for the 

majority of beneficiaries undergoing 

extended observation. In addition, 

expanded assessment and management 

composite APCs do not address certain 

concerns about extended observation 

services raised by stakeholders at CMS’ 

observation listening session last year 

(that is, observation time not counting 

towards the 3-day prior hospitalization 

requirement for the skilled nursing 

facility benefit). We will continue our 

efforts to model other composite 

structures for a possible new extended 

assessment and management composite 

structure for CY 2013. 

In summary, for CY 2012, we are 

proposing to continue to include 

composite APCs 8002 and 8003 in the 

OPPS. We are proposing to continue the 

extended assessment and management 

composite APC payment methodology 

and criteria that we finalized for CYs 

2009, 2010, and 2011. We also are 

proposing to calculate the median costs 

for APCs 8002 and 8003 using the same 

methodology that we used to calculate 

the medians for composite APCs 8002 

and 8003 for the CY 2008 OPPS (72 FR 

66649). That is, we used all single and 

‘‘pseudo’’ single procedure claims from 

CY 2010 that met the criteria for 

payment of each composite APC and 

applied the standard packaging and 

trimming rules to the claims before 

calculating the proposed CY 2012 

median costs. The proposed CY 2012 

median cost resulting from this 

methodology for composite APC 8002 is 

approximately $395, which was 

calculated from 16,770 single and 

‘‘pseudo’’ single bills that met the 

required criteria. The proposed CY 2012 

median cost for composite APC 8003 is 

approximately $735, which was 

calculated from 225,874 single and 

‘‘pseudo’’ single bills that met the 

required criteria. 

(2) Low Dose Rate (LDR) Prostate 

Brachytherapy Composite APC (APC 

8001) 

LDR prostate brachytherapy is a 

treatment for prostate cancer in which 

hollow needles or catheters are inserted 

into the prostate, followed by 

permanent implantation of radioactive 

sources into the prostate through the 

needles/catheters. At least two CPT 

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codes are used to report the composite 

treatment service because there are 

separate codes that describe placement 

of the needles/catheters and the 

application of the brachytherapy 

sources: CPT code 55875 (Transperineal 

placement of needles or catheters into 

prostate for interstitial radioelement 

application, with or without cystoscopy) 

and CPT code 77778 (Interstitial 

radiation source application; complex). 

Generally, the component services 

represented by both codes are provided 

in the same operative session in the 

same hospital on the same date of 

service to the Medicare beneficiary 

being treated with LDR brachytherapy 

for prostate cancer. As discussed in the 

CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66653), OPPS 

payment rates for CPT code 77778, in 

particular, had fluctuated over the years. 

We were frequently informed by the 

public that reliance on single procedure 

claims to set the median costs for these 

services resulted in use of mainly 

incorrectly coded claims for LDR 

prostate brachytherapy because a 

correctly coded claim should include, 

for the same date of service, CPT codes 

for both needle/catheter placement and 

application of radiation sources, as well 

as separately coded imaging and 

radiation therapy planning services (that 

is, a multiple procedure claim). 

In order to base payment on claims for 

the most common clinical scenario, and 

to further our goal of providing payment 

under the OPPS for a larger bundle of 

component services provided in a single 

hospital encounter, beginning in CY 

2008, we began providing a single 

payment for LDR prostate brachytherapy 

when the composite service, reported as 

CPT codes 55875 and 77778, is 

furnished in a single hospital encounter. 

We based the payment for composite 

APC 8001 (LDR Prostate Brachytherapy 

Composite) on the median cost derived 

from claims for the same date of service 

that contain both CPT codes 55875 and 

77778 and that do not contain other 

separately paid codes that are not on the 

bypass list. In uncommon occurrences 

in which the services are billed 

individually, hospitals have continued 

to receive separate payments for the 

individual services. We refer readers to 

the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66652 through 

66655) for a full history of OPPS 

payment for LDR prostate brachytherapy 

and a detailed description of how we 

developed the LDR prostate 

brachytherapy composite APC. 

For CY 2012, we are proposing to 

continue paying for LDR prostate 

brachytherapy services using the 

composite APC methodology proposed 

and implemented for CY 2008 through 

CY 2011. That is, we are proposing to 

use CY 2010 claims on which both CPT 

codes 55875 and 77778 were billed on 

the same date of service with no other 

separately paid procedure codes (other 

than those on the bypass list) to 

calculate the payment rate for composite 

APC 8001. Consistent with our CY 2008 

through CY 2011 practice, we are 

proposing not to use the claims that 

meet these criteria in the calculation of 

the median costs for APCs 0163 (Level 

IV Cystourethroscopy and Other 

Genitourinary Procedures) and 0651 

(Complex Interstitial Radiation Source 

Application), the APCs to which CPT 

codes 55875 and 77778 are assigned, 

respectively. The median costs for APCs 

0163 and 0651 would continue to be 

calculated using single and ‘‘pseudo’’ 

single procedure claims. We believe that 

this composite APC contributes to our 

goal of creating hospital incentives for 

efficiency and cost containment, while 

providing hospitals with the most 

flexibility to manage their resources. We 

also continue to believe that data from 

claims reporting both services required 

for LDR prostate brachytherapy provide 

the most accurate median cost upon 

which to base the composite APC 

payment rate. 

Using partial year CY 2010 claims 

data available for this CY 2012 proposed 

rule, we were able to use 556 claims that 

contained both CPT codes 55875 and 

77778 to calculate the median cost upon 

which the proposed CY 2012 payment 

for composite APC 8001 is based. The 

proposed median cost for composite 

APC 8001 for CY 2012 is approximately 

$3,364. This is an increase compared to 

the CY 2011 final median cost for this 

composite APC of approximately $3,195 

based on 849 single bill claims from a 

full year of CY 2009 claims data. The 

proposed CY 2012 median cost for this 

composite APC is slightly less than 

$3,555, the sum of the proposed median 

costs for APCs 0163 and 0651 ($2,658 + 

$897), the APCs to which CPT codes 

55875 and 77778 map if one service is 

billed on a claim without the other. We 

believe the proposed CY 2012 median 

cost for composite APC 8001 of 

approximately $3,364, calculated from 

claims we believe to be correctly coded, 

would result in a reasonable and 

appropriate payment rate for this service 

in CY 2012. 

(3) Cardiac Electrophysiologic 

Evaluation and Ablation Composite 

APC (APC 8000) 

Cardiac electrophysiologic evaluation 

and ablation services frequently are 

performed in varying combinations with 

one another during a single episode of 

care in the hospital outpatient setting. 

Therefore, correctly coded claims for 

these services often include multiple 

codes for component services that are 

reported with different CPT codes and 

that, prior to CY 2008, were always paid 

separately through different APCs 

(specifically, APC 0085 (Level II 

Electrophysiologic Evaluation), APC 

0086 (Ablate Heart Dysrhythm Focus), 

and APC 0087 (Cardiac 

Electrophysiologic Recording/ 

Mapping)). As a result, there would 

never be many single bills for cardiac 

electrophysiologic evaluation and 

ablation services, and those that are 

reported as single bills would often 

represent atypical cases or incorrectly 

coded claims. As described in the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66655 through 

66659), the APC Panel and the public 

expressed persistent concerns regarding 

the limited and reportedly 

unrepresentative single bills available 

for use in calculating the median costs 

for these services according to our 

standard OPPS methodology. 

Effective January 1, 2008, we 

established APC 8000 (Cardiac 

Electrophysiologic Evaluation and 

Ablation Composite) to pay for a 

composite service made up of at least 

one specified electrophysiologic 

evaluation service and one specified 

electrophysiologic ablation service. 

Calculating a composite APC for these 

services allowed us to utilize many 

more claims than were available to 

establish the individual APC median 

costs for these services, and we also saw 

this composite APC as an opportunity to 

advance our stated goal of promoting 

hospital efficiency through larger 

payment bundles. In order to calculate 

the median cost upon which the 

payment rate for composite APC 8000 is 

based, we used multiple procedure 

claims that contained at least one CPT 

code from group A for evaluation 

services and at least one CPT code from 

group B for ablation services reported 

on the same date of service on an 

individual claim. Table 9 in the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66656) 

identified the CPT codes that are 

assigned to groups A and B. For a full 

discussion of how we identified the 

group A and group B procedures and 

established the payment rate for the 

cardiac electrophysiologic evaluation 

and ablation composite APC, we refer 

readers to the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 66655 

through 66659). Where a service in 

group A is furnished on a date of service 

that is different from the date of service 

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for a code in group B for the same 

beneficiary, payments are made under 

the appropriate single procedure APCs 

and the composite APC does not apply. 

For CY 2012, we are proposing to 

continue to pay for cardiac 

electrophysiologic evaluation and 

ablation services using the composite 

APC methodology proposed and 

implemented for CY 2008 through CY 

2011. Consistent with our CY 2008 

through CY 2011 practice, we are 

proposing not to use the claims that 

meet the composite payment criteria in 

the calculation of the median costs for 

APC 0085 and APC 0086, to which the 

CPT codes in both groups A and B for 

composite APC 8000 are otherwise 

assigned. Median costs for APCs 0085 

and 0086 would continue to be 

calculated using single procedure 

claims. We continue to believe that the 

composite APC methodology for cardiac 

electrophysiologic evaluation and 

ablation services is the most efficient 

and effective way to use the claims data 

for the majority of these services and 

best represents the hospital resources 

associated with performing the common 

combinations of these services that are 

clinically typical. Furthermore, this 

approach creates incentives for 

efficiency by providing a single 

payment for a larger bundle of major 

procedures when they are performed 

together, in contrast to continued 

separate payment for each of the 

individual procedures. 

For CY 2012, using a partial year of 

CY 2010 claims data available for this 

proposed rule, we were able to use 

11,156 claims containing a combination 

of group A and group B codes and 

calculate a proposed median cost of 

approximately $11,598 for composite 

APC 8000. This is an increase compared 

to the CY 2011 final median cost for this 

composite APC of approximately 

$10,673 based on a full year of CY 2009 

claims data. We believe the proposed 

median cost of $11,598 calculated from 

a high volume of correctly coded 

multiple procedure claims would result 

in an accurate and appropriate proposed 

payment for cardiac electrophysiologic 

evaluation and ablation services when 

at least one evaluation service is 

furnished during the same clinical 

encounter as at least one ablation 

service. 

Table 7 below list the groups of 

procedures upon which we based 

proposed composite APC 8000 for CY 

2012. 

TABLE 7—PROPOSED GROUPS OF CARDIAC ELECTROPHYSIOLOGIC EVALUATION AND ABLATION PROCEDURES UPON

WHICH COMPOSITE APC 8000 IS BASED

Codes used in combinations: At least one in Group A and one in Group B CY 2011 

CPT Code 

Proposed 

single code 

CY 2012 APC 

Proposed CY 

2012 SI 

(composite) 

Group A: 

Comprehensive electrophysiologic evaluation with right atrial pacing and recording, right 

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

93619 0085 Q3 

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

atrial pacing and recording, right ventricular pacing and recording, His bundle recording.

93620 0085 Q3 

Group B: 

Intracardiac catheter ablation of atrioventricular node function, atrioventricular conduction 

for creation of complete heart block, with or without temporary pacemaker placement.

93650 0085 Q3 

Intracardiac catheter ablation of arrhythmogenic focus; for treatment of supraventricular 

tachycardia by ablation of fast or slow atrioventricular pathways, accessory atrioventricular connections or other atrial foci, singly or in combination.

93651 0086 Q3 

Intracardiac catheter ablation of arrhythmogenic focus; for treatment of ventricular tachycardia.93652 0086 Q3 

(4) Mental Health Services Composite 

APC (APC 0034) 

For CY 2012, we are proposing to 

continue our longstanding policy of 

limiting the aggregate payment for 

specified less resource-intensive mental 

health services furnished on the same 

date to the payment for a day of partial 

hospitalization, which we consider to be 

the most resource-intensive of all 

outpatient mental health treatment for 

CY 2012. We refer readers to the April 

7, 2000 OPPS final rule with comment 

period (65 FR 18452 through 18455) for 

the initial discussion of this 

longstanding policy. We continue to 

believe that the costs associated with 

administering a partial hospitalization 

program represent the most resourceintensive of all outpatient mental health 

treatment. Therefore, we do not believe 

that we should pay more for a day of 

individual mental health services under 

the OPPS than the partial 

hospitalization per diem payment. 

As discussed in detail in section VIII. 

of this proposed rule, for CY 2012, we 

are proposing to continue using a 

provider-specific two tiered payment 

approach for partial hospitalization 

services that distinguishes payment 

made for services furnished in a CMHC 

from payment made for services 

furnished in a hospital. Specifically, we 

are proposing one APC for partial 

hospitalization program days with three 

services furnished in a CMHC (APC 

0172, (Level I Partial Hospitalization (3 

services) for CMHCs) and one APC for 

days with four or more services 

furnished in a CMHC (APC 0173, Level 

II Partial Hospitalization (4 or more 

services) for CMHCs). We are proposing 

that the payment rates for these two 

APCs be based upon the median per 

diem costs calculated using data only 

from CMHCs. Similarly, we are 

proposing one APC for partial 

hospitalization program days with three 

services furnished in a hospital (APC 

0175, Level I Partial Hospitalization (3 

services) for Hospital-Based PHPs), and 

one APC for days with four or more 

services furnished in a hospital (APC 

0176, Level II Partial Hospitalization (4 

or more services) for Hospital-Based 

PHPs). We are proposing that the 

payment rates for these two APCs be 

based on the median per diem costs 

calculated using data only from 

hospitals. 

Because our longstanding policy of 

limiting the aggregate payment for 

specified less resource-intensive mental 

health services furnished on the same 

date to the payment rate for the most 

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resource-intensive of all outpatient 

mental health treatment, we are 

proposing to continue to set the CY 

2012 payment rate for APC 0034 

(Mental Health Services Composite) at 

the same rate as we are proposing for 

APC 0176, which is the maximum 

partial hospitalization per diem 

payment. We believe this APC payment 

rate would provide the most appropriate 

payment for composite APC 0034, 

taking into consideration the intensity 

of the mental health services and the 

differences in the HCPCS codes for 

mental health services that could be 

paid through this composite APC 

compared with the HCPCS codes that 

could be paid through partial 

hospitalization APC 0176. When the 

aggregate payment for specified mental 

health services provided by one hospital 

to a single beneficiary on one date of 

service based on the payment rates 

associated with the APCs for the 

individual services exceeds the 

maximum per diem partial 

hospitalization payment, we are 

proposing that those specified mental 

health services would be assigned to 

APC 0034. We are proposing that APC 

0034 would have the same payment rate 

as APC 0176 and that the hospital 

would continue to be paid one unit of 

APC 0034. The I/OCE currently 

determines, and we are proposing for 

CY 2012 that it would continue to 

determine, whether to pay these 

specified mental health services 

individually or to make a single 

payment at the same rate as the APC 

0176 per diem rate for partial 

hospitalization for all of the specified 

mental health services furnished by the 

hospital on that single date of service. 

(5) Multiple Imaging Composite APCs 

(APCs 8004, 8005, 8006, 8007, and 

8008) 

Prior to CY 2009, hospitals received a 

full APC payment for each imaging 

service on a claim, regardless of how 

many procedures were performed 

during a single session using the same 

imaging modality. Based on extensive 

data analysis, we determined that this 

practice neither reflected nor promoted 

the efficiencies hospitals can achieve 

when performing multiple imaging 

procedures during a single session (73 

FR 41448 through 41450). As a result of 

our data analysis, and in response to 

ongoing recommendations from 

MedPAC to improve payment accuracy 

for imaging services under the OPPS, we 

expanded the composite APC model 

developed in CY 2008 to multiple 

imaging services. Effective January 1, 

2009, we provide a single payment each 

time a hospital bills more than one 

imaging procedure within an imaging 

family on the same date of service. We 

utilize three imaging families based on 

imaging modality for purposes of this 

methodology: (1) Ultrasound; (2) 

computed tomography (CT) and 

computed tomographic angiography 

(CTA); and (3) magnetic resonance 

imaging (MRI) and magnetic resonance 

angiography (MRA). The HCPCS codes 

subject to the multiple imaging 

composite policy and their respective 

families are listed in Table 13 of the CY 

2011 OPPS/ASC final rule with 

comment period (75 FR 71859 through 

71860). 

While there are three imaging 

families, there are five multiple imaging 

composite APCs due to the statutory 

requirement at section 1833(t)(2)(G) of 

the Act that we differentiate payment 

for OPPS imaging services provided 

with and without contrast. While the 

ultrasound procedures included in the 

policy do not involve contrast, both CT/ 

CTA and MRI/MRA scans can be 

provided either with or without 

contrast. The five multiple imaging 

composite APCs established in CY 2009 

are: 

• APC 8004 (Ultrasound Composite); 

• APC 8005 (CT and CTA without 

Contrast Composite); 

• APC 8006 (CT and CTA with 

Contrast Composite); 

• APC 8007 (MRI and MRA without 

Contrast Composite); and 

• APC 8008 (MRI and MRA with 

Contrast Composite). 

We define the single imaging session 

for the ‘‘with contrast’’ composite APCs 

as having at least one or more imaging 

procedures from the same family 

performed with contrast on the same 

date of service. For example, if the 

hospital performs an MRI without 

contrast during the same session as at 

least one other MRI with contrast, the 

hospital will receive payment for APC 

8008, the ‘‘with contrast’’ composite 

APC. 

Hospitals continue to use the same 

HCPCS codes to report imaging 

procedures, and the I/OCE determines 

when combinations of imaging 

procedures qualify for composite APC 

payment or map to standard (sole 

service) APCs for payment. We make a 

single payment for those imaging 

procedures that qualify for composite 

APC payment, as well as any packaged 

services furnished on the same date of 

service. The standard (noncomposite) 

APC assignments continue to apply for 

single imaging procedures and multiple 

imaging procedures performed across 

families. For a full discussion of the 

development of the multiple imaging 

composite APC methodology, we refer 

readers to the CY 2009 OPPS/ASC final 

rule with comment period (73 FR 68559 

through 68569). 

At its February 2010 meeting, the APC 

Panel recommended that CMS continue 

providing analysis on an ongoing basis 

of the impact on beneficiaries of the 

multiple imaging composite APCs as 

data become available. In the CY 2011 

OPPS/ASC proposed rule, we indicated 

that we were accepting this 

recommendation and would provide the 

requested analysis to the APC Panel at 

a future meeting (75 FR 46212). At the 

February 28–March 1, 2011 APC Panel 

meeting, CMS staff provided an updated 

analysis of the multiple imaging 

composite APCs to the Panel, comparing 

partial year CY 2010 imaging composite 

cost and utilization data to comparable 

CY 2009 data in order to meet the APC 

Panel request that we provide analysis 

of the impact on beneficiaries of the 

multiple imaging composite APCs. 

For CY 2012, we are proposing to 

continue paying for all multiple imaging 

procedures within an imaging family 

performed on the same date of service 

using the multiple imaging composite 

payment methodology. The proposed 

CY 2012 payment rates for the five 

multiple imaging composite APCs (APC 

8004, APC 8005, APC 8006, APC 8007, 

and APC 8008) are based on median 

costs calculated from the partial year CY 

2010 claims available for this proposed 

rule that qualified for composite 

payment under the current policy (that 

is, those claims with more than one 

procedure within the same family on a 

single date of service). To calculate the 

proposed median costs, we used the 

same methodology that we used to 

calculate the final CY 2011 median costs 

for these composite APCs. That is, we 

removed any HCPCS codes in the OPPS 

imaging families that overlapped with 

codes on our bypass list (‘‘overlap 

bypass codes’’) to avoid splitting claims 

with multiple units or multiple 

occurrences of codes in an OPPS 

imaging family into new ‘‘pseudo’’ 

single claims. The imaging HCPCS 

codes that we removed from the bypass 

list for purposes of calculating the 

proposed multiple imaging composite 

APC median costs appear in Table 9 of 

this proposed rule. (We note that, 

consistent with our proposal in section 

II.A.1.b. of this proposed rule to add 

CPT code 71550 (Magnetic resonance 

(e.g., proton) imaging, chest (e.g., for 

evaluation of hilar and mediastinal 

lymphadenopathy); without contrast 

material(s)) to the list of bypass codes 

for CY 2012, we also are proposing to 

add CPT code 71550 to the list of 

proposed OPPS imaging family services 

overlapping with HCPCS codes on the 

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proposed CY 2012 bypass list.) We 

integrated the identification of imaging 

composite ‘‘single session’’ claims, that 

is, claims with multiple imaging 

procedures within the same family on 

the same date of service, into the 

creation of ‘‘pseudo’’ single procedure 

claims to ensure that claims were split 

in the ‘‘pseudo’’ single process into 

accurate reflections of either a 

composite ‘‘single session’’ imaging 

service or a standard sole imaging 

service resource cost. Like all single 

bills, the new composite ‘‘single 

session’’ claims were for the same date 

of service and contained no other 

separately paid services in order to 

isolate the session imaging costs. Our 

last step after processing all claims 

through the ‘‘pseudo’’ single process 

was to reassess the remaining multiple 

procedure claims using the full bypass 

list and bypass process in order to 

determine if we could make other 

‘‘pseudo’’ single bills. That is, we 

assessed whether a single separately 

paid service remained on the claim after 

removing line-items for the ‘‘overlap 

bypass codes.’’ 

As discussed in detail in section 

III.D.2. of this proposed rule, we are 

proposing to establish two APCs to 

which we would propose to assign the 

codes created for CY 2011 by the AMA’s 

CPT Editorial Board for combined 

abdominal and pelvis CT services. 

Specifically, we are proposing to create 

new APC 0331 (Combined Abdominal 

and Pelvis CT Without Contrast), to 

which we are proposing to assign CPT 

code 74176 (Computed tomography, 

abdomen and pelvis; without contrast 

material); and we are proposing to 

create new APC 0334 (Combined 

Abdominal and Pelvis CT With 

Contrast), to which we are proposing to 

assign CPT codes 74177 (Computed 

tomography, abdomen and pelvis; with 

contrast material(s)) and 74178 

(Computed tomography, abdomen and 

pelvis; without contrast material in one 

or both body regions, followed by 

contrast material(s) and further sections 

in one or both body regions) for the CY 

2012 OPPS. As noted and listed in 

section III.D.2. of this proposed rule, we 

selected claims of predecessor codes of 

new CPT codes 74176, 74177, and 

74178 to calculate the costs of proposed 

new APCs 0331 and 0334, respectively. 

Therefore, we are proposing not to use 

those claims listed in Table 21 in 

section III.D.2. of this proposed rule in 

calculating the costs of APCs 8005 and 

8006. 

We were able to identify 1 million 

‘‘single session’’ claims out of an 

estimated 2 million potential composite 

cases from our ratesetting claims data, 

or approximately half of all eligible 

claims, to calculate the proposed CY 

2012 median costs for the multiple 

imaging composite APCs. We list in 

Table 8 below the HCPCS codes that 

would be subject to the proposed 

multiple imaging composite policy, the 

approximate proposed median costs for 

the imaging composite APCs, and their 

respective families for CY 2012. The 

HCPCS codes listed in Table 8 are 

assigned status indicated ‘‘Q3’’’ in 

Addendum B to this proposed rule 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site) to 

identify their status as potentially 

payable through a composite APC. Their 

proposed composite APC assignment is 

identified in Addendum M to this 

proposed rule (which is referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site). Table 9 below lists the OPPS 

imaging family services that overlap 

with HCPCS codes on the proposed CY 

2012 bypass list. 

TABLE 8—PROPOSED OPPS IMAGING

FAMILIES AND MULTIPLE IMAGING

PROCEDURE COMPOSITE APCS

Family 1—Ultrasound 

Proposed CY 2012 APC 

8004 

(Ultrasound Composite) 

Proposed CY 2012 

Approximate APC 

Median Cost = $197 

76604 .............................. Us exam, chest. 

76700 .............................. Us exam, abdom, complete. 

76705 .............................. Echo exam of abdomen. 

76770 .............................. Us exam abdo back wall, 

comp. 

76775 .............................. Us exam abdo back wall, 

lim. 

76776 .............................. Us exam k transpl w/ 

Doppler. 

76831 .............................. Echo exam, uterus. 

76856 .............................. Us exam, pelvic, complete. 

76870 .............................. Us exam, scrotum. 

76857 .............................. Us exam, pelvic, limited. 

Family 2—CT and CTA With and Without 

Contrast 

Proposed CY 2012 APC 

8005 

(CT and CTA Without 

Contrast Composite)* 

Proposed CY 2012 

Approximate APC 

Median Cost = $445 

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. 

TABLE 8—PROPOSED OPPS IMAGING

FAMILIES AND MULTIPLE IMAGING

PROCEDURE COMPOSITE APCS— 

Continued 

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

dye. 

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

Proposed CY 2012 APC 

8006 

(CT and CTA With 

Contrast Composite) 

Proposed CY 2012 

Approximate APC 

Median Cost = $744 

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

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

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

dye. 

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

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

w/dye. 

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

dye. 

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

dye. 

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

dye. 

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

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

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

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

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

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

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

dye. 

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

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

dye. 

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

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

dye. 

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

w/dye. 

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

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

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

dye. 

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

w/dye. 

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

w/dye. 

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

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

dye. 

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

w/dye. 

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

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

dye. 

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

dye. 

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

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

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

contrast. 

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

regns. 

* If a ‘‘without contrast’’ CT or CTA procedure is 

performed during the same session as a ‘‘with 

contrast’’ CT or CTA procedure, the I/OCE will 

assign APC 8006 rather than APC 8005. 

Family 3—MRI and MRA With and Without 

Contrast 

Proposed CY 2012 APC 

8007 

(MRI and MRA Without 

Contrast Composite)* 

Proposed CY 2012 

Approximate APC 

Median Cost = $718 

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

joint. 

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TABLE 8—PROPOSED OPPS IMAGING

FAMILIES AND MULTIPLE IMAGING

PROCEDURE COMPOSITE APCS— 

Continued 

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. 

Proposed CY 2012 APC 

8008 

(MRI and MRA with 

Contrast Composite) 

Proposed CY 2012 

Approximate APC 

Median Cost = $1,032 

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

& w/dye. 

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

dye. 

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

dye. 

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

dye. 

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

& w/dye. 

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

dye. 

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

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

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

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

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

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

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

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

dye. 

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

dye. 

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

w/dye. 

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

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

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

dye. 

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

w/dye. 

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

dye. 

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

w/dye. 

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

dye. 

TABLE 8—PROPOSED OPPS IMAGING

FAMILIES AND MULTIPLE IMAGING

PROCEDURE COMPOSITE APCS— 

Continued 

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

w/dye. 

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

dye. 

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

dye. 

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

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

dye. 

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

dye. 

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

dye. 

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

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

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

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

un. 

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

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

breast. 

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

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

chest. 

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

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

ext. 

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

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

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

canal. 

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

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

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

upper extr. 

* If a ‘‘without contrast’’ MRI or MRA procedure is 

performed during the same session as a ‘‘with 

contrast’’ MRI or MRA procedure, the I/OCE will 

assign APC 8008 rather than 8007. 

TABLE 9—PROPOSED OPPS IMAGING

FAMILY SERVICES OVERLAPPING

WITH HCPCS CODES ON THE PROPOSED CY 2012 BYPASS LIST

Family 1—Ultrasound 

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. 

76856 .......... Us exam, pelvic, complete. 

76870 .......... Us exam, scrotum. 

76857 .......... Us exam, pelvic, limited. 

Family 2—CT and CTA with and without 

contrast 

70450 .......... Ct head/brain w/o dye. 

70480 .......... Ct orbit/ear/fossa w/o dye. 

70486 .......... Ct maxillofacial w/o dye. 

70490 .......... Ct soft tissue neck w/o dye. 

71250 .......... Ct thorax w/o dye. 

72125 .......... Ct neck spine w/o dye. 

72128 .......... Ct chest spine w/o dye. 

72131 .......... Ct lumbar spine w/o dye. 

72192 .......... Ct pelvis w/o dye. 

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

TABLE 9—PROPOSED OPPS IMAGING

FAMILY SERVICES OVERLAPPING

WITH HCPCS CODES ON THE PROPOSED CY 2012 BYPASS LIST— 

Continued 

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

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

Family 3—MRI and MRA with and without 

contrast 

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

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

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

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

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

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

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

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

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

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

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

(6) Cardiac Resynchronization Therapy 

Composite APC (APCs 0108, 0418, 0655, 

and 8009) 

Cardiac resynchronization therapy 

(CRT) uses electronic devices to 

sequentially pace both sides of the heart 

to improve its output. CRT utilizes a 

pacing electrode implanted in 

combination with either a pacemaker or 

an implantable cardioverter defibrillator 

(ICD). CRT performed by the 

implantation of an ICD along with a 

pacing electrode is referred to as ‘‘CRT– 

D.’’ CRT performed by the implantation 

of a pacemaker along with a pacing 

electrode is referred to as ‘‘CRT–P.’’ 

CRT–D procedures are described by 

combinations of CPT codes for the 

insertion of pulse generators and the 

insertion of the leads associated with 

ICDs, along with the insertion of the 

pacing electrode. For the implantation 

of a pulse generator, hospitals may use 

CPT code 33240 (Insertion of single or 

dual chamber pacing cardioverterdefibrillator pulse generator), which is 

the only CPT code assigned to APC 0107 

(Insertion of Cardioverter-Defibrillator) 

for CY 2011. For the implantation of a 

pulse generator and leads, hospitals may 

use CPT code 33249 (Insertion or 

repositioning of electrode lead(s) for 

single or dual chamber pacing 

cardioverter-defibrillator and insertion 

of pulse generator), which is the only 

CPT code assigned to APC 0108 

(Insertion/Replacement/Repair of 

Cardioverter-Defibrillator Leads) for CY 

2011. 

For CRT–P, hospitals may use CPT 

codes 33206 (Insertion or replacement 

of permanent pacemaker with 

transvenous electrode(s); atrial) and 

33207 (Insertion or replacement of 

permanent pacemaker with transvenous 

electrode(s); ventricular), which are 

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assigned to APC 0089 (Insertion/ 

Replacement of Permanent Pacemaker 

and Electrodes) for CY 2011. Hospitals 

also may use CPT code 33208 (Insertion 

or replacement of permanent pacemaker 

with transvenous electrode(s); atrial and 

ventricular), for the implantation of a 

pacemaker with leads, which is 

assigned to APC 0655 (Insertion/ 

Replacement/Conversion of a 

Permanent Dual Chamber Pacemaker). 

When CRT–P is provided, hospitals 

would report CPT code 33206, 33207, or 

33208 codes for ICD or pacemaker 

insertion, along with CPT code 33225 

(Insertion of pacing electrode, cardiac 

venous system, for left ventricular 

pacing, at time of insertion of pacing 

cardioverter-defibrillator or pacemaker 

pulse generator (including upgrade to 

dual chamber system)), for implantation 

of the pacing electrode, which is 

assigned to APC 0418 (Insertion of Left 

Ventricular Pacing Electrode) for CY 

2011. 

A number of commenters who 

responded to prior OPPS proposed 

rules, as well as public presenters to the 

APC Panel, have recommended that 

CMS establish new composite APCs for 

CRT–D, citing significant fluctuations in 

the median cost for CPT code 33225 and 

the payment rate for APC 0418. The 

commenters and presenters have 

pointed out that, because the definition 

of CPT code 33225 specifies that the 

pacing electrode is inserted at the same 

time as an ICD or pacemaker, CMS 

would not have many valid single or 

pseudo single claims upon which to 

calculate an accurate median cost. 

These commenters and presenters also 

asserted that claims data for these 

services demonstrate that the percentage 

of single claims available for use in CRT 

ratesetting is very low compared to the 

total number of claims submitted for 

CRT–D or CRT–P services. The APC 

Panel at its February and August 2009 

meetings recommended that CMS 

evaluate the implications of the creation 

of a new composite APC for CRT–D and 

recommended that CMS reconsider 

creating a composite APC or group of 

composite APCs for CRT–D and CRT–P. 

While we did not propose any new 

composite APCs for CY 2010 or CY 

2011, we accepted both of these APC 

Panel recommendations (75 FR 71852). 

In response to the APC Panel 

recommendations and the comments we 

have received, we have evaluated the 

implications of creating four composite 

APCs for CRT, which would include the 

ICD and pacemaker insertion 

procedures listed previously in this 

section (described by CPT codes 33240, 

33249, 33206, 33207, and 33208) 

performed in combination with the 

insertion of a pacing electrode 

(described by CPT code 33225). Table 

10 below outlines the four potential 

composite APCs that we modeled. 

Specifically, we provide a description of 

each potential composite APC, the 

combination of CPT codes that we used 

to define the potential composite APC, 

the frequency of claims that met the 

definition of the potential composite 

APC that could be used to calculate a 

median cost for the potential composite 

APC, and the median cost calculated for 

the potential composite APC. Table 10 

below contains the results from our 

calculations for the four potential 

composite APCs using CY 2010 claims 

data available for this proposed rule, 

that is, those claims processed between 

January 1 and December 31, 2010. 

TABLE 10—POTENTIAL COMPOSITE APCS

Potential 

composite 

APC 

Description Component 

APCs CPT codes CY 2010 frequency 

CY 2012 

payment 

estimate 

A ............... Cardiac Resynchronization Therapy—ICD Pulse Generator and Leads 0418 

0107 

33225 

33240 

21 $35,623 

B ............... Cardiac Resynchronization Therapy—ICD Pulse Generator .................... 0418 

0108 

33225 

33249 

2,358 38,854 

C .............. Cardiac Resynchronization Therapy—Pacemaker Pulse Generator, and 

Leads (Atrial or Ventricular).

0418 

0089 

33225 

33206 

33207 

84 17,306 

D .............. Cardiac Resynchronization Therapy—Pacemaker Pulse Generator, and 

Leads (Atrial and Ventricular).

0418 

0655 

33225 

33208 

314 18,705 

For CY 2012, under the authority of 

section 1833(t)(1)(B) of the Act, we are 

proposing to create a new composite 

APC 8009 (Cardiac Resynchronization 

Therapy with Defibrillator Composite), 

listed as potential composite APC ‘‘B’’ 

in Table 10 above, for CRT–D services. 

This proposed composite APC is the 

only modeled composite in the study as 

shown above in Table 10, with 

significant claims volume, and would 

combine a procedure currently in APC 

0418 with a procedure currently in APC 

0108 (Insertion/Replacement/Repair of 

Cardioverter-Defibrillator Leads) when 

performed on the same date of service. 

Specifically, we are proposing to create 

composite APC 8009, which would be 

used when CPT 33249 and CPT 33225 

are performed on the same day, in order 

to recognize the inherent challenges in 

calculating accurate median costs for 

CPT code 33225 based on single 

procedure claims utilized in standard 

OPPS ratesetting methodology, and to 

address commenters’ concerns regarding 

the fluctuations in median costs for APC 

0418. We believe a composite payment 

methodology is appropriate for these 

services and would result in more 

accurate payment for these services 

because such a methodology is 

specifically designed to provide 

payment for two or more procedures 

when they are provided in the same 

encounter, thus enabling us to use more 

claims data and to use claims data that 

more accurately represents the full cost 

of the services when they are furnished 

in the same encounter. We also believe 

that there is sufficient claims volume for 

CPT 33249 and CPT 33225 provided in 

the same encounter to warrant creation 

of the composite APC. In addition, we 

believe that the claims volume for CPT 

33249 and CPT 33225 is sufficient to 

demonstrate that these services are 

commonly performed together. While 

the other combinations of CRT 

procedures listed in Table 10 may also 

be performed together, we are not 

proposing to implement composite 

APCs for these services because of the 

low frequency with which CPT code 

33225 is reported with other CPT codes 

for ICD and pacemaker insertion in the 

claims data. As we have stated 

previously (74 FR 60392), because of the 

complex claims processing and 

ratesetting logic involved, in the past, 

we have explored composite APCs only 

for combinations of services that are 

commonly performed together. Because 

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of the low frequency of the other 

combinations of CRT procedures listed 

in Table 10, we do not consider them to 

be commonly performed together. 

Under the authority of section 

1833(t)(2)(E) of the Act, we also are 

proposing to cap the payment rate for 

composite APC 8009 at the most 

comparable Medicare-severity 

diagnosis-related group (MS–DRG) 

payment rate established under the IPPS 

that would be provided to acute care 

hospitals for providing CRT–D services 

to hospital inpatients. Specifically, we 

are proposing to pay APC 8009 at the 

lesser of the APC 8009 median cost or 

the IPPS payment rate for MS–DRG 227 

(Cardiac Defibrillator Implant without 

Cardiac Catheterization without Major 

Complication or Comorbidity), as 

adopted in the FY 2012 IPPS/LTCH PPS 

final rule. We would establish the OPPS 

payment amount at the FY 2012 IPPS 

standardized payment amount for MS– 

DRG 227. In the FY 2012 IPPS/LTCH 

proposed rule, this amount is 

$26,364.93. We calculated the 

standardized payment rate for MS–DRG 

227 ($26,364.93) by multiplying the 

normalized weight from Table 5 of the 

FY 2012 IPPS/LTCH PPS proposed rule 

(5.1370) by the sum of the nonlablor and 

labor-related shares of the proposed FY 

2012 IPPS operating standardized 

amount (nonwage-adjusted) ($5,132.36) 

which were obtained from Table 1B. For 

further detail on the calculation of the 

IPPS proposed FY 2012 payments rates, 

we refer readers to the FY 2012 IPPS/ 

LTCH PPS proposed rule (76 FR 26028 

through 26029). 

We consider the standardized 

payment rate for MS–DRG 227 to 

represent appropriate payment for a 

comparable package of services 

furnished to outpatients. We believe 

that, because this MS–DRG includes 

defibrillator implantation for those 

inpatients without major complications 

or comorbidities, it represents the 

payment made for hospital inpatients 

who are most similar to patients who 

would receive CRT–D on an outpatient 

basis, because hospital outpatients are 

generally less sick than hospital 

inpatients and because patients who 

had complications or comorbitities 

would be most likely to be admitted to 

inpatient status to receive CRT–D 

therapy. Similar to the proposed 

payment rate for composite APC 8009, 

the proposed payment rate for MS–DRG 

227 includes the device costs associated 

with CRT–D along with the service costs 

associated with CPT codes 33249 and 

33225, which are the procedures that 

are reported for implanting those 

devices. We believe that we should not 

pay more for these services under the 

proposed OPPS composite APC 

payment than under the IPPS because 

the OPPS payment would, by definition, 

include fewer items and services than 

the corresponding IPPS MS–DRG 

payment. For example, the IPPS MS– 

DRG payment includes payment for 

drugs and diagnostic tests that would be 

separately payable under the OPPS. A 

payment cap is necessary, therefore, to 

ensure that we do not create an 

inappropriate payment incentive to 

provide CRT–D services in one setting 

of care over another by paying more for 

CRT–D in the outpatient setting 

compared to the inpatient setting. We 

also believe that limiting payment for 

CRT–D services under the OPPS to the 

IPPS MS–DRG payment will ensure 

appropriate and equitable payment to 

hospitals because patients who receive 

these services in the hospital outpatient 

setting are not as sick as patients who 

have been admitted to receive this same 

service in the hospital inpatient setting. 

Therefore, we expect it would be less 

costly to provide care for these patients, 

who would also spend less time in the 

facility. For more detail and how this 

payment rate was calculated, we refer 

readers to section III. D. 6 of this 

proposed rule. 

In order to ensure that hospitals 

correctly code for CRT services in the 

future, we are proposing to create claim 

processing edits that would return 

claims to providers unless CPT code 

33225 is billed in conjunction with one 

of the following CPT codes, as specified 

by AMA in the CPT code book: 

• 33206 (Insertion or replacement of 

permanent pacemaker with transvenous 

electrode(s); atrial); 

• 33207 (Insertion or replacement of 

permanent pacemaker with transvenous 

electrode(s); ventricular); 

• 33208 (Insertion or replacement of 

permanent pacemaker with transvenous 

electrode(s); atrial and ventricular); 

• 33212 (Insertion or replacement of 

pacemaker pulse generator only; single 

chamber, atrial or ventricular); 

• 33213 (Insertion or replacement of 

pacemaker pulse generator only; dual 

chamber, atrial or ventricular); 

• 33214 (Upgrade of implanted 

pacemaker system, conversion of single 

chamber system to dual chamber system 

(includes removal of previously placed 

pulse generator, testing of existing lead, 

insertion of new lead, insertion of new 

pulse generator)); 

• 33216 (Insertion of a single 

transvenous electrode, permanent 

pacemaker or cardioverter-defibrillator); 

• 33217 (Insertion of 2 transvenous 

electrodes, permanent pacemaker or 

cardioverter-defibrillator); 

• 33222 (Revision or relocation of 

skin pocket for pacemaker), 33233 

(Removal of permanent pacemaker 

pulse generator); 

• 33234 (Removal of transvenous 

pacemaker electrode(s); single lead 

system, atrial or ventricular); 

• 33235 (Removal of transvenous 

pacemaker electrode(s); dual lead 

system, atrial or ventricular); 

• 33240 (Insertion of single or dual 

chamber pacing cardioverterdefibrillator pulse generator); or 

• 33249 (Insertion or repositioning of 

electrode lead(s) for single or dual 

chamber pacing cardioverterdefibrillator and insertion of pulse 

generator). 

Finally, in order to reduce the extent 

to which payment rates for the two 

services currently assigned to APC 0418, 

described by CPT codes 33224 and 

33225, might continue to fluctuate, we 

also are proposing to move CPT 33225 

from APC 0418 to APC 0108. We believe 

that moving these codes to APCs that 

have higher volumes of services to 

which they are more similar in clinical 

characteristics and median costs will 

increase the stability of the payments for 

these services from year to year. In 

general, a higher volume of services 

across multiple procedures within an 

APC results in more stable APC median 

costs and, therefore, in the payment rate 

from one year to the next. We also are 

proposing to change the name of APC 

0108 from ‘‘Insertion/Replacement/ 

Repair of Cardioverter-Defibrillator 

Leads’’ to ‘‘Insertion/Replacement/ 

Repair of AICD Leads, Generator, and 

Pacing Electrodes.’’ Similarly, we are 

proposing to move CPT 33224 from APC 

0418 to APC 0655 and to change the 

name of APC 0655 from ‘‘Insertion/ 

Replacement/Conversion of a 

Permanent Dual Chamber Pacemaker’’ 

to ‘‘Insertion/Replacement/Conversion 

of a Permanent Dual Chamber 

Pacemaker or Pacing Electrode.’’ We 

believe that moving CPT code 33224 

into APC 0655 will promote stability in 

payment for CPT code 33224 because 

CPT code 33224 would then be in an 

APC with similar median costs but with 

a higher volume of services and, 

therefore, will benefit from the stability 

in APC median cost and payment rate 

that generally results as the volume of 

services within an APC increases. 

Because these proposed actions would 

result in APC 0418 containing no CPT 

codes, we are proposing to delete APC 

0418. 

In summary, for CY 2012, we are 

proposing to create a composite for 

CRT–D services billed with CPT code 

33225 and CPT code 33249 on the same 

date of service (Composite APC 8009 

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(Cardiac Resynchronization Therapy— 

ICD Pulse Generator and Leads)), for 

which we are proposing that payment 

would be capped at the IPPS payment 

rate for MS–DRG 227. In other words, 

we would pay APC 8009 at the lesser of 

the APC 8009 median cost or the IPPS 

standardized payment for MS–DRG 227. 

We also are proposing to implement 

claims processing edits that would 

return to providers incorrectly coded 

claims on which a pacing electrode 

insertion (CPT code 33225) is billed 

without an ICD or pacemaker insertion. 

Finally, we are proposing to delete APC 

0418, and to redistribute its component 

CPT codes (33225 and 33224) to APCs 

0108 and 0655. The proposed changes 

would all be made in a budget neutral 

manner, in the same way that payment 

for other composite APCs and the 

reassignment of codes to APCs are 

budget neutral within the OPPS. We 

refer readers to section II.A.4 of this 

proposed rule for a discussion of the 

scaling of payment weights for budget 

neutrality. 

3. Proposed Changes to Packaged 

Services 

a. Background 

The OPPS, like other prospective 

payment systems, relies on the concept 

of averaging, where the payment may be 

more or less than the estimated cost of 

providing a service or bundle of services 

for a particular patient, but with the 

exception of outlier cases, the payment 

is adequate to ensure access to 

appropriate care. Packaging payment for 

multiple interrelated services into a 

single payment creates incentives for 

providers to furnish services in the most 

efficient way by enabling hospitals to 

manage their resources with maximum 

flexibility, thereby encouraging longterm cost containment. For example, 

where there are a variety of supplies 

that could be used to furnish a service, 

some of which are more expensive than 

others, packaging encourages hospitals 

to use the least expensive item that 

meets the patient’s needs, rather than to 

routinely use a more expensive item. 

Packaging also encourages hospitals to 

negotiate carefully with manufacturers 

and suppliers to reduce the purchase 

price of items and services or to explore 

alternative group purchasing 

arrangements, thereby encouraging the 

most economical health care. Similarly, 

packaging encourages hospitals to 

establish protocols that ensure that 

necessary services are furnished, while 

carefully scrutinizing the services 

ordered by practitioners to maximize 

the efficient use of hospital resources. 

Packaging payments into larger payment 

bundles promotes the stability of 

payment for services over time. Finally, 

packaging also may reduce the 

importance of refining service-specific 

payment because there is more 

opportunity for hospitals to average 

payment across higher cost cases 

requiring many ancillary services and 

lower cost cases requiring fewer 

ancillary services. For these reasons, 

packaging payment for services that are 

typically ancillary and supportive to a 

primary service has been a fundamental 

part of the OPPS since its 

implementation in August 2000. 

We assign status indicator ‘‘N’’ to 

those HCPCS codes that we believe are 

always integral to the performance of 

the primary modality; therefore, we 

always package their costs into the costs 

of the separately paid primary services 

with which they are billed. Services 

assigned status indicator ‘‘N’’ are 

unconditionally packaged. 

We assign status indicator ‘‘Q1’’ 

(‘‘STVX–Packaged Codes’’), ‘‘Q2’’ (‘‘T– 

Packaged Codes’’), or ‘‘Q3’’ (Codes that 

may be paid through a composite APC) 

to each conditionally packaged HCPCS 

code. An ‘‘STVX-packaged code’’ 

describes a HCPCS code whose payment 

is packaged when one or more 

separately paid primary services with 

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

‘‘X’’ are furnished in the hospital 

outpatient encounter. A ‘‘T-packaged 

code’’ describes a code whose payment 

is packaged when one or more 

separately paid surgical procedures with 

the status indicator of ‘‘T’’ are provided 

during the hospital outpatient 

encounter. ‘‘STVX-packaged codes’’ and 

‘‘T-packaged codes’’ are paid separately 

in those uncommon cases when they do 

not meet their respective criteria for 

packaged payment. ‘‘STVX-packaged 

codes’’ and ‘‘T-packaged codes’’ are 

conditionally packaged. We refer 

readers to section XI.A.1. of this 

proposed rule and Addenda D1 (which 

is referenced in section XVII. of this 

proposed rule and available via the 

Internet on the CMS Web site) with 

other Addenda, for a complete listing of 

proposed status indicators and the 

meaning of each. 

We use the term ‘‘dependent service’’ 

to refer to the HCPCS codes that 

represent services that are typically 

ancillary and supportive to a primary 

diagnostic or therapeutic modality. We 

use the term ‘‘independent service’’ to 

refer to the HCPCS codes that represent 

the primary therapeutic or diagnostic 

modality into which we package 

payment for the dependent service. In 

future years, as we consider the 

development of larger payment groups 

that more broadly reflect services 

provided in an encounter or episode-ofcare, it is possible that we might 

propose to bundle payment for a service 

that we now refer to as ‘‘independent.’’ 

Hospitals include HCPCS codes and 

charges for packaged services on their 

claims, and the estimated costs 

associated with those packaged services 

are then added to the costs of separately 

payable procedures on the same claims 

in establishing payment rates for the 

separately payable services. We 

encourage hospitals to report all HCPCS 

codes that describe packaged services 

that were provided, unless the CPT 

Editorial Panel or CMS provide other 

guidance. The appropriateness of the 

OPPS payment rates depends on the 

quality and completeness of the claims 

data that hospitals submit for the 

services they furnish to our Medicare 

beneficiaries. 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66610 

through 66659), we adopted the 

packaging of payment for items and 

services in seven categories into the 

payment for the primary diagnostic or 

therapeutic modality to which we 

believe these items and services are 

typically ancillary and supportive. The 

seven categories are: (1) Guidance 

services; (2) image processing services; 

(3) intraoperative services; (4) imaging 

supervision and interpretation services; 

(5) diagnostic radiopharmaceuticals; (6) 

contrast media; and (7) observation 

services. We specifically chose these 

categories of HCPCS codes for packaging 

because we believe that the items and 

services described by the codes in these 

categories are typically ancillary and 

supportive to a primary diagnostic or 

therapeutic modality and, in those 

cases, are an integral part of the primary 

service they support. 

In addition, in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66650 through 66659), we finalized 

additional packaging for the CY 2008 

OPPS, which included the 

establishment of new composite APCs 

for CY 2008, specifically APC 8000 

(Cardiac Electrophysiologic Evaluation 

and Ablation Composite), APC 8001 

(LDR Prostate Brachytherapy 

Composite), APC 8002 (Level I Extended 

Assessment & Management Composite), 

and APC 8003 (Level II Extended 

Assessment & Management Composite). 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68559 

through 68569), we expanded the 

composite APC model to one new 

clinical area—multiple imaging 

services. We created five multiple 

imaging composite APCs for payment in 

CY 2009 that incorporate statutory 

requirements to differentiate between 

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imaging services provided with contrast 

and without contrast as required by 

section 1833(t)(2)(G) of the Act. The 

multiple imaging composite APCs are: 

(1) APC 8004 (Ultrasound Composite); 

(2) APC 8005 (CT and CTA without 

Contrast Composite); (3) APC 8006 (CT 

and CTA with Contrast Composite); (4) 

APC 8007 (MRI and MRA without 

Contrast Composite); and (5) APC 8008 

(MRI and MRA with Contrast 

Composite). We discuss composite 

APCs in more detail in section II.A.2.e. 

of this proposed rule. 

We recognize that decisions about 

packaging and bundling payment 

involve a balance between ensuring that 

payment is adequate to enable the 

hospital to provide quality care and 

establishing incentives for efficiency 

through larger units of payment. 

Therefore, we invite public comments 

regarding our packaging proposals for 

the CY 2012 OPPS. 

b. Packaging Issues 

(1) CMS Presentation of Findings 

Regarding Expanded Packaging at the 

February 28–March 1, 2011 APC Panel 

Meeting 

In deciding whether to package a 

service or pay for a code separately, we 

have historically considered a variety of 

factors, including whether the service is 

normally provided separately or in 

conjunction with other services; how 

likely it is for the costs of the packaged 

code to be appropriately mapped to the 

separately payable codes with which it 

was performed; and whether the 

expected cost of the service is relatively 

low. 

As discussed in section I.D. of this 

proposed rule, the APC Panel advises 

CMS on the clinical integrity of 

payment groups and their weights, and 

the APC Panel has had a Packaging 

Subcommittee that is now renamed the 

Subcommittee for APC Groups and 

Status Indicator (SI) Assignments to 

reflect that its function has expanded to 

include assisting CMS with assignment 

of HCPCS codes to APCs. As part of its 

function, the APC Panel studies and 

makes recommendations on issues 

pertaining to services that are not 

separately payable under the OPPS, but 

whose payments are bundled or 

packaged into APC payments. The APC 

Panel has considered packaging issues 

at several earlier meetings. For 

discussions of earlier APC Panel 

meetings and recommendations, we 

refer readers to previously published 

hospital OPPS/ASC proposed and final 

rules on the CMS Web site at: http:// 

www.cms.gov/HospitalOutpatientPPS/ 

HORD/list.asp. 

(2) Packaging Recommendations of the 

APC Panel at Its February 28–March 1, 

2011 Meeting 

During the February 28–March 1, 

2011 APC Panel meeting, the APC Panel 

accepted the report of the Subcommittee 

for APC Groups and Status Indicator (SI) 

Assignment, heard several public 

presentations related to packaged 

services, discussed the deliberations of 

the subcommittee, and made five 

recommendations related to packaging 

and to the function of the subcommittee. 

The Report of the February 28–March 1, 

2011 meeting of the APC Panel may be 

found at the Web site at: http:// 

www.cms.gov/FACA/05_

AdvisoryPanelonAmbulatory

PaymentClassificationGroups.asp. 

To summarize, the APC Panel made 

five recommendations regarding the 

packaging of payment under the CY 

2012 OPPS. Below we present each of 

these five packaging recommendations 

and our responses to those 

recommendations. One 

recommendation that evolved from the 

discussions of the APC Groups and 

Status Indicator Subcommittee that is 

specific to HCPCS codes is discussed in 

section III.D. of this proposed rule. 

APC Panel Recommendation 4: That 

HCPCS code 31627 (Bronchoscopy, 

rigid or flexible, including fluoroscopic 

guidance, when performed; with 

computer-assisted, image-guided 

navigation (List separately in addition to 

code for primary procedure[s])) 

continue to be assigned a status 

indicator of ‘‘N.’’ The Panel further 

recommended that CMS continue to 

collect claims data for HCPCS code 

31627. 

CMS Response to Recommendation 4: 

HCPCS code 31627 was new for CY 

2010, and we assigned a new interim 

status indicator of ‘‘N’’ in our CY 2010 

OPPS/ASC final rule with comment 

period based on our policy of packaging 

guidance and intraoperative services 

that are ancillary and dependent upon 

an independent separately paid 

procedure. At the APC Panel’s February 

2010 meeting, the manufacturer of the 

electromagnetic navigation 

bronchoscopy (ENB) technology, one of 

several technologies that can be used to 

perform the service described by HCPCS 

code 31627, asserted that use of the ENB 

technology during a bronchoscopy 

procedure enables access to distal 

lesions that are otherwise not accessible 

without use of the ENB technology. The 

manufacturer also stated that without 

separate payment for the ENB 

technology, hospitals would likely not 

adopt the technology and the 

population that would likely benefit 

from the ENB technology would not 

have access to this technology. In 

response to the manufacturer’s 

presentation at the February 2010 Panel 

meeting, the APC Panel asked CMS to 

consider whether HCPCS code 31627 

should be packaged or paid separately; 

and if it should be paid separately, the 

APC Panel asked CMS to investigate the 

appropriate APC assignment. The report 

of the February 2010 APC Panel meeting 

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

FACA/05_AdvisoryPanelonAmbulatory

PaymentClassificationGroups.asp. 

We stated in the CY 2011 OPPS/ASC 

proposed rule (75 FR 46223) that we 

considered and analyzed the 

information available to us for HCPCS 

code 31627 and believed that the code 

described a procedure that is supportive 

of and ancillary to the primary 

diagnostic or therapeutic modality. 

Therefore, we proposed to package 

payment for HCPCS code 31627. We 

stated that, by proposing to package 

payment for this procedure, we would 

be treating it in the same manner as 

similar computer-assisted, navigational 

diagnostic procedures that are 

supportive of and ancillary to a primary 

diagnostic or therapeutic modality. 

At its August 23–24, 2010 meeting, 

the APC Panel listened to discussions 

regarding whether HCPCS code 31627 

should remain packaged for CY 2011. 

After hearing presentations from the 

public, the APC Panel recommended 

that CMS continue to package payment 

for HCPCS code 31627 into payment for 

the major separately paid procedure 

with which it is performed and asked 

that CMS bring claims data on the cost 

of HCPCS code 31627 to the APC 

Panel’s winter 2011 meeting for review. 

After consideration of all of the 

information provided by commenters on 

this issue, and hearing the discussion of 

the issue by the APC Panel at its August 

23–24, 2010 meeting, we accepted the 

APC Panel’s recommendation to 

continue to package payment for HCPCS 

code 31627 into the payment for the 

major separately paid procedure with 

which it is reported for CY 2011. In 

addition, we also accepted the APC 

Panel’s recommendation that CMS bring 

claims data [for HCPCS code 31627 to 

the winter 2011 APC Panel meeting. The 

report of the August 2010 APC Panel 

meeting is available at http:// 

www.cms.gov/FACA/05_

AdvisoryPanelonAmbulatory

PaymentClassificationGroups.asp. 

At its meeting on February 28–March 

1, 2011, the APC Panel listened to a 

public presentation in which the 

manufacturer of the ENB technology 

requested that HCPCS code 31627 be 

paid separately on the basis that the cost 

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of the technology is substantially higher 

than the OPPS payment for APC 0076 

(Level I Endoscopy Lower Airway), the 

APC to which most bronchoscopy codes 

are assigned and into which payment 

for HCPCS code 31627 is packaged. The 

manufacturer stated that if CMS does 

not pay HCPCS code 31627 separately, 

hospitals will not furnish the procedure 

to hospital outpatients. 

In response to the request of the APC 

Panel at its August 2010 meeting, we 

presented the available data on HCPCS 

code 31627 that could be derived from 

the hospital outpatient claims that were 

paid under the OPPS for services on and 

after January 1, 2010 through and 

including September 30, 2010, as 

processed through the CMS common 

working file by December 31, 2010. 

Specifically, using the limited set of 

APC Panel data, CMS found that 119 

hospitals billed for 573 units of HCPCS 

code 31627, and that HCPCS code 31627 

had a median cost of approximately 

$329 per unit. We also found that 

HCPCS code 31627 is reported on 0 to 

4 percent of the claims for 

bronchoscopy codes with which CPT 

guidance states that it is permissible to 

report HCPCS code 31627, with the 

exception of HCPCS code 31626 

(Bronchoscopy, rigid or flexible, 

including fluoroscopic guidance, when 

performed; with placement of fiducial 

markers, single or multiple). HCPCS 

code 31627 was reported on 

approximately 52% of claims for HCPCS 

code 31626 in the APC Panel data. The 

APC Panel considered this information 

in its formulation of Recommendation 4 

that CMS continue to package payment 

for HCPCS code 31627 into the payment 

for the bronchoscopy code with which 

HCPCS code 31627 is reported. 

Subsequent to the APC Panel meeting, 

examination and analysis of the CY 

2012 proposed rule data found that 149 

hospitals reported 867 units of HCPCS 

code 31627, and that HCPCS code 31627 

has a proposed rule median cost of 

approximately $344 per unit. 

After considering the public 

presentation and the information 

presented by CMS staff, the APC Panel 

recommended that HCPCS code 31627 

continue to be assigned a status 

indicator of ‘‘N.’’ The Panel further 

recommended that CMS continue to 

collect claims data for HCPCS code 

31627. We are proposing to accept both 

of the APC Panel’s recommendations for 

the CY 2012 OPPS. Specifically, we are 

proposing to assign HCPCS code 31627 

to status indicator ‘‘N’’ for the CY 2012 

OPPS and, therefore, are proposing to 

package payment for the procedure into 

payment for the bronchoscopy to which 

we believe that it is ancillary and 

supportive. As with all packaged items 

and services, the cost we calculate for 

CPT code 31627 will be added to the 

costs on the single bill for the 

bronchoscopy code with which the 

service reported by CPT code 31627 is 

furnished, and therefore, the cost of CPT 

code 31627 will be incorporated into the 

payment for the APC to which that 

bronchoscopy code is assigned. We 

continue to believe that HCPCS code 

31627, for which there are several 

different technologies, describes a 

service that is supportive and ancillary 

to the primary bronchoscopy procedure 

with which it must be reported, as 

defined by CPT. HCPCS code 31627 

describes a computer assisted image 

guided navigation service that is not 

furnished without a bronchoscopy. As 

defined by CPT, HCPCS code 31627 

may only be furnished in addition to a 

bronchocsopy service and therefore we 

believe that it is ancillary and 

supportive to the bronchsocopy service 

with which it must be reported. We 

agree to provide further claims 

information on HCPCS code 31627 to 

the APC Panel when it becomes 

available. 

APC Panel Recommendation 5: That 

CMS consider a more appropriate APC 

assignment for HCPCS code 31626 

(Bronchoscopy, rigid or flexible, 

including fluoroscopic guidance, when 

performed; with placement of fiducial 

markers), the most common code with 

which HCPCS code 31627 was billed in 

2010. 

CMS Response to Recommendation 5: 

We are accepting this recommendation, 

and therefore are proposing to reassign 

HCPCS code 31626 (which has a 

proposed CY 2012 APC median cost of 

approximately $2,708) from APC 0076 

(which has a proposed CY 2012 APC 

median cost of approximately $751) to 

APC 0415 (Level II Endoscopy Lower 

Airway), which has a proposed CY 2012 

APC median cost of approximately 

$2,007. We agree with the APC Panel 

that it appears that the proposed APC 

median cost of HCPCS code 31626 of 

$2,708 justifies placement in an APC 

that has a median cost that is more 

similar to the APC median cost for this 

code. We believe that APC 0415 is the 

most appropriate clinically similar APC 

because the proposed CY 2012 median 

cost for APC 0415 of $2,007 is more 

similar in clinical resource for HCPCS 

code 31626 than the proposed CY 2012 

median cost for APC 0076 of $715. 

APC Panel Recommendation 6: That 

Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., 

continue to chair the APC Groups and 

Status Indicator (SI) Assignments 

Subcommittee for 2011. 

CMS Response to Recommendation 6: 

We are accepting the APC Panel’s 

recommendation that Judith Kelly, 

R.H.I.T., R.H.I.A., C.C.S. continue to 

chair the APC Groups and Status 

Indicator Assignments Subcommittee 

for 2011. 

APC Panel Recommendation 7: That 

CMS furnish the results of its 

investigation of claims that contain the 

following unconditionally packaged 

codes without separately paid 

procedures: 

• HCPCS code G0177 (Training and 

educational services related to the care 

and treatment of patient’s disabling 

mental health problems per session (45 

minutes or more)); 

• HCPCS code G0378 (Hospital 

observation service, per hour); 

• HCPCS code 75940 (Percutaneous 

placement of IVC filter, radiological 

supervision and interpretation); 

• HCPCS code 76937 (Ultrasound 

guidance for vascular access requiring 

ultrasound evaluation of potential 

access sites, documentation of selected 

vessel patency, concurrent realtime 

ultrasound visualization of vascular 

needle entry, with permanent recording 

and reporting (List separately in 

addition to code for primary 

procedure)). 

CMS Response to Recommendation 7: 

We are accepting the APC Panel’s 

recommendation that CMS furnish the 

results of its investigation of claims that 

contain the unconditionally packaged 

codes: HCPCS code G0177, HCPCS code 

G0378, HCPCS code 75940, and HCPCS 

code 76937 at a future APC Panel 

meeting. 

APC Panel Recommendation 8: That 

the work of the APC Groups and Status 

Indicator (SI) Assignments 

Subcommittee continue. 

CMS Response to Recommendation 8: 

We are accepting the APC Panel’s 

recommendation that the work of the 

APC Groups and Status Indicator 

Assignments Subcommittee continue. 

(3) Other Packaging Proposals for CY 

2012 

The HCPCS codes for which we are 

proposing that payment be packaged 

into payment for the separately paid 

procedures with which the codes are 

reported either unconditionally (for 

which we are proposing to continue to 

assign status indicator ‘‘N’’), or 

conditionally (for which we are 

proposing to continue to assign status 

indicators ‘‘Q1’’, ‘‘Q2’’, or ‘‘Q3’’) are 

displayed in Addendum B of this 

proposed rule (which is referenced in 

section XVIII. of this proposed rule and 

available via the Internet on the CMS 

Web site). The supporting documents 

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for this CY 2012 OPPS/ASC proposed 

rule, including but not limited to 

Addendum B, are available at http:// 

www.cms.hhs.gov/ 

HospitalOutpatientPPS/HORD. To view 

the proposed status indicators by 

HCPCS code in Addendum B, select 

CMS 1525-P and then select the folder 

labeled ‘‘2012 OPPS Proposed Rule 

Addenda’’ from the list of supporting 

files. Open the zipped file and select 

Addendum B, which is available as both 

an Excel file and a text file. 

The proposed continuation of our 

standard policy regarding packaging of 

drugs and biologicals, implantable 

biologicals, contrast agents and 

diagnostic radiopharmaceuticals is 

discussed in section V.B. of this 

proposed rule. We note that an 

implantable biological that is surgically 

inserted or implanted through a surgical 

incision or a natural orifice is 

commonly referred to throughout this 

proposed rule as an ‘‘implantable 

biological.’’ 

The proposed creation of a new 

composite APC for CY 2012 for payment 

of the insertion of cardiac 

resynchronization devices is discussed 

in section II.A.2.e.(6) of this proposed 

rule. 

4. Proposed Calculation of OPPS Scaled 

Payment Weights 

Using the APC median costs 

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

of this proposed rule, we calculated the 

proposed relative payment weights for 

each APC for CY 2012 shown in 

Addenda A and B to this proposed rule 

(which are referenced in section XVIII. 

of this proposed rule and available via 

the Internet on the CMS Web site). In 

years prior to CY 2007, we standardized 

all the relative payment weights to APC 

0601 (Mid Level Clinic Visit) because 

mid-level clinic visits were among the 

most frequently performed services in 

the hospital outpatient setting. We 

assigned APC 0601 a relative payment 

weight of 1.00 and divided the median 

cost for each APC by the median cost for 

APC 0601 to derive the relative payment 

weight for each APC. 

Beginning with the CY 2007 OPPS (71 

FR 67990), we standardized all of the 

relative payment weights to APC 0606 

(Level 3 Clinic Visits) because we 

deleted APC 0601 as part of the 

reconfiguration of the clinic visit APCs. 

We selected APC 0606 as the base 

because APC 0606 was the mid-level 

clinic visit APC (that is, Level 3 of five 

levels). Therefore, for CY 2012, to 

maintain consistency in using a median 

for calculating unscaled weights 

representing the median cost of some of 

the most frequently provided services, 

we are proposing to continue to use the 

median cost of the mid-level clinic visit 

APC (APC 0606) to calculate unscaled 

weights. Following our standard 

methodology, but using the proposed 

CY 2012 median cost for APC 0606, for 

CY 2012 we assigned APC 0606 a 

relative payment weight of 1.00 and 

divided the median cost of each APC by 

the proposed median cost for APC 0606 

to derive the proposed unscaled relative 

payment weight for each APC. The 

choice of the APC on which to base the 

proposed relative weights for all other 

APCs does not affect the payments made 

under the OPPS because we scale the 

weights for budget neutrality. 

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

requires that APC reclassification and 

recalibration changes, wage index 

changes, and other adjustments be made 

in a budget neutral manner. Budget 

neutrality ensures that the estimated 

aggregate weight under the OPPS for CY 

2012 is neither greater than nor less 

than the estimated aggregate weight that 

would have been made without the 

changes. To comply with this 

requirement concerning the APC 

changes, we are proposing to compare 

the estimated aggregate weight using the 

CY 2011 scaled relative weights to the 

estimated aggregate weight using the 

proposed CY 2012 unscaled relative 

weights. For CY 2011, we multiplied the 

CY 2011 scaled APC relative weight 

applicable to a service paid under the 

OPPS by the volume of that service from 

CY 2010 claims to calculate the total 

weight for each service. We then added 

together the total weight for each of 

these services in order to calculate an 

estimated aggregate weight for the year. 

For CY 2012, we performed the same 

process using the proposed CY 2012 

unscaled weights rather than scaled 

weights. We then calculated the weight 

scaler by dividing the CY 2011 

estimated aggregate weight by the 

proposed CY 2012 estimated aggregate 

weight. The service-mix is the same in 

the current and prospective years 

because we use the same set of claims 

for service volume in calculating the 

aggregate weight for each year. For a 

detailed discussion of the weight scaler 

calculation, we refer readers to the 

OPPS claims accounting document 

available on the CMS Web site at: 

http://www.cms.gov/ 

HospitalOutpatientPPS/. We included 

payments to CMHCs in our comparison 

of estimated unscaled weight in CY 

2012 to estimated total weight in CY 

2011 using CY 2010 claims data, 

holding all other components of the 

payment system constant to isolate 

changes in total weight. Based on this 

comparison, we adjusted the unscaled 

relative weights for purposes of budget 

neutrality. The proposed CY 2012 

unscaled relative payment weights were 

adjusted by multiplying them by a 

proposed weight scaler of 1.4647 to 

ensure that the proposed CY 2012 

relative weights are budget neutral. 

Section 1833(t)(14) of the Act 

provides the payment rates for certain 

‘‘specified covered outpatient drugs.’’ 

That section states that ‘‘Additional 

expenditures resulting from this 

paragraph shall not be taken into 

account in establishing the conversion 

factor, weighting and other adjustment 

factors for 2004 and 2005 under 

paragraph (9) but shall be taken into 

account for subsequent years.’’ 

Therefore, the cost of those specified 

covered outpatient drugs (as discussed 

in section V.B.3. of this proposed rule) 

was included in the proposed budget 

neutrality calculations for the CY 2012 

OPPS. 

The proposed scaled relative payment 

weights listed in Addenda A and B to 

this proposed rule (which are referenced 

in section XVII. of this proposed rule 

and available via the Internet on the 

CMS Web site) incorporate the proposed 

recalibration adjustments discussed in 

sections II.A.1. and II.A.2. of this 

proposed rule. 

B. Proposed Conversion Factor Update 

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

requires us to update the conversion 

factor used to determine payment rates 

under the OPPS on an annual basis by 

applying the OPD fee schedule increase 

factor. For purposes of section 

1833(t)(3)(C)(iv) of the Act, subject to 

sections 1833(t)(17) and 1833(t)(3)(F) of 

the Act, the OPD fee schedule increase 

factor is equal to the hospital inpatient 

market basket percentage increase 

applicable to hospital discharges under 

section 1886(b)(3)(B)(iii) of the Act. In 

the FY 2012 IPPS/LTCH PPS proposed 

rule (76 FR 25949), consistent with 

current law, based on IHS Global 

Insight, Inc.’s first quarter 2011 forecast 

of the FY 2012 market basket increase, 

we proposed that the FY 2012 IPPS 

market basket update would be 2.8 

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

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

by section 3401(i) of the Pub. L. 111– 

148 and as amended by section 10319(g) 

of such law and further amended by 

section 1105(e) of Public Law 111–152, 

provide adjustments to the OPD fee 

schedule update for CY 2012. 

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

requires that the OPD fee schedule 

increase factor under subparagraph 

(C)(iv) be reduced by the adjustments 

described in section 1833(t)(3)(F) of the 

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Act. Specifically, section 1833(t)(3)(F)(i) 

of the Act requires that the OPD fee 

schedule increase factor under 

subparagraph (C)(iv) be reduced by the 

productivity adjustment described in 

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

for 2012 and subsequent years. Section 

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

the productivity adjustment as equal to 

the 10-year moving average of changes 

in annual economy-wide, private 

nonfarm business multifactor 

productivity (MFP) (as projected by the 

Secretary for the 10-year period ending 

with the applicable fiscal year, year, 

cost reporting period, or other annual 

period) (the ‘‘MFP adjustment’’). We 

refer readers to the FY 2012 IPPS/LTCH 

PPS proposed rule (76 FR 25949 

through 25951) for a discussion of the 

calculation of the MFP adjustment. The 

proposed MFP adjustment for FY 2012 

is estimated to be 1.2 percentage points. 

We are proposing to reduce the OPD 

fee schedule increase factor for CY 2012 

by the proposed MFP adjustment of 1.2 

percentage points for FY 2012. Since the 

OPD fee schedule increase factor is 

based on the IPPS hospital inpatient 

market basket percentage increase, we 

believe that it is appropriate to apply 

the same MFP adjustment that is used 

to reduce the IPPS market basket 

increase to the OPD fee schedule 

increase factor. Consistent with the FY 

2012 IPPS/LTCH PPS proposed rule, we 

are also proposing that if more recent 

data are subsequently available (for 

example, a more recent estimate of the 

market basket and MFP adjustment), we 

would use such data, if appropriate, to 

determine the FY 2012 market basket 

update and MFP adjustment in the CY 

2012 final rule. We believe that it is 

appropriate to apply the MFP 

adjustment, which is calculated on a 

fiscal year basis, to the OPD fee 

schedule increase factor, which is used 

to update the OPPS payment rates on a 

calendar year basis, because we believe 

that it is appropriate for the numbers 

associated with both components of the 

calculation (the underlying OPD fee 

schedule increase factor and the 

productivity adjustment) to be aligned 

so that changes in market conditions are 

aligned. 

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

the Act requires that the OPD fee 

schedule increase factor under 

subparagraph (C)(iv) be reduced by the 

adjustment described in subparagraph 

(G) for each of 2010 through 2019. For 

CY 2012, section 1833(t)(3)(G)(ii) of the 

Act provides a 0.1 percentage point 

reduction to the OPD fee schedule 

increase factor under subparagraph 

(C)(iv). Therefore, we are proposing to 

apply a 0.1 percentage point reduction 

to the OPD fee schedule increase factor. 

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

Act provides that application of this 

subparagraph may result in the increase 

factor under subparagraph (C)(iv) being 

less than 0.0 for a year, and may result 

in payment rates under the payment 

system under this subsection for a year 

being less than such payment rates for 

the preceding year. As described in 

further detail below, we are proposing 

an OPD fee schedule increase factor of 

1.5 percent for the CY 2012 OPPS (2.8 

percent, which is the proposed estimate 

of the hospital market basket increase, 

less the proposed 1.2 percentage points 

MFP adjustment, less the 0.1 percentage 

point additional adjustment). 

We are proposing to revise 42 CFR 

419.32 to reflect the requirement in 

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

for CY 2012, we reduce the OPD fee 

schedule increase factor by the 

multifactor productivity adjustment as 

determined by CMS, and to reflect the 

requirement in section 1833(t)(3)(G)(ii) 

of the Act, as required by section 

1833(t)(3)(F)(ii) of the Act, that we 

reduce the OPD fee schedule increase 

factor by 0.1 percentage point for CY 

2012. We also are proposing to amend 

§ 419.32 (iv)(A) to indicate that the 

hospital inpatient market basket 

percentage increase applicable under 

section 1886(b)(3)(B)(iii) of the Act is 

further reduced by the adjustments 

necessary to satisfy the requirements in 

sections 1833(t)(3)(F) and (t)(3)(G) of the 

Act. 

Hospitals that fail to meet the 

reporting requirements of the Hospital 

OQR Program would continue to be 

subject to a further reduction of 

additional 2.0 percentage points from 

the OPD fee schedule increase factor 

adjustment to the conversion factor that 

would be used to calculate the OPPS 

payment rates made for their services as 

required by section 1833(t)(17) of the 

Act. For a complete discussion of the 

Hospital OQR requirements and the 

payment reduction for hospitals that fail 

to meet those requirements, we refer 

readers to section XIV. of this proposed 

rule. 

To set the OPPS conversion factor for 

CY 2012, we are proposing to increase 

the CY 2011 conversion factor of 

$68.876 by 1.5 percent. In accordance 

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

are proposing to further adjust the 

conversion factor for CY 2012 to ensure 

that any revisions we make to the 

updates for a revised wage index and 

rural adjustment are made on a budget 

neutral basis. We calculated a proposed 

overall budget neutrality factor of 

1.0003 for wage index changes by 

comparing total estimated payments 

from our simulation model using the FY 

2012 IPPS proposed wage indices to 

those payments using the current (FY 

2011) IPPS wage indices, as adopted on 

a calendar year basis for the OPPS. For 

CY 2012, we are not proposing to make 

a change to our rural adjustment policy. 

Therefore, the proposed budget 

neutrality factor for the rural adjustment 

would be 1.0000. For CY 2012, we are 

proposing a cancer hospital payment 

adjustment policy, as discussed in 

section II.F. of this proposed rule, and, 

therefore, we applied a proposed budget 

neutrality adjustment of 0.9927 to adjust 

the conversion factor for that proposed 

policy. We calculated the proposed 

cancer hospital budget neutrality factor 

of 0.9927 by comparing total estimated 

payments from our simulation model for 

CY 2012 including the proposed 

payment adjustment for cancer hospitals 

to total estimated payments from our 

simulation model for CY 2012 without 

the proposed payment adjustment for 

cancer hospitals. 

For this proposed rule, we estimate 

that pass-through spending for both 

drugs and biologicals and devices for 

CY 2012 would equal approximately 

$64.5 million, which represents 0.15 

percent of total projected CY 2012 OPPS 

spending. Therefore, the conversion 

factor would also be adjusted by the 

difference between the 0.15 percent 

estimate of pass-through spending for 

CY 2011 and the 0.15 percent estimate 

of CY 2012 pass-through spending. 

Finally, estimated payments for outliers 

remain at 1.0 percent of total OPPS 

payments for CY 2012. 

The proposed OPD fee schedule 

increase factor of 1.5 percent for CY 

2012 (that is, the estimate of the hospital 

market basket increase of 2.8 percent 

less the 1.2 percentage points MFP 

adjustment and less the 0.1 percentage 

point adjustment which are necessary in 

order to comply with the requirements 

of the Affordable Care Act), the required 

proposed wage index budget neutrality 

adjustment of approximately 1.0003, the 

proposed cancer hospital payment 

adjustment of 0.9927, and the proposed 

adjustment of 0.00 percent of projected 

OPPS spending for the difference in the 

pass-through spending result in a 

proposed conversion factor for CY 2012 

of $69.420, which reflects the full OPD 

fee schedule increase, after including 

the adjustments necessary to comply 

with the requirements of the Affordable 

Care Act. 

To calculate the proposed CY 2012 

reduced market basket conversion factor 

for those hospitals that fail to meet the 

requirements of the Hospital OQR 

Program for the full CY 2012 payment 

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update, we are proposing to make all 

other adjustments discussed above, but 

would use a proposed reduced OPD fee 

schedule update factor of ¥0.5 percent 

(that is, the proposed OPD fee schedule 

increase factor further reduced by 2.0 

percentage points as required by section 

1833(t)(17)(A)(i) of the Act for failure to 

comply with the Hospital OQR 

requirements). This resulted in a 

proposed reduced conversion factor for 

CY 2012 of $68.052 for those hospitals 

that fail to meet the Hospital OQR 

requirements (a difference of ¥$1.368 

in the proposed conversion factor 

relative to those hospitals that met the 

Hospital OQR requirements). 

In summary, for CY 2012, we are 

proposing to use a conversion factor of 

$69.420 in the calculation of the 

national unadjusted payment rates for 

those items and services for which 

payment rates are calculated using 

median costs. We are proposing to 

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

new paragraph (3) to reflect the 

reductions to the OPD fee schedule 

increase factor that are required for CY 

2012 in order to satisfy the statutory 

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

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

proposing to amend § 419.32(b)(1)(iv)(A) 

to indicate that the hospital inpatient 

market basket percentage increase is 

reduced by the adjustments described in 

§ 419.32(b)(1)(iv)(B). We are proposing 

to use a reduced conversion factor of 

$68.052 in the calculation of payments 

for hospitals that fail to comply with the 

Hospital OQR requirements to reflect 

the reduction to the OPD fee schedule 

increase factor that is required by 

section 1833(t)(17) of the Act for these 

hospitals. 

C. Proposed Wage Index Changes 

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

requires the Secretary to determine a 

wage adjustment factor to adjust, for 

geographic wage differences, the portion 

of the OPPS payment rate, which 

includes the copayment standardized 

amount, that is attributable to labor and 

labor-related cost. This portion of the 

OPPS payment rate is called the OPPS 

labor-related share. This adjustment 

must be made in a budget neutral 

manner and budget neutrality is 

discussed in section II.B. of this 

proposed rule. 

The OPPS labor-related share is 60 

percent of the national OPPS payment. 

This labor-related share is based on a 

regression analysis that determined that, 

for all hospitals, approximately 60 

percent of the costs of services paid 

under the OPPS were attributable to 

wage costs. We confirmed that this 

labor-related share for outpatient 

services is appropriate during our 

regression analysis for the payment 

adjustment for rural hospitals in the CY 

2006 OPPS final rule with comment 

period (70 FR 68553). Therefore, we are 

not proposing to revise this policy for 

the CY 2012 OPPS. We refer readers to 

section II.H. of this proposed rule for a 

description and example of how the 

proposed wage index for a particular 

hospital is used to determine the 

proposed payment for the hospital. 

As discussed in section II.A.2.c. of 

this proposed rule, for estimating 

national median APC costs, we 

standardize 60 percent of estimated 

claims costs for geographic area wage 

variation using the same proposed FY 

2012 pre-reclassified wage index that 

the IPPS uses to standardize costs. This 

standardization process removes the 

effects of differences in area wage levels 

from the determination of a national 

unadjusted OPPS payment rate and the 

copayment amount. 

As published in the original OPPS 

April 7, 2000 final rule with comment 

period (65 FR 18545), the OPPS has 

consistently adopted the final fiscal year 

IPPS wage index as the calendar year 

wage index for adjusting the OPPS 

standard payment amounts for labor 

market differences. Thus, the wage 

index that applies to a particular acute 

care short-stay hospital under the IPPS 

would also apply to that hospital under 

the OPPS. As initially explained in the 

September 8, 1998 OPPS proposed rule, 

we believed that using the IPPS wage 

index as the source of an adjustment 

factor for the OPPS is reasonable and 

logical, given the inseparable, 

subordinate status of the HOPD within 

the hospital overall. In accordance with 

section 1886(d)(3)(E) of the Act, the 

IPPS wage index is updated annually. 

The Affordable Care Act contains 

provisions that affect the proposed FY 

2012 IPPS wage index values, including 

revisions to the reclassification wage 

comparability criteria that were 

finalized in the FY 2009 IPPS final rule 

(73 FR 48568 through 48570), and the 

application of rural floor budget 

neutrality on a national, rather than 

State-specific, basis through a uniform, 

national adjustment to the area wage 

index (76 FR 26021). In addition, 

section 10324 of the Affordable Care Act 

requires CMS to establish an adjustment 

to create a wage index floor of 1.00 for 

hospitals located in States determined 

to be frontier States. 

Section 10324 specifies that, for 

services furnished beginning CY 2011, 

the wage adjustment factor applicable to 

any hospital outpatient department that 

is located in a frontier State (as defined 

in section 1886(d)(3)(E)(iii)(II) of the 

Act) may not be less than 1.00. Further, 

section 10324 states that this adjustment 

to the wage index for these outpatient 

departments should not be made in a 

budget neutral manner. As such, for the 

CY 2012 OPPS, we are proposing to 

continue to adjust the FY 2012 IPPS 

wage index, as adopted on a calendar 

year basis for the OPPS, for all hospitals 

paid under the OPPS, including nonIPPS hospitals (providers that are not 

paid under the IPPS) located in a 

frontier State, to 1.00 in instances where 

the proposed FY 2012 wage index (that 

reflects Medicare Geographic 

Classification Review Board (MGCRB) 

reclassifications, the application of the 

rural floor, and the rural floor budget 

neutrality adjustment) for these 

hospitals is less than 1.00. Similar to 

our current policy for HOPDs that are 

affiliated with multicampus hospital 

systems, we fully expect that the HOPD 

would receive a wage index based on 

the geographic location of the specific 

inpatient hospital with which it is 

associated. Therefore, if the associated 

hospital is located in a frontier State, the 

wage index adjustment applicable for 

the hospital would also apply for the 

affiliated HOPD. We refer readers to the 

FY 2011 IPPS/LTCH PPS final rule (75 

FR 50160) for a detailed discussion 

regarding this provision, including our 

methodology for identifying which areas 

meet the definition of frontier States as 

provided for in section 

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

In addition to the changes required by 

the Affordable Care Act, we note that 

the proposed FY 2012 IPPS wage 

indices continue to reflect a number of 

adjustments implemented over the past 

few years, including, but not limited to, 

reclassification of hospitals to different 

geographic areas, the rural floor 

provisions, an adjustment for 

occupational mix, and an adjustment to 

the wage index based on commuting 

patterns of employees (out-migration 

adjustment). We refer readers to the FY 

2012 IPPS/LTCH PPS proposed rule (76 

FR 25880 through 25888) for a detailed 

discussion of all proposed changes to 

the FY 2012 IPPS wage indices. In 

addition, we refer readers to the CY 

2005 OPPS final rule with comment 

period (69 FR 65842 through 65844) and 

subsequent OPPS rules for a detailed 

discussion of the history of these wage 

index adjustments as applied under the 

OPPS. 

Section 3137 of the Affordable Care 

Act extended, through FY 2010, section 

508 reclassifications as well as certain 

special exceptions. The most recent 

extension of the provision was included 

in section 102 of the Medicare and 

Medicaid Extender Act, which extends, 

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42212 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

through FY 2011, section 508 

reclassifications as well as certain 

special exceptions. The latest extension 

of these provisions expires on 

September 30, 2011, and will no longer 

be applicable effective with FY 2012. As 

we did for CY 2010, we revised wage 

index values for certain special 

exception hospitals from January 1, 

2011 through December 31, 2011, under 

the OPPS, in order to give these 

hospitals the special exception wage 

indices under the OPPS for the same 

time period as under the IPPS. In 

addition, because the OPPS pays on a 

calendar year basis, the effective date 

under OPPS for all other non-section 

508 and non-special exception 

providers is July 1, 2011, instead of 

April 1, 2011, so that these providers 

may also receive a full 6 months of 

payment under the revised wage index 

comparable to IPPS. 

For purposes of the OPPS, we are 

proposing to continue our policy in CY 

2012 to allow non-IPPS hospitals paid 

under the OPPS to qualify for the outmigration adjustment if they are located 

in a section 505 out-migration county 

(section 505 of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA)). We 

note that, because non-IPPS hospitals 

cannot reclassify, they are eligible for 

the out-migration wage adjustment. 

Table 4J listed in the FY 2012 IPPS/ 

LTCH PPS proposed rule (and made 

available via the Internet on the CMS 

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

AcuteInpatientPPS/01_overview.asp) 

identifies counties eligible for the 

proposed out-migration adjustment and 

providers proposed to receive the 

adjustment for FY 2012. We note that, 

beginning with FY 2012, we proposed 

under the IPPS that an eligible hospital 

that waives its Lugar status in order to 

receive the out-migration adjustment 

has effectively waived its deemed urban 

status and, thus, is rural for all purposes 

under the IPPS, including being 

considered rural for the 

disproportionate share hospital (DSH) 

payment adjustment, effective for the 

fiscal year in which the hospital 

receives the out-migration adjustment. 

We refer readers to the FY 2012 IPPS/ 

LTCH PPS proposed rule (76 FR 25885) 

for more detailed discussion on the 

proposed Lugar redesignation waiver for 

the out-migration adjustment). As we 

have done in prior years, we are 

reprinting Table 4J as Addendum L to 

this proposed rule with the addition of 

non-IPPS hospitals that would receive 

the section 505 out-migration 

adjustment under the CY 2012 OPPS. 

Addendum L is referenced in section 

XVII. of this proposed rule and available 

via the Internet on the CMS Web site. 

As stated earlier in this section, our 

longstanding policy for OPPS has been 

to adopt the final wage index used in 

IPPS. Therefore, for calculating 

proposed OPPS payments in CY 2012, 

we use the proposed FY 2012 IPPS wage 

indices. However, section 1833(t)(2)(D) 

of the Act confers broad discretionary 

authority upon the Secretary in 

determining the wage adjustment factor 

used under the OPPS. Specifically, this 

provision provides that ‘‘subject to 

paragraph (19), the Secretary shall 

determine a wage adjustment factor to 

adjust the portion of payment and 

coinsurance attributable to labor-related 

costs for relative differences in labor 

and labor-related costs across 

geographic regions. * * *’’ In other 

prospective payment systems, we do not 

adopt the adjustments applied to the 

IPPS wage index, such as the 

outmigration adjustment, 

reclassifications, and the rural floor. For 

the OPPS, using the hospital IPPS wage 

index as the source of an adjustment 

factor for geographic wage differences 

has in the past been both reasonable and 

logical, given the inseparable, 

subordinate status of the outpatient 

department within the hospital overall. 

However, in recent years, we have 

become concerned that hospitals 

converting status significantly inflates 

wage indexes across a State, in a manner 

that was not intended by the Congress. 

In the FY 2008 IPPS final rule (72 FR 

47324 and 47325), we discussed a 

situation where a CAH may have 

converted back to IPPS status in order 

to increase the rural floor. 

The FY 2012 IPPS/LTCH PPS 

proposed rule (76 FR 26060) shows the 

impact of the CAH conversion. 

Hospitals in one State can expect an 

approximate 8-percent increase in IPPS 

payments due to the conversion and 

resulting increase of the rural floor. Our 

concern is that the manipulation of the 

rural floor is of sufficient magnitude 

that it requires all hospital wage indexes 

to be reduced approximately 0.62 

percent as a result of nationwide budget 

neutrality for the rural floor (or more 

than a 0.4 percent total payment 

reduction to all IPPS hospitals). 

In addition to the CAH conversion, 

we recently received two requests from 

urban hospitals to convert to rural 

hospital status under section 

1886(d)(8)(E) of the Act, which would 

inflate other States’ rural floors, through 

the conversion of what would otherwise 

be urban hospitals to rural status. While 

we recognize that conversions from 

urban-to-rural status are permitted 

under section 1886(d)(8)(E) of the Act, 

we do not believe Congress anticipated 

individual urban to rural conversion 

allowing payment redistributions of this 

magnitude. 

We believe the above discussions 

demonstrate that, as a result of hospital 

actions not envisioned by Congress, the 

rural floor is resulting in significant 

disparities in wage index and, in some 

cases, resulting in situations where all 

hospitals in a State receive a wage index 

higher than that of the single highest 

wage index urban hospital in the State. 

As stated above, the statute does not 

require the Secretary to use the IPPS 

wage adjustment factor to wage adjust 

OPPS payments and copayments, nor to 

apply to OPPS payment and copayment 

calculation the same adjustment that the 

law requires be applied to the IPPS 

wage adjustment factor. 

We are considering adopting a policy 

that would address situations where 

IPPS wage index adjustments, such as 

the rural floor, are resulting in 

significant fluctuations in the wage 

index. One option would be to not 

apply the rural floor wage index at all 

in the OPPS where the rural floor is set 

by a snall number of hospitals and 

results in a rural floor that benefits all 

hospitals in the State. Alternatively, we 

could apply within State rural budget 

neutrality to the OPPS wage index as we 

did for both the IPPS and OPPS wage 

index beginning in FY 2009. We are 

seeking public comment on whether to: 

(1) Adopt the IPPS wage index for the 

OPPS in its entirety including the rural 

floor, geographic reclassifications and 

all other wage index adjustments; (2) 

adopt the IPPS wage index for the OPPS 

in its entirety except when a small 

number of hospitals set the rural floor 

for the benefit of all other hospitals in 

the State; (3) adopt the IPPS wage index 

for the OPPS in its entirety except apply 

rural floor budget neutrality within each 

State instead of nationally; or (4) adopt 

another decision rule for when the rural 

floor should not be applied in the OPPS 

when we have concerns about 

disproportionate impact. 

We also are requesting public 

comments on an option that we are 

considering adopting for both the IPPS 

and the OPPS, where we would 

determine the applicable rural wage 

index floor using only data from those 

hospitals geographically rural under 

OMB and the Census Bureau’s MSA 

designations, and without including 

wage data associated with hospitals 

reclassified from urban to rural status 

under section 1886(d)(8)(E) of the Act. 

Such a policy would eliminate the 

incentive to reclassify from urban to 

rural status primarily to increase rural 

floors across a State, and would ensure 

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that the rural floor is based upon 

hospitals located in rural areas. 

With the exception of the proposed 

out-migration wage adjustment table 

(Addendum L to this proposed rule, 

which is available via the Internet on 

the CMS Web site), which includes nonIPPS hospitals paid under the OPPS, we 

are not reprinting the proposed FY 2012 

IPPS wage indices referenced in this 

discussion of the wage index. We refer 

readers to the CMS Web site for the 

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

HospitalOutpatientPPS/. At this link, 

readers will find a link to the proposed 

FY 2012 IPPS wage index tables. 

D. Proposed Statewide Average Default 

CCRs 

In addition to using CCRs to estimate 

costs from charges on claims for 

ratesetting, CMS uses overall hospitalspecific CCRs calculated from the 

hospital’s most recent cost report to 

determine outlier payments, payments 

for pass-through devices, and monthly 

interim transitional corridor payments 

under the OPPS during the PPS year. 

Medicare contractors cannot calculate a 

CCR for some hospitals because there is 

no cost report available. For these 

hospitals, CMS uses the statewide 

average default CCRs to determine the 

payments mentioned above until a 

hospital’s Medicare contractor is able to 

calculate the hospital’s actual CCR from 

its most recently submitted Medicare 

cost report. These hospitals include, but 

are not limited to, hospitals that are 

new, have not accepted assignment of 

an existing hospital’s provider 

agreement, and have not yet submitted 

a cost report. CMS also uses the 

statewide average default CCRs to 

determine payments for hospitals that 

appear to have a biased CCR (that is, the 

CCR falls outside the predetermined 

ceiling threshold for a valid CCR) or for 

hospitals in which the most recent cost 

report reflects an all-inclusive rate 

status (Medicare Claims Processing 

Manual (Pub. 100–04), Chapter 4, 

Section 10.11). In this proposed rule, we 

are proposing to update the default 

ratios for CY 2012 using the most recent 

cost report data. We discuss our policy 

for using default CCRs, including setting 

the ceiling threshold for a valid CCR, in 

the CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68594 through 

68599) in the context of our adoption of 

an outlier reconciliation policy for cost 

reports beginning on or after January 1, 

2009. 

For CY 2012, we are proposing to 

continue to use our standard 

methodology of calculating the 

statewide average default CCRs using 

the same hospital overall CCRs that we 

use to adjust charges to costs on claims 

data for setting the proposed CY 2012 

OPPS relative weights. Table 11 below 

lists the proposed CY 2012 default 

urban and rural CCRs by State and 

compares them to last year’s default 

CCRs. These proposed CCRs represent 

the ratio of total costs to total charges for 

those cost centers relevant to outpatient 

services from each hospital’s most 

recently submitted cost report, weighted 

by Medicare Part B charges. We also are 

proposing to adjust ratios from 

submitted cost reports to reflect final 

settled status by applying the 

differential between settled to submitted 

overall CCRs for the cost centers 

relevant to outpatient services from the 

most recent pair of final settled and 

submitted cost reports. We then weight 

each hospital’s CCR by the volume of 

separately paid line-items on hospital 

claims corresponding to the year of the 

majority of cost reports used to calculate 

the overall CCRs. We refer readers to the 

CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66680 through 

66682) and prior OPPS rules for a more 

detailed discussion of our established 

methodology for calculating the 

statewide average default CCRs, 

including the hospitals used in our 

calculations and our trimming criteria. 

For this CY 2012 OPPS/ASC proposed 

rule, approximately 87 percent of the 

submitted cost reports utilized in the 

default ratio calculations represented 

data for cost reporting periods ending in 

CY 2009 and 13 percent were for cost 

reporting periods ending in CY 2008. 

For Maryland, we used an overall 

weighted average CCR for all hospitals 

in the Nation as a substitute for 

Maryland CCRs. Few hospitals in 

Maryland are eligible to receive 

payment under the OPPS, which limits 

the data available to calculate an 

accurate and representative CCR. The 

weighted CCR is used for Maryland 

because it takes into account each 

hospital’s volume, rather than treating 

each hospital equally. We refer readers 

to the CY 2005 OPPS final rule with 

comment period (69 FR 65822) for 

further discussion and the rationale for 

our longstanding policy of using the 

national average CCR for Maryland. In 

general, observed changes in the 

statewide average default CCRs between 

CY 2011 and CY 2012 are modest and 

the few significant changes are 

associated with areas that have a small 

number of hospitals. 

Table 11 below lists the proposed 

statewide average default CCRs for 

OPPS services furnished on or after 

January 1, 2012. 

TABLE 11—PROPOSED CY 2012 STATEWIDE AVERAGE CCRS

State Urban/rural 

Proposed CY 

2012 default 

CCR 

Previous 

default CCR 

(CY 2011 

OPPS final 

rule) 

ALASKA ..................................................................................................... RURAL ............................................ 0.487 0.479 

ALASKA ..................................................................................................... URBAN ............................................ 0.321 0.315 

ALABAMA .................................................................................................. RURAL ............................................ 0.213 0.212 

ALABAMA .................................................................................................. URBAN ............................................ 0.191 0.193 

ARKANSAS ............................................................................................... RURAL ............................................ 0.225 0.223 

ARKANSAS ............................................................................................... URBAN ............................................ 0.274 0.282 

ARIZONA ................................................................................................... RURAL ............................................ 0.236 0.231 

ARIZONA ................................................................................................... URBAN ............................................ 0.193 0.202 

CALIFORNIA ............................................................................................. RURAL ............................................ 0.189 0.195 

CALIFORNIA ............................................................................................. URBAN ............................................ 0.202 0.205 

COLORADO .............................................................................................. RURAL ............................................ 0.345 0.350 

COLORADO .............................................................................................. URBAN ............................................ 0.225 0.233 

CONNECTICUT ......................................................................................... RURAL ............................................ 0.356 0.356 

CONNECTICUT ......................................................................................... URBAN ............................................ 0.292 0.291 

DISTRICT OF COLUMBIA ........................................................................ URBAN ............................................ 0.301 0.313 

DELAWARE ............................................................................................... RURAL ............................................ 0.280 0.279 

DELAWARE ............................................................................................... URBAN ............................................ 0.347 0.362 

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TABLE 11—PROPOSED CY 2012 STATEWIDE AVERAGE CCRS—Continued 

State Urban/rural 

Proposed CY 

2012 default 

CCR 

Previous 

default CCR 

(CY 2011 

OPPS final 

rule) 

FLORIDA ................................................................................................... RURAL ............................................ 0.183 0.185 

FLORIDA ................................................................................................... URBAN ............................................ 0.170 0.172 

GEORGIA .................................................................................................. RURAL ............................................ 0.241 0.246 

GEORGIA .................................................................................................. URBAN ............................................ 0.214 0.220 

HAWAII ...................................................................................................... RURAL ............................................ 0.320 0.356 

HAWAII ...................................................................................................... URBAN ............................................ 0.306 0.308 

IOWA ......................................................................................................... RURAL ............................................ 0.297 0.252 

IOWA ......................................................................................................... URBAN ............................................ 0.272 0.288 

IDAHO ........................................................................................................ RURAL ............................................ 0.416 0.419 

IDAHO ........................................................................................................ URBAN ............................................ 0.378 0.384 

ILLINOIS .................................................................................................... RURAL ............................................ 0.245 0.251 

ILLINOIS .................................................................................................... URBAN ............................................ 0.240 0.239 

INDIANA .................................................................................................... RURAL ............................................ 0.298 0.302 

INDIANA .................................................................................................... URBAN ............................................ 0.268 0.270 

KANSAS .................................................................................................... RURAL ............................................ 0.282 0.286 

KANSAS .................................................................................................... URBAN ............................................ 0.209 0.215 

KENTUCKY ............................................................................................... RURAL ............................................ 0.223 0.220 

KENTUCKY ............................................................................................... URBAN ............................................ 0.245 0.244 

LOUISIANA ................................................................................................ RURAL ............................................ 0.256 0.256 

LOUISIANA ................................................................................................ URBAN ............................................ 0.226 0.235 

MARYLAND ............................................................................................... RURAL ............................................ 0.280 0.284 

MARYLAND ............................................................................................... URBAN ............................................ 0.251 0.256 

MASSACHUSETTS ................................................................................... URBAN ............................................ 0.320 0.314 

MAINE ........................................................................................................ RURAL ............................................ 0.440 0.460 

MAINE ........................................................................................................ URBAN ............................................ 0.460 0.450 

MICHIGAN ................................................................................................. RURAL ............................................ 0.313 0.312 

MICHIGAN ................................................................................................. URBAN ............................................ 0.314 0.320 

MINNESOTA .............................................................................................. RURAL ............................................ 0.482 0.483 

MINNESOTA .............................................................................................. URBAN ............................................ 0.326 0.311 

MISSOURI ................................................................................................. RURAL ............................................ 0.248 0.258 

MISSOURI ................................................................................................. URBAN ............................................ 0.267 0.264 

MISSISSIPPI .............................................................................................. RURAL ............................................ 0.226 0.229 

MISSISSIPPI .............................................................................................. URBAN ............................................ 0.186 0.182 

MONTANA ................................................................................................. RURAL ............................................ 0.434 0.444 

MONTANA ................................................................................................. URBAN ............................................ 0.398 0.399 

NORTH CAROLINA ................................................................................... RURAL ............................................ 0.256 0.254 

NORTH CAROLINA ................................................................................... URBAN ............................................ 0.264 0.264 

NORTH DAKOTA ...................................................................................... RURAL ............................................ 0.322 0.351 

NORTH DAKOTA ...................................................................................... URBAN ............................................ 0.429 0.360 

NEBRASKA ............................................................................................... RURAL ............................................ 0.323 0.328 

NEBRASKA ............................................................................................... URBAN ............................................ 0.252 0.259 

NEW HAMPSHIRE .................................................................................... RURAL ............................................ 0.323 0.323 

NEW HAMPSHIRE .................................................................................... URBAN ............................................ 0.292 0.290 

NEW JERSEY ........................................................................................... URBAN ............................................ 0.221 0.221 

NEW MEXICO ........................................................................................... RURAL ............................................ 0.266 0.277 

NEW MEXICO ........................................................................................... URBAN ............................................ 0.286 0.307 

NEVADA .................................................................................................... RURAL ............................................ 0.242 0.269 

NEVADA .................................................................................................... URBAN ............................................ 0.169 0.178 

NEW YORK ............................................................................................... RURAL ............................................ 0.410 0.415 

NEW YORK ............................................................................................... URBAN ............................................ 0.350 0.375 

OHIO .......................................................................................................... RURAL ............................................ 0.324 0.327 

OHIO .......................................................................................................... URBAN ............................................ 0.241 0.241 

OKLAHOMA ............................................................................................... RURAL ............................................ 0.248 0.260 

OKLAHOMA ............................................................................................... URBAN ............................................ 0.220 0.208 

OREGON ................................................................................................... RURAL ............................................ 0.302 0.306 

OREGON ................................................................................................... URBAN ............................................ 0.327 0.340 

PENNSYLVANIA ....................................................................................... RURAL ............................................ 0.270 0.275 

PENNSYLVANIA ....................................................................................... URBAN ............................................ 0.200 0.210 

PUERTO RICO .......................................................................................... URBAN ............................................ 0.490 0.505 

RHODE ISLAND ........................................................................................ URBAN ............................................ 0.287 0.284 

SOUTH CAROLINA ................................................................................... RURAL ............................................ 0.222 0.222 

SOUTH CAROLINA ................................................................................... URBAN ............................................ 0.217 0.227 

SOUTH DAKOTA ...................................................................................... RURAL ............................................ 0.309 0.316 

SOUTH DAKOTA ...................................................................................... URBAN ............................................ 0.253 0.251 

TENNESSEE ............................................................................................. RURAL ............................................ 0.212 0.221 

TENNESSEE ............................................................................................. URBAN ............................................ 0.201 0.204 

TEXAS ....................................................................................................... RURAL ............................................ 0.239 0.245 

TEXAS ....................................................................................................... URBAN ............................................ 0.210 0.216 

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TABLE 11—PROPOSED CY 2012 STATEWIDE AVERAGE CCRS—Continued 

State Urban/rural 

Proposed CY 

2012 default 

CCR 

Previous 

default CCR 

(CY 2011 

OPPS final 

rule) 

UTAH ......................................................................................................... RURAL ............................................ 0.385 0.386 

UTAH ......................................................................................................... URBAN ............................................ 0.359 0.362 

VIRGINIA ................................................................................................... RURAL ............................................ 0.238 0.241 

VIRGINIA ................................................................................................... URBAN ............................................ 0.257 0.263 

VERMONT ................................................................................................. RURAL ............................................ 0.415 0.411 

VERMONT ................................................................................................. URBAN ............................................ 0.365 0.365 

WASHINGTON .......................................................................................... RURAL ............................................ 0.366 0.367 

WASHINGTON .......................................................................................... URBAN ............................................ 0.317 0.327 

WISCONSIN .............................................................................................. RURAL ............................................ 0.407 0.412 

WISCONSIN .............................................................................................. URBAN ............................................ 0.327 0.334 

WEST VIRGINIA ........................................................................................ RURAL ............................................ 0.283 0.291 

WEST VIRGINIA ........................................................................................ URBAN ............................................ 0.335 0.337 

WYOMING ................................................................................................. RURAL ............................................ 0.385 0.393 

WYOMING ................................................................................................. URBAN ............................................ 0.302 0.296 

E. Proposed OPPS Payments to Certain 

Rural and Other Hospitals 

1. Hold Harmless Transitional Payment 

Changes Made by Pub. L. 110–275 

(MIPPA) 

When the OPPS was implemented, 

every provider was eligible to receive an 

additional payment adjustment (called 

either transitional corridor payments or 

transitional outpatient payments 

(TOPs)) if the payments it received for 

covered OPD services under the OPPS 

were less than the payments it would 

have received for the same services 

under the prior reasonable cost-based 

system (referred to as the pre-BBA 

amount). Section 1833(t)(7) of the Act 

provides that the transitional corridor 

payments are temporary payments for 

most providers and were intended to 

ease their transition from the prior 

reasonable cost-based payment system 

to the OPPS system. There are two 

exceptions to this provision, cancer 

hospitals and children’s hospitals, and 

those hospitals receive the transitional 

corridor payments on a permanent 

basis. Section 1833(t)(7)(D)(i) of the Act 

originally provided for transitional 

corridor payments to rural hospitals 

with 100 or fewer beds for covered OPD 

services furnished before January 1, 

2004. However, section 411 of Public 

Law 108–173 amended section 

1833(t)(7)(D)(i) of the Act to extend 

these payments through December 31, 

2005, for rural hospitals with 100 or 

fewer beds. Section 411 also extended 

the transitional corridor payments to 

sole community hospitals (SCHs) 

located in rural areas for services 

furnished during the period that began 

with the provider’s first cost reporting 

period beginning on or after January 1, 

2004, and ending on December 31, 2005. 

Accordingly, the authority for making 

transitional corridor payments under 

section 1833(t)(7)(D)(i) of the Act, as 

amended by section 411 of Public Law 

108–173, for rural hospitals having 100 

or fewer beds and SCHs located in rural 

areas expired on December 31, 2005. 

Section 5105 of Public Law 109–171 

reinstituted the TOPs for covered OPD 

services furnished on or after January 1, 

2006, and before January 1, 2009, for 

rural hospitals having 100 or fewer beds 

that are not SCHs. When the OPPS 

payment was less than the provider’s 

pre-BBA amount, the amount of 

payment was increased by 95 percent of 

the amount of the difference between 

the two amounts for CY 2006, by 90 

percent of the amount of that difference 

for CY 2007, and by 85 percent of the 

amount of that difference for CY 2008. 

For CY 2006, we implemented section 

5105 of Public Law 109–171 through 

Transmittal 877, issued on February 24, 

2006. In the Transmittal, we did not 

specifically address whether TOPs 

apply to essential access community 

hospitals (EACHs), which are 

considered to be SCHs under section 

1886(d)(5)(D)(iii)(III) of the Act. 

Accordingly, under the statute, EACHs 

are treated as SCHs. In the CY 2007 

OPPS/ASC final rule with comment 

period (71 FR 68010), we stated that 

EACHs were not eligible for TOPs under 

Public Law 109–171. However, we 

stated they were eligible for the 

adjustment for rural SCHs. In the CY 

2007 OPPS/ASC final rule with 

comment period (71 FR 68010 and 

68228), we updated § 419.70(d) of our 

regulations to reflect the requirements of 

Public Law 109–171. 

In the CY 2009 OPPS/ASC proposed 

rule (73 FR 41461), we stated that, 

effective for services provided on or 

after January 1, 2009, rural hospitals 

having 100 or fewer beds that are not 

SCHs would no longer be eligible for 

TOPs, in accordance with section 5105 

of Public Law 109–171. However, 

subsequent to issuance of the CY 2009 

OPPS/ASC proposed rule, section 147 of 

Public Law 110–275 amended section 

1833(t)(7)(D)(i) of the Act by extending 

the period of TOPs to rural hospitals 

with 100 beds or fewer for 1 year, for 

services provided before January 1, 

2010. Section 147 of Public Law 110– 

275 also extended TOPs to SCHs 

(including EACHs) with 100 or fewer 

beds for covered OPD services provided 

on or after January 1, 2009, and before 

January 1, 2010. In accordance with 

section 147 of Public Law 110–275, 

when the OPPS payment is less than the 

provider’s pre-BBA amount, the amount 

of payment is increased by 85 percent 

of the amount of the difference between 

the two payment amounts for CY 2009. 

For CY 2009, we revised our 

regulations at §§ 419.70(d)(2) and (d)(4) 

and added a new paragraph (d)(5) to 

incorporate the provisions of section 

147 of Public Law 110–275. In addition, 

we made other technical changes to 

§ 419.70(d)(2) to more precisely capture 

our existing policy and to correct an 

inaccurate cross-reference. We also 

made technical corrections to the crossreferences in paragraphs (e), (g), and (i) 

of § 419.70. 

For CY 2010, we made a technical 

correction to the heading of 

§ 419.70(d)(5) to correctly identify the 

policy as described in the subsequent 

regulation text. The paragraph heading 

now indicates that the adjustment 

applies to small SCHs, rather than to 

rural SCHs. 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60425), we 

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stated that, effective for services 

provided on or after January 1, 2010, 

rural hospitals and SCHs (including 

EACHs) having 100 or fewer beds would 

no longer be eligible for TOPs, in 

accordance with section 147 of Public 

Law 110–275. However, subsequent to 

issuance of the CY 2010 OPPS/ASC 

final rule with comment period, section 

3121(a) of the Affordable Care Act 

amended section 1833(t)(7)(D)(i)(III) of 

the Act by extending the period of TOPs 

to rural hospitals that are not SCHs with 

100 beds or fewer for 1 year, for services 

provided before January 1, 2011. Section 

3121(a) of the Affordable Care Act 

amended section 1833(t)(7)(D)(i)(III) of 

the Act and extended the period of 

TOPs to SCHs (including EACHs) for 1 

year, for services provided before 

January 1, 2011, with section 3121(b) of 

the Affordable Care Act removing the 

100-bed limitation applicable to such 

SCHs for covered OPD services 

furnished on and after January 1, 2010, 

and before January 1, 2011. In 

accordance with section 3121 of the 

Affordable Care Act, when the OPPS 

payment is less than the provider’s preBBA amount, the amount of payment is 

increased by 85 percent of the amount 

of the difference between the two 

payment amounts for CY 2010. 

Accordingly, in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71882), we updated § 419.70(d) of the 

regulations to reflect the TOPs 

extensions and amendments described 

in section 3121 of the Affordable Care 

Act. 

Section 108 of the Medicare and 

Medicaid Extenders Act of 2010 

(MMEA) (Pub. L. 111–309) extended for 

one year the hold harmless provision for 

a rural hospital with 100 or fewer beds 

that is not an SCH (as defined in section 

1886(d)(5)(D)(iii). Therefore, for such a 

hospital, for services furnished before 

January 1, 2012, when the PPS amount 

is less than the provider’s pre-BBA 

amount, the amount of payment is 

increased by 85 percent of the amount 

of the difference between the two 

payments. In addition, section 108 of 

the MMEA also extended for one year 

the hold harmless provision for an SCH 

(as defined in section 1886(d)(5)(D)(iii) 

of the Act (including EACHs) removing 

the 100-bed limit applicable to such 

SCHs for covered OPD services 

furnished on or after January 1, 2010 

and before January 1, 2012. Therefore, 

for such hospitals, for services furnished 

before January 1, 2012, when the PPS 

amount is less than the provider’s preBBA amount, the amount of payment is 

increased by 85 percent of the amount 

of the difference between the two 

payments. We are proposing to revise 

our regulations at § 419.70(d) to conform 

the regulation text to the selfimplementing provisions of section 108 

of the MMEA described above. 

2. Proposed Adjustment for Rural SCHs 

and EACHs Under Section 

1833(t)(13)(B) of the Act 

In the CY 2006 OPPS final rule with 

comment period (70 FR 68556), we 

finalized a payment increase for rural 

SCHs of 7.1 percent for all services and 

procedures paid under the OPPS, 

excluding drugs, biologicals, 

brachytherapy sources, and devices paid 

under the pass-through payment policy 

in accordance with section 

1833(t)(13)(B) of the Act, as added by 

section 411 of Public Law 108–173. 

Section 411 gave the Secretary the 

authority to make an adjustment to 

OPPS payments for rural hospitals, 

effective January 1, 2006, if justified by 

a study of the difference in costs by APC 

between hospitals in rural areas and 

hospitals in urban areas. Our analysis 

showed a difference in costs for rural 

SCHs. Therefore, for the CY 2006 OPPS, 

we finalized a payment adjustment for 

rural SCHs of 7.1 percent for all services 

and procedures paid under the OPPS, 

excluding separately payable drugs and 

biologicals, brachytherapy sources, and 

devices paid under the pass-through 

payment policy, in accordance with 

section 1833(t)(13)(B) of the Act. 

In CY 2007, we became aware that we 

did not specifically address whether the 

adjustment applies to EACHs, which are 

considered to be SCHs under section 

1886(d)(5)(D)(iii)(III) of the Act. Thus, 

under the statute, EACHs are treated as 

SCHs. Therefore, in the CY 2007 OPPS/ 

ASC final rule with comment period (71 

FR 68010 and 68227), for purposes of 

receiving this rural adjustment, we 

revised § 419.43(g) to clarify that EACHs 

are also eligible to receive the rural SCH 

adjustment, assuming these entities 

otherwise meet the rural adjustment 

criteria. Currently, three hospitals are 

classified as EACHs, and as of CY 1998, 

under section 4201(c) of Public Law 

105–33, a hospital can no longer become 

newly classified as an EACH. 

This adjustment for rural SCHs is 

budget neutral and applied before 

calculating outliers and copayment. As 

stated in the CY 2006 OPPS final rule 

with comment period (70 FR 68560), we 

would not reestablish the adjustment 

amount on an annual basis, but we may 

review the adjustment in the future and, 

if appropriate, would revise the 

adjustment. We provided the same 7.1 

percent adjustment to rural SCHs, 

including EACHs, again in CYs 2008 

through 2011. Further, in the CY 2009 

OPPS/ASC final rule with comment 

period (73 FR 68590), we updated the 

regulations at § 419.43(g)(4) to specify, 

in general terms, that items paid at 

charges adjusted to costs by application 

of a hospital-specific CCR are excluded 

from the 7.1 percent payment 

adjustment. 

For the CY 2012 OPPS, we are 

proposing to continue our policy of a 

budget neutral 7.1 percent payment 

adjustment for rural SCHs, including 

EACHs, for all services and procedures 

paid under the OPPS, excluding 

separately payable drugs and 

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

at charges reduced to costs (75 FR 

46232). We intend to reassess the 7.1 

percent adjustment in the near future by 

examining differences between urban 

and rural hospitals’ costs using updated 

claims, cost reports, and provider 

information. 

F. Proposed OPPS Payments to Certain 

Cancer Hospitals Described by Section 

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

1. Background 

Since the inception of the OPPS, 

which was authorized by the Balanced 

Budget Act of 1997 (BBA), Medicare has 

paid cancer hospitals identified in 

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

(cancer hospitals) under the OPPS for 

covered outpatient hospital services. 

There are 11 cancer hospitals that meet 

the classification criteria in section 

1886(d)(1)(B)(v) of the Act. These 11 

cancer hospitals are exempted from 

payment under the IPPS. With the 

Medicare, Medicaid and SCHIP 

Balanced Budget Refinement Act of 

1999, Congress created section 

1833(t)(7) of the Act, ‘‘Transitional 

Adjustment to Limit Decline in 

Payment,’’ to serve as a permanent 

payment floor by limiting cancer 

hospitals’ potential losses under the 

OPPS. Through section 1833(t)(7)(D)(ii) 

of the Act, a cancer hospital receives the 

full amount of the difference between 

payments for covered outpatient 

services under the OPPS and a ‘‘preBBA’’ amount. That is, cancer hospitals 

are permanently held harmless to their 

‘‘pre-BBA’’ amount, and they receive 

Transitional Outpatient Payments 

(TOPs) to ensure that they do not 

receive a payment that is lower under 

the OPPS than the payment they would 

have received before implementation of 

the OPPS, as set forth in section 

1833(t)(7)(F) of the Act. The ‘‘pre-BBA’’ 

payment amount is an amount equal to 

the product of the reasonable cost of the 

hospital for covered outpatient services 

for the portions of the hospital’s cost 

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reporting period (or periods) occurring 

in the current year and the base 

payment-to-cost ratio (PCR) for the 

hospital. The ‘‘pre-BBA’’ amount, 

including the determination of the base 

PCR, are defined at 42 CFR 419.70(f). 

TOPs are calculated on Worksheet E, 

Part B, of the Hospital and Hospital 

Health Care Complex Cost Report (Form 

CMS–2552–96 or Form CMS–2552–10, 

as applicable) each year. Section 

1833(t)(7)(I) of the Act exempts TOPs 

from budget neutrality calculations. 

Almost all of the 11 cancer hospitals 

receive TOPs each year. The volume 

weighted average payment-to-cost ratio 

(PCR) for the cancer hospitals is 0.83, or 

outpatient payment with TOPs to cancer 

hospitals is 83 percent of reasonable 

cost. 

Section 3138 of the Affordable Care 

Act instructs the Secretary to conduct a 

study to determine if, under the OPPS, 

outpatient costs incurred by cancer 

hospitals described in section 

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

to ambulatory payment classification 

(APC) groups exceed the costs incurred 

by other hospitals furnishing services 

under section 1833(t) of the Act as 

determined appropriate by the 

Secretary. In addition, section 3138 of 

the Affordable Care Act requires the 

Secretary to take into consideration the 

cost of drugs and biologicals incurred by 

such hospitals when studying cancer 

hospital costliness. Further, section 

3138 of the Affordable Care Act 

provides that if the Secretary determines 

that cancer hospitals’ costs with respect 

to APC groups are determined to be 

greater than the costs of other hospitals 

furnishing services under section 

1833(t) of the Act, the Secretary shall 

provide an appropriate adjustment to 

reflect these higher costs. Cancer 

hospitals described in section 

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

eligible for TOPs (which are not budget 

neutral) and outlier payments (which 

are budget neutral). 

2. Study of Cancer Hospitals’ Costs 

Relative to Other Hospitals 

It has been our standard analytical 

approach to use a combination of 

explanatory and payment regression 

models to assess the costliness of a class 

of hospitals while controlling for other 

legitimate influences of costliness, such 

as ability to achieve economies of scale, 

to ensure that costliness is due to the 

type of hospital and to identify 

appropriate payment adjustments. We 

used this approach in our CY 2006 

OPPS final rule with comment period to 

establish the 7.1 percent payment 

adjustment for rural SCHs (70 FR 68556 

through 68561). In our discussion for 

the CY 2006 OPPS proposed rule, we 

stated that a simple comparison of unit 

costs would not be sufficient to assess 

the costliness of a class of hospitals 

because the costs faced by individual 

hospitals, whether urban or rural, are a 

function of many varying factors, 

including local labor supply and the 

complexity and volume of services 

provided (70 FR 42699). 

In constructing our analysis of cancer 

hospitals’ costs with respect to APC 

groups relative to other hospitals, we 

considered whether our standard 

analytical approach to use a 

combination of explanatory and 

payment regression models would lead 

to valid results for this particular study, 

or whether we should develop a 

different or modified analytic approach. 

We note that the analyses presented in 

the CY 2006 OPPS proposed and final 

rules were designed to establish an 

adjustment for a large class of rural 

hospitals. In contrast, section 3138 of 

the Affordable Care Act is specifically 

limited to identifying an adjustment for 

11 cancer hospitals to the extent their 

costs with respect to APC groups 

exceeded those costs incurred by other 

hospitals furnishing services under 

section 1833(t) of the Act. With such a 

small sample size (11 out of 

approximately 4,000 hospitals paid 

under the OPPS), we were concerned 

that the standard explanatory and 

payment regression models used to 

establish the rural hospital adjustment 

would lead to imprecise estimates of 

payment adjustments for this small 

group of hospitals. Further, section 3138 

of the Affordable Care Act specifies 

explicitly that cost comparisons 

between classes of hospitals must 

include the cost of drugs and 

biologicals. In our CY 2006 analysis of 

rural hospitals, we excluded the cost of 

drugs and biologicals in our model 

because the extreme units associated 

with proper billing for some drugs and 

biologicals can bias the calculation of a 

service mix index, or volume weighted 

average APC relative weight, for each 

hospital (70 FR 42698). Therefore, we 

chose not to pursue our standard 

combination of explanatory and 

payment regression modeling to 

determine a proposed cancer hospital 

adjustment. 

As discussed in the CY 2011 OPPS/ 

ASC proposed rule (75 FR 46235), while 

we chose not to use our standard 

models to calculate a proposed cancer 

hospital adjustment, we determined it 

still would be appropriate to construct 

our usual provider-level analytical 

dataset consisting of variables related to 

assessing costliness with respect to APC 

groups, including average cost per unit 

for a hospital and the hospital’s average 

APC relative weight as an indicator of 

the hospital’s resource intensity, as 

measured by the APC relative weights. 

We used these variables to calculate 

univariate statistics that describe the 

costliness with respect to APC groups 

and related aspects of cancer hospitals 

and other hospitals paid under the 

OPPS. While descriptive statistics 

cannot control for the myriad factors 

that contribute to observed costs, we 

believed that stark differences in cost 

between cancer hospitals and other 

hospitals paid under the OPPS that 

would be observable by examining 

descriptive univariate statistics would 

provide some indication of relative 

costliness. We began our analysis of the 

cancer hospitals by creating an 

analytical dataset of hospitals billing 

under the OPPS for CY 2009 (a total of 

3,933) that were included in our claims 

dataset for establishing the CY 2011 

OPPS proposed APC relative weights. 

This analytical dataset included the 

3,933 OPPS hospitals’ total estimated 

cost (including packaged cost), total 

lines, total discounted units as modeled 

for CY 2011 OPPS payment, and the 

average weight of their separately 

payable services (total APC weight 

divided by total units) as modeled for 

the CY 2011 OPPS. We then 

summarized estimated utilization and 

payment for each hospital (‘‘hospitallevel’’). These files consist of hospitallevel aggregate costs (including the cost 

of packaged items and services), total 

estimated discounted units under the 

modeled proposed CY 2011 OPPS, total 

estimated volume of number of 

occurrences of separately payable 

HCPCS codes under the modeled 

proposed CY 2011 OPPS, and total 

relative weight of separately payable 

services under the modeled proposed 

CY 2011 OPPS. After summarizing 

modeled payment to the hospital-level, 

we removed 48 hospitals in Puerto Rico 

from our dataset because we did not 

believe that their cost structure reflected 

the costs of most hospitals paid under 

the OPPS and because they could bias 

the calculation of hospital-weighted 

statistics. We then removed an 

additional 66 hospitals with a cost per 

unit of more than 3 standard deviations 

from the geometric mean (mean of the 

natural log) because including outliers 

in hospital-weighted descriptive 

statistics also could bias those statistics. 

This resulted in a dataset with 11 cancer 

hospitals and 3,808 other hospitals. 

We included the following standard 

hospital-level variables that describe 

hospital costliness in our analysis file: 

outpatient cost per discounted unit 

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under the modeled CY 2011 OPPS 

(substituting a cost per administration, 

rather than a cost per unit, for drugs and 

biologicals); each hospital’s proposed 

CY 2011 wage index as a measure of 

relative labor cost; the service mix 

index, or volume-weighted average 

proposed CY 2011 APC relative weight 

(including a simulated weight for drugs 

and biologicals created by dividing the 

CY 2010 April ASP-based payment 

amount at ASP+6 percent appearing in 

Addendum A and B of the proposed 

rule by the proposed conversion factor 

of $68.267); outpatient volume based on 

number of occurrences of HCPCS codes 

in the CY 2009 claims data; and number 

of beds. We used these variables 

because they are key indicators of 

costliness with respect to APC groups 

under the modeled OPPS system, and 

they allowed us to assess the relative 

costliness of classes of hospitals under 

the proposed CY 2011 OPPS. A 

hospital’s service mix index is a 

measure of resource intensity of the 

services provided by the hospital as 

measured by the proposed CY 2011 

OPPS relative weights, and 

standardizing the cost per discounted 

unit by the service mix index creates an 

adjusted cost per unit estimate that 

reflects the remaining relative costliness 

of a hospital remaining after receiving 

the estimated payments that we 

proposed to make under the CY 2011 

OPPS. In short, if a class of hospitals 

demonstrates higher cost per unit after 

standardization by service mix, it is an 

early indication that the class of 

hospitals may be significantly more 

costly in the regression models. We 

used these data to calculate the 

descriptive univariate statistics for 

cancer hospitals appearing in Table 12 

below. We note that because drugs and 

biologicals are such a significant portion 

of the services that the cancer hospitals 

provide, and because section 3138 of the 

Affordable Care Act explicitly requires 

us to consider the cost of drugs and 

biologicals, we included the cost of 

these items in our total cost calculation 

for each hospital, counting each 

occurrence of a drug in the modeled 

proposed CY 2011 data (based on units 

in CY 2009 claims data). That is, we 

sought to treat each administration of a 

drug or biological as one unit. 

In reviewing these descriptive 

statistics, we observed that cancer 

hospitals had a standardized cost per 

discounted unit of $150.12 compared to 

a standardized cost per discounted unit 

of $94.14 for all other hospitals. That is, 

cancer hospitals’ average cost per 

discounted unit remained high even 

after accounting for payment under the 

modeled proposed CY 2011 payment 

system, which is not true for all other 

hospitals. Observing such differences in 

standardized cost per discounted unit 

led us to conclude that cancer hospitals 

are more costly with respect to APC 

groups than other hospitals furnishing 

services under the OPPS, even without 

the inferential statistical models that we 

typically employ. 

TABLE 12—MEANS AND STANDARD DEVIATIONS FOR KEY VARIABLES BY CANCER AND NON-CANCER OPPS HOSPITALS

Variable 

Cancer hospitals Non-cancer hospitals 

Mean Standard 

deviation Mean Standard deviation 

Outpatient Cost per Unit * ................................................................................ $344.20 (64.68) $264.11 (165.86) 

Unit Cost Standardized by Service Mix Wage Indices .................................... $150.12 (31.64) $94.14 (81.19) 

Wage Index ...................................................................................................... 1.10 (0.13) 0.98 (0.16) 

Service Mix Index * .......................................................................................... 2.19 (0.26) 3.18 (2.25) 

Outpatient Volume ........................................................................................... 192,197 (186,063) 34,578 (43,094) 

Beds ................................................................................................................. 173 (162.33) 173 (171.46) 

Number of Hospitals ........................................................................................ 11 ........................ 3,808 ........................

* Includes drugs and biologicals based on per administration rather than per unit. 

3. CY 2011 Proposed Payment 

Adjustment for Certain Cancer Hospitals 

Having reviewed the cost data from 

the standard analytic database and 

determined that cancer hospitals are 

more costly with respect to APC groups 

than other hospitals furnishing services 

under the OPPS system, we decided to 

examine hospital cost report data from 

Worksheet E, Part B (where TOPs are 

calculated on the Hospital and Hospital 

Health Care Complex Cost Report each 

year) in order to determine whether our 

findings were further supported by cost 

report data and to determine an 

appropriate proposed payment 

adjustment methodology for CY 2011 

based on cost report data. Analyses on 

our standard analytic database and 

descriptive statistics presented in Table 

12 above did not consider TOPs in 

assessing costliness of cancer hospitals 

relative to other hospitals furnishing 

services under section 1833(t) of the 

Act. There were several reasons for this. 

One, TOPs have no associated relative 

weight that could be included in an 

assessment of APC-based payment. 

TOPs are paid at cost report settlement 

on an aggregate basis, not on a per 

service basis, and we would have no 

way to break these payments down into 

a relative weight to incorporate these 

retrospective aggregate payments in the 

form of a relative weight. In addition, 

section 3138 of the Affordable Care Act 

requires that any cancer adjustment be 

made within the budget neutral system, 

and TOPs are not part of the budget 

neutral payment system. The cost report 

data we selected for the analysis were 

limited to the OPPS-specific payment 

and cost data available on Worksheet E, 

Part B. These data include aggregate 

OPPS payments, including outlier 

payments and the cost of medical and 

other health services. These aggregate 

measures of cost and payment also 

include the cost and payment for drugs 

and biologicals and other adjustments 

that we typically include in our 

regression modeling, including wage 

index adjustment and rural adjustment, 

if applicable. While these cost report 

data cannot provide an estimate of cost 

per unit after controlling for other 

potential factors that could influence 

cost per unit, we used this aggregate 

cost and payment data to examine the 

cancer hospitals’ OPPS PCR and OPPS 

PCR with TOPs, and compare these to 

the OPPS PCR for other hospitals. PCRs 

calculated from the most recent cost 

report data available at the time of the 

CY 2011 OPPS/ASC proposed rule also 

indicated that costs relative to payments 

at cancer hospitals were higher than 

those at other hospitals paid under the 

OPPS (that is, cancer hospitals have 

lower PCRs). In order to calculate PCRs 

for hospitals paid under the OPPS 

(including cancer hospitals), we used 

the same extract of cost report data from 

the Hospital Cost Report Information 

System (HCRIS) that we used to 

calculate the CCRs that were used to 

estimate median costs for the CY 2011 

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OPPS. We limited the dataset to the 

hospitals with CY 2009 claims data that 

we used to model the CY 2011 proposed 

APC relative weights. 

We estimated that, on average, the 

OPPS payments to the 11 cancer 

hospitals, not including TOPs, were 

approximately 62 percent of reasonable 

cost (that is, we calculated a PCR of 

0.615 for the cancer hospitals), whereas 

we estimated that, on average, the OPPS 

payments to other hospitals furnishing 

services under the OPPS were 

approximately 87 percent of reasonable 

cost (resulting in a PCR of 0.868). When 

TOPS were included in the calculation 

of the PCR, cancer hospitals, as a group, 

received payments that were 

approximately 83 percent of reasonable 

cost, which was still lower than the 

average PCR of other OPPS hospitals of 

approximately 87 percent of reasonable 

cost. 

Based on our findings that cancer 

hospitals, as a class, have a significantly 

lower volume weighted average PCR 

than the volume weighted PCR of other 

hospitals furnishing services under the 

OPPS and our findings that the cancer 

hospitals cost per discounted unit 

standardized for service mix remains 

much higher than the standardized cost 

per discounted unit of all other 

hospitals, we proposed an adjustment 

for cancer hospitals to reflect these 

higher costs, effective January 1, 2011. 

For purposes of calculating a proposed 

adjustment, we chose to rely on this 

straightforward assessment of payments 

and costs from the cost report data 

because of the concerns outlined above 

with respect to the small number of 

hospitals, and because of the challenges 

associated with accurately including 

drug and biological costs in our 

standard regression models. We 

believed that an appropriate adjustment 

would redistribute enough payments 

from other hospitals furnishing services 

under the OPPS to the cancer hospitals 

to give cancer hospitals a PCR that was 

comparable to the average PCR for other 

hospitals furnishing services under the 

OPPS. Therefore, we proposed a 

hospital-specific payment adjustment 

determined as the percentage of 

additional payment needed to raise each 

cancer hospital’s PCR to the weighted 

average PCR for other hospitals 

furnishing services under the OPPS 

(0.868) in the CY 2011 dataset. This 

would be accomplished by adjusting 

each cancer hospital’s OPPS payment by 

the percentage difference between the 

hospital’s individual PCR (without 

TOPs) and the weighted average PCR of 

the other hospitals furnishing services 

under the OPPS. This cancer hospital 

payment adjustment proposed for CY 

2011 would have resulted in an 

estimated aggregate increase in OPPS 

payments to cancer hospitals of 41.2 

percent and a net increase in total 

payments, including TOPs, of 5 percent 

for CY 2011. 

4. Proposed CY 2011 Cancer Hospital 

Payment Adjustment That Was Not 

Finalized 

The public comments associated with 

the cancer hospital adjustment that we 

proposed for CY 2011 are detailed in the 

CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71886 through 

71887). Many commenters urged CMS 

to consider TOPs when calculating the 

cancer hospital payment adjustment 

stating that the proposed methodology 

results, largely, in a change in the form 

of outpatient payments to cancer 

hospitals by shifting payment from hold 

harmless payment under the TOPs 

provision to APC payments. Noting that 

the majority of cancer care provided in 

the country is provided by the noncancer hospitals that would experience 

a payment reduction under the CY 2011 

proposal, commenters also suggested 

that the associated budget neutral 

payment reduction of 0.7 percent was 

not appropriate or equitable to other 

OPPS hospitals. Commenters also 

expressed concern that the proposed 

payment adjustment would increase 

beneficiary copayments. That is, they 

believed that the proposed cancer 

hospital adjustment would increase 

APC payments and, because beneficiary 

copayment is a percentage of the APC 

payment, Medicare beneficiaries seeking 

services at the 11 designated cancer 

hospitals would experience higher 

copayments due to the proposed 

methodology. These commenters 

strongly encouraged CMS to implement 

the adjustment in a way that does not 

increase beneficiary copayments. These 

commenters also indicated that CMS 

should have taken into account the 

concentration of outpatient services at 

the designated cancer hospitals, as 

compared to other OPPS hospitals, and 

adjust the PCR benchmark higher. The 

commenters argued that other PPS 

hospitals have the ability to improve 

their Medicare margins through other 

payment systems, but that cancer 

hospitals receive the majority of their 

Medicare payments through the OPPS. 

One commenter suggested that the CMS 

analysis was inadequate to conclude 

that costs are higher in cancer hospitals 

and that an adjustment is warranted. As 

indicated in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71887), because the many public 

comments we received identified a 

broad range of very important issues 

and concerns associated with the 

proposed cancer hospital payment 

adjustment, we determined that further 

study and deliberation was necessary 

and, therefore, we did not finalize the 

CY 2011 proposed payment adjustment 

for certain cancer hospitals. 

5. Proposed Payment Adjustment for 

Certain Cancer Hospitals for CY 2012 

During our deliberations that occurred 

subsequent to the CY 2011 OPPS/ASC 

final rule, we reconfirmed that TOPs 

could not be included when 

establishing the PCR target given the 

current statutory language in section 

1833(t)(18) of the Act that was to 

capture costliness with respect to APC 

groups. Specifically, section 

1833(t)(18)(A) of the Act requires the 

Secretary to determine if, under the 

OPPS, costs incurred by cancer 

hospitals with respect to APC groups 

exceed those costs incurred by other 

hospitals furnishing services under the 

OPPS. As discussed in the CY 2011 

OPPS/ASC proposed rule and final rule 

with comment period, TOPs payments 

are not paid on a service specific basis, 

and we have no way to break these 

payments down into a relative weight 

that could be included in an assessment 

of an APC-based payment. Because 

section 1833(t)(18)(A) of the Act ties the 

assessment of the costs incurred by the 

11 cancer hospitals to APC groups, we 

cannot include TOPs, which are not tied 

to APC groups, in such assessment. In 

addition, section 1833(t)(7)(D)(ii) of the 

Act (the hold harmless provision for 

cancer hospitals) provides that this 

adjustment is applied for covered OPD 

services for which the ‘‘PPS amount’’ is 

less than the ‘‘pre-BBA’’ amount. The 

‘‘PPS amount’’ means, with respect to 

covered OPD services, ‘‘the amount 

payable under this title [Title 18] for 

such services (determined without 

regard to this paragraph) * * *’’ (See 

section 1833(t)(7)(E) of the Act). Under 

this provision, the cancer adjustment 

must be included in the calculation of 

the ‘‘PPS amount’’ because it is an 

integral component of ‘‘the amount 

payable under this title.’’ Further, we 

note that the Affordable Care Act 

requires that any cancer hospital 

payment adjustment be made within the 

budget neutral system. We note that 

TOPs are not part of the budget neutral 

payment system. 

In addition, we have revisited the 

issue of whether payments associated 

with the cancer hospital payment 

adjustment can be excluded from the 

amount of payment on which the 

copayment amount is determined. We 

continue to believe that the statute 

requires such payment to be included in 

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the amount of payment upon which the 

copayment amount is determined. 

Specifically, section 1833(t)(8) of the 

Act sets forth the methodology for 

calculating the copayment amount 

under section 1833(t). Section 

1833(t)(8)(A) of the Act states the 

following: ‘‘Except as provided in 

subparagraphs (B) and (C), the 

copayment amount under this 

subsection is the amount by which the 

amount described in paragraph (4)(B) 

exceeds the amount of payment 

determined under paragraph (4)(C).’’ We 

note that the amount in paragraph (4)(B) 

incorporates the amount calculated 

under subparagraph (A) of section 

1833(t)(4) of the Act which provides 

that the ‘‘Medicare OPD fee schedule 

amount (computed under paragraph 

(3)(D)) for the service or group and year 

is adjusted for relative differences in the 

cost of labor and other factors 

determined by the Secretary, as 

computed under paragraphs (2)(D) and 

(2)(E).’’ The reference to ‘‘factors 

computed under paragraphs* * * 

(2)(E)’’ includes a cancer hospital 

payment adjustment because it is 

required to be provided under 

paragraph (2)(E). Therefore, the statute 

is clear that the cancer hospital payment 

adjustment is a component of the 

payment amount upon which the 

beneficiary copayment is determined. 

Finally, though commenters suggested 

that CMS take into account the cancer 

hospitals’ significant Medicare 

outpatient concentration relative to that 

of other OPPS hospitals when 

establishing an appropriate PCR 

benchmark, we believe it is 

inappropriate to incorporate the 

payments associated with other 

Medicare payment systems when 

determining a payment adjustment 

under the OPPS. 

After a thorough review and 

deliberation of the issues associated 

with the cancer hospital payment 

adjustment proposed for CY 2011, we 

continue to believe a straightforward 

and appropriate method to adjust 

payments of cancer hospitals described 

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

order to reflect their higher costs with 

respect to APC groups is to propose to 

redistribute enough payments from 

other hospitals furnishing services 

under the OPPS to the cancer hospitals 

to give each cancer hospital a PCR that 

is comparable to the weighted average 

PCR for other hospitals furnishing 

services under section 1833(t) of the 

Act. Therefore, as explained in more 

detail below, for services furnished on 

and after January 1, 2012, we are 

proposing that, for a cancer hospital 

with an individual PCR (as determined 

by the Secretary) below the weighted 

average PCR for other hospitals 

furnishing services under section 

1833(t) of the Act (as determined by the 

Secretary) (Target PCR), we would make 

a hospital-specific payment adjustment 

by adjusting the wage-adjusted OPPS 

payment for covered OPD services 

(except for devices receiving passthrough status as defined in 42 CFR 

419.66) by the percent difference 

between the hospital’s individual PCR 

and the weighted average PCR of other 

hospitals furnishing services under 

section 1833(t) of the Act in the CY 2012 

dataset. With respect to such hospitals, 

for devices receiving pass-through status 

as defined in 42 CFR 419.66 which are 

furnished on and after January 1, 2012, 

we are proposing a zero percent 

adjustment. For a cancer hospital with 

an individual PCR (as determined by the 

Secretary) above the weighted average 

PCR for other hospitals furnishing 

services under section 1833(t) of the Act 

(as determined by the Secretary), we are 

proposing a zero percent adjustment for 

covered hospital outpatient services 

furnished on and after January 1, 2012. 

In order to calculate PCRs for 

hospitals furnishing services under the 

OPPS (including cancer hospitals) for 

the proposed CY 2012 cancer hospital 

payment adjustment, we used the same 

extract of cost report data from HCRIS, 

as discussed in section II.A of this 

proposed rule, used to estimate median 

costs for the proposed CY 2012 OPPS. 

Using these cost report data, we 

included data from Worksheet E, Part B, 

for each hospital, using data from each 

hospital’s most recent cost report, 

whether as submitted or settled. We 

then limited the data set to the hospitals 

with CY 2010 claims data that we use 

to model the impact of the CY 2012 

proposed APC relative weights (4,009 

hospitals) because it is appropriate to 

use the same set of hospitals that we are 

using to calibrate the modeled proposed 

CY 2012 OPPS. The cancer hospitals in 

this dataset largely had cost report data 

from cost reporting periods ending in 

FY 2009 and FY 2010. The cost report 

data for the other hospitals were from 

cost report periods with fiscal year ends 

ranging from 2008 to 2010. We then 

removed the cost report data for 47 

hospitals from Puerto Rico from our 

data set because we do not believe that 

their cost structure reflects the costs of 

most hospitals paid under the OPPS and 

therefore their inclusion may bias the 

calculation of hospital-weighted 

statistics. We also removed 206 

hospitals with cost report data that were 

not complete (missing OPPS payments, 

including outliers, missing aggregate 

cost data, or both), so that all cost 

reports in the study would have both 

the payment and cost data necessary to 

calculate a PCR for each hospital, 

leading to a final analytic file of 3,756 

hospitals with cost report data. We 

believe that the costs and PPS payments 

reported on Worksheet E, Part B, for the 

hospitals included in our CY 2012 

modeling should be sufficiently 

accurate for assessing the hospital’s 

relative costliness because all of the key 

elements that we believe are necessary 

for the analysis (payment and cost) are 

contained on this worksheet. 

Using this smaller dataset of cost 

report data, we estimate that, on 

average, the OPPS payments to the 11 

cancer hospitals, not including TOPs, 

are approximately 65 percent of 

reasonable cost (that is, we calculated a 

PCR of 0.647 for the cancer hospitals), 

whereas, we estimate that, on average, 

the OPPS payments to other hospitals 

furnishing services under the OPPS are 

approximately 90 percent of reasonable 

cost (resulting in a PCR of 0.901). 

Individual cancer hospitals’ OPPS PCRs 

range from approximately 0.56 to 

approximately 0.82. 

As indicated above, we are proposing 

that, for a cancer hospital with an 

individual PCR below the weighted 

average PCR for other hospitals 

furnishing services under the OPPS in 

the CY 2012 dataset, we would make a 

hospital-specific payment adjustment by 

adjusting the wage-adjusted OPPS 

payment for covered OPD services 

(except devices receiving pass-through 

status because these items and services 

are always paid at the estimated full 

cost and, therefore, no payment 

adjustment is necessary) furnished on 

and after January 1, 2012, by the percent 

difference between the hospital’s 

individual PCR and the weighted 

average PCR of other hospitals 

furnishing services under the OPPS in 

the CY 2012 dataset. This proposed 

methodology would result in the 

proposed percentage payment 

adjustments for the 11 cancer hospitals 

appearing in Table 13 below. In 

addition, we note that we are proposing 

to amend 42 CFR 419.43 by adding a 

new paragraph (i). Proposed new 

paragraph (i)(1) would specify that CMS 

provides for a payment adjustment for 

covered hospital outpatient services 

furnished on or after January 1, 2012, by 

cancer hospitals described in section 

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

new paragraph (i)(2) would specify how 

the amount of the payment adjustment 

to cancer hospitals is established. 

Proposed new paragraph (i)(3) would 

specify that this payment adjustment 

would be budget neutral, consistent 

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with section 1833(t)(18)(B) of the Act. 

Proposed new paragraph (i)(4) would 

specify the services or groups that are 

excluded from qualifying for the cancer 

hospital payment adjustment. In the 

event that a cancer hospital has a PCR 

that is higher than the weighted average 

PCR for other OPPS hospitals furnishing 

services under the OPPS, we are 

proposing that the specific hospital 

would receive a zero percent 

adjustment. We believe that this would 

indicate that the cancer hospital’s costs 

do not exceed the costs incurred by 

other hospitals furnishing services 

under the OPPS and, therefore, a 

payment adjustment above zero percent 

would not be necessary. 

We note that the proposed payment 

adjustment for all cancer hospitals 

would result in an estimated aggregate 

increase in OPPS payments to cancer 

hospitals of 39 percent for CY 2012 and 

an estimated net increase in total 

payments, including TOPs, of 9 percent, 

based on cost report data. The dataset of 

hospital cost report data that we used to 

model this proposed payment 

adjustment for cancer hospitals is 

available under supporting 

documentation for this proposed rule on 

the CMS Web site at: http:// 

www.cms.gov/HospitalOutpatientPPS/ 

HORD/. 

TABLE 13—PROPOSED CY 2012 HOSPITAL-SPECIFIC PAYMENT ADJUSTMENT FOR CANCER HOSPITALS WITHOUT REGARD

TO TOPS AND OUTLIER PAYMENTS

Provider 

number Hospital name 

Percent increase without 

TOPs or 

outlier payment 

050146 ... City of Hope Helford Clinical Research Hospital ............................................................................................................ 10.1 

050660 ... USC Kenneth Norris Jr. Cancer Hospital ........................................................................................................................ 15.7 

100079 ... University of Miami Hospital & Clinic .............................................................................................................................. 27.6 

100271 ... H. Lee Moffitt Cancer Center & Research Institute ........................................................................................................ 21.6 

220162 ... Dana-Farber Cancer Institute .......................................................................................................................................... 54.4 

330154 ... Memorial Hospital for Cancer and Allied Diseases ........................................................................................................ 39.4 

330354 ... Roswell Park Cancer Institute ......................................................................................................................................... 24.3 

360242 ... James Cancer Hospital & Solove Research Institute ..................................................................................................... 30.1 

390196 ... Hospital of the Fox Chase Cancer Center ...................................................................................................................... 15.3 

450076 ... University of Texas M. D. Anderson Cancer Center ...................................................................................................... 61.8 

500138 ... Seattle Cancer Care Alliance .......................................................................................................................................... 43.7 

Proposed Aggregate Payment Adjustment 39.3 

Because section 7101 of the 

Affordable Care Act expanded the 340B 

drug program to include certain cancer 

hospitals, we believe that the PCRs and 

any cancer hospital payment adjustment 

should be recalculated annually. The 

340B drug program allows certain 

hospitals to purchase certain outpatient 

drugs at reduced prices. The Affordable 

Care Act provision was effective for 

drugs purchased on or after January 1, 

2010. Inclusion of cancer hospitals in 

the 340B drug program should lower 

drug costs at these cancer hospitals 

going forward and, therefore, may cause 

significant changes in each cancer 

hospital’s PCR compared to the previous 

year’s calculation. Therefore, we are 

proposing to recalculate the PCR of each 

cancer hospital and the weighted 

average PCR of the other hospitals 

furnishing services under 1833(t) on an 

annual basis in order to determine an 

appropriate hospital specific payment 

adjustment to cancer hospitals each 

year. 

We note that the changes made by 

section 3138 of the Affordable Care Act 

do not affect the existing statutory 

provisions that provide for outlier 

payment for all hospitals paid under the 

OPPS, including cancer hospitals and 

TOPs for cancer hospitals. Because 

outlier payments are made within 

budget neutrality, outlier payments are 

assessed after all budget neutral 

payments for an individual service have 

been made, including the cancer 

hospital payment adjustment. The TOPs 

are assessed after all payments have 

been made for a cost reporting period. 

Further, both outlier payments and 

TOPs serve as a safety net for hospitals, 

although outliers are budget neutral and 

TOPs are not, and TOPs are limited to 

certain hospitals. Outliers and TOPs are 

assessed after final payments have been 

made. If this proposed payment 

adjustment is finalized, we estimate that 

there would be no cancer hospitals that 

would continue to receive TOPs. We are 

proposing to update the hospitalspecific cancer hospital payment 

adjustments in Table 13 using the more 

recent cost reports that will become 

available for the CY 2012 OPPS/ASC 

final rule with comment period. 

G. Proposed Hospital Outpatient Outlier 

Payments 

1. Background 

Currently, the OPPS pays outlier 

payments on a service-by-service basis. 

For CY 2011, the outlier threshold is 

met when the cost of furnishing a 

service or procedure by a hospital 

exceeds 1.75 times the APC payment 

amount and exceeds the APC payment 

rate plus a $2,025 fixed-dollar 

threshold. We introduced a fixed-dollar 

threshold in CY 2005, in addition to the 

traditional multiple threshold, in order 

to better target outliers to those high 

cost and complex procedures where a 

very costly service could present a 

hospital with significant financial loss. 

If the cost of a service meets both of 

these conditions, the multiple threshold 

and the fixed-dollar threshold, the 

outlier payment is calculated as 50 

percent of the amount by which the cost 

of furnishing the service exceeds 1.75 

times the APC payment rate. Before CY 

2009, this outlier payment had 

historically been considered a final 

payment by longstanding OPPS policy. 

We implemented a reconciliation 

process similar to the IPPS outlier 

reconciliation process for cost reports 

with cost reporting periods beginning 

on or after January 1, 2009 (73 FR 68594 

through 68599). 

It has been our policy for the past 

several years to report the actual amount 

of outlier payments as a percent of total 

spending in the claims being used to 

model the proposed OPPS. Our current 

estimate of total outlier payments as a 

percent of total CY 2010 OPPS payment, 

using available CY 2010 claims and the 

revised OPPS expenditure estimate for 

the Presidential Budget for FY 2012, is 

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approximately 1.11 percent of the total 

aggregated OPPS payments. Therefore, 

for CY 2010, we estimate that we paid 

at 0.11 percent above the CY 2010 

outlier target of 1.0 percent of total 

aggregated OPPS payments. 

As explained in the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 71887 through 71889), we set our 

projected target for aggregate outlier 

payments at 1.0 percent of the estimated 

aggregate total payments under the 

OPPS for CY 2011. The outlier 

thresholds were set so that estimated CY 

2011 aggregate outlier payments would 

equal 1.0 percent of the total estimated 

aggregate payments under the OPPS. 

Using CY 2010 claims data and CY 2011 

payment rates, we currently estimate 

that the aggregate outlier payments for 

CY 2011 would be approximately 1.06 

percent of the total CY 2011 OPPS 

payments. The difference between 1.0 

percent and 1.06 percent is reflected in 

the regulatory impact analysis in section 

XX. of this proposed rule. We note that 

we provide estimated CY 2012 outlier 

payments for hospitals and CMHCs with 

claims included in the claims data that 

we used to model impacts in the 

Hospital-Specific Impacts—ProviderSpecific Data file on the CMS Web site 

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

HospitalOutpatientPPS/. 

2. Proposed Outlier Calculation 

We are proposing for CY 2012 to 

continue our policy of estimating outlier 

payments to be 1.0 percent of the 

estimated aggregate total payments 

under the OPPS for outlier payments. 

We are proposing that a portion of that 

1.0 percent, specifically 0.14 percent, 

would be allocated to CMHCs for PHP 

outlier payments. This is the amount of 

estimated outlier payments that would 

result from the proposed CMHC outlier 

threshold as a proportion of total 

estimated outlier payments. As 

discussed in section VIII.C. of this 

proposed rule, for CMHCs, we are 

proposing to continue our longstanding 

policy that if a CMHC’s cost for partial 

hospitalization services, paid under 

either APC 0172 (Level I Partial 

Hospitalization (3 services) for CMHCs) 

or APC 0173 (Level II Partial 

Hospitalization (4 or more services) for 

CMHCs), exceeds 3.40 times the 

payment for APC 0173, the outlier 

payment would be calculated as 50 

percent of the amount by which the cost 

exceeds 3.40 times the APC 0173 

payment rate. For further discussion of 

CMHC outlier payments, we refer 

readers to section VIII.C. of this 

proposed rule. 

To ensure that the estimated CY 2012 

aggregate outlier payments would equal 

1.0 percent of estimated aggregate total 

payments under the OPPS, we are 

proposing that the hospital outlier 

threshold be set so that outlier payments 

would be triggered when the cost of 

furnishing a service or procedure by a 

hospital exceeds 1.75 times the APC 

payment amount and exceeds the APC 

payment rate plus a $2,100 fixed-dollar 

threshold. This proposed threshold 

reflects the methodology discussed 

below in this section, as well as the 

proposed APC recalibration for CY 

2012. 

We calculated the proposed fixeddollar threshold for this proposed rule 

using largely the same methodology as 

we did in CY 2011 (75 FR 71887 

through 71889). For purposes of 

estimating outlier payments for the 

proposed rule, we used the hospitalspecific overall ancillary CCRs available 

in the April 2011 update to the 

Outpatient Provider-Specific File 

(OPSF). The OPSF contains providerspecific data, such as the most current 

CCR, which are maintained by the 

Medicare contractors and used by the 

OPPS Pricer to pay claims. The claims 

that we use to model each OPPS update 

lag by 2 years. For this proposed rule, 

we used CY 2010 claims to model the 

CY 2012 OPPS. In order to estimate the 

proposed CY 2012 hospital outlier 

payments for this proposed rule, we 

inflated the charges on the CY 2010 

claims using the same inflation factor of 

1.0908 that we used to estimate the IPPS 

fixed-dollar outlier threshold for the FY 

2012 IPPS/LTCH PPS proposed rule (76 

FR 26024). We used an inflation factor 

of 1.0444 to estimate CY 2011 charges 

from the CY 2010 charges reported on 

CY 2010 claims. The methodology for 

determining this charge inflation factor 

is discussed in the FY 2012 IPPS/LTCH 

PPS proposed rule (76 FR 26024). As we 

stated in the CY 2005 OPPS final rule 

with comment period (69 FR 65845), we 

believe that the use of these charge 

inflation factors are appropriate for the 

OPPS because, with the exception of the 

inpatient routine service cost centers, 

hospitals use the same ancillary and 

outpatient cost centers to capture costs 

and charges for inpatient and outpatient 

services. 

As noted in the CY 2007 OPPS/ASC 

final rule with comment period (71 FR 

68011), we are concerned that we could 

systematically overestimate the OPPS 

hospital outlier threshold if we did not 

apply a CCR inflation adjustment factor. 

Therefore, we are proposing to apply the 

same CCR inflation adjustment factor 

that we are proposing to apply for the 

FY 2012 IPPS outlier calculation to the 

CCRs used to simulate the proposed CY 

2012 OPPS outlier payments that 

determine the fixed-dollar threshold. 

Specifically, for CY 2012, we are 

proposing to apply an adjustment of 

0.9850 to the CCRs that were in the 

April 2011 OPSF to trend them forward 

from CY 2011 to CY 2012. The 

methodology for calculating this 

proposed adjustment is discussed in the 

FY 2012 IPPS/LTCH PPS proposed rule 

(76 FR 26024 through 26025). 

Therefore, to model hospital outlier 

payments for this CY 2012 OPPS/ASC 

proposed rule, we applied the overall 

CCRs from the April 2011 OPSF file 

after adjustment (using the proposed 

CCR inflation adjustment factor of 

0.9850 to approximate CY 2012 CCRs) to 

charges on CY 2010 claims that were 

adjusted (using the proposed charge 

inflation factor of 1.0908 to approximate 

CY 2012 charges). We simulated 

aggregated CY 2012 hospital outlier 

payments using these costs for several 

different fixed-dollar thresholds, 

holding the 1.75 multiple threshold 

constant and assuming that outlier 

payments would continue to be made at 

50 percent of the amount by which the 

cost of furnishing the service would 

exceed 1.75 times the APC payment 

amount, until the total outlier payments 

equaled 1.0 percent of aggregated 

estimated total CY 2012 OPPS 

payments. We estimate that a proposed 

fixed-dollar threshold of $2,100, 

combined with the proposed multiple 

threshold of 1.75 times the APC 

payment rate, would allocate 1.0 

percent of aggregated total OPPS 

payments to outlier payments. We are 

proposing to continue to make an 

outlier payment that equals 50 percent 

of the amount by which the cost of 

furnishing the service exceeds 1.75 

times the APC payment amount when 

both the 1.75 multiple threshold and the 

proposed fixed-dollar threshold of 

$2,100 are met. For CMHCs, we are 

proposing that, if a CMHC’s cost for 

partial hospitalization services, paid 

under either APC 0172 or APC 0173, 

exceeds 3.40 times the payment for APC 

0173, the outlier payment would be 

calculated as 50 percent of the amount 

by which the cost exceeds 3.40 times 

the APC 0173 payment rate. 

Section 1833(t)(17)(A) of the Act, 

which applies to hospitals as defined 

under section 1886(d)(1)(B) of the Act, 

requires that hospitals that fail to report 

data required for the quality measures 

selected by the Secretary, in the form 

and manner required by the Secretary 

under 1833(t)(17)(B) of the Act, incur a 

2.0 percentage point reduction to their 

OPD fee schedule increase factor, that 

is, the annual payment update factor. 

The application of a reduced OPD fee 

schedule increase factor results in 

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reduced national unadjusted payment 

rates that will apply to certain 

outpatient items and services furnished 

by hospitals that are required to report 

outpatient quality data and that fail to 

meet the Hospital OQR requirements. 

For hospitals that fail to meet the 

Hospital OQR requirements, we are 

proposing to continue our policy that 

we implemented in CY 2010 that the 

hospitals’ costs would be compared to 

the reduced payments for purposes of 

outlier eligibility and payment 

calculation. For more information on 

the Hospital OQR Program, we refer 

readers to section XIV. of this proposed 

rule. 

3. Outlier Reconciliation 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 CFR 68599), 

we adopted as final policy a process to 

reconcile hospital or CMHC outlier 

payments at cost report settlement for 

services furnished during cost reporting 

periods beginning in CY 2009. OPPS 

outlier reconciliation more fully ensures 

accurate outlier payments for those 

facilities that have CCRs that fluctuate 

significantly relative to the CCRs of 

other facilities, and that receive a 

significant amount of outlier payments 

(73 FR 68598). As under the IPPS, we 

do not adjust the fixed-dollar threshold 

or the amount of total OPPS payments 

set aside for outlier payments for 

reconciliation activity because such 

action would be contrary to the 

prospective nature of the system. Our 

proposed outlier threshold calculation 

assumes that overall ancillary CCRs 

accurately estimate hospital costs based 

on the information available to us at the 

time we set the prospective fixed-dollar 

outlier threshold. For these reasons, as 

we have previously discussed in the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68596), we are 

not proposing to incorporate any 

assumptions about the effects of 

reconciliation into our calculation of the 

OPPS fixed-dollar outlier threshold. 

H. Proposed Calculation of an Adjusted 

Medicare Payment From the National 

Unadjusted Medicare Payment 

The basic methodology for 

determining prospective payment rates 

for HOPD services under the OPPS is set 

forth in existing regulations at 42 CFR 

Part 419, subparts C and D. For this 

proposed rule, the payment rate for 

most services and procedures for which 

payment is made under the OPPS is the 

product of the proposed conversion 

factor calculated in accordance with 

section II.B. of this proposed rule and 

the proposed relative weight determined 

under section II.A. of this proposed rule. 

Therefore, the proposed national 

unadjusted payment rate for most APCs 

contained in Addendum A to this 

proposed rule (which is referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site) and for most HCPCS codes to 

which separate payment under the 

OPPS has been assigned in Addendum 

B to this proposed rule (which is 

referenced in section XVII. of this 

proposed rule and available via the 

Internet on the CMS Web site) was 

calculated by multiplying the proposed 

CY 2012 scaled weight for the APC by 

the proposed CY 2012 conversion factor. 

We note that section 1833(t)(17) of the 

Act, which applies to hospitals as 

defined under section 1886(d)(1)(B) of 

the Act, requires that hospitals that fail 

to submit data required to be submitted 

on quality measures selected by the 

Secretary, in the form and manner and 

at a time specified by the Secretary, 

incur a reduction of 2.0 percentage 

points to their OPD fee schedule 

increase factor, that is, the annual 

payment update factor. The application 

of a reduced OPD fee schedule increase 

factor results in reduced national 

unadjusted payment rates that apply to 

certain outpatient items and services 

provided by hospitals that are required 

to report outpatient quality data and 

that fail to meet the Hospital Outpatient 

Quality Reporting (OQR) Program 

(formerly referred to as the Hospital 

Outpatient Quality Data Reporting 

Program (HOP QDRP)) requirements. 

For further discussion of the payment 

reduction for hospitals that fail to meet 

the requirements of the Hospital OQR 

Program, we refer readers to section 

XVI.D. of this proposed rule. 

We demonstrate in the steps below 

how to determine the APC payments 

that will be made in a calendar year 

under the OPPS to a hospital that fulfills 

the Hospital OQR Program requirements 

and to a hospital that fails to meet the 

Hospital OQR Program requirements for 

a service that has any of the following 

status indicator assignments: ‘‘P,’’ ‘‘Q1,’’ 

‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘U,’’ ‘‘V,’’ 

or ‘‘X’’ (as defined in Addendum D1 to 

this proposed rule), in a circumstance in 

which the multiple procedure discount 

does not apply, the procedure is not 

bilateral, and conditionally packaged 

services (status indicator of ‘‘Q1’’ and 

‘‘Q2’’) qualify for separate payment. We 

note that, although blood and blood 

products with status indicator ‘‘R’’ and 

brachytherapy sources with status 

indicator ‘‘U’’ are not subject to wage 

adjustment, they are subject to reduced 

payments when a hospital fails to meet 

the Hospital OQR Program 

requirements. 

Individual providers interested in 

calculating the payment amount that 

they would receive for a specific service 

from the national unadjusted payment 

rates presented in Addenda A and B to 

this proposed rule (which are referenced 

in section XVII. of this proposed rule 

and available via the Internet on the 

CMS Web site) should follow the 

formulas presented in the following 

steps. For purposes of the payment 

calculations below, we refer to the 

proposed national unadjusted payment 

rate for hospitals that meet the 

requirements of the Hospital OQR 

Program as the ‘‘full’’ national 

unadjusted payment rate. We refer to 

the national unadjusted payment rate 

for hospitals that fail to meet the 

requirements of the Hospital OQR 

Program as the ‘‘reduced’’ national 

unadjusted payment rate. The reduced 

national unadjusted payment rate is 

calculated by multiplying the reporting 

ratio of 0.980 times the ‘‘full’’ national 

unadjusted payment rate. The national 

unadjusted payment rate used in the 

calculations below is either the full 

national unadjusted payment rate or the 

reduced national unadjusted payment 

rate, depending on whether the hospital 

met its Hospital OQR Program 

requirements in order to receive the full 

CY 2012 OPPS fee schedule increase 

factor of 1.50 percent. 

Step 1. Calculate 60 percent (the 

labor-related portion) of the proposed 

national unadjusted payment rate. Since 

the initial implementation of the OPPS, 

we have used 60 percent to represent 

our estimate of that portion of costs 

attributable, on average, to labor. We 

refer readers to the April 7, 2000 OPPS 

final rule with comment period (65 FR 

18496 through 18497) for a detailed 

discussion of how we derived this 

percentage. We confirmed that this 

labor-related share for hospital 

outpatient services is appropriate during 

our regression analysis for the payment 

adjustment for rural hospitals in the CY 

2006 OPPS final rule with comment 

period (70 FR 68553). 

The formula below is a mathematical 

representation of Step 1 and identifies 

the labor-related portion of a specific 

payment rate for a specific service. 

X is the labor-related portion of the 

national unadjusted payment rate. 

X = .60 * (national unadjusted payment 

rate) 

Step 2. Determine the wage index area 

in which the hospital is located and 

identify the wage index level that 

applies to the specific hospital. The 

wage index values assigned to each area 

reflect the geographic statistical areas 

(which are based upon OMB standards) 

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to which hospitals are assigned for FY 

2012 under the IPPS, reclassifications 

through the MGCRB, section 

1886(d)(8)(B) ‘‘Lugar’’ hospitals, 

reclassifications under section 

1886(d)(8)(E) of the Act, as defined in 

§ 412.103 of the regulations, and 

hospitals designated as urban under 

section 601(g) of Public Law 98–21. We 

note that the reclassifications of 

hospitals under section 508 of Public 

Law 108–173, as extended by sections 

3137 and 10317 of the Affordable Care 

Act, expired on September 30, 2010. 

Section 102 of the Medicare and 

Medicaid Extenders Act of 2010 extends 

Section 508 and certain additional 

special exception hospital 

reclassifications from October 1, 2010 

through September 30, 2011. Therefore, 

these reclassifications will not apply to 

the CY 2012 OPPS. (For further 

discussion of the changes to the FY 

2012 IPPS wage indices, as applied to 

the CY 2012 OPPS, we refer readers to 

section II.C. of this proposed rule.) We 

are proposing to continue applying a 

wage index floor of 1.00 to frontier 

states, in accordance with section 10324 

of the Affordable Care Act. 

Step 3. Adjust the wage index of 

hospitals located in certain qualifying 

counties that have a relatively high 

percentage of hospital employees who 

reside in the county, but who work in 

a different county with a higher wage 

index, in accordance with section 505 of 

Public Law 108–173. Addendum L to 

this proposed rule (which is referenced 

in section XVII. of this proposed rule 

and available via the Internet on the 

CMS Web site) contains the qualifying 

counties and the associated proposed 

wage index increase developed for the 

FY 2012 IPPS and listed as Table 4J in 

the FY 2012 IPPS/LTCH PPS proposed 

rule and available via the Internet on the 

CMS Web site at: http:// 

www.cms.hhs.gov/AcuteInpatientPPS/ 

01_overview.asp. This step is to be 

followed only if the hospital is not 

reclassified or redesignated under 

section 1886(d)(8) or section 1886(d)(10) 

of the Act. 

Step 4. Multiply the applicable wage 

index determined under Steps 2 and 3 

by the amount determined under Step 1 

that represents the labor-related portion 

of the national unadjusted payment rate. 

The formula below is a mathematical 

representation of Step 4 and adjusts the 

labor-related portion of the national 

payment rate for the specific service by 

the wage index. 

Xa is the labor-related portion of the 

national unadjusted payment rate (wage 

adjusted). 

Xa = .60 * (national unadjusted payment 

rate) * applicable wage index. 

Step 5. Calculate 40 percent (the 

nonlabor-related portion) of the national 

unadjusted payment rate and add that 

amount to the resulting product of Step 

4. The result is the wage index adjusted 

payment rate for the relevant wage 

index area. 

The formula below is a mathematical 

representation of Step 5 and calculates 

the remaining portion of the national 

payment rate, the amount not 

attributable to labor, and the adjusted 

payment for the specific service. 

Y is the nonlabor-related portion of 

the national unadjusted payment rate. 

Y = .40 * (national unadjusted payment 

rate) 

Adjusted Medicare Payment = Y + Xa

Step 6. If a provider is a SCH, set forth 

in the regulations at § 412.92, or an 

EACH, which is considered to be a SCH 

under section 1886(d)(5)(D)(iii)(III) of 

the Act, and located in a rural area, as 

defined in § 412.64(b), or is treated as 

being located in a rural area under 

§ 412.103, multiply the wage index 

adjusted payment rate by 1.071 to 

calculate the proposed total payment. 

The formula below is a mathematical 

representation of Step 6 and applies the 

rural adjustment for rural SCHs. 

Adjusted Medicare Payment (SCH or 

EACH) = Adjusted Medicare 

Payment * 1.071 

We have provided examples below of 

the calculation of both the proposed full 

and reduced national unadjusted 

payment rates that would apply to 

certain outpatient items and services 

performed by hospitals that meet and 

that fail to meet the Hospital OQR 

Program requirements, using the steps 

outlined above. For purposes of this 

example, we use a provider that is 

located in Brooklyn, New York that is 

assigned to CBSA 35644. This provider 

bills one service that is assigned to APC 

0019 (Level I Excision/Biopsy). The 

proposed CY 2012 full national 

unadjusted payment rate for APC 0019 

is $338.51. The proposed reduced 

national unadjusted payment rate for a 

hospital that fails to meet the Hospital 

OQR Program requirements is $331.74. 

This reduced rate is calculated by 

multiplying the reporting ratio of 0.980 

by the full unadjusted payment rate for 

APC 0019. 

The proposed FY 2012 wage index for 

a provider located in CBSA 35644 in 

New York is 1.3190. The proposed 

labor-related portion of the full national 

unadjusted payment is $267.90 (.60 * 

$338.51 *1.3190). The proposed laborrelated portion of the reduced national 

unadjusted payment is $262.54 (.60 * 

$331.74 * 1.3190). The proposed 

nonlabor-related portion of the full 

national unadjusted payment is $135.40 

(.40 * $338.51). The proposed nonlaborrelated portion of the reduced national 

unadjusted payment is $132.70 (.40 * 

$331.74). The sum of the labor-related 

and nonlabor-related portions of the full 

national adjusted payment is $403.30 

($267.90 + $135.40). The sum of the 

reduced national adjusted payment is 

$395.24 ($262.54 + $132.70). 

I. Proposed Beneficiary Copayments 

1. Background 

Section 1833(t)(3)(B) of the Act 

requires the Secretary to set rules for 

determining the unadjusted copayment 

amounts to be paid by beneficiaries for 

covered OPD services. Section 

1833(t)(8)(C)(ii) of the Act specifies that 

the Secretary must reduce the national 

unadjusted copayment amount for a 

covered OPD service (or group of such 

services) furnished in a year in a 

manner so that the effective copayment 

rate (determined on a national 

unadjusted basis) for that service in the 

year does not exceed a specified 

percentage. As specified in section 

1833(t)(8)(C)(ii)(V) of the Act, for all 

services paid under the OPPS in CY 

2010, and in calendar years thereafter, 

the percentage is 40 percent of the APC 

payment rate. 

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

provides that, for a covered OPD service 

(or group of such services) furnished in 

a year, the national unadjusted 

copayment amount cannot be less than 

20 percent of the OPD fee schedule 

amount. However, section 

1833(t)(8)(C)(i) of the Act limits the 

amount of beneficiary copayment that 

may be collected to the amount of the 

inpatient deductible. Section 4104 of 

the Affordable Care Act eliminated the 

Part B coinsurance for preventive 

services furnished on and after January 

1, 2011 that meet certain requirements, 

including flexible sigmoidoscopies and 

screening colonscopies, and waived the 

Part B deductible for screening 

colonoscopies that become diagnostic 

during the procedure. Our discussion of 

the changes made by the Affordable 

Care Act with regard to copayments for 

preventive services furnished on and 

after January 1, 2011 may be found in 

section XII.B. of the CY 2011 OPPS final 

rule (75 FR 72013). 

2. Proposed OPPS Copayment Policy 

For CY 2012, we are proposing to 

determine copayment amounts for new 

and revised APCs using the same 

methodology that we implemented 

beginning in CY 2004. (We refer readers 

to the November 7, 2003 OPPS final rule 

with comment period (68 FR 63458).) In 

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Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 42225 

addition, we are proposing to use the 

same standard rounding principles that 

we have historically used in instances 

where the application of our standard 

copayment methodology would result in 

a copayment amount that is less than 20 

percent and cannot be rounded, under 

standard rounding principles, to 20 

percent. (We refer readers to the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66687) in which 

we discuss our rationale for applying 

these rounding principles.) The 

proposed national unadjusted 

copayment amounts for services payable 

under the OPPS that would be effective 

January 1, 2012, are shown in Addenda 

A and B to this proposed rule (which 

are referenced in section XVII. of this 

proposed rule and available via the 

Internet on the CMS Web site). As 

discussed in section XIV.E. of this 

proposed rule, for CY 2012, the 

proposed Medicare beneficiary’s 

minimum unadjusted copayment and 

national unadjusted copayment for a 

service to which a reduced national 

unadjusted payment rate applies would 

equal the product of the reporting ratio 

and the national unadjusted copayment, 

or the product of the reporting ratio and 

the minimum unadjusted copayment, 

respectively, for the service. 

3. Proposed Calculation of an Adjusted 

Copayment Amount for an APC Group 

Individuals interested in calculating 

the national copayment liability for a 

Medicare beneficiary for a given service 

provided by a hospital that met or failed 

to meet its Hospital OQR Program 

requirements should follow the 

formulas presented in the following 

steps. 

Step 1. Calculate the beneficiary 

payment percentage for the APC by 

dividing the APC’s national unadjusted 

copayment by its payment rate. For 

example, using APC 0019, $67.71 is 20 

percent of the full national unadjusted 

payment rate of $338.51. For APCs with 

only a minimum unadjusted copayment 

in Addenda A and B of this proposed 

rule (which are referenced in section 

XVII. of this proposed rule and available 

via the Internet on the CMS Web site), 

the beneficiary payment percentage is 

20 percent. 

The formula below is a mathematical 

representation of Step 1 and calculates 

national copayment as a percentage of 

national payment for a given service. 

B is the beneficiary payment 

percentage. 

B = National unadjusted copayment for 

APC/national unadjusted payment rate 

for APC 

Step 2. Calculate the appropriate 

wage-adjusted payment rate for the APC 

for the provider in question, as 

indicated in Steps 2 through 4 under 

section II.H. of this proposed rule. 

Calculate the rural adjustment for 

eligible providers as indicated in Step 6 

under section II.H. of this proposed rule. 

Step 3. Multiply the percentage 

calculated in Step 1 by the payment rate 

calculated in Step 2. The result is the 

wage-adjusted copayment amount for 

the APC. 

The formula below is a mathematical 

representation of Step 3 and applies the 

beneficiary percentage to the adjusted 

payment rate for a service calculated 

under section II.H. of this proposed rule, 

with and without the rural adjustment, 

to calculate the adjusted beneficiary 

copayment for a given service. 

Wage-adjusted copayment amount for 

the APC = Adjusted Medicare 

Payment * B 

Wage-adjusted copayment amount for 

the APC (SCH or EACH) = 

(Adjusted Medicare Payment * 

1.071) * B 

Step 4. For a hospital that failed to 

meet its Hospital OQR Program 

requirements, multiply the copayment 

calculated in Step 3 by the reporting 

ratio of 0.980. 

The proposed unadjusted copayments 

for services payable under the OPPS 

that would be effective January 1, 2012, 

are shown in Addenda A and B to this 

proposed rule (which are referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site). We note that the proposed 

national unadjusted payment rates and 

copayment rates shown in Addenda A 

and B to this proposed rule reflect the 

proposed full CY 2012 OPD fee 

schedule increase factor discussed in 

section XIV.E. of this proposed rule. 

Also as noted above, section 

1833(t)(8)(C)(i) of the Act limits the 

amount of beneficiary copayment that 

may be collected to the amount of the 

inpatient deductible. 

III. Proposed OPPS Ambulatory 

Payment Classification (APC) Group 

Policies 

A. Proposed OPPS Treatment of New 

CPT and Level II HCPCS Codes 

CPT and Level II HCPCS codes are 

used to report procedures, services, 

items, and supplies under the hospital 

OPPS. Specifically, CMS recognizes the 

following codes on OPPS claims: (1) 

Category I CPT codes, which describe 

medical services and procedures; (2) 

Category III CPT codes, which describe 

new and emerging technologies, 

services, and procedures; and (3) Level 

II HCPCS codes, which are used 

primarily to identify products, supplies, 

temporary procedures, and services not 

described by CPT codes. CPT codes are 

established by the American Medical 

Association (AMA) and the Level II 

HCPCS codes are established by the 

CMS HCPCS Workgroup. These codes 

are updated and changed throughout the 

year. CPT and HCPCS code changes that 

affect the OPPS are published both 

through the annual rulemaking cycle 

and through the OPPS quarterly update 

Change Requests (CRs). CMS releases 

new Level II HCPCS codes to the public 

or recognizes the release of new CPT 

codes by the AMA and makes these 

codes effective (that is, the codes can be 

reported on Medicare claims) outside of 

the formal rulemaking process via OPPS 

quarterly update CRs. This quarterly 

process offers hospitals access to codes 

that may more accurately describe items 

or services furnished and/or provides 

payment or more accurate payment for 

these items or services in a timelier 

manner than if CMS waited for the 

annual rulemaking process. We solicit 

comments on these new codes and 

finalize our proposals related to these 

codes through our annual rulemaking 

process. In Table 14 below, we 

summarize our proposed process for 

updating codes through our OPPS 

quarterly update CRs, seeking public 

comments, and finalizing their 

treatment under the OPPS. We note that 

because of the timing of the publication 

of this proposed rule, the codes that will 

be implemented through the July 2011 

OPPS quarterly update are not included 

in Addendum B of this proposed rule 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site), while 

those codes based upon the April 2011 

OPPS quarterly update are included in 

Addendum B. 

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42226 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

TABLE 14—COMMENT TIMEFRAME FOR NEW OR REVISED HCPCS CODES

OPPS quarterly update 

CR Type of code Effective date Comments sought When finalized 

April l, 2011 .................... Level II HCPCS Codes ........ April 1, 2011 ................. CY 2012 OPPS/ASC proposed rule.CY 2012 OPPS/ASC final 

rule with comment period. 

July 1, 2011 ................... Level II HCPCS Codes ........ July 1, 2011 ................. CY 2012 OPPS/ASC proposed rule.CY 2012 OPPS/ASC final 

rule with comment period. 

Category I (certain vaccine 

codes) and III CPT codes.

July 1, 2011 ................. CY 2012 OPPS/ASC proposed rule.CY 2012 OPPS/ASC final 

rule with comment period. 

October 1, 2011 ............. Level II HCPCS Codes ........ October 1, 2011 ........... CY 2012 OPPS/ASC final 

rule with comment period.

CY 2013 OPPS/ASC final 

rule with comment period. 

January 1, 2012 ............. Level II HCPCS Codes ........ January 1, 2012 ........... CY 2012 OPPS/ASC final 

rule with comment period.

CY 2013 OPPS/ASC final 

rule with comment period. 

Category I and III CPT 

Codes.

January 1, 2012 ........... CY 2012 OPPS/ASC final 

rule with comment period.

CY 2013 OPPS/ASC final 

rule with comment period. 

This process is discussed in detail 

below. We have separated our 

discussion into two sections based on 

whether we are proposing to solicit 

public comments in this CY 2012 OPPS/ 

ASC proposed rule or whether we will 

be soliciting public comments in the CY 

2012 OPPS/ASC final rule with 

comment period. We note that we 

sought public comment in the CY 2011 

OPPS/ASC final rule with comment 

period on the new CPT and Level II 

HCPCS codes that were effective 

January 1, 2011. We also sought public 

comments in the CY 2011 OPPS/ASC 

final rule with comment period on the 

new Level II HCPCS codes effective 

October 1, 2010. These new codes, with 

an effective date of October 1, 2010, or 

January 1, 2011, were flagged with 

comment indicator ‘‘NI’’ (New code, 

interim APC assignment; comments will 

be accepted on the interim APC 

assignment for the new code) in 

Addendum B to the CY 2011 OPPS/ASC 

final rule with comment period to 

indicate that we were assigning them an 

interim payment status and an APC and 

payment rate, if applicable, which were 

subject to public comment following 

publication of the CY 2011 OPPS/ASC 

final rule with comment period. We will 

respond to public comments and 

finalize our proposed OPPS treatment of 

these codes in the CY 2012 OPPS/ASC 

final rule with comment period. 

1. Proposed Treatment of New Level II 

HCPCS Codes and Category I CPT 

Vaccine Codes and Category III CPT 

Codes for Which We Are Soliciting 

Public Comments in This CY 2012 

Proposed Rule 

Through the April 2011 OPPS 

quarterly update CR (Transmittal 2174, 

Change Request 7342, dated March 18, 

2011) and the July 2011 OPPS quarterly 

update CR (Transmittal 2234, Change 

Request 7443, dated May 27, 2011), we 

recognized several new HCPCS codes 

for separate payment under the OPPS. 

Effective April 1 and July 1 of CY 2011, 

we made effective a total of 22 new 

Level II HCPCS codes and 14 Category 

III CPT codes. Specifically, 5 new Level 

II HCPCS codes were effective for the 

April 2011 update and another 17 new 

Level II HCPCS codes were effective for 

the July 2011 update for a total of 22. 

Fourteen new Category III CPT codes 

were effective for the July 2011 update. 

Of the 22 new Level II HCPCS codes, we 

recognized for separate payment 16 of 

these codes, and of the 14 new Category 

III CPT codes, we recognized for 

separate payment 12 of these codes, for 

a total of 28 new HCPCS codes that are 

recognized for separate payment for CY 

2012. 

Through the April 2011 OPPS 

quarterly update CR, we allowed 

separate payment for each of the five 

new Level II HCPCS codes. Specifically, 

as displayed in Table 15 below, we 

provided separate payment for the 

following HCPCS codes: 

• HCPCS code C9280 (Injection, 

eribulin mesylate, 1 mg) 

• HCPCS code C9281 (Injection, 

pegloticase, 1 mg) 

• HCPCS code C9282 (Injection, 

ceftaroline fosamil, 10 mg) 

• HCPCS code Q2040 (Injection, 

incobotulinumtoxin A, 1 unit) 

• HCPCS code C9729 (Percutaneous 

laminotomy/laminectomy (intralaminar 

approach) for decompression of neural 

elements, (with ligamentous resection, 

discectomy, facetectomy and/or 

foraminotomy, when performed) any 

method under indirect image guidance, 

with the use of an endoscope when 

performed, single or multiple levels, 

unilateral or bilateral; lumbar) 

We note that HCPCS code Q2040 

replaced HCPCS code C9278 (Injection, 

incobotulinumtoxin A, 1 unit) 

beginning April 1, 2010. HCPCS code 

C9278 was effective January 1, 2011, 

and deleted March 30, 2011, because it 

was replaced with HCPCS code Q2040. 

HCPCS code C9278 was assigned to 

pass-through status beginning January 1, 

2011, when the code was implemented. 

Because HCPCS code Q2040 describes 

the same drug as HCPCS code C9278, 

we are continuing its pass-through 

status and assigning the HCPCS Q-code 

to the same APC and status indicator as 

its predecessor HCPCS C-code, as 

shown in Table 15 below. Specifically, 

HCPCS code Q2040 is assigned to APC 

9278 and status indicator ‘‘G.’’ 

We are proposing to assign the Level 

II HCPCS codes listed in Table 15 to the 

specific proposed APCs and status 

indicators set forth in this proposed 

rule. 

TABLE 15—LEVEL II HCPCS CODES WITH A CHANGE IN OPPS STATUS INDICATOR OR NEWLY IMPLEMENTED IN APRIL

2011 

CY 2011 

HCPCS 

code 

CY 2011 long descriptor 

Proposed 

CY 2012 

status 

indicator 

Proposed 

CY 2012 

APC 

C9280 ..... Injection, eribulin mesylate, 1 mg ............................................................................................................... G 9280 

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TABLE 15—LEVEL II HCPCS CODES WITH A CHANGE IN OPPS STATUS INDICATOR OR NEWLY IMPLEMENTED IN APRIL

2011—Continued 

CY 2011 

HCPCS 

code 

CY 2011 long descriptor 

Proposed 

CY 2012 

status 

indicator 

Proposed 

CY 2012 

APC 

C9281 ..... Injection, pegloticase, 1 mg ........................................................................................................................ G 9281 

C9282 ..... Injection, ceftaroline fosamil, 10 mg ........................................................................................................... G 9282 

C9729 ..... Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, 

(with ligamentous resection, discectomy, facetectomy and/or foraminotomy, when performed) any 

method under indirect image guidance, with the use of an endoscope when performed, single or 

multiple levels, unilateral or bilateral; lumbar.

T 0208 

Q2040* ... Injection, incobotulinumtoxin A, 1 unit ........................................................................................................ G 9278 

*Level II HCPCS code C9278 was deleted March 31, 2011, and replaced with HCPCS code Q2040 effective April 1, 2011. 

Through the July 2011 OPPS quarterly 

update CR, which included HCPCS 

codes that were made effective July 1, 

2011, we allowed separate payment for 

11 of the 17 new Level II HCPCS codes. 

Specifically, as displayed in Table 16 of 

this proposed rule, we provided 

separate payment for the following 

HCPCS codes: 

• HCPCS code C9283 (Injection, 

acetaminophen, 10 mg) 

• HCPCS code C9284 (Injection, 

ipilimumab, 10 mg) 

• HCPCS code C9285 (Lidocaine 70 

mg/tetracaine 70 mg, per patch) 

• HCPCS code C9365 (Oasis Ultra TriLayer matrix, per square centimeter) 

• HCPCS code C9406 (Iodine I–123 

ioflupane, diagnostic, per study dose, 

up to 5 millicuries) 

• HCPCS code C9730 (Bronchoscopic 

bronchial thermoplasty with imaging 

guidance (if performed), radiofrequency 

ablation of airway smooth muscle, 1 

lobe) 

• HCPCS code C9731 (Bronchoscopic 

bronchial thermoplasty with imaging 

guidance (if performed), radiofrequency 

ablation of airway smooth muscle, 2 or 

more lobes) 

• HCPCS code Q2041 (Injection, von 

willebrand factor complex (human), 

Wilate, 1 i.u. vwf:rco) 

• HCPCS code Q2042 (Injection, 

hydroxyprogesterone caproate, 1 mg) 

• HCPCS code Q2043 (Sipuleucel-t, 

minimum of 50 million autologous 

cd54+ cells activated with pap-gm-csf, 

including leukapheresis and all other 

preparatory procedures, per infusion) 

• HCPCS code Q2044 (Injection, 

belimumab, 10 mg) 

We note that two of the Level II 

HCPCS Q-codes that were made 

effective July 1, 2011, were previously 

described by a HCPCS J-code and a Ccode that were assigned to pass-through 

status under the hospital OPPS. 

Specifically, HCPCS code Q2041 

replaced HCPCS code J7184 (Injection, 

von willebrand factor complex (human), 

Wilate, per 100 iu vwf:rco) beginning 

July 1, 2011. HCPCS code J7184 was 

assigned to pass-through status when it 

was made effective January 1, 2011; 

however, the code is ‘‘Not Payable by 

Medicare’’ because HCPCS code J7184 is 

replaced with HCPCS code Q2041 

effective July 1, 2011. Therefore, HCPCS 

code J7184 was reassigned to status 

indicator ‘‘E’’ effective July 1, 2011. 

Because HCPCS code J7184 describes 

the same drug as HCPCS code Q2041, 

we continued its pass-through status 

and assigned HCPCS code Q2041 to 

status indicator ‘‘G’’ effective July 1, 

2011. However, because the dosage 

descriptor for HCPCS code Q2041 is not 

the same as HCPCS code J7184, we 

reassigned HCPCS code Q2041 to a new 

APC to maintain data consistency for 

future rulemaking. Specifically, HCPCS 

code Q2041 was assigned to APC 1352 

effective July 1, 2011. In addition, 

HCPCS code Q2043 replaced HCPCS 

code C9273 (Sipuleucel-t, minimum of 

50 million autologous cd54+ cells 

activated with pap-gm-csf, including 

leukapheresis and all other preparatory 

procedures, per infusion) beginning July 

1, 2011. HCPCS code C9273 was 

assigned to pass-through status when it 

was made effective October 1, 2010. 

Because HCPCS code Q2043 describes 

the same product as HCPCS code C9273, 

we continued its pass-through status 

and assigned HCPCS code Q2043 to 

status indicator ‘‘G’’ as well as assigned 

it to the same APC, specifically APC 

9273, effective July 1, 2011. 

Of the 17 HCPCS codes that were 

made effective July 1, 2011, we did not 

recognize for separate payment 6 

HCPCS codes that describe durable 

medical equipment (DME) because DME 

is paid under the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Fee Schedule and 

not the OPPS. These codes are listed in 

Table 16 below, and are assigned to 

either status indicator ‘‘Y’’ or ‘‘A’’ 

effective July 1, 2011. 

Table 16 below includes a complete 

list of the Level II HCPCS codes that 

were made effective July 1, 2011, with 

their proposed status indicators, APC 

assignments, and payment rates for CY 

2012. 

TABLE 16—NEW LEVEL II HCPCS CODES IMPLEMENTED IN JULY 2011 

CY 2011 

HCPCS 

code 

CY 2011 long descriptor 

Proposed CY 

2012 status 

indicator 

Proposed CY 

2012 APC 

Proposed CY 

2012 payment 

rate 

C9283 ..... Injection, acetaminophen, 10 mg ........................................................................... G 9283 $0.11 

C9284 ..... Injection, ipilimumab, 1 mg ..................................................................................... G 9284 127.20 

C9285 ..... Lidocaine 70 mg/tetracaine 70 mg, per patch ........................................................ G 9285 13.57 

C9365 ..... Oasis Ultra Tri-Layer matrix, per square centimeter .............................................. G 9365 10.60 

C9406 ..... Iodine I–123 ioflupane, diagnostic, per study dose, up to 5 millicuries ................. G 9406 1,908.00 

C9730 ..... Bronchoscopic bronchial thermoplasty with imaging guidance (if performed), radiofrequency ablation of airway smooth muscle, 1 lobe.T 0415 1,971.77 

C9731 ..... Bronchoscopic bronchial thermoplasty with imaging guidance (if performed), radiofrequency ablation of airway smooth muscle, 2 or more lobes.T 0415 1,971.77 

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TABLE 16—NEW LEVEL II HCPCS CODES IMPLEMENTED IN JULY 2011—Continued 

CY 2011 

HCPCS 

code 

CY 2011 long descriptor 

Proposed CY 

2012 status 

indicator 

Proposed CY 

2012 APC 

Proposed CY 

2012 payment 

rate 

K0741 ..... Portable gaseous oxygen system, rental, includes portable container, regulator, 

flowmeter, humidifier, cannula or mask, and tubing, for cluster headaches.

Y NA NA 

K0742 ..... Portable oxygen contents, gaseous, 1 month’s supply = 1 unit, for cluster headaches, for initial months supply or to replace used contents.Y NA NA 

K0743 ..... Suction pump, home model, portable, for use on wounds .................................... Y NA NA 

K0744 ..... Absorptive wound dressing for use with suction pump, home model, portable, 

pad size 16 square inches or less.

A NA NA 

K0745 ..... Absorptive wound dressing for use with suction pump, home model, portable, 

pad size more than 16 square inches but less than or equal to 48 square 

inches.

A NA NA 

K0746 ..... Absorptive wound dressing for use with suction pump, home model, portable, 

pad size greater than 48 square inches.

A NA NA 

Q2041 ..... Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco ............... G 1352 0.88 

Q2042 ..... Injection, hydroxyprogesterone caproate, 1 mg ..................................................... K 1354 2.90 

Q2043 ..... Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with papgm-csf, including leukapheresis and all other preparatory procedures, per infusion.G 9273 32,860.00 

Q2044 ..... Injection, belimumab, 10 mg .................................................................................. G 1353 39.15 

For CY 2012, we are proposing to 

continue our established policy of 

recognizing Category I CPT vaccine 

codes for which FDA approval is 

imminent and Category III CPT codes 

that the AMA releases in January of 

each year for implementation in July 

through the OPPS quarterly update 

process. Under the OPPS, Category I 

vaccine codes and Category III CPT 

codes that are released on the AMA Web 

site in January are made effective in July 

of the same year through the July 

quarterly update CR, consistent with the 

AMA’s implementation date for the 

codes. Through the July 2011 OPPS 

quarterly update CR, we allow separate 

payment for 12 of the 14 new Category 

III CPT codes effective July 1, 2011. 

Specifically, as displayed in Table 17 of 

this proposed rule, we allow separate 

payment for the following CPT codes: 

• CPT code 0263T (Intramuscular 

autologous bone marrow cell therapy, 

with preparation of harvested cells, 

multiple injections, one leg, including 

ultrasound guidance, if performed; 

complete procedure including unilateral 

or bilateral bone marrow harvest) 

• CPT code 0264T (Intramuscular 

autologous bone marrow cell therapy, 

with preparation of harvested cells, 

multiple injections, one leg, including 

ultrasound guidance, if performed; 

complete procedure excluding bone 

marrow harvest) 

• CPT code 0265T (Intramuscular 

autologous bone marrow cell therapy, 

with preparation of harvested cells, 

multiple injections, one leg, including 

ultrasound guidance, if performed; 

unilateral or bilateral bone marrow 

harvest only for intramuscular 

autologous bone marrow cell therapy) 

• CPT code 0267T (Implantation or 

replacement of carotid sinus baroreflex 

activation device; lead only, unilateral 

(includes intra-operative interrogation, 

programming, and repositioning, when 

performed)) 

• CPT code 0268T (Implantation or 

replacement of carotid sinus baroreflex 

activation device; pulse generator only 

(includes intra-operative interrogation, 

programming, and repositioning, when 

performed)) 

• CPT code 0269T (Revision or 

removal of carotid sinus baroreflex 

activation device; total system (includes 

generator placement, unilateral or 

bilateral lead placement, intra-operative 

interrogation, programming, and 

repositioning, when performed)) 

• CPT code 0270T (Revision or 

removal of carotid sinus baroreflex 

activation device; lead only, unilateral 

(includes intra-operative interrogation, 

programming, and repositioning, when 

performed)) 

• CPT code 0271T (Revision or 

removal of carotid sinus baroreflex 

activation device; pulse generator only 

(includes intra-operative interrogation, 

programming, and repositioning, when 

performed)) 

• CPT code 0272T (Interrogation 

device evaluation (in person), carotid 

sinus baroreflex activation system, 

including telemetric iterative 

communication with the implantable 

device to monitor device diagnostics 

and programmed therapy values, with 

interpretation and report (e.g., battery 

status, lead impedance, pulse 

amplitude, pulse width, therapy 

frequency, pathway mode, burst mode, 

therapy start/stop times each day)) 

• CPT code 0273T (Interrogation 

device evaluation (in person), carotid 

sinus baroreflex activation system, 

including telemetric iterative 

communication with the implantable 

device to monitor device diagnostics 

and programmed therapy values, with 

interpretation and report (e.g., battery 

status, lead impedance, pulse 

amplitude, pulse width, therapy 

frequency, pathway mode, burst mode, 

therapy start/stop times each day); with 

programming) 

• CPT 0274T (Percutaneous 

laminotomy/laminectomy (intralaminar 

approach) for decompression of neural 

elements, (with or without ligamentous 

resection, discectomy, facetectomy and/ 

or foraminotomy) any method under 

indirect image guidance (e.g., 

fluoroscopic, CT), with or without the 

use of an endoscope, single or multiple 

levels, unilateral or bilateral; cervical or 

thoracic) 

• CPT 0275T (Percutaneous 

laminotomy/laminectomy (intralaminar 

approach) for decompression of neural 

elements, (with or without ligamentous 

resection, discectomy, facetectomy and/ 

or foraminotomy) any method under 

indirect image guidance (e.g., 

fluoroscopic, CT), with or without the 

use of an endoscope, single or multiple 

levels, unilateral or bilateral; lumbar) 

(As published in the July 2011 OPPS 

quarterly update CR, CPT code 0275T 

replaced Level II HCPCS code C9729 

effective July 1, 2011.) 

We note that Category III CPT codes 

0262T (Implantation of catheterdelivered prosthetic pulmonary valve, 

endovascular approach) and 0266T 

(Implantation or replacement of carotid 

sinus baroreflex activation device; total 

system (includes generator placement, 

unilateral or bilateral lead placement, 

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intra-operative interrogation, 

programming, and repositioning, when 

performed)) are assigned to status 

indicator ‘‘C’’ (Inpatient Procedures) 

under the hospital OPPS beginning July 

1, 2011. We believe these procedures 

should only be paid when provided in 

the inpatient setting because of the 

clinical circumstances under which 

these procedures are performed. There 

are no new Category I Vaccine CPT 

codes for the July 2011 update. 

Table 17 below lists the Category III 

CPT codes that were implemented in 

July 2011 for which we are proposing to 

allow separate payment, along with 

their proposed status indicators, 

proposed APC assignments, and 

proposed payment rates for CY 2012. 

TABLE 17—CATEGORY III CPT CODES IMPLEMENTED IN JULY 2011 

CY 2011 CPT 

code CY 2011 long descriptor 

Proposed CY 

2012 status 

indicator 

Proposed CY 

2012 APC 

Proposed CY 

2012 payment 

rate 

0262T .................. Implantation of catheter-delivered prosthetic pulmonary valve, 

endovascular approach.

C NA NA 

0263T .................. Intramuscular autologous bone marrow cell therapy, with preparation 

of harvested cells, multiple injections, one leg, including ultrasound 

guidance, if performed; complete procedure including unilateral or 

bilateral bone marrow harvest.

S 0112 $2,166.33 

0264T .................. Intramuscular autologous bone marrow cell therapy, with preparation 

of harvested cells, multiple injections, one leg, including ultrasound 

guidance, if performed; complete procedure excluding bone marrow 

harvest.

S 0112 2,166.33 

0265T .................. Intramuscular autologous bone marrow cell therapy, with preparation 

of harvested cells, multiple injections, one leg, including ultrasound 

guidance, if performed; unilateral or bilateral bone marrow harvest 

only for intramuscular autologous bone marrow cell therapy.

S 0112 2,166.33 

0266T .................. Implantation or replacement of carotid sinus baroreflex activation device; total system (includes generator placement, unilateral or bilateral lead placement, intra-operative interrogation, programming, and 

repositioning, when performed).

C NA NA 

0267T .................. Implantation or replacement of carotid sinus baroreflex activation device; lead only, unilateral (includes intra-operative interrogation, programming, and repositioning, when performed).T 0687 1,496.15 

0268T .................. Implantation or replacement of carotid sinus baroreflex activation device; pulse generator only (includes intra-operative interrogation, 

programming, and repositioning, when performed).

S 0039 14,743.58 

0269T .................. Revision or removal of carotid sinus baroreflex activation device; total 

system (includes generator placement, unilateral or bilateral lead 

placement, intra-operative interrogation, programming, and repositioning, when performed).

T 0221 2,567.33 

0270T .................. Revision or removal of carotid sinus baroreflex activation device; lead 

only, unilateral (includes intra-operative interrogation, programming, 

and repositioning, when performed).

T 0687 1,496.15 

0271T .................. Revision or removal of carotid sinus baroreflex activation device; pulse 

generator only (includes intra-operative interrogation, programming, 

and repositioning, when performed).

T 0688 2,003.33 

0272T .................. Interrogation device evaluation (in person), carotid sinus baroreflex activation system, including telemetric iterative communication with the 

implantable device to monitor device diagnostics and programmed 

therapy values, with interpretation and report (e.g., battery status, 

lead impedance, pulse amplitude, pulse width, therapy frequency, 

pathway mode, burst mode, therapy start/stop times each day).

S 0218 80.78 

0273T .................. Interrogation device evaluation (in person), carotid sinus baroreflex activation system, including telemetric iterative communication with the 

implantable device to monitor device diagnostics and programmed 

therapy values, with interpretation and report (e.g., battery status, 

lead impedance, pulse amplitude, pulse width, therapy frequency, 

pathway mode, burst mode, therapy start/stop times each day); with 

programming.

S 0218 80.78 

0274T .................. Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method 

under indirect image guidance (e.g., fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or 

bilateral; cervical or thoracic.

T 0208 3,535.92 

0275T .................. Percutaneous laminotomy/laminectomy (intralaminar approach) for decompression of neural elements, (with or without ligamentous resection, discectomy, facetectomy and/or foraminotomy) any method 

under indirect image guidance (e.g., fluoroscopic, CT), with or without the use of an endoscope, single or multiple levels, unilateral or 

bilateral; lumbar.

T 0208 3,535.92 

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42230 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

We are soliciting public comments on 

the CY 2012 proposed status indicators 

and the proposed APC assignments and 

payment rates, if applicable, for the 

Level II HCPCS codes and the Category 

III CPT codes that are newly recognized 

in April or July 2011 through the 

respective OPPS quarterly update CRs. 

These codes are listed in Tables 15, 16, 

and 17 of this proposed rule. We are 

proposing to finalize their status 

indicators and their APC assignments 

and payment rates, if applicable, in the 

CY 2012 OPPS/ASC final rule with 

comment period. Because the July 2011 

OPPS quarterly update CR is issued 

close to the publication of this proposed 

rule, the Level II HCPCS codes and the 

Category III CPT codes implemented 

through the July 2011 OPPS quarterly 

update CR could not be included in 

Addendum B to this proposed rule, but 

these codes are listed in Tables 16 and 

17, respectively. We are proposing to 

incorporate these codes into Addendum 

B to the CY 2012 OPPS/ASC final rule 

with comment period, which is 

consistent with our annual OPPS update 

policy. The Level II HCPCS codes 

implemented or modified through the 

April 2011 OPPS update CR and 

displayed in Table 15 are included in 

Addendum B to this proposed rule 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site), where 

their proposed CY 2012 payment rates 

also are shown. 

2. Proposed Process for New Level II 

HCPCS Codes and Category I and 

Category III CPT Codes for Which We 

Will Be Soliciting Public Comments on 

the CY 2012 OPPS/ASC Final Rule With 

Comment Period 

As has been our practice in the past, 

we incorporate those new Category I 

and III CPT codes and new Level II 

HCPCS codes that are effective January 

1 in the final rule with comment period 

updating the OPPS for the following 

calendar year. These codes are released 

to the public via the CMS HCPCS (for 

Level II HCPCS codes) and AMA Web 

sites (for CPT codes), and also through 

the January OPPS quarterly update CRs. 

In the past, we also have released new 

Level II HCPCS codes that are effective 

October 1 through the October OPPS 

quarterly update CRs and incorporated 

these new codes in the final rule with 

comment period updating the OPPS for 

the following calendar year. All of these 

codes are flagged with comment 

indicator ‘‘NI’’ in Addendum B to the 

OPPS/ASC final rule with comment 

period to indicate that we are assigning 

them an interim payment status which 

is subject to public comment. 

Specifically, the status indicator and the 

APC assignment and payment rate, if 

applicable, for all such codes flagged 

with comment indicator ‘‘NI’’ are open 

to public comment in the final rule with 

comment period, and we respond to 

these comments in the OPPS/ASC final 

rule with comment period for the next 

calendar year’s OPPS/ASC update. We 

are proposing to continue this process 

for CY 2012. Specifically, for CY 2012, 

we are proposing to include in 

Addendum B (which is available via the 

Internet on the CMS Web site) to the CY 

2012 OPPS/ASC final rule with 

comment period the new Category I and 

III CPT codes effective January 1, 2012 

(including the Category III CPT codes 

that were released by the AMA in July 

2011) that would be incorporated in the 

January 2012 OPPS quarterly update CR 

and the new Level II HCPCS codes, 

effective October 1, 2011, or January 1, 

2012, that would be released by CMS in 

its October 2011 and January 2012 OPPS 

quarterly update CRs. These codes 

would be flagged with comment 

indicator ‘‘NI’’ in Addendum B to the 

CY 2012 OPPS/ASC final rule with 

comment period to indicate that we 

have assigned them an interim OPPS 

payment status for CY 2012. Their status 

indicators and their APC assignments 

and payment rates, if applicable, would 

be open to public comment in the CY 

2012 OPPS/ASC final rule with 

comment period and would be finalized 

in the CY 2013 OPPS/ASC final rule 

with comment period. We note that the 

Category III CPT codes that were 

released by the AMA in July 2011 that 

are subject to comment in this CY 2012 

OPPS/ASC proposed rule, and are listed 

in Table 17, will not be assigned to 

comment indicator ‘‘NI’’ in Addendum 

B because comments about these codes 

will be addressed in the CY 2012 OPPS/ 

ASC final rule with comment period. 

B. Proposed OPPS Changes—Variations 

Within APCs 

1. Background 

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

requires the Secretary to develop a 

classification system for covered 

hospital outpatient department services. 

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

that the Secretary may establish groups 

of covered OPD services within this 

classification system, so that services 

classified within each group are 

comparable clinically and with respect 

to the use of resources. In accordance 

with these provisions, we developed a 

grouping classification system, referred 

to as Ambulatory Payment 

Classifications (APCs), as set forth in 

§ 419.31 of the regulations. We use 

Level I and Level II HCPCS codes to 

identify and group the services within 

each APC. The APCs are organized such 

that each group is homogeneous both 

clinically and in terms of resource use. 

Using this classification system, we 

have established distinct groups of 

similar services. We also have 

developed separate APC groups for 

certain medical devices, drugs, 

biologicals, therapeutic 

radiopharmaceuticals, and 

brachytherapy devices. 

We have packaged into payment for 

each procedure or service within an 

APC group the costs associated with 

those items or services that are directly 

related to, and supportive of, performing 

the main independent procedures or 

furnishing the services. Therefore, we 

do not make separate payment for these 

packaged items or services. For 

example, packaged items and services 

include: (1) use of an operating, 

treatment, or procedure room; (2) use of 

a recovery room; (3) observation 

services; (4) anesthesia; (5) medical/ 

surgical supplies; (6) pharmaceuticals 

(other than those for which separate 

payment may be allowed under the 

provisions discussed in section V. of 

this proposed rule); (7) incidental 

services such as venipuncture; and (8) 

guidance services, image processing 

services, intraoperative services, 

imaging supervision and interpretation 

services, diagnostic 

radiopharmaceuticals, and contrast 

media. Further discussion of packaged 

services is included in section II.A.3. of 

this proposed rule. 

In CY 2008, we implemented 

composite APCs to provide a single 

payment for groups of services that are 

typically performed together during a 

single clinical encounter and that result 

in the provision of a complete service 

(72 FR 66650 through 66652). Under CY 

2011 OPPS policy, we provide 

composite APC payment for certain 

extended assessment and management 

services, low dose rate (LDR) prostate 

brachytherapy, cardiac 

electrophysiologic evaluation and 

ablation, mental health services, and 

multiple imaging services. Further 

discussion of composite APCs is 

included in section II.A.2.e. of this 

proposed rule. 

Under the OPPS, we generally pay for 

hospital outpatient services on a rateper-service basis, where the service may 

be reported with one or more HCPCS 

codes. Payment varies according to the 

APC group to which the independent 

service or combination of services is 

assigned. Each APC weight represents 

the hospital median cost of the services 

included in that APC, relative to the 

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hospital median cost of the services 

included in APC 0606 (Level 3 Hospital 

Clinic Visits). The APC weights are 

scaled to APC 0606 because it is the 

middle level hospital clinic visit APC 

(the Level 3 hospital clinic visit CPT 

code out of five levels), and because 

middle level hospital clinic visits are 

among the most frequently furnished 

services in the hospital outpatient 

setting. 

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

requires the Secretary to review, on a 

recurring basis occurring no less than 

annually and revise the groups, the 

relative payment weights, and the wage 

and other adjustments to take into 

account changes in medical practice, 

changes in technology, the addition of 

new services, new cost data, and other 

relevant information and factors; the Act 

further requires us to repeat this process 

on a basis that is not less often than 

annually. Section 1833(t)(9)(A) of the 

Act also requires the Secretary, 

beginning in CY 2001, to consult with 

an expert outside advisory panel 

composed of an appropriate selection of 

representatives of providers to review 

(and advise the Secretary concerning) 

the clinical integrity of the APC groups 

and the relative payment weights (the 

APC Panel recommendations for 

specific services for the CY 2012 OPPS 

and our responses to them are discussed 

in the relevant specific sections 

throughout this proposed rule). 

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

provides that, subject to certain 

exceptions, the items and services 

within an APC group cannot be 

considered comparable with respect to 

the use of resources if the highest 

median cost (or mean cost as elected by 

the Secretary) for an item or service in 

the group is more than 2 times greater 

than the lowest median cost (or mean 

cost, if so elected) for an item or service 

within the same group (referred to as the 

‘‘2 times rule’’). We use the median cost 

of the item or service in implementing 

this provision. The statute authorizes 

the Secretary to make exceptions to the 

2 times rule in unusual cases, such as 

low-volume items and services (but the 

Secretary may not make such an 

exception in the case of a drug or 

biological that has been designated as an 

orphan drug under section 526 of the 

Federal Food, Drug, and Cosmetic Act). 

2. Application of the 2 Times Rule 

In accordance with section 1833(t)(2) 

of the Act and § 419.31 of the 

regulations, we annually review the 

items and services within an APC group 

to determine, with respect to 

comparability of the use of resources, if 

the median cost of the highest cost item 

or service within an APC group is more 

than 2 times greater than the median of 

the lowest cost item or service within 

that same group. In making this 

determination, we consider only those 

HCPCS codes that are significant based 

on the number of claims. We note that, 

for purposes of identifying significant 

HCPCS for examination in the 2 times 

rule, we consider codes that have more 

than 1,000 single major claims or codes 

that have both greater than 99 single 

major claims and contribute at least 2 

percent of the single major claims used 

to establish the APC median cost to be 

significant (75 FR 71832). This 

longstanding definition of when a 

HCPCS code is significant for purposes 

of the 2 times rule was selected because 

we believe that a subset of 1,000 claims 

is negligible within the set of 

approximately 100 million single 

procedure or single session claims we 

use for establishing median costs. 

Similarly, a HCPCS code for which 

there are fewer than 99 single bills and 

which comprises less than 2 percent of 

the single major claims within an APC 

will have a negligible impact on the 

APC median. In this proposed rule, we 

are proposing to make exceptions to this 

limit on the variation of costs within 

each APC group in unusual cases, such 

as low volume items and services for CY 

2012. 

During the APC Panel’s February 2011 

meeting, we presented median cost and 

utilization data for services furnished 

during the period of January 1, 2010, 

through September 30, 2010, about 

which we had concerns or about which 

the public had raised concerns 

regarding their APC assignments, status 

indicator assignments, or payment rates. 

The discussions of most service-specific 

issues, the APC Panel 

recommendations, if any, and our 

proposals for CY 2012 are contained 

mainly in sections III.C. and III.D. of this 

proposed rule. 

In addition to the assignment of 

specific services to APCs that we 

discussed with the APC Panel, we also 

identified APCs with 2 times violations 

that were not specifically discussed 

with the APC Panel but for which we 

are proposing changes to their HCPCS 

codes’ APC assignments in Addendum 

B (available via the Internet) to this 

proposed rule. In these cases, to 

eliminate a 2 times violation or to 

improve clinical and resource 

homogeneity, we are proposing to 

reassign the codes to APCs that contain 

services that are similar with regard to 

both their clinical and resource 

characteristics. We also are proposing to 

rename existing APCs or create new 

clinical APCs to complement proposed 

HCPCS code reassignments. In many 

cases, the proposed HCPCS code 

reassignments and associated APC 

reconfigurations for CY 2012 included 

in this proposed rule are related to 

changes in median costs of services that 

are observed in the CY 2010 claims data 

newly available for CY 2012 ratesetting. 

We also are proposing changes to the 

status indicators for some codes that are 

not specifically and separately 

discussed in this proposed rule. In these 

cases, we are proposing to change the 

status indicators for some codes because 

we believe that another status indicator 

would more accurately describe their 

payment status from an OPPS 

perspective based on the policies that 

we are proposing for CY 2012. 

Addendum B to this proposed rule 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site) identifies 

with comment indicator ‘‘CH’’ those 

HCPCS codes for which we are 

proposing a change to the APC 

assignment or status indicator that were 

initially assigned in the April 2011 

Addendum B update (via Transmittal 

2174, Change Request 7342, dated 

March 18, 2011). 

3. Proposed Exceptions to the 2 Times 

Rule 

As discussed earlier, we may make 

exceptions to the 2 times limit on the 

variation of costs within each APC 

group in unusual cases such as lowvolume items and services. Taking into 

account the APC changes that we are 

proposing for CY 2012 based on the 

APC Panel recommendations that are 

discussed mainly in sections III.C. and 

III.D. of this proposed rule, the other 

proposed changes to status indicators 

and APC assignments as identified in 

Addendum B to this proposed rule 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site), and the 

use of CY 2010 claims data to calculate 

the median costs of procedures 

classified in the APCs, we reviewed all 

the APCs to determine which APCs 

would not satisfy the 2 times rule. We 

used the following criteria to decide 

whether to propose exceptions to the 2 

times rule for affected APCs: 

• Resource homogeneity; 

• Clinical homogeneity; 

• Hospital outpatient setting; 

• Frequency of service (volume); and 

• Opportunity for upcoding and code 

fragments. 

For a detailed discussion of these 

criteria, we refer readers to the April 7, 

2000 OPPS final rule with comment 

period (65 FR 18457 and 18458). 

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42232 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

Table 18 of this proposed rule lists 17 

APCs that we are proposing to exempt 

from the 2 times rule for CY 2012 based 

on the criteria cited above and based on 

claims data processed from January 1, 

2010, through September 30, 2010. For 

the final rule with comment period, we 

plan to use claims data for dates of 

service between January 1, 2010, and 

December 31, 2010, that were processed 

on or before June 30, 2011, and updated 

CCRs, if available. Based on our analysis 

of CY 2010 claims data in preparation 

for this proposed rule, we found 17 

APCs with 2 times rule violations. We 

applied the criteria as described earlier 

to identify the APCs that we are 

proposing as exceptions to the 2 times 

rule for CY 2012, and identified 17 

APCs that meet the criteria for exception 

to the 2 times rule for this proposed 

rule. These proposed APC exceptions 

are listed in Table 18 below. For cases 

in which a recommendation by the APC 

Panel appeared to result in or allow a 

violation of the 2 times rule, we 

generally accepted the APC Panel’s 

recommendation because those 

recommendations were based on 

explicit consideration of resource use, 

clinical homogeneity, hospital 

specialization, and the quality of the CY 

2010 claims data used to determine the 

APC payment rates that we are 

proposing for CY 2012. The proposed 

median costs for hospital outpatient 

services for these and all other APCs 

that were used in the development of 

this proposed rule can be found on the 

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

HospitalOutpatientPPS/ 

01_overview.asp. 

TABLE 18—PROPOSED APC EXCEPTIONS TO THE 2 TIMES RULE FOR

CY 2012 

Proposed 

CY 2012 

APC 

Proposed CY 2012 APC title 

0016 ....... Level IV Debridement & Destruction. 

0057 ....... Bunion Procedures. 

0058 ....... Level I Strapping and Cast Application. 

0060 ....... Manipulation Therapy. 

0080 ....... Diagnostic Cardiac Catheterization. 

0105 ....... Repair/Revision/Removal of 

Pacemakers, AICDs, or Vascular Devices. 

0235 ....... Level I Posterior Segment Eye 

Procedures. 

0245 ....... Level I Cataract Procedures without IOL Insert. 

0263 ....... Level I Miscellaneous Radiology 

Procedures. 

0340 ....... Minor Ancillary Procedures. 

0347 ....... Level III Transfusion Laboratory 

Procedures. 

TABLE 18—PROPOSED APC EXCEPTIONS TO THE 2 TIMES RULE FOR

CY 2012—Continued 

Proposed 

CY 2012 

APC 

Proposed CY 2012 APC title 

0367 ....... Level I Pulmonary Test. 

0369 ....... Level III Pulmonary Tests. 

0432 ....... Health and Behavior Services. 

0604 ....... Level 1 Hospital Clinic Visits. 

0660 ....... Level II Otorhinolaryngologic 

Function Tests. 

0667 ....... Level II Proton Beam Radiation 

Therapy. 

C. Proposed New Technology APCs 

1. Background 

In the November 30, 2001 final rule 

(66 FR 59903), we finalized changes to 

the time period a service was eligible for 

payment under a New Technology APC. 

Beginning in CY 2002, we retain 

services within New Technology APC 

groups until we gather sufficient claims 

data to enable us to assign the service 

to an appropriate clinical APC. This 

policy allows us to move a service from 

a New Technology APC in less than 2 

years if sufficient data are available. It 

also allows us to retain a service in a 

New Technology APC for more than 2 

years if sufficient data upon which to 

base a decision for reassignment have 

not been collected. 

We note that the cost bands for New 

Technology APCs range from $0 to $50 

in increments of $10, from $50 to $100 

in increments of $50, from $100 to 

$2,000 in increments of $100, and from 

$2,000 to $10,000 in increments of $500. 

These cost bands identify the APCs to 

which new technology procedures and 

services with estimated service costs 

that fall within those cost bands are 

assigned under the OPPS. Payment for 

each APC is made at the mid-point of 

the APC’s assigned cost band. For 

example, payment for New Technology 

APC 1507 (New Technology—Level VII 

($500—$600)) is made at $550. 

Currently, there are 82 New Technology 

APCs, ranging from the lowest cost band 

assigned to APC 1491 (New 

Technology—Level IA ($0–$10)) 

through the highest cost band assigned 

to APC 1574 (New Technology—Level 

XXXVII ($9,500–$10,000). In CY 2004 

(68 FR 63416), we last restructured the 

New Technology APCs to make the cost 

intervals more consistent across 

payment levels and refined the cost 

bands for these APCs to retain two 

parallel sets of New Technology APCs, 

one set with a status indicator of ‘‘S’’’ 

(Significant Procedures, Not Discounted 

when Multiple. Paid under OPPS; 

separate APC payment) and the other set 

with a status indicator of ‘‘T’’ 

(Significant Procedure, Multiple 

Reduction Applies. Paid under OPPS; 

separate APC payment). These current 

New Technology APC configurations 

allow us to price new technology 

services more appropriately and 

consistently. 

Every year we receive many requests 

for higher payment amounts under our 

New Technology APCs for specific 

procedures under the OPPS because 

they require the use of expensive 

equipment. We are taking this 

opportunity to reiterate our response in 

general to the issue of hospitals’ capital 

expenditures as they relate to the OPPS 

and Medicare. 

Under the OPPS, one of our goals is 

to make payments that are appropriate 

for the services that are necessary for the 

treatment of Medicare beneficiaries. The 

OPPS, like other Medicare payment 

systems, is budget neutral and increases 

are limited to the annual hospital 

inpatient market basket increase. We 

believe that our payment rates generally 

reflect the costs that are associated with 

providing care to Medicare beneficiaries 

in cost-efficient settings, and we believe 

that our rates are adequate to ensure 

access to services. 

For many emerging technologies, 

there is a transitional period during 

which utilization may be low, often 

because providers are first learning 

about the techniques and their clinical 

utility. Quite often, parties request that 

Medicare make higher payment 

amounts under our New Technology 

APCs for new procedures in that 

transitional phase. These requests, and 

their accompanying estimates for 

expected total patient utilization, often 

reflect very low rates of patient use of 

expensive equipment, resulting in high 

per use costs for which requesters 

believe Medicare should make full 

payment. Medicare does not, and we 

believe should not, assume 

responsibility for more than its share of 

the costs of procedures based on 

Medicare beneficiary projected 

utilization and does not set its payment 

rates based on initial projections of low 

utilization for services that require 

expensive capital equipment. For the 

OPPS, we rely on hospitals to make 

informed business decisions regarding 

the acquisition of high cost capital 

equipment, taking into consideration 

their knowledge about their entire 

patient base (Medicare beneficiaries 

included) and an understanding of 

Medicare’s and other payers’ payment 

policies. 

We note that, in a budget neutral 

environment, payments may not fully 

cover hospitals’ costs in a particular 

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circumstance, including those for the 

purchase and maintenance of capital 

equipment. We rely on hospitals to 

make their decisions regarding the 

acquisition of high cost equipment with 

the understanding that the Medicare 

program must be careful to establish its 

initial payment rates, including those 

made through New Technology APCs, 

for new services that lack hospital 

claims data based on realistic utilization 

projections for all such services 

delivered in cost-efficient hospital 

outpatient settings. As the OPPS 

acquires claims data regarding hospital 

costs associated with new procedures, 

we regularly examine the claims data 

and any available new information 

regarding the clinical aspects of new 

procedures to confirm that our OPPS 

payments remain appropriate for 

procedures as they transition into 

mainstream medical practice. 

2. Proposed Movement of Procedures 

From New Technology APCs to Clinical 

APCs 

As we explained in the November 30, 

2001 final rule (66 FR 59902), we 

generally keep a procedure in the New 

Technology APC to which it is initially 

assigned until we have collected 

sufficient data to enable us to move the 

procedure to a clinically appropriate 

APC. However, in cases where we find 

that our original New Technology APC 

assignment was based on inaccurate or 

inadequate information (although it was 

the best information available at the 

time), or where the New Technology 

APCs are restructured, we may, based 

on more recent resource utilization 

information (including claims data) or 

the availability of refined New 

Technology APC cost bands, reassign 

the procedure or service to a different 

New Technology APC that most 

appropriately reflects its cost. 

Consistent with our current policy, 

we are proposing for CY 2012 to retain 

services within New Technology APC 

groups until we gather sufficient claims 

data to enable us to assign the service 

to a clinically appropriate APC. The 

flexibility associated with this policy 

allows us to move a service from a New 

Technology APC in less than 2 years if 

sufficient claims data are available. It 

also allows us to retain a service in a 

New Technology APC for more than 2 

years if sufficient claims data upon 

which to base a decision for 

reassignment have not been collected. 

Table 19 below lists the HCPCS codes 

and associated status indicators that we 

are proposing to reassign from a New 

Technology APC to a clinically 

appropriate APC or to a different New 

Technology APC for CY 2012. 

Currently, in CY 2011, there are three 

procedures described by a HCPCS Gcode receiving payment through a New 

Technology APC. Specifically, HCPCS 

code G0417 (Surgical pathology, gross 

and microscopic examination for 

prostate needle saturation biopsy 

sampling, 21–40 specimens) is assigned 

to New Technology APC 1506 (New 

Technology—Level VI ($400–$500)); 

HCPCS code G0418 (Surgical pathology, 

gross and microscopic examination for 

prostate needle saturation biopsy 

sampling, 41–60 specimens) is assigned 

to New Technology APC 1511 (New 

Technology—Level XI ($900–$1,000)); 

and HCPCS code G0419 (Surgical 

pathology, gross and microscopic 

examination for prostate needle 

saturation biopsy sampling, greater than 

60 specimens) is assigned to New 

Technology APC 1513 (New 

Technology—Level XIII ($1,100– 

$1,200)). 

Analysis of our hospital outpatient 

data for claims submitted for CY 2010 

indicates that prostate saturation biopsy 

procedures are rarely performed on 

Medicare patients. For OPPS claims 

submitted from CY 2009 through CY 

2010, our claims data show that there 

were only five claims submitted for 

HCPCS code G0417 in CY 2009 and 

only one in CY 2010 with a proposed 

median cost of approximately $532. Our 

claims data did not show any hospital 

outpatient claims for HCPCS codes 

G0418 and G0419 from either CY 2009 

or CY 2010. 

While we believe that these 

procedures will always be low volume, 

given the number of specimens being 

collected, we believe that we should 

continue their New Technology 

payments for another year for HCPCS 

codes G0417, G0418, and G0419 to see 

if more claims data become available. 

For CY 2012, we are proposing to revise 

the APC assignments for these 

procedures and continue the New 

Technology APC payments for HCPCS 

G-codes G0417, G0418, and G0419. 

Specifically, we are proposing to 

reassign HCPCS code G0417 from APC 

1506 to APC 1505 (New Technology– 

Level V ($300–$400)), HCPCS code 

G0418 from APC 1511 to APC 1506 

(New Technology—Level VI ($400– 

$500)), and HCPCS G0419 code from 

APC 1513 to APC 1508 (New 

Technology—Level VIII ($600–$700)). 

We believe that the proposed revised 

APC assignments would more 

appropriately reflect the procedures 

described by these three HCPCS Gcodes, based on clinical and resource 

considerations. These procedures and 

their proposed APC assignments are 

displayed in Table 19. 

TABLE 19—PROPOSED REASSIGNMENT OF PROCEDURES ASSIGNED TO NEW TECHNOLOGY APCS FOR CY 2012 

CY 

2011 

HCPCS 

code 

CY 2011 short descriptor CY 2011 SI CY 2011 

APC 

Proposed 

CY 2012 SI 

Proposed 

CY 2012 

APC 

G0417 Sat biopsy prostate 21–40 ............................................................................. S 1506 S 1505 

G0418 Sat biopsy prostate 41–60 ............................................................................. S 1511 S 1506 

G0419 Sat biopsy prostate: >60 ................................................................................ S 1513 S 1508 

D. Proposed OPPS APC-Specific Policies 

1. Revision/Removal of Neurostimulator 

Electrodes (APC 0687) 

For CY 2011, we continued to assign 

CPT codes 63661 (Removal of spinal 

neurostimulator electrode percutaneous 

array(s), including fluoroscopy, when 

performed), 63662 (Removal of spinal 

neurostimulator electrode plate/ 

paddle(s) placed via laminotomy or 

laminectomy, including fluoroscopy, 

when performed), 63663 (Revision, 

including replacement, when 

performed, of spinal neurostimulator 

electrode percutaneous array(s), 

including fluoroscopy, when 

performed), and 63664 (Revision, 

including replacement, when 

performed, of spinal neurostimulator 

electrode plate/paddle(s) placed via 

laminotomy or laminectomy, including 

fluoroscopy, when performed) to APC 

0687 (Revision/Removal of 

Neurostimulator Electrodes), which had 

a CY 2011 final rule median cost of 

approximately $1,480. These codes were 

created effective for services performed 

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on or after January 1, 2010, when the 

AMA CPT Editorial Board deleted CPT 

code 63660 (Revision or removal of 

spinal neurostimulator electrode 

percutaneous array(s) or plate/paddle(s)) 

and created new CPT codes 63661, 

63662, 63663, and 63664 to differentiate 

between revision and removal 

procedures, and to also differentiate 

between percutaneous leads (arrays) and 

surgical leads (plates/paddles). 

As discussed in the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 71913), we have received several 

comments objecting to the placement of 

CPT codes 63663 and 63664 in APC 

0687 because, the commenter stated, 

these codes are used to report both 

revision and replacement of 

neurostimulator electrodes. The 

commenters believed that the use of 

hospital resources is substantially 

greater when neurostimulator electrodes 

are being replaced rather than revised. 

We responded to these comments by 

stating that we did not have CY 2009 

claims data on the cost of these codes 

upon which to make an assessment of 

whether there is a meaningful difference 

between the cost of revising the 

electrodes or replacing them, and that 

we were not convinced by the 

commenters stating that the use of the 

CPT codes for these services and the 

assignment of the codes for revision/ 

replacement of neurostimulator 

electrodes to APC 0687 was 

inappropriate. We further stated that the 

OPPS is a payment system of averages 

in which the payment for a service is 

based on the estimated relative cost of 

the service, including a range of supply 

and other input costs, as well as other 

services in the same APC that are 

comparable in resource cost and clinical 

homogeneity. We noted that we expect 

that hospital charges for a service, 

which are derived from the cost of a 

service, can vary across individual 

patients. Therefore, we expect 

variability in the estimated cost of a 

service, across cases in a hospital and 

among hospitals, to be reflected at some 

level in the final APC relative payment 

weight. We indicated that we would 

examine estimated costs for these CPT 

codes in the CY 2010 claims data that 

we would use to model the CY 2012 

proposed rule when these data became 

available. 

At its February 28–March 1, 2011 

meeting, the APC Panel recommended 

that CMS provide more data on CPT 

codes 63663, 63664, and 64569 

(Revision or replacement of cranial 

nerve (e.g., vagus nerve) 

neurostimulator electrode array, 

including connection to existing pulse 

generator) to determine whether they 

represent primarily device replacements 

or device revisions. We are accepting 

this recommendation and have 

examined the CY 2010 claims data 

available for this proposed rule to 

compare the frequency of claims 

containing CPT codes 63663 or 63664 

that were billed with HCPCS C1778 

(Lead, neurostimulator (implantable)) or 

C1897 (Lead, neurostimulator test kit 

(implantable)) to the frequency of claims 

with CPT codes 63663 or 63664 billed 

without HCPCS codes C1778 and 

C1897, in order to determine whether 

they represent primarily device 

replacements or device revisions. We 

found that 61 percent of claims 

containing CPT codes 63663 or 63664 

did not contain HCPCS code C1778 or 

C1897, while 39 percent of claims with 

CPT codes 63663 or 63664 did contain 

HCPCS code C1778 or C1897. Because 

the majority of the claims did not 

contain HCPCS code C1778 or C1897, 

these findings suggest that these CPT 

codes are used to describe mainly 

device revision procedures, although 

there are a significant number of cases 

of device replacement procedures in the 

claims data. We will present the 

requested data for CPT code 64569 at a 

future meeting of the APC Panel. 

We also have completed an 

examination of the estimated costs for 

CPT codes 63661, 63662, 63663, and 

63664 now that claims data for these 

CPT codes are available for the first time 

since they became effective on January 

1, 2010. Based on the partial year claims 

data available for this proposed rule, the 

proposed median costs for CPT codes 

63661 and 63662 are approximately 

$1,167 and $2,190, respectively. The 

claims data show a median cost of 

approximately $4,316 for CPT code 

63663 and a median cost of 

approximately $4,883 for CPT code 

63664, which constitute a 2 times rule 

violation within APC 0687. 

In order to resolve the 2 times rule 

violation in APC 0687, we are proposing 

to move CPT codes 63663 and 63664 

from APC 0687 to APC 0040 

(Percutaneous Implantation of 

Neurostimulator Electrodes), which has 

a CY 2012 proposed median cost of 

approximately $4,516 that is more 

consistent with the median costs for 

CPT codes 63663 and 63664. We also 

are proposing to change the title of APC 

0040 to ‘‘Level I Implantation/Revision/ 

Replacement of Neurostimulator 

Electrodes’’ to reflect that the APC 

would include revision and replacement 

procedures beginning in CY 2012, and 

to change the title of APC 0061 from 

‘‘Laminectomy, Laparoscopy, or 

Incision for Implantation of 

Neurostimulator Electrodes’’ to ‘‘Level II 

Implantation/Revision/Replacement of 

Neurostimulator Electrodes’’ to be 

consistent with the APC 0040 title 

change. We believe that CPT codes 

63661 and 63662 continue to be placed 

appropriately in APC 0687 because their 

CY 2012 proposed CPT median costs of 

approximately $1,167 and $2,190, 

respectively, are consistent with the 

overall proposed APC 0687 median cost 

of approximately $1,492 and because 

they describe only device removal 

procedures. 

2. Computed Tomography of Abdomen 

and Pelvis (APCs 0331 and 0334) 

The AMA CPT Editorial Panel created 

three new codes for computed 

tomography (CT) of abdominal and 

pelvis that were effective January 1, 

2011: CPT code 74176 (Computed 

tomography, abdomen and pelvis; 

without contrast material); CPT code 

74177 (Computed tomography, 

abdomen and pelvis; with contrast 

material(s)); and CPT code 74178 

(Computed tomography, abdomen and 

pelvis; without contrast material in one 

or both body regions, followed by 

contrast material(s) and further sections 

in one or both body regions). As with all 

new CPT codes for CY 2011, these new 

codes were announced through the 

publication of the CY 2011 CPT in 

November 2010, effective on January 1, 

2011. 

In accordance with our longstanding 

policy, we made an interim APC 

assignment for each new code for CY 

2011 based on our understanding of the 

resources required to furnish the service 

as the service was defined in the new 

code (75 FR 71898). Specifically, for CY 

2011, we assigned new CPT code 74176 

to APC 0332 (Computed Tomography 

Without Contrast), which has a CY 2011 

payment rate of approximately $194; we 

assigned CPT code 74177 to APC 0283 

(Computed Tomography With Contrast), 

which has a CY 2011 payment rate of 

$300; and we assigned CPT code 74178 

to CPT code 0333 (Computed 

Tomography Without Contrast Followed 

by With Contrast), which has a CY 2011 

payment rate of $334. For CY 2011, we 

also made these codes eligible for 

composite payment under the multiple 

imaging composite APC methodology 

when they are furnished with other CT 

procedures to the same patient on the 

same day. 

As is our standard practice each year, 

our clinicians review each of the many 

CPT code changes that will be effective 

in the forthcoming year and make a 

decision regarding status indicator and/ 

or APC assignment based on their 

understanding of the nature of the 

services furnished. We are unable to 

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include a proposed status indicator and/ 

or APC assignment in the proposed rule 

for codes that are not announced by the 

AMA CPT Editorial Board prior to the 

proposed rule. Therefore, in accordance 

with our longstanding policy, we 

include, in the final rule with comment 

period, an interim status indicator and/ 

or APC assignment for all new CPT 

codes that are announced by the AMA 

CPT Editorial Board subsequent to the 

OPPS/ASC proposed rule to enable 

payment to be made for new services as 

soon as the code is effective. In 

accordance with our longstanding 

practice, we identified the new codes 

for abdominal/pelvis CT for CY 2011 in 

Addendum B of the CY 2011 OPPS/ASC 

final rule with comment period as 

having new interim APC assignments by 

showing a comment indicator of ‘‘NI,’’ 

and we provided a public comment 

period. As we do with all new CPT 

codes, we will respond to the public 

comments in the OPPS/ASC final rule 

with comment period for CY 2012. This 

longstanding process enables us to pay 

for new services as soon as the new CPT 

codes for them go into effect, despite the 

fact that they first become publicly 

available at the same time the final rule 

with comment period for the upcoming 

year is made public. 

At its February 28–March 1, 2011 

meeting, the APC Panel heard public 

presentations on this issue and 

recommended that CMS provide more 

data on the new CPT codes for 

combined abdomen and pelvis CT as 

soon as these data are available. We are 

accepting this recommendation, and we 

will provide claims data as soon as the 

data are available. We note that because 

these codes were effective January 1, 

2011, the first available claims data for 

these codes will be the APC Panel 

claims data for the CY 2013 OPPS 

rulemaking. These data will be for dates 

of service January 1, 2011 through and 

including September 30, 2011, as 

processed through the Common 

Working File on or before September 30, 

2011. 

In general, stakeholders who provided 

comments on the interim assignment of 

these codes for CY 2011 stated that the 

most appropriate approach to 

establishing payment for these new 

codes is to assign these procedures to 

APCs that recognize that each of the 

new codes reflects the reporting under 

a single code of two services that were 

previously reported under two separate 

codes and that, therefore, payments 

would be more accurate and better 

reflective of the relative cost of the 

services under the OPPS if we were to 

establish payment rates for the codes for 

CY 2012 using claim data that reflect the 

combined cost of the two predecessor 

codes. They noted that when these 

services were reported in CY 2010 using 

two CPT codes, rather than a single 

code, the services that are being 

reported under CPT code 74176 were 

assigned to imaging composite APC 

8005 (CT and CTA without Contrast) for 

which the CY 2010 payment was 

$419.45. Similarly, the services being 

reported under CPT code 74177 or CPT 

code 74178 were assigned to composite 

APC 8006 (CT and CTA with Contrast) 

for which the CY 2010 payment was 

$628.49. They indicated that they 

believed that simulating the median cost 

for CPT codes 74176, 74177, and 74178 

using historic claims data from the 

predecessor codes in a manner similar 

to that used to create the composite APC 

medians would result in the best 

estimates of costs for these codes and, 

therefore, the most accurate payment 

rate for these codes. 

After considering the presentations at 

the APC Panel meeting, the views of 

stakeholders who met with us to discuss 

this issue, and the comments in 

response to the CY 2011 final rule with 

public comment period, and after 

examining our claims data for the 

predecessor codes, we believe that 

establishment of payment rates for these 

services based on historic claims data 

for the combinations of predecessor 

codes that are now reported by CPT 

codes 74176, 74177, and 74178 would 

result in a more accurate and 

appropriate payment for these services 

for CY 2012 because it would take into 

account the full cost of both services 

that are now reported by a single CPT 

code. We believe that the best way to 

secure the most appropriate payments 

for CY 2012 is to use the claims data 

from the predecessor codes under which 

the new codes were reported for CY 

2010 to simulate median costs for the 

new codes and to create APCs that are 

appropriate to the services. To do so 

should reflect both the full cost of the 

service as reported by the new code and 

should also reflect the efficiencies of 

reporting the service represented by the 

single new code. Therefore, we are 

proposing to establish two APCs to 

which we would propose to assign the 

combined abdominal and pelvis CT 

services. Specifically, we are proposing 

to create new APC 0331 (Combined 

Abdominal and Pelvis CT Without 

Contrast), to which we are proposing to 

assign CPT code 74176 and for which 

we are proposing to base the CY 2012 

OPPS payment rate on a median cost of 

approximately $417. We also are 

proposing to create new APC 0334 

(Combined Abdominal and Pelvis CT 

With Contrast), to which we are 

proposing to assign CPT codes 74177 

and 74178 for the CY 2012 OPPS and for 

which we are proposing to base the CY 

2012 OPPS payment rate on a median 

cost of approximately $592. We are 

proposing to create two new APCs to 

which to assign these codes, rather than 

one, because CPT code 74176 is 

furnished without contrast, while CPT 

codes 74177 and 74178 are furnished 

with contrast. Section 1833(t)(2)(G) of 

the Act requires that services with 

contrast may not be assigned to APCs 

that contain services without contrast, 

and therefore, we could not assign CPT 

code 74176, which does not require 

contrast, to the same APC as CPT codes 

74177 and 74178, which require 

contrast. 

We are proposing to create new APC 

0331 to which we would assign CPT 

code 74176 and to create new APC 0334 

to which we would assign CPT codes 

74177 and 74178 because the proposed 

methodology for simulating the median 

costs for CPT codes 74176, 74177, and 

74178, which uses claims data for the 

predecessor codes is unique to these 

CPT codes. Therefore, we believe that it 

is appropriate to create APCs comprised 

only of services for which we calculated 

medians using claims data for the 

predecessor codes. To the extent this 

policy is finalized, we would reassess 

whether it continues to be appropriate 

to pay these codes under APCs 0331 and 

0334 once the median costs for the 

proposed CY 2013 OPPS are calculated 

using our standard methodology, based 

on hospitals’ CY 2011 charges for CPT 

codes 74176, 74177, and 74178. 

To calculate the median costs for 

proposed APCs 0331 and 0334 for CY 

2012, we selected claims that contained 

one unit of both of the predecessor CPT 

codes that appear in the CY 2011 CPT 

for CPT codes 74676, 74677, and 74678. 

The predecessor codes are limited to the 

codes in Table 20 below. 

TABLE 20—CPT CODES THAT WERE

COMBINED TO CREATE NEW ABDOMINAL AND PELVIS CPT CODES

FOR CY 2011 

CPT 

Code Descriptor 

72192 .. Computed tomography, pelvis; 

without contrast material. 

72193 .. Computed tomography, pelvis; with 

contrast material(s). 

72194 .. Computed tomography, pelvis; 

without contrast material, followed by contrast material(s) and 

further sections. 

74150 .. Computed tomography, abdomen; 

without contrast material. 

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TABLE 20—CPT CODES THAT WERE

COMBINED TO CREATE NEW ABDOMINAL AND PELVIS CPT CODES

FOR CY 2011—Continued 

CPT 

Code Descriptor 

74160 .. Computed tomography, abdomen; 

with contrast material(s). 

74170 .. Computed tomography, abdomen; 

without contrast material, followed by contrast material(s) and 

further sections. 

For purposes of selecting claims to be 

used to calculate simulated median 

costs, we selected only claims that 

contained one (and only one) unit of 

each of the predecessor codes in the 

allowed combinations identified in 

Table 21 below. We used only claims 

that contained one and only one unit of 

each of the code combinations because 

we believe that it represents the best 

simulation of the definition of the new 

codes. Where more than one unit of 

either or both codes were reported, the 

claim would be paid under an imaging 

composite APC, not under APC 0331 or 

0334. For median calculation, claims 

that contained more than one unit of 

either or both codes were assigned to 

the applicable imaging composite APC. 

We refer readers to section II.A.2.e.5 of 

this proposed rule for discussion of the 

imaging composite APCs. 

TABLE 21—COMBINATIONS OF PREDECESSOR CPT CODES USED TO SIMULATE MEDIAN COSTS FOR THE COMBINED

ABDOMINAL AND PELVIS CT CODES THAT ARE NEW FOR CY 2011 

Combined abdominal and pelvis CT code 

Predecessor 

CT abdomen 

without 

contrast 

Predecessor 

CT pelvis without contrast 

Predecessor 

CT abdomen 

with contrast 

Predecessor 

CT pelvis with 

contrast 

74176 ............................................................................................................... 74150 72192 ........................ ........................

74177 ............................................................................................................... ........................ ........................ 74160 72193 

74178 ............................................................................................................... 74150 ........................ ........................ 72193 

74178 ............................................................................................................... 74150 ........................ ........................ 72194 

74178 ............................................................................................................... ........................ 72192 74160 ........................

74178 ............................................................................................................... ........................ ........................ 74160 72194 

74178 ............................................................................................................... ........................ 72192 74170 ........................

74178 ............................................................................................................... ........................ ........................ 74170 72193 

74178 ............................................................................................................... ........................ ........................ 74170 72194 

After we selected the claims that 

contained one and only one unit of each 

code in each combination, we deleted 

claims that contained other separately 

paid HCPCS codes if those codes did 

not appear on the bypass list (we refer 

readers to section II.A.1.b. of this 

proposed rule and to Addendum N, 

which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site). We 

bypassed the costs for codes that 

appeared on the bypass list to create 

simulated single procedure claims for 

CPT codes 74178, 74177, and 74178. 

Using the remaining simulated single 

procedure claims for the combined 

abdominal and pelvis CT services, we 

applied our standard trimming, 

packaging, and wage standardization 

methodology to calculate the median 

cost for each combined abdominal and 

pelvis CT code for the two proposed 

APCs. We refer readers to section 

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

discussion of our standard trimming, 

packaging, and wage standardization 

methodology. 

We found that using this proposed 

methodology resulted in a simulated 

median cost for CPT code 74176 of 

approximately $417, and that, because 

we are proposing that CPT code 74176 

would be the only HCPCS code assigned 

to APC 0331, the simulated median cost 

for APC 0331 also would be 

approximately $417. We found that 

using this proposed methodology, the 

simulated median cost for CPT code 

74177 was approximately $570 and the 

simulated median cost for CPT code 

74178 was approximately $638, and that 

the simulated median cost for proposed 

APC 0334 was approximately $592. We 

are proposing to use this simulation 

methodology to establish proposed 

median costs for proposed APCs 0331 

and 0334 for the CY 2012 OPPS. 

We also are proposing that, in cases 

where CPT code 74176 is reported with 

CT codes that describe CT services for 

other regions of the body other than the 

abdomen and pelvis in which contrast 

is not used, it would be assigned to 

imaging composite APC 8005 (CT and 

CTA Without Contrast), for which we 

are proposing a median cost of 

approximately $445 for the CY 2012 

OPPS. In cases where CPT code 74177 

or 74178 is reported with CT codes that 

describe CT services for regions of the 

body other than abdomen and pelvis in 

which contrast is used, we are 

proposing that the code would be 

assigned to APC 8006 (CT and CTA 

With Contrast), for which we are 

proposing a median cost of 

approximately $744 for the CY 2012 

OPPS. We are proposing to assign CPT 

codes 74176 to imaging composite APC 

8005 and to assign CPT codes 74177 and 

74178 to imaging composite APC 8006 

because the predecessor codes for CPT 

codes 74176, 74177 and 74178 

(identified in Table 20), continue to be 

reported when either abdominal CT or 

pelvis CT (but not both) is furnished, 

and we are proposing to continue to 

assign them to imaging composite APCs 

8005 and 8006. We believe that it would 

be inconsistent with our proposed 

imaging composite policy if we did not 

propose to assign CPT codes 74176, 

74177, and 74178 to the applicable 

imaging composite APC for CY 2012. 

We refer readers to section II.A.2.e.(5) of 

this proposed rule for the discussion of 

the calculation of our proposed median 

costs for APCs 8005 and 8006 for CY 

2012. 

In summary, we are proposing to 

establish new APCs 0331 and 0334 to 

which we would assign the abdominal 

and pelvis CT codes that were created 

by the AMA CPT Editorial Panel for CY 

2011 and to use the simulation 

methodology we describe above to 

establish simulated median costs on 

which we would base the CY 2012 

payment rates because we believe that 

to do so would result in relative 

payment weights for these new services 

that will more accurately reflect the 

resources required to furnish these 

services as defined by CPT than would 

be true of continued assignment of the 

codes to the single service APCs to 

which we made interim assignments for 

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CY 2011. We note that claims and cost 

data for these services will be available 

for the CY 2013 OPPS rulemaking, and 

we will reassess the payment policy for 

these codes based on the cost data that 

are used to establish the CY 2013 OPPS 

median cost and payment rates. 

3. Placement of Amniotic Membrane 

(APCs 0233 and 0244) 

For the CY 2011 update, the AMA 

CPT Editorial Panel revised the long 

descriptor for CPT code 65780 (Ocular 

surface reconstruction; amniotic 

membrane transplantation, multiple 

layers) to include the words ‘‘multiple 

layers’’ to further clarify the code 

descriptor. In addition, the AMA CPT 

Editorial Panel created two new CPT 

codes that describe the placement of 

amniotic membrane on the ocular 

surface without reconstruction; one 

describing the placement of a selfretaining (non-sutured/non-glued) 

device on the surface of the eye, and the 

other describing a single layer of 

amniotic membrane sutured to the 

surface of the eye. Specifically, the 

AMA CPT Editorial Panel created CPT 

codes 65778 (Placement of amniotic 

membrane on the ocular surface for 

wound healing; self-retaining) and 

65779 (Placement of amniotic 

membrane on the ocular surface for 

wound healing; single layer, sutured), 

effective January 1, 2011. 

As has been our practice since the 

implementation of the OPPS in 2000, 

we carefully review all new procedures 

before assigning them to an APC. In 

determining the APC assignments for 

CPT codes 65778 and 65779, we took 

into consideration the clinical and 

resource characteristics involved with 

placement of amniotic membrane 

products on the eye for wound healing 

via a self-retaining device and a sutured, 

single-layer technique. In the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 72402), we assigned CPT 

code 65780 to APC 0244 (Corneal and 

Amniotic Membrane Transplant) with a 

CY 2011 payment rate of approximately 

$2,681. We assigned CPT code 65778 to 

APC 0239 (Level II Repair and Plastic 

Eye Procedures) with a payment rate of 

approximately $559, and CPT code 

65779 to APC 0255 (Level II Anterior 

Segment Eye Procedures) with a 

payment rate of approximately $519. In 

addition, we assigned both CPT codes 

65778 and 65779 to comment indicator 

‘‘NI’’ in Addendum B of the CY 2011 

OPPS/ASC final rule with comment 

period to indicate that both codes were 

new codes for CY 2011 with an interim 

APC assignment subject to public 

comment. We will address any public 

comments on issues regarding these 

new codes in the CY 2012 OPPS/ASC 

final rule with comment period. 

At the APC Panel at the February 28– 

March 1, 2011 meeting, a presenter 

requested the reassignment of both new 

CPT codes 65778 and 65779 to APC 

0244, which is the same APC to which 

CPT code 65780 is assigned. The 

presenter indicated that prior to CY 

2011, the procedures described by CPT 

codes 65578 and 65779 were previously 

reported under the original version of 

CPT code 65780, which did not specify 

‘‘multiple layers,’’ and as such these 

new codes should continue to be 

assigned to APC 0244. Further, the 

presenter stated that the costs of the 

new procedures described by CPT codes 

65778 and 65779 are very similar to the 

procedure described by CPT code 

65780. 

The APC Panel recommended that 

CMS reassign both CPT codes 65778 

and 65779 to APC 0233 (Level III 

Anterior Segment Eye Procedures), 

citing clinical similarity to procedures 

already in APC 0233. Based on clinical 

as well as resource similarity to the 

other procedures currently assigned to 

APC 0233, we are proposing to accept 

the APC Panel’s recommendations to 

reassign CPT code 65778 from APC 

0239 to APC 0233 and to reassign CPT 

code 65779 from APC 0255 to APC 

0233. However, based upon our further 

review and analysis of the clinical 

characteristics of the procedure 

described by CPT code 65778, we also 

are proposing to conditionally package 

CPT code 65778. The service described 

by CPT code 65778 would rarely be 

provided as a separate, stand-alone 

service in the HOPD; it would almost 

exclusively be provided in addition to 

another procedure or service. Our 

medical advisors indicate that the 

procedure described by CPT code 65778 

is not significantly different than 

placing a bandage contact lens on the 

surface of the eye to cover a corneal 

epithelial defect. CPT code 65778 

describes the simple placement of a 

special type of bandage (a self-retaining 

amniotic membrane device) on the 

surface of the eye, which would most 

commonly be used in the HOPD to 

cover the surface of the eye after a 

procedure that results in a corneal 

epithelial defect. Given the 

characteristics of this procedure and its 

likely use in the HOPD, we are 

proposing to conditionally package CPT 

code 65778 for CY 2012 and reassign its 

status indicator from ‘‘T’’ to ‘‘Q2’’ to 

indicate that the procedure is packaged 

when it is billed on the same date with 

another procedure or service that is also 

assigned to status indicator ‘‘T.’’ 

Otherwise, separate payment would be 

made for the procedure. 

In summary, for CY 2012, we are 

proposing to reassign CPT code 65778 

from APC 0239 to APC 0233 with a 

conditionally packaged status, to 

reassign CPT code 65779 from APC 

0255 to APC 0233, which has a 

proposed median cost of approximately 

$1,214, and to continue to assign CPT 

code 65780 to APC 0244, which has a 

proposed median cost of approximately 

$2,767. 

As has been our practice since the 

implementation of the OPPS, we 

annually review all the items and 

services within an APC group to 

determine, with respect to 

comparability of the use of resources, 

for any 2 times 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. 

Because CPT codes 65778 and 65779 are 

new for CY 2011, and we have no 

claims data for the CY 2012 update, we 

will again reevaluate the status indicator 

and APC assignments for CPT codes 

65778, 65779, and 65780 in CY 2012 for 

the CY 2013 OPPS rulemaking cycle. 

The amniotic membrane procedures and 

their CY 2012 proposed APC 

assignments are displayed in Table 22 

below. 

TABLE 22—PROPOSED APC ASSIGNMENT FOR THE AMNIOTIC MEMBRANE PROCEDURES FOR CY 2012 

CY 2011 

HCPCS 

code 

CY 2011 short descriptor CY 2011 SI CY 2011 

APC 

Proposed 

CY 2012 SI 

Proposed 

CY 2012 

APC 

65778 ..... Cover eye w/membrane .............................................................................. T 0239 Q2 0233 

65779 ..... Cover eye w/membrane suture ................................................................... T 0255 T 0233 

65780 ..... Ocular reconst transplant ............................................................................ T 0244 T 0244 

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4. Upper Gastrointestinal Services 

(APCs 0141, 0419, and 0422) 

For CY 2011, there are two upper 

gastrointestinal (GI) procedure APCs, 

APC 0141 (Level I Upper GI 

Procedures), which has a CY 2011 

national unadjusted payment rate of 

$611.73, and APC 0422 (Level II Upper 

GI Procedures), which has a CY 2011 

national unadjusted payment rate of 

$1,148.75. In the CY 2011 OPPS/ASC 

proposed rule, we proposed to 

reconfigure APCs 0141 (Level I Upper 

GI Procedures) and APC 0442 (Level II 

Upper GI Procedures) by moving several 

CPT codes from APC 0141 to APC 0422. 

We received public comments on the 

proposed rule objecting to our proposal 

on the basis that the reconfiguration 

would reduce the median cost and, 

therefore, the payment for services to 

which APC 0422 was assigned and 

would not maintain the clinical 

homogeneity of these services. Instead 

commenters, including the applicable 

medical specialty societies, asked that 

we reconfigure APCs 0141 and 0422 to 

create three APCs by adding a new APC 

for upper GI procedures. They also 

recommended a HCPCS configuration 

that they believed would provide 

payment rates that would more 

accurately reflect the median costs of 

the services in APCs 0141 and 0422. We 

finalized our proposed changes to APCs 

0141 and 0422 for CY 2011 without 

establishing a third APC for upper GI 

procedures for the reasons discussed in 

the CY 2011 OPPS/ASC final rule with 

public comment period (75 FR 71907). 

However, when we developed the 

median costs for APCs 0141 and 0422 

using CY 2010 claims data for 

discussion at the APC Panel meeting of 

February 28–March 1, 2011, we 

observed that there was a 2 times 

violation for APC 0141 that had not 

existed for CY 2010 OPPS. For the APC 

Panel meeting, we simulated the HCPCS 

and APC median costs that would result 

from the reconfiguration that was 

recommended by the stakeholders in 

their comments on the CY 2011 OPPS/ 

ASC final rule with comment period, 

and we discussed the results with the 

APC Panel. The APC Panel 

recommended that CMS create an 

intermediate level upper GI procedures 

APC (APC Panel Recommendation 13). 

The APC Panel recommendations and 

report may be found at the APC Panel 

Web site, located at: http:// 

www.cms.gov/FACA/05_

AdvisoryPanelonAmbulatory

PaymentClassificationGroups.asp. 

For the reasons we discuss below, we 

are accepting the APC Panel 

recommendation to propose to establish 

three levels of upper GI procedure APCs 

and to propose to adopt the 

reconfiguration recommended by 

stakeholders because we believe that the 

proposed reconfiguration will provide 

payments that are more closely aligned 

with the median costs of the services. 

Creating an intermediate APC for upper 

GI procedures provides APC median 

costs that are more closely aligned with 

the median costs for the many CPT 

codes for upper GI procedures, and 

therefore, the APC median costs better 

reflect the resources required to provide 

these services as defined by the CPT 

codes for them. Moreover, the proposed 

reconfiguration resolves the 2 times rule 

violation that would result in APC 0141 

if we were to apply the CY 2011 APC 

configuration to the CY 2012 proposed 

rule data. Therefore, we believe that we 

would need to propose to reassign 

HCPCS codes regardless of whether we 

created the intermediate APC for CY 

2012. We believe that the proposed 

reconfiguration to create the 

intermediate APC is the most 

appropriate means of avoiding a 2 times 

violation that would otherwise exist for 

CY 2012 and that the resulting median 

costs will provide payments that are 

more reflective of the relative costs of 

the services being furnished. 

Therefore, for CY 2012, we are 

proposing to create new APC 0419 

(Level II Upper GI Procedures), as 

recommended by the stakeholders, and 

we are proposing to reassign HCPCS 

codes previously assigned to APCs 0141 

and 0422 to the three APC 

configuration. Table 23 below contains 

the proposed HCPCS reassignments for 

CY 2012 using the proposed three APC 

reconfiguration. We believe that this 

proposed reconfiguration classifies 

upper GI CPT codes in groups that 

demonstrate the best clinical and 

resource homogeneity. For APC 0141, 

we calculated a proposed rule median 

cost for CY 2012 of approximately $603. 

For proposed new APC 0419, we 

calculated a proposed rule median cost 

of approximately $904. For APC 0422, 

we calculated a proposed rule median 

cost of approximately $1,833. 

TABLE 23—PROPOSED RECONFIGURATION OF UPPER GI PROCEDURE CODES FOR CY 2012 

APC HCPCS SI Description Median Single bill 

frequency 

Percent 

single bills 

Total 

frequency 

0141 .............. .................... Level I Upper GI Procedures ......... $602.59 .................... .................... ....................

43831 T Place gastrostomy tube ................. 0.00 0 .................... 0 

43510 T Surgical opening of stomach ......... 186.33 1 .................... 1 

43999 T Stomach surgery procedure .......... 238.68 1,732 .................... 2,128 

43204 T Esoph scope w/sclerosis inj ........... 361.50 2 .................... 6 

43761 T Reposition gastrostomy tube ......... 496.12 361 .................... 602 

43235 T Uppr gi endoscopy diagnosis ........ 538.38 70,885 20 124,837 

43200 T Esophagus endoscopy ................... 592.17 1,016 .................... 5,513 

43239 T Upper gi endoscopy biopsy ........... 618.39 260,422 73 516,015 

43202 T Esophagus endoscopy biopsy ....... 619.63 461 .................... 1,244 

43248 T Uppr gi endoscopy/guide wire ....... 621.09 16,548 5 37,741 

43234 T Upper gi endoscopy exam ............. 644.39 510 .................... 872 

43247 T Operative upper GI endoscopy ...... 656.88 5,028 1 16,489 

43236 T Uppr gi scope w/submuc inj .......... 660.41 3,369 1 8,141 

43600 T Biopsy of stomach ......................... 666.46 5 .................... 14 

43243 T Upper gi endoscopy & inject .......... 748.56 161 .................... 326 

43241 T Upper GI endoscopy with tube ...... 782.08 164 .................... 462 

43499 T Esophagus surgery procedure ....... 2,158.45 528 .................... 1,375 

0419 .............. .................... Level II Upper GI Procedures ........ 903.97 .................... .................... ....................

91111 T Esophageal capsule endoscopy .... 730.21 69 .................... 79 

43250 T Upper GI endoscopy/tumor ............ 730.67 949 1 3,083 

43201 T Esoph scope w/submucous inj ...... 760.79 99 .................... 256 

43251 T Operative upper GI endoscopy ...... 793.29 2,976 3 10,936 

43237 T Endoscopic us exam esoph ........... 796.01 369 .................... 696 

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TABLE 23—PROPOSED RECONFIGURATION OF UPPER GI PROCEDURE CODES FOR CY 2012—Continued 

APC HCPCS SI Description Median Single bill 

frequency 

Percent 

single bills 

Total 

frequency 

43259 T Endoscopic ultrasound exam ......... 811.70 13,234 15 21,312 

43246 T Place gastrostomy tube ................. 814.37 15,205 17 20,923 

43231 T Esoph endoscopy w/us exam ........ 822.22 346 .................... 455 

43244 T Upper GI endoscopy/ligation ......... 875.56 5,100 6 6,916 

43215 T Esophagus endoscopy ................... 881.45 220 .................... 858 

43255 T Operative upper GI endoscopy ...... 882.09 3,810 4 7,517 

43458 T Dilate esophagus ........................... 890.28 145 .................... 1,305 

43217 T Esophagus endoscopy ................... 890.36 24 .................... 104 

49446 T Change g-tube to g-j perc .............. 891.78 389 .................... 681 

43205 T Esophagus endoscopy/ligation ...... 894.22 121 .................... 142 

43249 T Esoph endoscopy dilation .............. 897.83 19,351 22 50,173 

49440 T Place gastrostomy tube perc ......... 899.69 1,770 2 2,823 

43245 T Uppr gi scope dilate strictr ............. 919.77 2,489 3 5,401 

43226 T Esoph endoscopy dilation .............. 925.45 741 1 1,138 

43240 T Esoph endoscope w/drain cyst ...... 953.86 32 .................... 85 

49441 T Place duod/jej tube perc ................ 976.70 136 .................... 232 

43220 T Esoph endoscopy dilation .............. 1,011.56 593 1 908 

43232 T Esoph endoscopy w/us fn bx ......... 1,017.09 351 .................... 425 

44100 T Biopsy of bowel .............................. 1,028.66 5 .................... 22 

43238 T Uppr gi endoscopy w/us fn bx ....... 1,115.06 383 .................... 539 

43242 T Uppr gi endoscopy w/us fn bx ....... 1,125.47 12,260 14 16,443 

43258 T Operative upper GI endoscopy ...... 1,138.38 5,654 6 10,278 

43227 T Esoph endoscopy repair ................ 1,405.46 25 .................... 39 

43830 T Place gastrostomy tube ................. 1,721.16 150 .................... 288 

0422 .............. .................... Level III Upper GI Procedures ....... 1,833.15 .................... .................... ....................

43216 T Esophagus endoscopy/lesion ........ 1,416.11 12 .................... 31 

43870 T Repair stomach opening ................ 1,651.04 95 4 153 

43257 T Uppr gi scope w/thrml txmnt .......... 1,724.95 46 2 62 

43228 T Esoph endoscopy ablation ............. 1,829.56 2,518 93 3,022 

C9724 T EPS gast cardia plic ...................... 5,957.92 38 1 69 

5. Pulmonary Rehabilitation (APC 0102) 

Section 144(a)(1) of Public Law 110– 

275 (MIPPA) added section 1861(fff) to 

the Act to provide Medicare Part B 

coverage and payment for a 

comprehensive program of pulmonary 

rehabilitation services furnished to 

beneficiaries with chronic obstructive 

pulmonary disease, effective January 1, 

2010. Accordingly, in the CY 2010 

OPPS/ASC final rule with comment 

period, we established a policy to pay 

for pulmonary rehabilitation services 

furnished as a part of the 

comprehensive pulmonary 

rehabilitation program benefit (74 FR 

60567). There was and continues to be 

no single CPT code that fully and 

accurately describes the comprehensive 

pulmonary rehabilitation benefit 

provided in section 1861(fff) of the Act. 

Moreover, there were no alphanumeric 

HCPCS codes that described the 

comprehensive pulmonary 

rehabilitation benefit in effect for CY 

2008 (on which the CY 2010 OPPS was 

based) or CY 2009 (on which the CY 

2011 OPPS was based). Therefore, for 

CY 2010, we created new HCPCS code 

G0424 (Pulmonary rehabilitation, 

including exercise (includes 

monitoring), one hour, per session, up 

to two sessions per day) and assigned 

the code to APC 0102 (Level II 

Pulmonary Treatment), which we also 

created for CY 2010 OPPS. Because 

none of the pulmonary treatment codes 

for which there were charges for CY 

2008 or CY 2009 accurately described 

the comprehensive pulmonary 

rehabilitation service for which MIPPA 

provided coverage, we did not assume 

that the charge reported on any one of 

the previously existing HCPCS codes 

under which pulmonary treatments 

were reported would represent the full 

charge for the comprehensive 

pulmonary rehabilitation service. 

Instead, for the CY 2010 OPPS, which 

was based on claims for services in CY 

2008, we calculated a median ‘‘per 

session’’ cost that we simulated from 

historical hospital claims data for 

pulmonary therapy services that were 

billed in combination with one another, 

much like we create composite APC 

median costs by summing the costs of 

multiple procedures that are typically 

provided on the same date. Our 

methodology for calculating the ‘‘per 

session’’ median cost that we used as 

the basis for the CY 2010 OPPS payment 

rate for HCPCS code G0424 and APC 

0102 is discussed in detail in the CY 

2010 OPPS final rule with comment 

period (74 FR 60567 through 60570). 

Specifically, to simulate the ‘‘per 

session’’ median cost of new HCPCS 

code G0424 from claims data for 

existing services, we used only claims 

that contained at least one unit of 

HCPCS code G0239 (Therapeutic 

procedures to improve respiratory 

function or increase strength or 

endurance of respiratory muscles, two 

or more individuals (includes 

monitoring), the group code that is 

without limitation on time duration, 

and one unit of HCPCS code G0237 

(Therapeutic procedures to increase 

strength or endurance of respiratory 

muscles, one on one, face to face, per 15 

minutes (includes monitoring) or 

HCPCS code G0238 (Therapeutic 

procedures to improve respiratory 

function or increase strength or 

endurance of respiratory muscles, one 

on one, face to face, per 15 minutes 

(includes monitoring), the individual, 

face-to-face codes that report 15 minutes 

of service, on the same date of service. 

We reasoned that patients in a 

pulmonary rehabilitation program 

would typically receive individual and 

group services in each session of 

approximately 1 hour in duration. This 

was consistent with public comments 

that suggested that pulmonary 

rehabilitation is often provided in group 

sessions in the HOPD, although patients 

commonly require additional one-onone care in order to fully participate in 

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the program. We note that our use of 

‘‘per session’’ claims reporting one unit 

of HCPCS code G0237 or G0238 and one 

unit of HCPCS code G0239 in this 

simulation methodology was also 

consistent with our overall finding of 

approximately 2.4 service units of the 

HCPCS G-codes per day on a single date 

of service, usually consisting of both 

individual and group services, for 

patients receiving pulmonary therapy 

services in the HOPD based upon CY 

2008 claims. We concluded that the 

typical session of pulmonary 

rehabilitation would be 1 hour based on 

public comments that indicated that a 

session of pulmonary rehabilitation is 

typically 1 hour and based on our 

findings that the most commonly 

reported HCPCS code for pulmonary 

treatment is HCPCS code G0239, which 

has no time definition for this group 

service. 

We included all costs of the related 

tests and assessment services (CPT 

codes 94620 (Pulmonary stress testing; 

simple (e.g., 6-minute walk test, 

prolonged exercise test for 

bronchospasm with pre- and postspirometry and oximetry)); 94664 

(Demonstration and/or evaluation of 

patient utilization of an aerosol 

generator, nebulizer, metered dose 

inhaler or IPPB device); and 94667 

(Manipulation chest wall, such as 

cupping, percussion and vibration to 

facilitate lung function; initial 

demonstration and/or evaluation), and 

all CPT codes for established patient 

clinic visits, on the same date of service 

as the HCPCS G-codes in the claims we 

used to simulate the median cost for 

HCPCS code G0424. After identifying 

these ‘‘per session’’ claims, which we 

believe to represent 1 hour of care, we 

summed the costs on them and 

calculated the median cost for the set of 

selected claims. In light of the cost and 

clinical similarities of pulmonary 

rehabilitation and the existing services 

described by HCPCS codes G0237, 

G0238, and G0239 and the CPT codes 

for related assessments and tests, and 

the significant number of ‘‘per session’’ 

hospital claims we found, we believed 

that the simulated median cost for 

HCPCS code G0424, constructed to 

include the costs of these services where 

furnished, was our best estimate of the 

expected hospital cost of a pulmonary 

rehabilitation session, given that we did 

not have hospital charges for the 

comprehensive pulmonary 

rehabilitation service provided by 

MIPPA for which we created HCPCS 

code G0424. 

We used the resulting simulated 

median ‘‘per session’’ cost of 

approximately $50 as the basis for the 

payment for pulmonary rehabilitation 

service for CY 2010, the first year in 

which the comprehensive pulmonary 

rehabilitation benefit was covered. For 

CY 2011, which was based on claims for 

services furnished in CY 2009, we 

continued to assign HCPCS code G0424 

to APC 0102 and to apply the 

simulation methodology that we used in 

CY 2010 to claims for services in CY 

2009 to calculate a median ‘‘per 

session’’ cost simulated from historical 

hospital claims data for similar 

pulmonary therapy services for the CY 

2011 OPPS. The CY 2011 OPPS final 

rule median cost of approximately $62 

resulted in a national unadjusted 

payment rate for CY 2011 of 

approximately $63. 

For the CY 2012 OPPS, however, we 

have a very robust set of claims for 

HCPCS code G0424 on which hospitals 

reported the charges for the 

comprehensive pulmonary 

rehabilitation service for which MIPPA 

provided the pulmonary rehabilitation 

benefit beginning on January 1, 2010. 

Specifically, the CY 2012 OPPS 

proposed rule data, based on CY 2010 

claims, contained a total frequency of 

393,056 lines of HCPCS code G0424, of 

which we were able to use 391,901 

single procedure bills or almost 100 

percent of the claims submitted for 

HCPCS code G0424. This is an 

extremely robust volume of single 

procedure bills containing charges for 

HCPCS code G0424 on which to base a 

median cost. In general, we have found 

that higher volumes of single bills both 

in absolute numbers and as a percentage 

of total frequency provide very stable 

estimates of hospital costs. 

Therefore, we are proposing that the 

payment rate for HCPCS code G0424 

and, therefore, for APC 102, would be 

based on the median cost for the service 

as derived from claims for services 

furnished in CY 2010 and the most 

current available cost report 

information, using our longstanding 

process for estimating the median cost 

of a service described by a HCPCS code. 

We refer readers to section II. of this 

proposed rule for a description of our 

longstanding standard process for 

calculating the median costs on which 

the OPPS payment rates are based. 

Using our standard median calculation 

process for HCPCS code G0424 results 

in a proposed median cost of 

approximately $38 for HCPCS code 

G0424 and, therefore, for APC 0102. 

Given that the volume of claims in the 

CY 2012 OPPS proposed rule data is so 

robust for HCPCS code G0424, we 

believe that the proposed median cost 

we calculated for HCPCS code G0424 is 

a valid reflection of the relative cost of 

the comprehensive pulmonary 

rehabilitation service described by 

HCPCS code G0424 and that the 

proposed median cost for HCPCS code 

G0424 is an appropriate basis on which 

to establish the proposed national 

unadjusted payment rate for APC 0102. 

We recognize that there is a 

significant difference between our 

simulated median cost for CY 2011 and 

the CY 2012 proposed rule median cost 

of approximately $38 that is derived 

from application of our standard median 

calculation process to hospital claims 

data for CY 2010. We believe that this 

difference arises because the median 

simulation methodology we used for CY 

2010 and CY 2011 selected claims that 

contained multiple procedures and 

packaged the costs of numerous services 

into the ‘‘per session’’ cost for the 

simulated code where numerous 

services appeared on the same date of 

service. Our simulation methodology 

assumed that hospitals would include 

the charges for these additional services 

in their CY 2010 charges for HCPCS 

code G0424 because the services are 

included in the definition of 

comprehensive pulmonary 

rehabilitation. 

In response to the CY 2012 OPPS 

proposed median of approximately $38 

for HCPCS code G0424, we looked at 

our claims data in more depth. We 

found that 1,048 hospitals, 

approximately 25 percent of hospitals 

paid under the OPPS, reported HCPCS 

code G0424 and that the median line 

item median cost (exclusive of 

packaging) was approximately $38, 

virtually no different from the median 

cost per unit that we derived from the 

single bills. We also examined the 

charges that were submitted for HCPCS 

code G0424 in CY 2010 and the CCRs 

that were applied to the charges for 

HCPCS code G0424 to calculate the 

estimated median cost for the code for 

this CY 2012 proposed rule. We also 

looked at the revenue codes under 

which charges for HCPCS code G0424 

were reported and the percentage of cost 

that was associated with packaged costs, 

such as oxygen, drugs, and medical 

supplies. We found that the median line 

item charge for HCPCS code G0424 in 

the CY 2012 proposed rule data was 

approximately $150 and that the median 

CCR was 0.29. We also found that the 

most frequently reported revenue code 

for HCPCS code G0424 was revenue 

code 410 (Respiratory therapy), 

approximately 108,000 single bills, and 

with revenue code 948 (Pulmonary 

Rehabilitation), approximately 81,000 

single bills, being the second most 

commonly reported revenue code for 

HCPCS code G0424. We found that only 

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0.02 percent of the cost of HCPCS code 

G0424 was packaged cost (for example, 

oxygen, drugs, and supplies). In general, 

our detailed examination of total and 

line item charges for pulmonary 

rehabilitation, the CCRs used to reduce 

the charges to estimated costs on the 

single bills, the revenue codes reported, 

and the absence of packaging on the 

single bills supports the proposed 

median cost of $38 per unit as a valid 

estimate of the relative cost of one unit 

of HCPCS code G0424. 

In summary, our examination of the 

claims and cost data for HCPCS code 

G0424 causes us to believe that the 

proposed median cost that we 

calculated from claims data for HCPCS 

code G0424 was calculated correctly 

according to our longstanding standard 

median cost calculation methodology. 

Therefore, we are proposing to base the 

CY 2012 OPPS payment rate for HCPCS 

code G0424 and APC 0102 on the 

median cost that we derive from 

applying our standard median 

calculation methodology to the CY 2010 

charges and cost data for HCPCS code 

G0424. 

6. Insertion/Replacement/Repair of 

AICD Leads, Generator, and Pacing 

Electrodes (APC 0108) 

For CY 2011, only HCPCS code 33249 

(Insertion or repositioning of electrode 

lead(s) for single or dual chamber 

pacing cardioverter-defibrillator and 

insertion of pulse generator) is assigned 

to APC 0108 (Insertion/Replacement/ 

Repair of Cardioverter Defibrillator 

Leads). HCPCS code 33249, and 

therefore APC 0108, has a CY 2011 

OPPS median cost of $26,543.91 on 

which the CY 2011 national unadjusted 

payment rate is based. For CY 2011, 

there are two HCPCS codes assigned to 

APC 0418: CPT code 33225 (Insertion of 

pacing electrode, cardiac venous 

system, for left ventricular pacing, at 

time of insertion of pacing cardioverterdefibrillator or pacemaker pulse 

generator (including upgrade to dual 

chamber system) (List separately in 

addition to code for primary 

procedure)), and CPT code 33224 

(Insertion of pacing electrode, cardiac 

venous system, for left ventricular 

pacing, with attachment to previously 

placed pacemaker or pacing 

cardioverter-defibrillator pulse 

generator (including revision of pocket, 

removal, insertion, and/or replacement 

of generator)). APC 0418 is titled 

‘‘Insertion of left ventricular pacing 

electrode’’ for CY 2011. APC 0418 has 

a CY 2011 median cost of $10,516.97 on 

which the CY 2011 payment rate for 

HCPCS codes 33225 and 33224 are 

based. Both APCs 0108 and 0418 are 

device-dependent APCs for which the 

criteria and process used for calculating 

the median costs are discussed in 

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

In the CY 2010 claims data used for 

this CY 2012 proposed rule, HCPCS 

code 33249 has a median cost of 

approximately $27,020 based on 6,139 

single bills; HCPCS code 33225 has a 

median cost of approximately $34,018 

based on 458 single bills, and HCPCS 

code 33224 has a median cost of 

approximately $12,418 based on 201 

single bills. We are proposing to retain 

HCPCS code 33249 in APC 0108 but to 

reassign HCPCS code 33225 to APC 

0108 on the basis that these codes are 

similar in clinical characteristics and 

median cost. We are proposing to revise 

the title of APC 0108 to read ‘‘Insertion/ 

Replacement/Repair of AICD Leads, 

Generator, and Pacing Electrodes’’ for 

CY 2012. Under our standard 

methodology, using CY 2010 claims 

data, we calculated a median cost of 

approximately $27,361 for APC 0108. 

We also are proposing to assign 

HCPCS code 33224 to APC 0655 

because it is similar in clinical 

characteristics and median costs to the 

other services in APC 0655, and to 

revise the title of APC 0655 to read 

‘‘Insertion/Replacement/Conversion of a 

Permanent Dual Chamber Pacemaker or 

Pacing Electrode.’’ We are proposing a 

CY 2012 OPPS median cost for APC 

0655 of approximately $9,785 upon 

which we are proposing to base the CY 

2012 OPPS payment rate. We are 

proposing the changes to the titles of 

APCs 0108 and 0655 to better describe 

the proposed content of the APCs. 

Because the reassignment of HCPCS 

code 33225 to APC 0108 and HCPCS 

33244 to APC 0655 would result in APC 

0418 containing no HCPCS codes, we 

are proposing to delete APC 0418. 

As we discuss in detail in section 

III.D. of this proposed rule, we are 

proposing that HCPCS codes 33249 and 

33225 would be paid under APC 0108 

only if they are not reported on the same 

date of service. We are proposing that, 

when HCPCS codes 33249 and 33225 

are reported on the same date of service, 

they would be paid through proposed 

new composite APC 8009 (Cardiac 

Resynchronization Therapy with 

Defibrillator Composite) and that the 

payment rate for proposed composite 

APC 8009 would be limited to the 

proposed IPPS standardized payment 

amount for MS–DRG 227 (Cardiac 

Defibrillator Implant without Cardiac 

Catheterization and without Medical 

Complications and Comorbidities), 

which is currently estimated to be 

$26,364.93. In other words, we are 

proposing to pay APC 8009 at the lesser 

of the APC 8009 median cost or the IPPS 

standardized payment rate for MS–DRG 

227. We calculated the standardized 

payment rate for MS–DRG 227 

($26,364.93) by multiplying the 

normalized weight from Table 5 of the 

FY 2012 IPPS/LTCH PPS proposed rule 

(5.1370) by the sum of the nonlabor and 

labor-related shares of the proposed FY 

2012 IPPS operating standardized 

amount (nonwage-adjusted) laborrelated share $3,182.06 + nonlaborrelated share $1,950.30 = $5,132.36) 

which were obtained from Table1B. For 

further detail on the calculation of the 

IPPS proposed FY 2012 payment rates, 

we refer readers to the FY 2012 IPPS/ 

LTCH PPS proposed rule (76 FR 26028 

through 26029). 

In addition, under the authority of 

section 1833(t)(2)(E) of the Act, which 

gives the Secretary the authority to 

make adjustments to ensure equitable 

payments, we are proposing to limit the 

payment for services that are assigned to 

APC 0108, to the proposed IPPS 

standardized payment amount for MS– 

DRG 227. In other words, we are 

proposing to pay APC 0108 at the lesser 

of the APC 0108 median cost or the IPPS 

standardized payment rate for MS–DRG 

227. We believe that MS–DRG 227 is the 

most comparable DRG to APC 0108 

because, like APC 0108, MS–DRG 227 

includes implantation of a defibrillator 

in patients who do not have medical 

complication or comorbidities. If we 

were to base payment for APC 0108 on 

our calculated median cost of 

approximately $27,361, it would result 

in a payment under the CY 2012 OPPS 

that would exceed our proposed 

standardized payment under the IPPS 

for MS–DRG 227 of $26,364.93. We do 

not believe that it would be equitable to 

pay more for the implantation of a 

cardioverter defibrillator or 

implantation of a left ventricular pacing 

electrode for an outpatient encounter, 

which, by definition, includes fewer 

items and services than an inpatient 

stay during which the patient has the 

same procedure. In contrast, the amount 

Medicare would pay for an inpatient 

stay includes continuous skilled nursing 

care, room and board, all medications, 

and all diagnostic tests for an average of 

3 days. 

We believe that limiting OPPS 

payment for the services described by 

HCPCS codes 33249 and 33225 to the 

IPPS MS–DRG payment will ensure 

sufficient, appropriate, and equitable 

payment to hospitals because patients 

who receive these services in the 

hospital outpatient setting are not as 

sick as patients who have been admitted 

to receive this same service in the 

hospital inpatient setting. Therefore, we 

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expect it would be less costly to care for 

these patients as outpatients, who 

would also spend less time in the 

facility and receive fewer services. In 

addition, we believe that a payment cap 

is necessary to ensure that we do not 

create an inappropriate payment 

incentive to implant ICDs and left 

ventricular leads in one setting of care 

over another by paying more in the 

outpatient setting compared to the 

inpatient setting. 

We are proposing to continue all other 

standard policies that apply to devicedependent procedures, including the 

procedure-to-device edits that were 

established beginning in the CY 2005 

OPPS for claims processing and median 

calculation; and calculation of and 

application of device offset amounts 

when pass-through devices are used and 

when an ‘‘FB’’ or ‘‘FC’’ modifier is 

attached to the line for either CPT code 

33249 or 33225. However, for CY 2012, 

we are proposing that if the APC 0108 

median cost that we will calculate for 

the CY 2012 OPPS/ASC final rule 

exceeds the FY 2012 IPPS standardized 

payment rate for MS–DRG 227, as 

adopted in the FY 2012 IPPS/LTCH PPS 

final rule, we would establish the OPPS 

payment amount at the IPPS 

standardized payment rate for MS–DRG 

227 for FY 2012. In the FY 2012 IPPS/ 

LTCH PPS proposed rule, this amount is 

$26,364.93. If the median cost for APC 

0108 as calculated using the CY 2012 

OPPS/ASC final rule data is less than 

the FY 2012 IPPS standardized payment 

rate for MS–DRG 227, we would base 

the payment for APC 0108 on the CY 

2012 OPPS/ASC final rule median cost 

for APC 0108. These proposed changes 

would be made in a budget neutral 

manner, in the same way that payment 

for other APCs is budget neutral within 

the OPPS. 

IV. Proposed OPPS Payment for Devices 

A. Proposed Pass-Through Payments for 

Devices 

1. Expiration of Transitional PassThrough Payments for Certain Devices 

a. Background 

Section 1833(t)(6)(B)(iii) of the Act 

requires that, under the OPPS, a 

category of devices be eligible for 

transitional pass-through payments for 

at least 2, but not more than 3, years. 

This pass-through payment eligibility 

period begins with the first date on 

which transitional pass-through 

payments may be made for any medical 

device that is described by the category. 

We may establish a new device category 

for pass-through payment in any 

quarter. Under our established policy, 

we base the pass-through status 

expiration date for a device category on 

the date on which pass-through 

payment is effective for the category. 

The date on which a pass-through 

category is in effect is the first date on 

which pass-through payment may be 

made for any medical device that is 

described by such category. We propose 

and finalize the dates for expiration of 

pass-through status for device categories 

as part of the OPPS annual update. 

We also have an established policy to 

package the costs of the devices that are 

no longer eligible for pass-through 

payments into the costs of the 

procedures with which the devices are 

reported in the claims data used to set 

the payment rates (67 FR 66763). 

Brachytherapy sources, which are now 

separately paid in accordance with 

section 1833(t)(2)(H) of the Act, are an 

exception to this established policy. 

There currently is one new device 

category eligible for pass-through 

payment, described by HCPCS code 

C1749 (Endoscope, retrograde imaging/ 

illumination colonoscope device 

(implantable), which we announced in 

the October 2010 OPPS Update 

(Transmittal 2050, Change Request 

7117, dated September 17, 2010). There 

are no categories for which we proposed 

expiration of pass-through status in CY 

2011. If we create new device categories 

for pass-through payment status during 

the remainder of CY 2011, we will 

propose future expiration dates in 

accordance with the statutory 

requirement that they be eligible for 

pass-through payments for at least 2, but 

not more than 3, years from the date on 

which pass-through payment for any 

medical device described by the 

category may first be made. 

b. Proposed CY 2012 Policy 

As stated above, section 

1833(t)(6)(B)(iii) of the Act requires that, 

under the OPPS, a category of devices 

be eligible for transitional pass-through 

payments for at least 2, but not more 

than 3 years. Device pass-through 

category C1749 was established for passthrough payments on October 1, 2010, 

and will have been eligible for passthrough payments for more than 2 years 

but less than 3 years as of the end of CY 

2012. Therefore, we are proposing an 

expiration date for pass-through 

payment for device category C1749 of 

December 31, 2012. Therefore, under 

our proposal, beginning January 1, 2013, 

device category C1749 will no longer be 

eligible for pass-through payments. 

2. Proposed Provisions for Reducing 

Transitional Pass-Through Payments to 

Offset Costs Packaged into APC Groups 

a. Background 

We have an established policy to 

estimate the portion of each APC 

payment rate that could reasonably be 

attributed to the cost of the associated 

devices that are eligible for pass-through 

payments (66 FR 59904). We deduct 

from the pass-through payments for 

identified device categories eligible for 

pass-through payments an amount that 

reflects the portion of the APC payment 

amount that we determine is associated 

with the cost of the device, defined as 

the device APC offset amount, as 

required by section 1833(t)(6)(D)(ii) of 

the Act. We have consistently employed 

an established methodology to estimate 

the portion of each APC payment rate 

that could reasonably be attributed to 

the cost of an associated device eligible 

for pass-through payment, using claims 

data from the period used for the most 

recent recalibration of the APC rates (72 

FR 66751 through 66752). We establish 

and update the applicable device APC 

offset amounts for eligible pass-through 

device categories through the 

transmittals that implement the 

quarterly OPPS updates. 

We currently have published a list of 

all procedural APCs with the CY 2011 

portions (both percentages and dollar 

amounts) of the APC payment amounts 

that we determine are associated with 

the cost of devices, on the CMS Web site 

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

HospitalOutpatientPPS/ 

01_overview.asp. The dollar amounts 

are used as the device APC offset 

amounts. In addition, in accordance 

with our established practice, the device 

APC offset amounts in a related APC are 

used in order to evaluate whether the 

cost of a device in an application for a 

new device category for pass-through 

payment is not insignificant in relation 

to the APC payment amount for the 

service related to the category of 

devices, as specified in our regulations 

at § 419.66(d). 

As of CY 2009, the costs of 

implantable biologicals without passthrough status are packaged into the 

payment for the procedures in which 

they are inserted or implanted because 

implantable biologicals without passthrough status are not separately paid 

(73 FR 68633 through 68636). For CY 

2010, we finalized a new policy to 

specify that the pass-through evaluation 

process and pass-through payment 

methodology for implantable biologicals 

that are surgically inserted or implanted 

(through a surgical incision or a natural 

orifice; also referred to as ‘‘implantable 

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biologicals’’) and that are newly 

approved for pass-through status 

beginning on or after January 1, 2010, be 

the device pass-through process and 

payment methodology only. As a result, 

for CY 2010, we included implantable 

biologicals in our calculation of the 

device APC offset amounts (74 FR 

60476). We calculated and set the 

device APC offset amount for a newly 

established device pass-through 

category, which could include a newly 

eligible implantable biological, 

beginning in CY 2010 using the same 

methodology we have historically used 

to calculate and set device APC offset 

amounts for device categories eligible 

for pass-through payment (72 FR 66751 

through 66752), with one modification. 

Because implantable biologicals are 

considered devices rather than drugs for 

purposes of pass-through evaluation and 

payment under our established policy, 

the device APC offset amounts include 

the costs of implantable biologicals. For 

CY 2010, we also finalized a policy to 

utilize the revised device APC offset 

amounts to evaluate whether the cost of 

an implantable biological in an 

application for a new device category 

for pass-through payment is not 

insignificant in relation to the APC 

payment amount for the service related 

to the category of devices. Further, for 

CY 2010, we no longer used the ‘‘policypackaged’’ drug APC offset amounts for 

evaluating the cost significance of 

implantable biological pass-through 

applications under review and for 

setting the APC offset amounts that 

would apply to pass-through payment 

for those implantable biologicals, 

effective for new pass-through status 

determinations beginning in CY 2010 

(74 FR 60463). 

For CY 2011, we continued our policy 

that the pass-through evaluation process 

and pass-through payment methodology 

for implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) and that are newly approved for 

pass-through status beginning on or 

after January 1, 2010, be the device passthrough process and payment 

methodology only. 

b. Proposed CY 2012 Policy 

We are proposing to continue our 

policy, for CY 2012, that the passthrough evaluation process and passthrough payment methodology for 

implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) and that are newly approved for 

pass-through status beginning on or 

after January 1, 2010, be the device passthrough process and payment 

methodology only. The rationale for this 

policy is provided in the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60471 through 60477). We 

also are proposing to continue our 

established policies for calculating and 

setting the device APC offset amounts 

for each device category eligible for 

pass-through payment. In addition, we 

are proposing to continue to review 

each new device category on a case-bycase basis to determine whether device 

costs associated with the new category 

are already packaged into the existing 

APC structure. If device costs packaged 

into the existing APC structure are 

associated with the new category, we 

would deduct the device APC offset 

amount from the pass-through payment 

for the device category. As stated earlier, 

these device APC offset amounts also 

would be used in order to evaluate 

whether the cost of a device in an 

application for a new device category 

for pass-through payment is not 

insignificant in relation to the APC 

payment amount for the service related 

to the category of devices (§ 419.66(d)). 

For CY 2012, we also are proposing to 

continue our policy established in CY 

2010 to include implantable biologicals 

in our calculation of the device APC 

offset amounts. In addition, we are 

proposing to continue to calculate and 

set any device APC offset amount for a 

new device pass-through category that 

includes a newly eligible implantable 

biological beginning in CY 2012 using 

the same methodology we have 

historically used to calculate and set 

device APC offset amounts for device 

categories eligible for pass-through 

payment, and to include the costs of 

implantable biologicals in the 

calculation of the device APC offset 

amounts, as we first finalized and 

implemented for CY 2010. 

In addition, we are proposing to 

update, on the CMS Web site at http:// 

www.cms.gov/HospitalOutpatientPPS, 

the list of all procedural APCs with the 

final CY 2012 portions of the APC 

payment amounts that we determine are 

associated with the cost of devices so 

that this information is available for use 

by the public in developing potential 

CY 2012 device pass-through payment 

applications and by CMS in reviewing 

those applications. 

In summary, for CY 2012, consistent 

with the policy established for CY 2010, 

we are proposing to continue the 

following policies related to passthrough payment for devices: (1) 

treating implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) and that are newly approved for 

pass-through status on or after January 

1, 2010, as devices for purposes of the 

OPPS pass-through evaluation process 

and payment methodology; (2) 

including implantable biologicals in 

calculating the device APC offset 

amounts; (3) using the device APC offset 

amounts to evaluate whether the cost of 

a device (defined to include implantable 

biologicals) in an application for a new 

device category for pass-through 

payment is not insignificant in relation 

to the APC payment amount for the 

service related to the category of 

devices; and (4) reducing device passthrough payments based on device costs 

already included in the associated 

procedural APCs, when we determine 

that device costs associated with the 

new category are already packaged into 

the existing APC structure. 

B. Proposed Adjustment to OPPS 

Payment for No Cost/Full Credit and 

Partial Credit Devices 

1. Background 

In recent years, there have been 

several field actions on and recalls of 

medical devices as a result of 

implantable device failures. In many of 

these cases, the manufacturers have 

offered devices without cost to the 

hospital or with credit for the device 

being replaced if the patient required a 

more expensive device. In order to 

ensure that payment rates for 

procedures involving devices reflect 

only the full costs of those devices, our 

standard ratesetting methodology for 

device-dependent APCs uses only 

claims that contain the correct device 

code for the procedure, do not contain 

token charges, do not contain the ‘‘FB’’ 

modifier signifying that the device was 

furnished without cost or with a full 

credit, and do not contain the ‘‘FC’’ 

modifier signifying that the device was 

furnished with partial credit. As 

discussed in section II.A.2.d.(1) of this 

proposed rule, we are proposing to 

continue to use our standard ratesetting 

methodology for device-dependent 

APCs for CY 2012. 

To ensure equitable payment when 

the hospital receives a device without 

cost or with full credit, in CY 2007, we 

implemented a policy to reduce the 

payment for specified device-dependent 

APCs by the estimated portion of the 

APC payment attributable to device 

costs (that is, the device offset) when the 

hospital receives a specified device at 

no cost or with full credit (71 FR 68071 

through 68077). Hospitals are instructed 

to report no cost/full credit cases using 

the ‘‘FB’’ modifier on the line with the 

procedure code in which the no cost/ 

full credit device is used. In cases in 

which the device is furnished without 

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cost or with full credit, the hospital is 

instructed to report a token device 

charge of less than $1.01. In cases in 

which the device being inserted is an 

upgrade (either of the same type of 

device or to a different type of device) 

with a full credit for the device being 

replaced, the hospital is instructed to 

report as the device charge the 

difference between its usual charge for 

the device being implanted and its usual 

charge for the device for which it 

received full credit. In CY 2008, we 

expanded this payment adjustment 

policy to include cases in which 

hospitals receive partial credit of 50 

percent or more of the cost of a specified 

device. Hospitals are instructed to 

append the ‘‘FC’’ modifier to the 

procedure code that reports the service 

provided to furnish the device when 

they receive a partial credit of 50 

percent or more of the cost of the new 

device. 

We reduce the OPPS payment for the 

implantation procedure by 100 percent 

of the device offset for no cost/full 

credit cases when both a specified 

device code is present on the claim and 

the procedure code maps to a specified 

APC. Payment for the implantation 

procedure is reduced by 50 percent of 

the device offset for partial credit cases 

when both a specified device code is 

present on the claim and the procedure 

code maps to a specified APC. 

Beneficiary copayment is based on the 

reduced payment amount when either 

the ‘‘FB’’ or the ‘‘FC’’ modifier is billed 

and the procedure and device codes 

appear on the lists of procedures and 

devices to which this policy applies. We 

refer readers to the CY 2008 OPPS/ASC 

final rule with comment period for more 

background information on the ‘‘FB’’ 

and ‘‘FC’’ payment adjustment policies 

(72 FR 66743 through 66749). 

2. Proposed APCs and Devices Subject 

to the Adjustment Policy 

For CY 2012, we are proposing to 

continue the existing policy of reducing 

OPPS payment for specified APCs by 

100 percent of the device offset amount 

when a hospital furnishes a specified 

device without cost or with a full credit 

and by 50 percent of the device offset 

amount when the hospital receives 

partial credit in the amount of 50 

percent or more of the cost for the 

specified device. Because the APC 

payments for the related services are 

specifically constructed to ensure that 

the full cost of the device is included in 

the payment, we continue to believe it 

is appropriate to reduce the APC 

payment in cases in which the hospital 

receives a device without cost, with full 

credit, or with partial credit, in order to 

provide equitable payment in these 

cases. (We refer readers to section 

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

description of our standard ratesetting 

methodology for device-dependent 

APCs.) Moreover, the payment for these 

devices comprises a large part of the 

APC payment on which the beneficiary 

copayment is based, and we continue to 

believe it is equitable that the 

beneficiary cost sharing reflects the 

reduced costs in these cases. 

For CY 2012, we also are proposing to 

continue using the three criteria 

established in the CY 2007 OPPS/ASC 

final rule with comment period for 

determining the APCs to which this 

policy applies (71 FR 68072 through 

68077). Specifically: (1) all procedures 

assigned to the selected APCs must 

involve implantable devices that would 

be reported if device insertion 

procedures were performed; (2) the 

required devices must be surgically 

inserted or implanted devices that 

remain in the patient’s body after the 

conclusion of the procedure (at least 

temporarily); and (3) the device offset 

amount must be significant, which, for 

purposes of this policy, is defined as 

exceeding 40 percent of the APC cost. 

We also are proposing to continue to 

restrict the devices to which the APC 

payment adjustment would apply to a 

specific set of costly devices to ensure 

that the adjustment would not be 

triggered by the implantation of an 

inexpensive device whose cost would 

not constitute a significant proportion of 

the total payment rate for an APC. As 

we stated in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71925), we continue to believe these 

criteria are appropriate because free 

devices and device credits are likely to 

be associated with particular cases only 

when the device must be reported on 

the claim and is of a type that is 

implanted and remains in the body 

when the beneficiary leaves the 

hospital. We believe that the reduction 

in payment is appropriate only when 

the cost of the device is a significant 

part of the total cost of the APC into 

which the device cost is packaged, and 

that the 40-percent threshold is a 

reasonable definition of a significant 

cost. 

We examined the offset amounts 

calculated from the CY 2012 proposed 

rule data and the clinical characteristics 

of APCs to determine whether the APCs 

to which the no cost/full credit and 

partial credit device adjustment policy 

applied in CY 2011 continue to meet the 

criteria for CY 2012, and to determine 

whether other APCs to which the policy 

did not apply in CY 2011 would meet 

the criteria for CY 2012. Based on the 

CY 2010 claims data available for this 

proposed rule, we are not proposing any 

changes to the APCs and devices to 

which this policy applies. However, as 

discussed in section II.A.2.e.(6) of this 

proposed rule, we are proposing to 

delete APC 0418 (Insertion of Left 

Ventricular Pacing Electrode) for CY 

2012 and, therefore, are proposing to 

remove this APC from the list of APCs 

to which the no cost/full credit and 

partial credit device adjustment policy 

would apply in CY 2012. 

Table 24 below lists the proposed 

APCs to which the payment adjustment 

policy for no cost/full credit and partial 

credit devices would apply in CY 2012 

and displays the proposed payment 

adjustment percentages for both no cost/ 

full credit and partial credit 

circumstances. We are proposing that 

the no cost/full credit adjustment for 

each APC to which this policy would 

continue to apply would be the device 

offset percentage for the APC (the 

estimated percentage of the APC cost 

that is attributable to the device costs 

that are packaged into the APC). We also 

are proposing that the partial credit 

device adjustment for each APC would 

continue to be 50 percent of the no cost/ 

full credit adjustment for the APC. 

Table 25 below lists the proposed 

devices to which the payment 

adjustment policy for no cost/full credit 

and partial credit devices would apply 

in CY 2012. In the CY 2012 OPPS/ASC 

final rule with comment period, we will 

update the lists of APCs and devices to 

which the no cost/full credit and partial 

credit device adjustment policy would 

apply for CY 2012, consistent with the 

three selection criteria discussed earlier 

in this section, based on the final CY 

2010 claims data available for the final 

rule with comment period. 

We are proposing, for CY 2012, that 

OPPS payments for implantation 

procedures to which the ‘‘FB’’ modifier 

is appended be reduced by 100 percent 

of the device offset for no cost/full 

credit cases when both a device code 

listed in Table 25 below, is present on 

the claim and the procedure code maps 

to an APC listed in Table 24 below. We 

are also proposing that OPPS payments 

for implantation procedures to which 

the ‘‘FC’’ modifier is appended are 

reduced by 50 percent of the device 

offset when both a device code listed in 

Table 25 is present on the claim and the 

procedure code maps to an APC listed 

in Table 24. Beneficiary copayment is 

based on the reduced amount when 

either the ‘‘FB’’ modifier or the ‘‘FC’’ 

modifier is billed and the procedure and 

device codes appear on the lists of 

procedures and devices to which this 

policy applies. 

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TABLE 24—PROPOSED APCS TO WHICH THE NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE ADJUSTMENT POLICY

WOULD APPLY IN CY 2012 

Proposed 

CY 2012 

APC 

Proposed CY 2012 APC title 

Proposed CY 

2012 device 

offset percentage for no 

cost/full credit 

case 

Proposed CY 

2012 device 

offset percentage for partial 

credit case 

0039 ....... Level I Implantation of Neurostimulator Generator ............................................................................. 85% 43% 

0040 ....... Level I Implantation/Revision/Replacement of Neurostimulator Electrodes ....................................... 54% 27% 

0061 ....... Level II Implantation/Revision/Replacement of Neurostimulator Electrodes ...................................... 64% 32% 

0089 ....... Insertion/Replacement of Permanent Pacemaker and Electrodes ..................................................... 71% 35% 

0090 ....... Insertion/Replacement of Pacemaker Pulse Generator ...................................................................... 73% 37% 

0106 ....... Insertion/Replacement of Pacemaker Leads and/or Electrodes ......................................................... 43% 21% 

0107 ....... Insertion of Cardioverter-Defibrillator .................................................................................................. 88% 44% 

0108 ....... Insertion/Replacement/Repair of Cardioverter-Defibrillator Leads ...................................................... 87% 43% 

0227 ....... Implantation of Drug Infusion Device .................................................................................................. 81% 40% 

0259 ....... Level VII ENT Procedures ................................................................................................................... 83% 41% 

0315 ....... Level II Implantation of Neurostimulator Generator ............................................................................ 88% 44% 

0318 ....... Implantation of Cranial Neurostimulator Pulse Generator and Electrode ........................................... 86% 43% 

0385 ....... Level I Prosthetic Urological Procedures ............................................................................................ 61% 30% 

0386 ....... Level II Prosthetic Urological Procedures ........................................................................................... 70% 35% 

0425 ....... Level II Arthroplasty or Implantation with Prosthesis .......................................................................... 60% 30% 

0648 ....... Level IV Breast Surgery ...................................................................................................................... 44% 22% 

0654 ....... Insertion/Replacement of a permanent dual chamber pacemaker ..................................................... 74% 37% 

0655 ....... Insertion/Replacement/Conversion of a permanent dual chamber pacemaker .................................. 73% 37% 

0680 ....... Insertion of Patient Activated Event Recorders .................................................................................. 72% 36% 

TABLE 25—PROPOSED DEVICES TO

WHICH THE NO COST/FULL CREDIT

AND PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WOULD APPLY IN

CY 2012 

CY 2012 

Device 

HCPCS 

code 

CY 2012 Short descriptor 

C1721 .... AICD, dual chamber. 

C1722 .... AICD, single chamber. 

C1728 .... Cath, brachytx seed adm. 

C1764 .... Event recorder, cardiac. 

C1767 .... Generator, neurostim, imp. 

C1771 .... Rep dev, urinary, w/sling. 

C1772 .... Infusion pump, programmable. 

C1776 .... Joint device (implantable). 

C1777 .... Lead, AICD, endo single coil. 

C1778 .... Lead, neurostimulator. 

C1779 .... Lead, pmkr, transvenous VDD. 

C1785 .... Pmkr, dual, rate-resp. 

C1786 .... Pmkr, single, rate-resp. 

C1789 .... Prosthesis, breast, imp. 

C1813 .... Prosthesis, penile, inflatab. 

C1815 .... Pros, urinary sph, imp. 

C1820 .... Generator, neuro rechg bat sys. 

C1881 .... Dialysis access system. 

C1882 .... AICD, other than sing/dual. 

C1891 .... Infusion pump, non-prog, perm. 

C1895 .... Lead, AICD, endo dual coil. 

C1896 .... Lead, AICD, non sing/dual. 

C1897 .... Lead, neurostim, test kit. 

C1898 .... Lead, pmkr, other than trans. 

C1899 .... Lead, pmkr/AICD combination. 

C1900 .... Lead coronary venous. 

C2619 .... Pmkr, dual, non rate-resp. 

C2620 .... Pmkr, single, non rate-resp. 

C2621 .... Pmkr, other than sing/dual. 

C2622 .... Prosthesis, penile, non-inf. 

C2626 .... Infusion pump, non-prog, temp. 

C2631 .... Rep dev, urinary, w/o sling. 

L8600 ..... Implant breast silicone/eq. 

L8614 ..... Cochlear device/system. 

TABLE 25—PROPOSED DEVICES TO

WHICH THE NO COST/FULL CREDIT

AND PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WOULD APPLY IN

CY 2012—Continued 

CY 2012 

Device 

HCPCS 

code 

CY 2012 Short descriptor 

L8680 ..... Implt neurostim elctr each. 

L8685 ..... Implt nrostm pls gen sng rec. 

L8686 ..... Implt nrostm pls gen sng non. 

L8687 ..... Implt nrostm pls gen dua rec. 

L8688 ..... Implt nrostm pls gen dua non 

L8690 ..... Aud osseo dev, int/ext comp. 

V. Proposed OPPS Payment Changes for 

Drugs, Biologicals, and 

Radiopharmaceuticals 

A. Proposed OPPS Transitional PassThrough Payment for Additional Costs 

of Drugs, Biologicals, and 

Radiopharmaceuticals 

1. Background 

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

for temporary additional payments or 

‘‘transitional pass-through payments’’ 

for certain drugs and biologicals (also 

referred to as biologics). As enacted by 

the Medicare, Medicaid, and SCHIP 

Balanced Budget Refinement Act 

(BBRA) of 1999 (Pub. L. 106–113), this 

provision requires the Secretary to make 

additional payments to hospitals for 

current orphan drugs, as designated 

under section 526 of the Federal Food, 

Drug, and Cosmetic Act (Pub. L. 107– 

186); current drugs and biologicals and 

brachytherapy sources used for the 

treatment of cancer; and current 

radiopharmaceutical drugs and 

biologicals. For those drugs and 

biologicals referred to as ‘‘current,’’ the 

transitional pass-through payment 

began on the first date the hospital 

OPPS was implemented. 

Transitional pass-through payments 

also are provided for certain ‘‘new’’ 

drugs and biologicals that were not 

being paid for as an HOPD service as of 

December 31, 1996, and whose cost is 

‘‘not insignificant’’ in relation to the 

OPPS payments for the procedures or 

services associated with the new drug or 

biological. For pass-through payment 

purposes, radiopharmaceuticals are 

included as ‘‘drugs.’’ Under the statute, 

transitional pass-through payments for a 

drug or biological described in section 

1833(t)(6)(C)(i)(II) of the Act can be 

made for a period of at least 2 years, but 

not more than 3 years, after the 

product’s first payment as a hospital 

outpatient service under Medicare Part 

B. Proposed CY 2012 pass-through 

drugs and biologicals and their 

designated APCs are assigned status 

indicator ‘‘G’’ in Addenda A and B to 

this proposed rule, which are referenced 

in section XVII. of this proposed rule 

and available via the Internet. 

Section 1833(t)(6)(D)(i) of the Act 

specifies that the pass-through payment 

amount, in the case of a drug or 

biological, is the amount by which the 

amount determined under section 

1842(o) of the Act for the drug or 

biological exceeds the portion of the 

otherwise applicable Medicare OPD fee 

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42246 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

schedule that the Secretary determines 

is associated with the drug or biological. 

If the drug or biological is covered 

under a competitive acquisition contract 

under section 1847B of the Act, the 

pass-through payment amount is 

determined by the Secretary to be equal 

to the average price for the drug or 

biological for all competitive acquisition 

areas and the year established under 

such section as calculated and adjusted 

by the Secretary. As we noted in the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68633), the Part 

B drug CAP program was postponed 

beginning in CY 2009 (Medicare 

Learning Network (MLN) Matters 

Special Edition 0833, available via the 

Web site: http://www.cms.gov). As of 

publication of this proposed rule, the 

postponement of the Part B drug CAP 

program remains in effect, and there is 

no effective CAP program rate for passthrough drugs and biologicals as of 

January 1, 2009. Consistent with what 

we indicated in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71928), if the program is reinstituted 

during CY 2012 and Part B drug CAP 

rates become available, we would again 

use the Part B drug CAP rate for passthrough drugs and biologicals if they are 

a part of the Part B drug CAP program. 

Otherwise, we would continue to use 

the rate that would be paid in the 

physician’s office setting for all drugs 

and biologicals with pass-through 

status. 

This methodology for determining the 

pass-through payment amount is set 

forth in regulations at 42 CFR 419.64, 

which specify that the pass-through 

payment equals the amount determined 

under section 1842(o) of the Act minus 

the portion of the APC payment that 

CMS determines is associated with the 

drug or biological. Section 1847A of the 

Act establishes the average sales price 

(ASP) methodology, which is used for 

payment for drugs and biologicals 

described in section 1842(o)(1)(C) of the 

Act furnished on or after January 1, 

2005. The ASP methodology, as applied 

under the OPPS, uses several sources of 

data as a basis for payment, including 

the ASP, the wholesale acquisition cost 

(WAC), and the average wholesale price 

(AWP). In this proposed rule, the term 

‘‘ASP methodology’’ and ‘‘ASP-based’’ 

are inclusive of all data sources and 

methodologies described therein. 

Additional information on the ASP 

methodology can be found on the CMS 

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

McrPartBDrugAvgSalesPrice. 

For CYs 2005, 2006, and 2007, we 

estimated the OPPS pass-through 

payment amount for drugs and 

biologicals to be zero based on our 

interpretation that the ‘‘otherwise 

applicable Medicare OPD fee schedule’’ 

amount was equivalent to the amount to 

be paid for pass-through drugs and 

biologicals under section 1842(o) of the 

Act (or section 1847B of the Act, if the 

drug or biological is covered under a 

competitive acquisition contract). We 

concluded for those years that the 

resulting difference between these two 

rates would be zero. For CYs 2008 and 

2009, we estimated the OPPS passthrough payment amount for drugs and 

biologicals to be $6.6 million and $23.3 

million, respectively. For CY 2010, we 

estimated the OPPS pass-through 

payment estimate for drugs and 

biologicals to be $35.5 million. For CY 

2011, we estimated the OPPS passthrough payment for drugs and 

biologicals to be $15.5 million. Our 

proposed OPPS pass-through payment 

estimate for drugs and biologicals in CY 

2012 is $19 million, which is discussed 

in section VI.B. of this proposed rule. 

The pass-through application and 

review process for drugs and biologicals 

is explained on the CMS Web site at: 

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

HospitalOutpatientPPS/ 

04_passthrough_payment.asp. 

2. Proposed Drugs and Biologicals With 

Expiring Pass-Through Status in CY 

2012 

We are proposing that the passthrough status of 19 drugs and 

biologicals would expire on December 

31, 2011, as listed in Table 26 below. 

All of these drugs and biologicals will 

have received OPPS pass-through 

payment for at least 2 years and no more 

than 3 years by December 31, 2011. 

These drugs and biologicals were 

approved for pass-through status on or 

before January 1, 2010. With the 

exception of those groups of drugs and 

biologicals that are always packaged 

when they do not have pass-through 

status, specifically diagnostic 

radiopharmaceuticals, contrast agents, 

and implantable biologicals, our 

standard methodology for providing 

payment for drugs and biologicals with 

expiring pass-through status in an 

upcoming calendar year is to determine 

the product’s estimated per day cost and 

compare it with the OPPS drug 

packaging threshold for that calendar 

year (which is proposed at $80 for CY 

2012), as discussed further in section 

V.B.2. of this proposed rule. If the drug’s 

or biological’s estimated per day cost is 

less than or equal to the applicable 

OPPS drug packaging threshold, we 

would package payment for the drug or 

biological into the payment for the 

associated procedure in the upcoming 

calendar year. If the estimated per day 

cost of the drug or biological is greater 

than the OPPS drug packaging 

threshold, we would provide separate 

payment at the applicable relative ASPbased payment amount (which is 

proposed at ASP+4 percent for CY 2012, 

as discussed further in section V.B.3. of 

this proposed rule). Section V.B.2.d. of 

this proposed rule discusses the 

packaging of all nonpass-through 

contrast agents, diagnostic 

radiopharmaceuticals, and implantable 

biologicals. 

TABLE 26—PROPOSED DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH STATUS WILL EXPIRE DECEMBER 31, 2011 

Proposed 

CY 2012 

HCPCS 

code 

CY 2012 long descriptor Proposed 

CY 2012 SI 

Proposed 

CY 2012 

APC 

A9582 ....... Iodine I-123 iobenguane, diagnostic, per study dose, up to 15 millicuries .............................................. N N/A 

A9583 ....... Injection, gadofosveset trisodium, 1 ml .................................................................................................... N N/A 

C9250 ....... Human plasma fibrin sealant, vapor-heated, solvent-detergent (Artiss), 2 ml ......................................... K 9250 

C9360 ....... Dermal substitute, native, non-denatured collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5 square centimeters.K 9360 

C9361 ....... Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 centimeter length ................. N N/A 

C9362 ....... Porous purified collagen matrix bone void filler (Integra Mozaik Osteoconductive Scaffold Strip), per 

0.5 cc.

N N/A 

C9363 ....... Skin substitute, Integra Meshed Bilayer Wound Matrix, per square centimeter ...................................... K 9363 

C9364 ....... Porcine implant, Permacol, per square centimeter .................................................................................. N N/A 

J0598 ........ Injection, C–1 esterase inhibitor (human), Cinryze, 10 units ................................................................... K 9251 

J0641 ........ Injection, levoleucovorin calcium, 0.5 mg ................................................................................................. K 1236 

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TABLE 26—PROPOSED DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH STATUS WILL EXPIRE DECEMBER 31, 

2011—Continued 

Proposed 

CY 2012 

HCPCS 

code 

CY 2012 long descriptor Proposed 

CY 2012 SI 

Proposed 

CY 2012 

APC 

J0718 ........ Injection, certolizumab pegol, 1 mg .......................................................................................................... K 9249 

J1680 ........ Injection, human fibrinogen concentrate, 100 mg .................................................................................... K 1290 

J2426 ........ Injection, paliperidone palmitate, 1 mg ..................................................................................................... K 9255 

J2562 ........ Injection, plerixafor, 1 mg ......................................................................................................................... K 9252 

J7312 ........ Injection, dexamethasone intravitreal implant, 0.1 mg ............................................................................. K 9256 

J8705 ........ Topotecan, oral, 0.25 mg .......................................................................................................................... K 1238 

J9155 ........ Injection, degarelix, 1 mg .......................................................................................................................... K 1296 

J9328 ........ Injection, temozolomide, 1 mg .................................................................................................................. K 9253 

Q0138 ....... Injection, Ferumoxytol, for treatment of iron deficiency anemia, 1 mg .................................................... K 1297 

3. Proposed Drugs, Biologicals, and 

Radiopharmaceuticals With New or 

Continuing Pass-Through Status in CY 

2012 

We are proposing to continue passthrough status in CY 2012 for 33 drugs 

and biologicals. None of these drugs and 

biologicals will have received OPPS 

pass-through payment for at least 2 

years and no more than 3 years by 

December 31, 2011. These drugs and 

biologicals, which were approved for 

pass-through status between April 1, 

2010 and July 1, 2011, are listed in 

Table 27 below. The APCs and HCPCS 

codes for these drugs and biologicals 

approved for pass-through status 

through April 1, 2011, are assigned 

status indicator ‘‘G’’ in Addenda A and 

B, which are referenced in section XVIII 

of this proposed rule and available via 

the Internet. 

Section 1833(t)(6)(D)(i) of the Act sets 

the amount of pass-through payment for 

pass-through drugs and biologicals (the 

pass-through payment amount) as the 

difference between the amount 

authorized under section 1842(o) of the 

Act (or, if the drug or biological is 

covered under a CAP under section 

1847B of the Act, an amount determined 

by the Secretary equal to the average 

price for the drug or biological for all 

competitive acquisition areas and the 

year established under such section as 

calculated and adjusted by the 

Secretary) and the portion of the 

otherwise applicable OPD fee schedule 

that the Secretary determines is 

associated with the drug or biological. 

Payment for drugs and biologicals with 

pass-through status under the OPPS is 

currently made at the physician’s office 

payment rate of ASP+6 percent. We 

believe it is consistent with the statute 

to propose to continue to provide 

payment for drugs and biologicals with 

pass-through status at a rate of ASP+6 

percent in CY 2012, the amount that 

drugs and biologicals receive under 

section 1842(o) of the Act. Thus, for CY 

2012, we are proposing to pay for passthrough drugs and biologicals at ASP+6 

percent, equivalent to the rate these 

drugs and biologicals would receive in 

the physician’s office setting in CY 

2012. Therefore, the difference between 

ASP+4 percent that we are proposing to 

pay for nonpass-through separately 

payable drugs under the CY 2012 OPPS 

and ASP+6 percent would be the CY 

2012 pass-through payment amount for 

these drugs and biologicals. In the case 

of pass-through contrast agents and 

diagnostic radiopharmaceuticals, their 

pass-through payment amount would be 

equal to ASP+6 percent because, if not 

on pass-through status, payment for 

these products would be packaged into 

the associated procedures. We note that 

we are proposing to expire pass-through 

status for the remaining three 

implantable biologicals approved on or 

before January 1, 2010, under passthrough status as a drug or biological. 

Therefore, as described in the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60476) and as proposed 

in this proposed rule, implantable 

biologicals that are surgically inserted or 

implanted (through a surgical incision 

or a natural orifice) would be evaluated 

under the device pass-through process 

and paid according to the device 

payment methodology. Payment for 

nonpass-through implantable 

biologicals would continue to be 

packaged into the payment for the 

associated procedure as described in 

section V.B.2.d. of this proposed rule. 

In addition, we are proposing to 

continue to update pass-through 

payment rates on a quarterly basis on 

the CMS Web site during CY 2012 if 

later quarter ASP submissions (or more 

recent WAC or AWP information, as 

applicable) indicate that adjustments to 

the payment rates for these pass-through 

drugs or biologicals are necessary. For a 

full description of this policy, we refer 

readers to the CY 2006 OPPS/ASC final 

rule with comment period (70 FR 42722 

and 42723). If the Part B drug CAP is 

reinstated during CY 2012, and a drug 

or biological that has been granted passthrough status for CY 2012 becomes 

covered under the Part B drug CAP, we 

are proposing to provide pass-through 

payment at the Part B drug CAP rate and 

to make the adjustments to the payment 

rates for these drugs and biologicals on 

a quarterly basis, as appropriate. 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. 

In CY 2012, as is consistent with our 

CY 2011 policy for diagnostic and 

therapeutic radiopharmaceuticals, we 

are proposing to provide payment for 

both diagnostic and therapeutic 

radiopharmaceuticals that are granted 

pass-through status based on the ASP 

methodology. As stated above, for 

purposes of pass-through payment, we 

consider radiopharmaceuticals to be 

drugs under the OPPS. Therefore, if a 

diagnostic or therapeutic 

radiopharmaceutical receives passthrough status during CY 2012, we are 

proposing to follow the standard ASP 

methodology to determine the passthrough payment rate that drugs receive 

under section 1842(o) of the Act, which 

is ASP+6 percent. If ASP data are not 

available for a radiopharmaceutical, we 

are proposing to provide pass-through 

payment at WAC+6 percent, the 

equivalent payment provided to passthrough drugs and biologicals without 

ASP information. If WAC information is 

also not available, we are proposing to 

provide payment for the pass-through 

radiopharmaceutical at 95 percent of its 

most recent AWP. 

As discussed in more detail in section 

V.B.2.d. of this proposed rule, over the 

last 4 years, we implemented a policy 

whereby payment for all nonpassthrough diagnostic 

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42248 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

radiopharmaceuticals, contrast agents, 

and implantable biologicals is packaged 

into payment for the associated 

procedure. We are proposing to 

continue the packaging of these items, 

regardless of their per day cost, in CY 

2012. As stated earlier, pass-through 

payment is the difference between the 

amount authorized under section 

1842(o) of the Act (or, if the drug or 

biological is covered under a CAP under 

section 1847B of the Act, an amount 

determined by the Secretary equal to the 

average price for the drug or biological 

for all competitive acquisition areas and 

the year established under such section 

as calculated and adjusted by the 

Secretary) and the portion of the 

otherwise applicable OPD fee schedule 

that the Secretary determines is 

associated with the drug or biological. 

Because payment for a drug that is 

either a diagnostic radiopharmaceutical 

or a contrast agent (identified as a 

‘‘policy-packaged’’ drug, first described 

in the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68639)) 

would otherwise be packaged if the 

product did not have pass-through 

status, we believe the otherwise 

applicable OPPS payment amount 

would be equal to the ‘‘policypackaged’’ drug APC offset amount for 

the associated clinical APC in which the 

drug or biological is utilized. The 

calculation of the ‘‘policy-packaged’’ 

drug APC offset amounts are described 

in more detail in section IV.A.2. of this 

proposed rule. It follows that the 

copayment for the nonpass-through 

payment portion (the otherwise 

applicable fee schedule amount that we 

would also offset from payment for the 

drug or biological if a payment offset 

applies) of the total OPPS payment for 

those drugs and biologicals would, 

therefore, be accounted for in the 

copayment for the associated clinical 

APC in which the drug or biological is 

used. 

According to section 1833(t)(8)(E) of 

the Act, the amount of copayment 

associated with pass-through items is 

equal to the amount of copayment that 

would be applicable if the pass-through 

adjustment was not applied. Therefore, 

as we did in CY 2011, we are proposing 

to continue to set the associated 

copayment amount for pass-through 

diagnostic radiopharmaceuticals and 

contrast agents that would otherwise be 

packaged if the item did not have passthrough status to zero for CY 2012. The 

separate OPPS payment to a hospital for 

the pass-through diagnostic 

radiopharmaceutical or contrast agent, 

after taking into account any applicable 

payment offset for the item due to the 

device or ‘‘policy-packaged’’ APC offset 

policy, is the item’s pass-through 

payment, which is not subject to a 

copayment according to the statute. 

Therefore, we are proposing to not 

publish a copayment amount for these 

items in Addenda A and B to the 

proposed rule (which are referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site). 

The 33 drugs and biologicals that we 

are proposing to continue on passthrough status for CY 2012 or that have 

been granted pass-through status as of 

July 2011 are displayed in Table 27. We 

note that, for CY 2010 and the first two 

quarters of CY 2011, HCPCS code J1572 

(Injection, immune globulin, 

(flebogamma/flebogamma dif), 

intravenous, non-lyophilized (e.g. 

liquid), 500 mg) was assigned a status 

indicator of ‘‘K,’’ meaning that this 

product was paid separately as a 

nonpass-through separate payable drug. 

Beginning on July 1, 2011, HCPCS code 

J1572 is assigned a status indicator of 

‘‘G’’ and will be given pass-through 

status for at least 2, but not more than 

3, years. The payment rate reflecting a 

pass-through payment amount of ASP+6 

percent is not included in Addenda A 

and B of this proposed rule because 

these Addenda solely reflect codes and 

prices effective as of the second quarter 

of CY 2011, or April 2011. 

TABLE 27—PROPOSED DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2012 

Proposed 

CY 2012 

HCPCS 

code 

CY 2012 long descriptor Proposed 

CY 2012 SI 

Proposed 

CY 2012 

APC 

C9270 ....... Injection, immune globulin (Gammaplex), intravenous, non-lyophilized (e.g. liquid), 500 mg ................. G 9270 

C9272 ....... Injection, denosumab, 1 mg ..................................................................................................................... G 9272 

C9274 ....... Crotalidae polyvalent immune fab (ovine), 1 vial ..................................................................................... G 9274 

C9275 ....... Injection, hexaminolevulinate hydrochloride, 100 mg, per study dose .................................................... G 9275 

C9276 ....... Injection, cabazitaxel, 1 mg ...................................................................................................................... G 9276 

C9277 ....... Injection, alglucosidase alfa (Lumizyme), 1 mg ....................................................................................... G 9277 

C9279 ....... Injection, ibuprofen, 100 mg ..................................................................................................................... G 9279 

C9280 ....... Injection, eribulin mesylate, 1 mg ............................................................................................................. G 9280 

C9281 ....... Injection, pegloticase, 1 mg ...................................................................................................................... G 9281 

C9282 ....... Injection, ceftaroline fosamil, 10 mg ......................................................................................................... G 9282 

C9283 ** ... Injection, acetaminophen, 10 mg .............................................................................................................. G 9283 

C9284 ** ... Injection, ipilimumab, 1 mg ....................................................................................................................... G 9284 

C9285 ** ... Lidocaine 70 mg/tetracaine 70 mg, per patch .......................................................................................... G 9285 

C9365 ** ... Oasis Ultra Tri-Layer Matrix, per square centimeter ................................................................................ G 9365 

C9367 ....... Skin substitute, Endoform Dermal Template, per square centimeter ...................................................... G 9367 

C9406 ** ... Iodine I–123 ioflupane, diagnostic, per study dose, up to 5 millicuries ................................................... G 9406 

J0597 ........ Injection, C–1 Esterase inhibitor (human), Berinert, 10 units .................................................................. G 9269 

J0775 ........ Injection, collagenase clostridium histolyticum, 0.01 mg .......................................................................... G 1340 

J1290 ........ Injection, ecallantide, 1 mg ....................................................................................................................... G 9263 

J1572 *** ... Injection, immune globulin, (flebogamma/flebogamma dif), intravenous, non-lyophilized (e.g. liquid), 

500 mg.

G 0947 

J3095 ........ Injection, telavancin, 10 mg ...................................................................................................................... G 9258 

J3262 ........ Injection, tocilizumab, 1 mg ...................................................................................................................... G 9624 

J3357 ........ Injection, ustekinumab, 1 mg .................................................................................................................... G 9261 

J3385 ........ Injection, velaglucerase alfa, 100 units .................................................................................................... G 9271 

J7335 ........ Capsaicin 8% patch, per 10 square centimeters ..................................................................................... G 9268 

J8562 ........ Fludarabine phosphate, oral, 10 mg ......................................................................................................... G 1339 

J9302 ........ Injection, ofatumumab, 10 mg .................................................................................................................. G 9260 

J9307 ........ Injection, pralatrexate, 1 mg ..................................................................................................................... G 9259 

J9315 ........ Injection, romidepsin, 1 mg ....................................................................................................................... G 9625 

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TABLE 27—PROPOSED DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2012—Continued 

Proposed 

CY 2012 

HCPCS 

code 

CY 2012 long descriptor Proposed 

CY 2012 SI 

Proposed 

CY 2012 

APC 

Q2040 ....... Injection, incobotulinumtoxin A, 1 unit ...................................................................................................... G 9278 

Q2041 ** ... Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco ................................................. G 1352 

Q2043 * ..... Sipuleucel-T, minimum of 50 million autologous CD54+ cells activated with PAP–GM–CSF, including 

leukapheresis and all other preparatory procedures, per infusion.

G 9273 

Q2044 ** ... Injection, belimumab, 10 mg ..................................................................................................................... G 1353 

* HCPCS code C9273 was deleted June 30, 2011, and replaced with HCPCS code Q2043 effective July 1, 2011. 

** These HCPCS codes are effective July 1, 2011, and are not included in the Addenda to this proposed rule. 

*** HCPCS code J1572 has a status indicator of ‘‘G,’’ effective July 1, 2011. 

4. Proposed Provisions for Reducing 

Transitional Pass-Through Payments for 

Diagnostic Radiopharmaceuticals and 

Contrast Agents To Offset Costs 

Packaged into APC Groups 

a. Background 

Prior to CY 2008, diagnostic 

radiopharmaceuticals and contrast 

agents were paid separately under the 

OPPS if their mean per day costs were 

greater than the applicable year’s drug 

packaging threshold. In CY 2008 (72 FR 

66768), we began a policy of packaging 

payment for all nonpass-through 

diagnostic radiopharmaceuticals and 

contrast agents as ancillary and 

supportive items and services into their 

associated nuclear medicine procedures. 

Therefore, beginning in CY 2008, 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents were not subject to the annual 

OPPS drug packaging threshold to 

determine their packaged or separately 

payable payment status, and instead all 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents were packaged as a matter of 

policy. For CY 2012, we are proposing 

to continue to package payment for all 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents, as discussed in section V.B.2.d. 

of this proposed rule. 

b. Proposed Payment Offset Policy for 

Diagnostic Radiopharmaceuticals 

As previously noted, 

radiopharmaceuticals are considered to 

be drugs for OPPS pass-through 

payment purposes. As described above, 

section 1833(t)(6)(D)(i) of the Act 

specifies that the transitional passthrough payment amount for passthrough drugs and biologicals is the 

difference between the amount paid 

under section 1842(o) of the Act (or the 

Part B drug CAP rate) and the otherwise 

applicable OPD fee schedule amount. 

There is currently one 

radiopharmaceutical with pass-through 

status under the OPPS, HCPCS code 

C9406 (Iodine I–123 ioflupane, 

diagnostic, per study dose, up to 5 

millicuries). HCPCS code C9406 was 

granted pass-through status beginning 

July 1, 2011, and is proposed to 

continue receiving pass-through status 

in CY 2012. We currently apply the 

established radiopharmaceutical 

payment offset policy to pass-through 

payment for this product. As described 

earlier in section V.A.3. of this proposed 

rule, we are proposing that new passthrough diagnostic 

radiopharmaceuticals would be paid at 

ASP+6 percent, while those without 

ASP information would be paid at 

WAC+6 percent or, if WAC is not 

available, payment would be based on 

95 percent of the product’s most 

recently published AWP. 

Because a payment offset is necessary 

in order to provide an appropriate 

transitional pass-through payment, we 

deduct from the pass-through payment 

for radiopharmaceuticals an amount 

reflecting the portion of the APC 

payment associated with predecessor 

radiopharmaceuticals in order to ensure 

no duplicate radiopharmaceutical 

payment is made. In CY 2009, we 

established a policy to estimate the 

portion of each APC payment rate that 

could reasonably be attributed to the 

cost of predecessor diagnostic 

radiopharmaceuticals when considering 

a new diagnostic radiopharmaceutical 

for pass-through payment (73 FR 68638 

through 68641). Specifically, we utilize 

the ‘‘policy-packaged’’ drug offset 

fraction for APCs containing nuclear 

medicine procedures, calculated as 1 

minus (the cost from single procedure 

claims in the APC after removing the 

cost for ‘‘policy-packaged’’ drugs 

divided by the cost from single 

procedure claims in the APC). In the CY 

2010 OPPS/ASC final rule with 

comment period (74 FR 60480 through 

60484), we finalized a policy to redefine 

‘‘policy-packaged’’ drugs as only 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents, as a result of the policy 

discussed in sections V.A.4. and 

V.B.2.d. of the CY 2010 OPPS/ASC final 

rule with comment period (74 FR 60471 

through 60477 and 60495 through 

60499, respectively) that treats nonpassthrough implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) and implantable biologicals that 

are surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) with newly approved passthrough status beginning in CY 2010 or 

later as devices, rather than drugs. To 

determine the actual APC offset amount 

for pass-through diagnostic 

radiopharmaceuticals that takes into 

consideration the otherwise applicable 

OPPS payment amount, we multiply the 

‘‘policy-packaged’’ drug offset fraction 

by the APC payment amount for the 

nuclear medicine procedure with which 

the pass-through diagnostic 

radiopharmaceutical is used and, 

accordingly, reduce the separate OPPS 

payment for the pass-through diagnostic 

radiopharmaceutical by this amount. 

Beginning in CY 2011 and as 

discussed in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71934 through 71936), we finalized a 

policy to require hospitals to append 

modifier ‘‘FB’’ to specified nuclear 

medicine procedures when the 

diagnostic radiopharmaceutical is 

received at no cost/full credit. These 

instructions are contained within the 

I/OCE CMS specifications on the CMS 

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

OutpatientCodeEdit/02_

OCEQtrReleaseSpecs.asp#TopOfPage. 

For CY 2012 and future years, we are 

proposing to continue to require 

hospitals to append modifier ‘‘FB’’ to 

specified nuclear medicine procedures 

when the diagnostic 

radiopharmaceutical is received at no 

cost/full credit. In addition, we are 

proposing to continue to require that 

when a hospital bills with an ‘‘FB’’ 

modifier with the nuclear medicine 

scan, the payment amount for 

procedures in the APCs listed in Table 

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28 of this proposed rule would be 

reduced by the full ‘‘policy-packaged’’ 

offset amount appropriate for diagnostic 

radiopharmaceuticals. Finally, we also 

are proposing to continue to require 

hospitals to report a token charge of less 

than $1.01 in cases in which the 

diagnostic radiopharmaceutical is 

furnished without cost or with full 

credit. 

For CY 2011, we finalized a policy to 

apply the diagnostic 

radiopharmaceutical offset policy to 

payment for pass-through diagnostic 

radiopharmaceuticals, as described 

above. For CY 2012, we are proposing 

to continue to apply the diagnostic 

radiopharmaceutical offset policy to 

payment for pass-through diagnostic 

radiopharmaceuticals. Table 28 displays 

the proposed APCs to which nuclear 

medicine procedures would be assigned 

in CY 2012 and for which we expect 

that an APC offset could be applicable 

in the case of diagnostic 

radiopharmaceuticals with pass-through 

status. 

TABLE 28—PROPOSED APCS TO WHICH NUCLEAR MEDICINE PROCEDURES WOULD BE ASSIGNED FOR CY 2012 

Proposed CY 

2012 APC CY 2012 APC title 

0307 ............. Myocardial Positron Emission Tomography (PET) imaging. 

0308 ............. Non-Myocardial Positron Emission Tomography (PET) imaging. 

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

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

0389 ............. Level I Non-imaging Nuclear Medicine. 

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

0391 ............. Level II Endocrine Imaging. 

0392 ............. Level II Non-imaging Nuclear Medicine. 

0393 ............. Hematologic Processing & Studies. 

0394 ............. Hepatobiliary Imaging. 

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

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

0397 ............. Vascular Imaging. 

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

0400 ............. Hematopoietic Imaging. 

0401 ............. Level I Pulmonary Imaging. 

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

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

0404 ............. Renal and Genitourinary Studies. 

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

0408 ............. Level II Tumor/Infection Imaging. 

0414 ............. Level II Tumor/Infection Imaging. 

c. Proposed Payment Offset Policy for 

Contrast Agents 

Section 1833(t)(6)(D)(i) of the Act 

specifies that the transitional passthrough payment amount for passthrough drugs and biologicals is the 

difference between the amount paid 

under section 1842(o) of the Act (or the 

Part B drug CAP rate) and the otherwise 

applicable OPD fee schedule amount. 

There is currently one contrast agent 

with pass-through status under the 

OPPS: HCPCS code C9275 (Injection, 

hexaminolevulinate hydrochloride, 100 

mg, per study dose). HCPCS code C9275 

was granted pass-through status 

beginning January 1, 2011, and is 

proposed to continue with pass-through 

status in CY 2012. As described earlier 

in section V.A.3. of this proposed rule, 

new pass-through contrast agents would 

be paid at ASP+6 percent, while those 

without ASP information would be paid 

at WAC+6 percent or, if WAC is not 

available, payment would be based on 

95 percent of the product’s most 

recently published AWP. 

We believe that a payment offset is 

necessary in order to provide an 

appropriate transitional pass-through 

payment for contrast agents, because all 

of these items are packaged when they 

do not have pass-through status. In 

accordance with our standard offset 

methodology, we are proposing for CY 

2012 to deduct from the payment for 

pass-through contrast agents an amount 

that reflects the portion of the APC 

payment associated with predecessor 

contrast agents, in order to ensure no 

duplicate contrast agent payment is 

made. 

In CY 2010, we established a policy 

to estimate the portion of each APC 

payment rate that could reasonably be 

attributed to the cost of predecessor 

contrast agents when considering new 

contrast agents for pass-through 

payment (74 FR 60482 through 60484). 

For CY 2012, as we did in CY 2011, we 

are proposing to continue to apply this 

same policy to contrast agents. 

Specifically, we are proposing to utilize 

the ‘‘policy-packaged’’ drug offset 

fraction for clinical APCs calculated as 

1 minus (the cost from single procedure 

claims in the APC after removing the 

cost for ‘‘policy-packaged’’ drugs 

divided by the cost from single 

procedure claims in the APC). In CY 

2010, we finalized a policy to redefine 

‘‘policy-packaged’’ drugs as only 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents (74 FR 60495 through 60499). To 

determine the actual APC offset amount 

for pass-through contrast agents that 

takes into consideration the otherwise 

applicable OPPS payment amount, we 

are proposing to multiply the ‘‘policypackaged’’ drug offset fraction by the 

APC payment amount for the procedure 

with which the pass-through contrast 

agent is used and, accordingly, reduce 

the separate OPPS payment for the passthrough contrast agent by this amount. 

We are proposing to continue to apply 

this methodology for CY 2012 to 

recognize that when a contrast agent 

with pass-through status is billed with 

any procedural APC listed in Table 29, 

a specific offset based on the procedural 

APC would be applied to payments for 

the contrast agent to ensure that 

duplicate payment is not made for the 

contrast agent. 

We are proposing to continue to post 

annually on the CMS Web site at http:// 

www.cms.gov/HospitalOutpatientPPS a 

file that contains the APC offset 

amounts that will be used for that year 

for purposes of both evaluating cost 

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significance for candidate pass-through 

device categories and drugs and 

biologicals, including contrast agents, 

and establishing any appropriate APC 

offset amounts. Specifically, the file will 

continue to provide, for every OPPS 

clinical APC, the amounts and 

percentages of APC payment associated 

with packaged implantable devices, 

‘‘policy-packaged’’ drugs, and 

‘‘threshold-packaged’’ drugs and 

biologicals. 

Proposed procedural APCs for which 

we expect a contrast offset could be 

applicable in the case of a pass-through 

contrast agent have been identified as 

any procedural APC with a ‘‘policypackaged’’ drug amount greater than $20 

that is not a nuclear medicine APC 

identified in Table 28 above and these 

APCs are displayed in Table 29 below. 

The methodology used to determine a 

proposed threshold cost for application 

of a contrast agent offset policy is 

described in detail in the CY 2010 

OPPS/ASC final rule with comment 

period (70 FR 60483 through 60484). 

For CY 2012, we are proposing to 

continue to recognize that when a 

contrast agent with pass-through status 

is billed with any procedural APC listed 

in Table 29, a specific offset based on 

the procedural APC would be applied to 

payment for the contrast agent to ensure 

that duplicate payment is not made for 

the contrast agent. 

TABLE 29—PROPOSED APCS TO WHICH A CONTRAST AGENT OFFSET MAY BE APPLICABLE FOR CY 2012 

Proposed CY 2012 APC Proposed CY 2012 APC title 

0080 ........................................... Diagnostic Cardiac Catheterization. 

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

0083 ........................................... Coronary or Non-Coronary Angioplasty and Percutaneous Valvulopasty. 

0093 ........................................... Vascular Reconstruction/Fistula Repair without Device. 

0104 ........................................... Transcathether Placement of Intracoronary Stents. 

0128 ........................................... Echocardiogram with Contrast. 

0152 ........................................... Level I Percutaneous Abdominal and Biliary Procedures. 

0229 ........................................... Transcathether Placement of Intravascular Shunts. 

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. 

0418 ........................................... Insertion of Left Ventricular Pacing Elect. 

0442 ........................................... Dosimetric Drug Administration. 

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

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

0662 ........................................... CT Angiography. 

0668 ........................................... Level I Angiography and Venography. 

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

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

B. Proposed OPPS Payment for Drugs, 

Biologicals, and Radiopharmaceuticals 

Without Pass-Through Status 

1. Background 

Under the CY 2011 OPPS, we 

currently pay for drugs, biologicals, and 

radiopharmaceuticals that do not have 

pass-through status in one of two ways: 

as a packaged payment included in the 

payment for the associated service; or as 

a separate payment (individual APCs). 

We explained in the April 7, 2000 OPPS 

final rule with comment period (65 FR 

18450) that we generally package the 

cost of drugs and radiopharmaceuticals 

into the APC payment rate for the 

procedure or treatment with which the 

products are usually furnished. 

Hospitals do not receive separate 

payment for packaged items and 

supplies, and hospitals may not bill 

beneficiaries separately for any 

packaged items and supplies whose 

costs are recognized and paid within the 

national OPPS payment rate for the 

associated procedure or service. 

(Transmittal A–01–133, issued on 

November 20, 2001, explains in greater 

detail the rules regarding separate 

payment for packaged services.) 

Packaging costs into a single aggregate 

payment for a service, procedure, or 

episode-of-care is a fundamental 

principle that distinguishes a 

prospective payment system from a fee 

schedule. In general, packaging the costs 

of items and services into the payment 

for the primary procedure or service 

with which they are associated 

encourages hospital efficiencies and 

also enables hospitals to manage their 

resources with maximum flexibility. 

Section 1833(t)(16)(B) of the Act set 

the threshold for establishing separate 

APCs for drugs and biologicals at $50 

per administration for CYs 2005 and 

2006. Therefore, for CYs 2005 and 2006, 

we paid separately for drugs, 

biologicals, and radiopharmaceuticals 

whose per day cost exceeded $50 and 

packaged the costs of drugs, biologicals, 

and radiopharmaceuticals whose per 

day cost was equal to or less than $50 

into the procedures with which they 

were billed. For CY 2007, the packaging 

threshold for drugs, biologicals, and 

radiopharmaceuticals that were not new 

and did not have pass-through status 

was established at $55. For CYs 2008 

and 2009, the packaging threshold for 

drugs, biologicals, and 

radiopharmaceuticals that were not new 

and did not have pass-through status 

was established at $60. For CY 2010, the 

packaging threshold for drugs, 

biologicals, and radiopharmaceuticals 

that were not new and did not have 

pass-through status was established at 

$65. For CY 2011, the packaging 

threshold for drugs, biologicals, and 

radiopharmaceuticals that were not new 

and did not have pass-through status 

was established at $70. The 

methodology used to establish the $55 

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threshold for CY 2007, the $60 

threshold for CYs 2008 and 2009, the 

$65 threshold for CY 2010, the $70 

threshold for CY 2011, and our 

proposed approach for CY 2012 are 

discussed in more detail in section 

V.B.2.b. of this proposed rule. 

2. Proposed Criteria for Packaging 

Payment for Drugs, Biologicals, and 

Radiopharmaceuticals 

a. Background 

As indicated in section V.B.1. of this 

proposed rule, in accordance with 

section 1833(t)(16)(B) of the Act, the 

threshold for establishing separate APCs 

for payment of drugs and biologicals 

was set to $50 per administration during 

CYs 2005 and 2006. In CY 2007, we 

used the four quarter moving average 

Producer Price Index (PPI) levels for 

Pharmaceutical Preparations 

(Prescription) to trend the $50 threshold 

forward from the third quarter of CY 

2005 (when the Pub. L. 108–173 

mandated threshold became effective) to 

the third quarter of CY 2007. We then 

rounded the resulting dollar amount to 

the nearest $5 increment in order to 

determine the CY 2007 threshold 

amount of $55. Using the same 

methodology as that used in CY 2007 

(which is discussed in more detail in 

the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68085 through 

68086)), we set the packaging threshold 

for establishing separate APCs for drugs 

and biologicals at $60 for CYs 2008 and 

2009. For CY 2010, we set the packaging 

threshold at $65; and for CY 2011, we 

set the packaging threshold at $70. 

Following the CY 2007 methodology, 

for CY 2012, we used updated four 

quarter moving average PPI levels to 

trend the $50 threshold forward from 

the third quarter of CY 2005 to the third 

quarter of CY 2012 and again rounded 

the resulting dollar amount ($77.63) to 

the nearest $5 increment, which yielded 

a figure of $80. In performing this 

calculation, we used the most recent 

forecast of the quarterly index levels for 

the PPI for Pharmaceuticals for Human 

Use (Prescription) (Bureau of Labor 

Statistics (BLS) series code 

WPUSI07003) from CMS’ Office of the 

Actuary (OACT). We note that we are 

not proposing a change to the PPI that 

is used to calculate the threshold for CY 

2012; however, this change in 

terminology reflects a change to the BLS 

naming convention for this series. We 

refer to this series generally as the PPI 

for Prescription Drugs below. We chose 

this PPI as it reflects price changes 

associated with the average mix of all 

pharmaceuticals in the overall economy. 

In addition, we chose this price series 

because it is publicly available and 

regularly published, improving public 

access and transparency. Forecasts of 

the PPI for Prescription Drugs are 

developed by IHS Global Insight, Inc., a 

nationally recognized economic and 

financial forecasting firm. As actual 

inflation for past quarters replaced 

forecasted amounts, the PPI estimates 

for prior quarters have been revised 

(compared with those used in the CY 

2007 OPPS/ASC final rule with 

comment period) and have been 

incorporated into our calculation. Based 

on the calculations described above, we 

are proposing a packaging threshold for 

CY 2012 of $80. (For a more detailed 

discussion of the OPPS drug packaging 

threshold and the use of the PPI for 

Prescription Drugs, we refer readers to 

the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68085 through 

68086).) 

b. Proposed Cost Threshold for 

Packaging of Payment for HCPCS Codes 

That Describe Certain Drugs, 

Nonimplantable Biologicals, and 

Therapeutic Radiopharmaceuticals 

(‘‘Threshold-Packaged Drugs’’) 

To determine their proposed CY 2012 

packaging status for this proposed rule, 

we calculated on a HCPCS code-specific 

basis (with the exception of those drugs 

and biologicals with multiple HCPCS 

codes that include different dosages as 

described in section V.B.2.c. of this 

proposed rule and excluding diagnostic 

radiopharmaceuticals, contrast agents, 

and implantable biologicals that we are 

proposing to continue to package in CY 

2012, as discussed in section V.B.2.d. of 

this proposed rule) the per day cost of 

all drugs, nonimplantable biologicals, 

and therapeutic radiopharmaceuticals 

(collectively called ‘‘thresholdpackaged’’ drugs) that had a HCPCS 

code in CY 2010 and were paid (via 

packaged or separate payment) under 

the OPPS, using CY 2010 claims data 

processed before January 1, 2011. In 

order to calculate the per day costs for 

drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals to 

determine their proposed packaging 

status in CY 2012, we used the 

methodology that was described in 

detail in the CY 2006 OPPS proposed 

rule (70 FR 42723 through 42724) and 

finalized in the CY 2006 OPPS final rule 

with comment period (70 FR 68636 

through 70 FR 68638). 

To calculate the CY 2012 proposed 

rule per day costs, we used an estimated 

payment rate for each drug and 

nonimplantable biological HCPCS code 

of ASP+4 percent (which is the payment 

rate we are proposing for separately 

payable drugs and nonimplantable 

biologicals for CY 2012, as discussed in 

more detail in section V.B.3.b. of this 

proposed rule). We used the 

manufacturer submitted ASP data from 

the fourth quarter of CY 2010 (data that 

were used for payment purposes in the 

physician’s office setting, effective April 

1, 2011) to determine the proposed rule 

per day cost. 

As is our standard methodology, for 

CY 2012, we are proposing to use 

payment rates based on the ASP data 

from the fourth quarter of CY 2010 for 

budget neutrality estimates, packaging 

determinations, impact analyses, and 

completion of Addenda A and B to this 

proposed rule (which are referenced in 

section XVII. of this proposed rule and 

available via the Internet) because these 

are the most recent data available for 

use at the time of development of this 

proposed rule. These data were also the 

basis for drug payments in the 

physician’s office setting, effective April 

1, 2011. For items that did not have an 

ASP-based payment rate, such as some 

therapeutic radiopharmaceuticals, we 

used their mean unit cost derived from 

the CY 2010 hospital claims data to 

determine their per day cost. We are 

proposing to package items with a per 

day cost less than or equal to $80 and 

identified items with a per day cost 

greater than $80 as separately payable. 

Consistent with our past practice, we 

crosswalked historical OPPS claims data 

from the CY 2010 HCPCS codes that 

were reported to the CY 2011 HCPCS 

codes that we display in Addendum B 

of this proposed rule (which is 

referenced in section XVII. of this 

proposed rule and available via the 

Internet) for payment in CY 2012. 

Our policy during previous cycles of 

the OPPS has been to use updated ASP 

and claims data to make final 

determinations of the packaging status 

of HCPCS codes for drugs, 

nonimplantable biologicals, and 

therapeutic radiopharmaceuticals for 

the final rule with comment period. We 

note that it is also our policy to make 

an annual packaging determination for a 

HCPCS code only when we develop the 

OPPS/ASC final rule for the update 

year. Only HCPCS codes that are 

identified as separately payable in the 

final rule with comment period will be 

subject to quarterly updates. For our 

calculation of per day costs of HCPCS 

codes for drugs and nonimplantable 

biologicals in the CY 2012 OPPS/ASC 

final rule with comment period, we are 

proposing to use ASP data from the first 

quarter of CY 2011, which is the basis 

for calculating payment rates for drugs 

and biologicals in the physician’s office 

setting using the ASP methodology, 

effective July 1, 2011, along with 

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updated hospital claims data from CY 

2010. We note that we also are 

proposing to use these data for budget 

neutrality estimates and impact analyses 

for the CY 2012 OPPS/ASC final rule 

with comment period. Payment rates for 

HCPCS codes for separately payable 

drugs and nonimplantable biologicals 

included in Addenda A and B to the 

final rule with comment period will be 

based on ASP data from the second 

quarter of CY 2011, which will be the 

basis for calculating payment rates for 

drugs and biologicals in the physician’s 

office setting using the ASP 

methodology, effective October 1, 2011. 

These rates would then be updated in 

the January 2012 OPPS update, based on 

the most recent ASP data to be used for 

physician’s office and OPPS payment as 

of January 1, 2012. For items that do not 

currently have an ASP-based payment 

rate, we are proposing to recalculate 

their mean unit cost from all of the CY 

2010 claims data and updated cost 

report information available for the CY 

2012 final rule with comment period to 

determine their final per day cost. 

Consequently, the packaging status of 

some HCPCS codes for drugs, 

nonimplantable biologicals, and 

therapeutic radiopharmaceuticals in this 

CY 2012 OPPS/ASC proposed rule may 

be different from the same drug HCPCS 

code’s packaging status determined 

based on the data used for the final rule 

with comment period. Under such 

circumstances, we are proposing to 

continue to follow the established 

policies initially adopted for the CY 

2005 OPPS (69 FR 65780) in order to 

more equitably pay for those drugs 

whose median cost fluctuates relative to 

the proposed CY 2012 OPPS drug 

packaging threshold and the drug’s 

payment status (packaged or separately 

payable) in CY 2011. Specifically, for 

CY 2012, we are proposing to apply the 

following policies to these HCPCS codes 

for drugs, nonimplantable biologicals, 

and therapeutic radiopharmaceuticals 

whose relationship to the proposed $80 

drug packaging threshold changes: 

• HCPCS codes for drugs and 

nonimplantable biologicals that were 

paid separately in CY 2011 and that are 

proposed for separate payment in CY 

2012, and that then have per day costs 

equal to or less than $80, based on the 

ASPs and hospital claims data used for 

this CY 2012 proposed rule, would 

continue to receive separate payment in 

CY 2012. 

• HCPCS codes for drugs and 

nonimplantable biologicals that were 

packaged in CY 2011 and that are 

proposed for separate payment in CY 

2012, and that then have per day costs 

equal to or less than $80, based on the 

ASPs and hospital claims data used for 

this CY 2012 proposed rule, would 

remain packaged in CY 2012. 

• HCPCS codes for drugs and 

nonimplantable biologicals for which 

we are proposing packaged payment in 

CY 2012 but then have per day costs 

greater than $80, based on the ASPs and 

hospital claims data used for this CY 

2012 proposed rule, would receive 

separate payment in CY 2012. 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60485 

through 60489), we implemented a 

policy to treat oral and injectable forms 

of 5–HT3 antiemetics comparably to all 

other threshold packaged drugs, 

nonimplantable biologicals, and 

therapeutic radiopharmaceuticals under 

our standard packaging methodology of 

packaging drugs with a per day cost less 

than $65. We are proposing for CY 2012 

to continue our policy of not exempting 

these 5–HT3 antiemetic products from 

our standard packaging methodology. 

For CY 2012, we are proposing to 

package payment for all of the 5–HT3 

antiemetics except palonosetron 

hydrochloride, which for CY 2012 has a 

estimated per day cost, from the CY 

2010 claims data, above the proposed 

CY 2012 drug packaging threshold. Our 

rationale for this policy is outlined in 

the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60487 through 

60488). 

c. Proposed Packaging Determination for 

HCPCS Codes That Describe the Same 

Drug or Biological but Different Dosages 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66776), we 

began recognizing, for OPPS payment 

purposes, multiple HCPCS codes 

reporting different dosages for the same 

covered Part B drugs or biologicals in 

order to reduce hospitals’ administrative 

burden by permitting them to report all 

HCPCS codes for drugs and biologicals. 

In general, prior to CY 2008, the OPPS 

recognized for payment only the HCPCS 

code that described the lowest dosage of 

a drug or biological. We extended this 

recognition to multiple HCPCS codes for 

several other drugs under the CY 2009 

OPPS (73 FR 68665). During CYs 2008 

and 2009, we applied a policy that 

assigned the status indicator of the 

previously recognized HCPCS code to 

the associated newly recognized code(s), 

reflecting the packaged or separately 

payable status of the new code(s). In the 

CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66775), we 

explained that once claims data were 

available for these previously 

unrecognized HCPCS codes, we would 

determine the packaging status and 

resulting status indicator for each 

HCPCS code according to the general, 

established HCPCS code-specific 

methodology for determining a code’s 

packaging status for a given update year. 

However, we also stated that we 

planned to closely follow our claims 

data to ensure that our annual packaging 

determinations for the different HCPCS 

codes describing the same drug or 

biological did not create inappropriate 

payment incentives for hospitals to 

report certain HCPCS codes instead of 

others. 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60490 

through 60491), we finalized a policy to 

make a single packaging determination 

for a drug, rather than an individual 

HCPCS code, when a drug has multiple 

HCPCS codes describing different 

dosages. We analyzed CY 2008 claims 

data for the HCPCS codes describing 

different dosages of the same drug or 

biological that were newly recognized in 

CY 2008 and found that our claims data 

would result in several different 

packaging determinations for different 

codes describing the same drug or 

biological. Furthermore, we found that 

our claims data would include few units 

and days for a number of newly 

recognized HCPCS codes, resulting in 

our concern that these data reflected 

claims from only a small number of 

hospitals, even though the drug or 

biological itself may be reported by 

many other hospitals under the most 

common HCPCS code. Based on these 

findings from our first available claims 

data for the newly recognized HCPCS 

codes, we believed that adopting our 

standard HCPCS code-specific 

packaging determinations for these 

codes could lead to payment incentives 

for hospitals to report certain HCPCS 

codes instead of others, particularly 

because we do not currently require 

hospitals to report all drug and 

biological HCPCS codes under the OPPS 

in consideration of our previous policy 

that generally recognized only the 

lowest dosage HCPCS code for a drug or 

biological for OPPS payment. For CY 

2012, we continue to believe that 

adopting the standard HCPCS codespecific packaging determinations for 

these codes could lead to payment 

incentives for hospitals to report certain 

HCPCS codes for drugs instead of 

others. Making packaging 

determinations on a drug-specific basis 

eliminates these incentives and allows 

hospitals flexibility in choosing to 

report all HCPCS codes for different 

dosages of the same drug or only the 

lowest dosage HCPCS code. Therefore, 

we are proposing to continue our policy 

to make packaging determinations on a 

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42254 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

drug-specific basis, rather than an 

HCPCS code-specific basis, for those 

HCPCS codes that describe the same 

drug or biological but different dosages 

in CY 2012. 

For CY 2012, in order to propose a 

packaging determination that is 

consistent across all HCPCS codes that 

describe different dosages of the same 

drug or biological, we aggregated both 

our CY 2010 claims data and our pricing 

information at ASP+4 percent across all 

of the HCPCS codes that describe each 

distinct drug or biological in order to 

determine the mean units per day of the 

drug or biological in terms of the HCPCS 

code with the lowest dosage descriptor. 

All HCPCS codes listed in Table 30 

below had ASP pricing information 

available for this CY 2012 OPPS/ASC 

proposed rule. Therefore, we multiplied 

the weighted average ASP+4 percent per 

unit payment amount across all dosage 

levels of a specific drug or biological by 

the estimated units per day for all 

HCPCS codes that describe each drug or 

biological from our claims data to 

determine the estimated per day cost of 

each drug or biological at less than or 

equal to $80 (whereupon all HCPCS 

codes for the same drug or biological 

would be packaged) or greater than $80 

(whereupon all HCPCS codes for the 

same drug or biological would be 

separately payable). The proposed 

packaging status of each drug and 

biological HCPCS code to which this 

methodology would apply is displayed 

in Table 30 below. 

TABLE 30.—PROPOSED HCPCS CODES TO WHICH THE CY 2012 DRUG—SPECIFIC PACKAGING DETERMINATION

METHODOLOGY WOULD APPLY

Proposed CY 2012 

HCPCS code Proposed CY 2012 long descriptor 

Proposed 

CY 2012 

SI 

C9257 ............................... Injection, bevacizumab, 0.25 mg ................................................................................................................ K 

J9035 ................................ Injection, bevacizumab, 10 mg ................................................................................................................... K 

J1020 ................................ Injection, methylprednisolone acetate, 20 mg ............................................................................................ N 

J1030 ................................ Injection, methylprednisolone acetate, 40 mg ............................................................................................ N 

J1040 ................................ Injection, methylprednisolone acetate, 80 mg ............................................................................................ N 

J1070 ................................ Injection, testosterone cypionate, up to 100 mg ........................................................................................ N 

J1080 ................................ Injection, testosterone cypionate, 1 cc, 200 mg ......................................................................................... N 

J1440 ................................ Injection, filgrastim (g-csf), 300 mcg .......................................................................................................... K 

J1441 ................................ Injection, filgrastim (g-csf), 480 mcg .......................................................................................................... K 

J1460 ................................ Injection, gamma globulin, intramuscular, 1 cc .......................................................................................... K 

J1560 ................................ Injection, gamma globulin, intramuscular over 10 cc ................................................................................. K 

J1642 ................................ Injection, heparin sodium, (heparin lock flush), per 10 units ..................................................................... N 

J1644 ................................ Injection, heparin sodium, per 1000 units .................................................................................................. N 

J1850 ................................ Injection, kanamycin sulfate, up to 75 mg .................................................................................................. N 

J1840 ................................ Injection, kanamycin sulfate, up to 500 mg ................................................................................................ N 

J2270 ................................ Injection, morphine sulfate, up to 10 mg .................................................................................................... N 

J2271 ................................ Injection, morphine sulfate, 100mg ............................................................................................................ N 

J2788 ................................ Injection, rho d immune globulin, human, minidose, 50 micrograms (250 i.u.) ......................................... K 

J2790 ................................ Injection, rho d immune globulin, human, full dose, 300 micrograms (1500 i.u.) ...................................... K 

J2920 ................................ Injection, methylprednisolone sodium succinate, up to 40 mg .................................................................. N 

J2930 ................................ Injection, methylprednisolone sodium succinate, up to 125 mg ................................................................ N 

J3120 ................................ Injection, testosterone enanthate, up to 100 mg ........................................................................................ N 

J3130 ................................ Injection, testosterone enanthate, up to 200 mg ........................................................................................ N 

J3471 ................................ Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units) ........................... N 

J3472 ................................ Injection, hyaluronidase, ovine, preservative free, per 1000 usp units ...................................................... N 

J7050 ................................ Infusion, normal saline solution , 250 cc .................................................................................................... N 

J7040 ................................ Infusion, normal saline solution, sterile (500 ml=1 unit) ............................................................................. N 

J7030 ................................ Infusion, normal saline solution , 1000 cc .................................................................................................. N 

J7515 ................................ Cyclosporine, oral, 25 mg ........................................................................................................................... N 

J7502 ................................ Cyclosporine, oral, 100 mg ......................................................................................................................... N 

J8520 ................................ Capecitabine, oral, 150 mg ........................................................................................................................ K 

J8521 ................................ Capecitabine, oral, 500 mg ........................................................................................................................ K 

J9250 ................................ Methotrexate sodium, 5 mg ........................................................................................................................ N 

J9260 ................................ Methotrexate sodium, 50 mg ...................................................................................................................... N 

Q0164 ............................... Prochlorperazine maleate, 5 mg, oral, FDA approved prescription anti-emetic, for use as a complete 

therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 

48-hour doseage regimen.

N 

Q0165 ............................... Prochlorperazine maleate, 10 mg, oral, FDA approved prescription anti-emetic, for use as a complete 

therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 

48-hour doseage regimen.

N 

Q0167 ............................... Dronabinol, 2.5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0168 ............................... Dronabinol, 5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage 

regimen.

N 

Q0169 ............................... Promethazine hydrochloride, 12.5 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.N 

Q0170 ............................... Promethazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.N 

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TABLE 30.—PROPOSED HCPCS CODES TO WHICH THE CY 2012 DRUG—SPECIFIC PACKAGING DETERMINATION

METHODOLOGY WOULD APPLY—Continued 

Proposed CY 2012 

HCPCS code Proposed CY 2012 long descriptor 

Proposed 

CY 2012 

SI 

Q0171 ............................... Chlorpromazine hydrochloride, 10 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.N 

Q0172 ............................... Chlorpromazine hydrochloride, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotheapy treatment, not to exceed a 48-hour dosage regimen.N 

Q0175 ............................... Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0176 ............................... Perphenazine, 8 mg, oral, FDA approved prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage regimen.

N 

Q0177 ............................... Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription anti-emetic, for use as a complete 

therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 

48-hour dosage regimen.

N 

Q0178 ............................... Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as a complete 

therapeutic substitute for an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 

48-hour dosage regimen.

N 

d. Proposed Packaging of Payment for 

Diagnostic Radiopharmaceuticals, 

Contrast Agents, and Implantable 

Biologicals (‘‘Policy-Packaged’’ Drugs 

and Devices) 

Prior to CY 2008, the methodology of 

calculating a product’s estimated per 

day cost and comparing it to the annual 

OPPS drug packaging threshold was 

used to determine the packaging status 

of drugs, biologicals, and 

radiopharmaceuticals under the OPPS 

(except for our CYs 2005 through 2009 

exemption for 5-HT3 antiemetics). 

However, as established in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 66766 through 66768), we 

began packaging payment for all 

diagnostic radiopharmaceuticals and 

contrast agents into the payment for the 

associated procedure, regardless of their 

per day costs. In addition, in CY 2009 

we adopted a policy that packaged the 

payment for nonpass-through 

implantable biologicals into payment for 

the associated surgical procedure on the 

claim (73 FR 68633 through 68636). We 

refer to diagnostic radiopharmaceuticals 

and contrast agents collectively as 

‘‘policy-packaged’’ drugs and 

implantable biologicals as devices 

because, in CY 2010, we began to treat 

implantable biologicals as devices for all 

OPPS payment purposes. 

According to our regulations at 

§ 419.2(b), as a prospective payment 

system, the OPPS establishes a national 

payment rate that includes operating 

and capital-related costs that are 

directly related and integral to 

performing a procedure or furnishing a 

service on an outpatient basis including, 

but not limited to, implantable 

prosthetics, implantable durable 

medical equipment, and medical and 

surgical supplies. Packaging costs into a 

single aggregate payment for a service, 

encounter, or episode-of-care is a 

fundamental principle that 

distinguishes a prospective payment 

system from a fee schedule. In general, 

packaging the costs of items and 

services into the payment for the 

primary procedure or service with 

which they are associated encourages 

hospital efficiencies and also enables 

hospitals to manage their resources with 

maximum flexibility. 

Prior to CY 2008, we noted that the 

proportion of drugs, biologicals, and 

radiopharmaceuticals that were 

separately paid under the OPPS had 

increased in recent years, a pattern that 

we also observed for procedural services 

under the OPPS. Our final CY 2008 

policy that packaged payment for all 

nonpass-through diagnostic 

radiopharmaceuticals and contrast 

agents, regardless of their per day costs, 

contributed significantly to expanding 

the size of the OPPS payment bundles 

and is consistent with the principles of 

a prospective payment system. 

As discussed in more detail in the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68645 through 

68649), we presented several reasons 

supporting our initial policy to package 

payment of diagnostic 

radiopharmaceuticals and contrast 

agents into their associated procedures 

on a claim. Specifically, we stated that 

we believed packaging was appropriate 

because: (1) the statutorily required 

OPPS drug packaging threshold has 

expired; (2) we believe that diagnostic 

radiopharmaceuticals and contrast 

agents function effectively as supplies 

that enable the provision of an 

independent service; and (3) section 

1833(t)(14)(A)(iii) of the Act requires 

that payment for specified covered 

outpatient drugs (SCODs) be set 

prospectively based on a measure of 

average hospital acquisition cost. For 

these reasons, we believe it is 

appropriate to continue to treat 

diagnostic radiopharmaceuticals and 

contrast agents differently from other 

SCODs for CY 2012. Therefore, we are 

proposing to continue packaging 

payment for all contrast agents and 

diagnostic radiopharmaceuticals, 

collectively referred to as ‘‘policypackaged’’ drugs, regardless of their per 

day costs, for CY 2012. We also are 

proposing to continue to package the 

payment for diagnostic 

radiopharmaceuticals into the payment 

for the associated nuclear medicine 

procedure and to package the payment 

for contrast agents into the payment of 

the associated echocardiography 

imaging procedure, regardless of 

whether the agent met the OPPS drug 

packaging threshold. We refer readers to 

the CY 2010 OPPS/ASC final rule with 

comment period for a detailed 

discussion of nuclear medicine and 

echocardiography services (74 FR 35269 

through 35277). 

In CY 2009, we adopted a final policy 

to package payment for all nonpassthrough implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) like our longstanding policy that 

packaged payment for all implantable 

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42256 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

through status. We finalized a policy in 

CY 2010 to package payment for 

nonpass-through implantable 

biologicals that are surgically inserted or 

implanted (through a surgical incision 

or a natural orifice) into the body, 

considering them to be devices. For CY 

2012, we are proposing to continue to 

package payment for nonpass-through 

implantable biologicals that are 

surgically inserted or implanted 

(through a surgical incision or a natural 

orifice) into the body, considering them 

to be devices. Three of the products 

with expiring pass-through status for CY 

2012 are biologicals that, according to 

their FDA-approved indications, are 

only surgically implanted. These 

products are described by HCPCS codes 

C9361 (Collagen matrix nerve wrap 

(NeuroMend Collagen Nerve Wrap), per 

0.5 centimeter length), C9362 (Porous 

purified collagen matrix bone void filler 

(Integra Mozaik Osteoconductive 

Scaffold Strip), per 0.5 cc), and C9364 

(Porcine implant, Permacol, per square 

centimeter). Like the two implantable 

biologicals with expiring pass-through 

status in CY 2011 that were discussed 

in the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71948 

through 71950), we believe that the 

three biologicals specified above with 

expiring pass-through status for CY 

2012 differ from other biologicals paid 

under the OPPS in that they specifically 

function as surgically implanted 

devices. As a result of our proposed 

packaged payment methodology for 

nonpass-through implantable 

biologicals, we are proposing to package 

payment for HCPCS codes C9361, 

C9362, and C9364 and assign them 

status indicator ‘‘N’’ for CY 2012. In 

addition, any new biologicals without 

pass-through status that are surgically 

inserted or implanted (through a 

surgical incision or a natural orifice) 

would be packaged in CY 2012. 

Moreover, for nonpass-through 

biologicals that may sometimes be used 

as implantable devices, we continue to 

instruct hospitals to not bill separately 

for the HCPCS codes for the products 

when used as implantable devices. This 

reporting ensures that the costs of these 

products that may be, but are not 

always, used as implanted biologicals 

are appropriately packaged into 

payment for the associated implantation 

procedures. 

3. Proposed Payment for Drugs and 

Biologicals Without Pass-Through 

Status That Are Not Packaged 

a. Proposed Payment for Specified 

Covered Outpatient Drugs (SCODs) and 

Other Separately Payable and Packaged 

Drugs and Biologicals 

Section 1833(t)(14) of the Act defines 

certain separately payable 

radiopharmaceuticals, drugs, and 

biologicals and mandates specific 

payments for these items. Under section 

1833(t)(14)(B)(i) of the Act, a ‘‘specified 

covered outpatient drug’’ is a covered 

outpatient drug, as defined in section 

1927(k)(2) of the Act, for which a 

separate APC has been established and 

that either is a radiopharmaceutical 

agent or is a drug or biological for which 

payment was made on a pass-through 

basis on or before December 31, 2002. 

Under section 1833(t)(14)(B)(ii) of the 

Act, certain drugs and biologicals are 

designated as exceptions and are not 

included in the definition of ‘‘specified 

covered outpatient drugs,’’ known as 

SCODs. These exceptions are— 

• A drug or biological for which 

payment is first made on or after 

January 1, 2003, under the transitional 

pass-through payment provision in 

section 1833(t)(6) of the Act. 

• A drug or biological for which a 

temporary HCPCS code has not been 

assigned. 

• During CYs 2004 and 2005, an 

orphan drug (as designated by the 

Secretary). 

Section 1833(t)(14)(A)(iii) of the Act 

requires that payment for SCODs in CY 

2006 and subsequent years be equal to 

the average acquisition cost for the drug 

for that year as determined by the 

Secretary, subject to any adjustment for 

overhead costs and taking into account 

the hospital acquisition cost survey data 

collected by the Government 

Accountability Office (GAO) in CYs 

2004 and 2005, and later periodic 

surveys conducted by the Secretary as 

set forth in the statute. If hospital 

acquisition cost data are not available, 

the law requires that payment be equal 

to payment rates established under the 

methodology described in section 

1842(o), section 1847A, or section 

1847B of the Act, as calculated and 

adjusted by the Secretary as necessary. 

Most physician Part B drugs are paid at 

ASP+6 percent pursuant to section 

1842(o) and section 1847A of the Act. 

Section 1833(t)(14)(E) of the Act 

provides for an adjustment in OPPS 

payment rates for overhead and related 

expenses, such as pharmacy services 

and handling costs. Section 

1833(t)(14)(E)(i) of the Act required 

MedPAC to study pharmacy overhead 

and related expenses and to make 

recommendations to the Secretary 

regarding whether, and if so how, a 

payment adjustment should be made to 

compensate hospitals for overhead and 

related expenses. Section 

1833(t)(14)(E)(ii) of the Act authorizes 

the Secretary to adjust the weights for 

ambulatory procedure classifications for 

SCODs to take into account the findings 

of the MedPAC study. 

In the CY 2006 OPPS proposed rule 

(70 FR 42728 through 42731), we 

discussed the June 2005 report by 

MedPAC regarding pharmacy overhead 

costs in HOPDs and summarized the 

findings of that study: 

• Handling costs for drugs, 

biologicals, and radiopharmaceuticals 

administered in the HOPD are not 

insignificant; 

• Little information is available about 

the magnitude of pharmacy overhead 

costs; 

• Hospitals set charges for drugs, 

biologicals, and radiopharmaceuticals at 

levels that reflect their respective 

handling costs; and 

• Hospitals vary considerably in their 

likelihood of providing services that 

utilize drugs, biologicals, or 

radiopharmaceuticals with different 

handling costs. 

As a result of these findings, MedPAC 

developed seven drug categories for 

pharmacy and nuclear medicine 

handling costs based on the estimated 

level of hospital resources used to 

prepare the products (70 FR 42729). 

Associated with these categories were 

two recommendations for accurate 

payment of pharmacy overhead under 

the OPPS. 

1. CMS should establish separate, 

budget neutral payments to cover the 

costs hospitals incur for handling 

separately payable drugs, biologicals, 

and radiopharmaceuticals. 

2. CMS should define a set of 

handling fee APCs that group drugs, 

biologicals, and radiopharmaceuticals 

based on attributes of the products that 

affect handling costs; CMS should 

instruct hospitals to submit charges for 

these APCs and base payment rates for 

the handling fee APCs on submitted 

charges reduced to costs. 

In response to the MedPAC findings, 

in the CY 2006 OPPS proposed rule (70 

FR 42729), we discussed our belief that, 

because of the varied handling resources 

required to prepare different forms of 

drugs, it would be impossible to 

exclusively and appropriately assign a 

drug to a certain overhead category that 

would apply to all hospital outpatient 

uses of the drug. Therefore, our CY 2006 

OPPS proposal included a proposal to 

establish three distinct Level II HCPCS 

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C-codes and three corresponding APCs 

for drug handling categories to 

differentiate overhead costs for drugs 

and biologicals (70 FR 42730). We also 

proposed: (1) to combine several 

overhead categories recommended by 

MedPAC; (2) to establish three drug 

handling categories, as we believed that 

larger groups would minimize the 

number of drugs that may fit into more 

than one category and would lessen any 

undesirable payment policy incentives 

to utilize particular forms of drugs or 

specific preparation methods; (3) to 

collect hospital charges for these HCPCS 

C-codes for 2 years; and (4) to ultimately 

base payment for the corresponding 

drug handling APCs on CY 2006 claims 

data available for the CY 2008 OPPS. 

In the CY 2006 OPPS final rule with 

comment period (70 FR 68659 through 

68665), we discussed the public 

comments we received on our proposal 

regarding pharmacy overhead. The 

overwhelming majority of commenters 

did not support our proposal regarding 

pharmacy overhead and urged us not to 

finalize this policy, as it would be 

administratively burdensome for 

hospitals to establish charges for HCPCS 

codes for pharmacy overhead and to 

report them. Therefore, we did not 

finalize this proposal for CY 2006. 

Instead, we established payment for 

separately payable drugs and biologicals 

at ASP+6 percent, which we calculated 

by comparing the estimated aggregate 

cost of separately payable drugs and 

biologicals in our claims data to the 

estimated aggregate ASP dollars for 

separately payable drugs and 

biologicals, using the ASP as a proxy for 

average acquisition cost (70 FR 68642). 

Hereinafter, we refer to this 

methodology as our standard drug 

payment methodology. We concluded 

that payment for drugs and biologicals 

and pharmacy overhead at a combined 

ASP+6 percent rate would serve as an 

acceptable proxy for the combined 

acquisition and overhead costs of each 

of these products. 

In the CY 2007 OPPS/ASC final rule 

with comment period (71 FR 68091), we 

finalized our proposed policy to provide 

a single payment of ASP+6 percent for 

the hospital’s acquisition cost for the 

drug or biological and all associated 

pharmacy overhead and handling costs. 

The ASP+6 percent rate that we 

finalized was higher than the equivalent 

average ASP-based amount calculated 

from claims of ASP+4 percent according 

to our standard drug payment 

methodology, but we adopted payment 

at ASP+6 percent for stability while we 

continued to examine the issue of the 

costs of pharmacy overhead in the 

HOPD and awaited the accumulation of 

CY 2006 data as discussed in the prior 

year’s rule. 

In the CY 2008 OPPS/ASC proposed 

rule (72 FR 42735), in response to 

ongoing discussions with interested 

parties, we proposed to continue our 

methodology of providing a combined 

payment rate for drug and biological 

acquisition and pharmacy overhead 

costs while continuing our efforts to 

improve the available data. We also 

proposed to instruct hospitals to remove 

the pharmacy overhead charge for both 

packaged and separately payable drugs 

and biologicals from the charge for the 

drug or biological and report the 

pharmacy overhead charge on an 

uncoded revenue code line on the 

claim. We believed that this would 

provide us with an avenue for collecting 

pharmacy handling cost data specific to 

drugs in order to package the overhead 

costs of these items into the associated 

procedures, most likely drug 

administration services. Similar to the 

public response to our CY 2006 

pharmacy overhead proposal, the 

overwhelming majority of commenters 

did not support our CY 2008 proposal 

and urged us to not finalize this policy 

(72 FR 66761). At its September 2007 

meeting, the APC Panel recommended 

that hospitals not be required to 

separately report charges for pharmacy 

overhead and handling and that 

payment for overhead be included as 

part of drug payment. The APC Panel 

also recommended that CMS continue 

to evaluate alternative methods to 

standardize the capture of pharmacy 

overhead costs in a manner that is 

simple to implement at the 

organizational level (72 FR 66761). 

Because of concerns expressed by the 

APC Panel and public commenters, we 

did not finalize the proposal to instruct 

hospitals to separately report pharmacy 

overhead charges for CY 2008. Instead, 

in the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66763), we 

finalized a policy of providing payment 

for separately payable drugs and 

biologicals and their pharmacy 

overhead at ASP+5 percent as a 

transition from their CY 2007 payment 

of ASP+6 percent to payment based on 

the equivalent average ASP-based 

payment rate calculated from hospital 

claims according to our standard drug 

payment methodology, which was 

ASP+3 percent for the CY 2008 OPPS/ 

ASC final rule with comment period. 

Hospitals continued to include charges 

for pharmacy overhead costs in the lineitem charges for the associated drugs 

reported on claims. 

For CY 2009, we proposed to pay 

separately payable drugs and biologicals 

at ASP+4 percent, including both 

SCODs and other drugs without CY 

2009 OPPS pass-through status, based 

on our standard drug payment 

methodology. We also continued to 

explore mechanisms to improve the 

available data. We proposed to split the 

‘‘Drugs Charged to Patients’’ cost center 

into two cost centers: One for drugs 

with high pharmacy overhead costs and 

one for drugs with low pharmacy 

overhead costs (73 FR 41492). We noted 

that we expected that CCRs from the 

proposed new cost centers would be 

available in 2 to 3 years to refine OPPS 

drug cost estimates by accounting for 

differential hospital markup practices 

for drugs with high and low overhead 

costs. After consideration of the public 

comments received and the APC Panel 

recommendations, we finalized a CY 

2009 policy (73 FR 68659) to provide 

payment for separately payable 

nonpass-through drugs and biologicals 

based on costs calculated from hospital 

claims at a 1-year transitional rate of 

ASP+4 percent, in the context of an 

equivalent average ASP-based payment 

rate of ASP+2 percent calculated 

according to our standard drug payment 

methodology from the final rule claims 

data and cost report data. We did not 

finalize our proposal to split the single 

standard ‘‘Drugs Charged to Patients’’ 

cost center into two cost centers largely 

due to concerns raised by hospitals 

about the associated administrative 

burden. Instead, we indicated in the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68659) that we 

would continue to explore other 

potential approaches to improve our 

drug cost estimation methodology, 

thereby increasing payment accuracy for 

separately payable drugs and 

biologicals. 

In response to the CMS proposals for 

the CY 2008 and CY 2009 OPPS, a group 

of pharmacy stakeholders (hereinafter 

referred to as the pharmacy 

stakeholders), including some cancer 

hospitals, some pharmaceutical 

manufacturers, and some hospital and 

professional associations, commented 

that CMS should pay an acquisition cost 

of ASP+6 percent for separately payable 

drugs, should substitute ASP+6 percent 

for the packaged cost of all packaged 

drugs and biologicals on procedure 

claims, and should redistribute the 

difference between the aggregate 

estimated packaged drug cost in claims 

and payment for all drugs, including 

packaged drugs at ASP+6 percent, as 

separate pharmacy overhead payments 

for separately payable drugs. They 

indicated that this approach would 

preserve the aggregate drug cost 

observed in the claims data, while 

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significantly increasing payment 

accuracy for individual drugs and 

procedures by redistributing drug cost 

from packaged drugs. Their suggested 

approach would provide a separate 

overhead payment for each separately 

payable drug or biological at one of 

three different levels, depending on the 

pharmacy stakeholders’ assessment of 

the complexity of pharmacy handling 

associated with each specific drug or 

biological (73 FR 68651 through 68652). 

Each separately payable drug or 

biological HCPCS code would be 

assigned to one of the three overhead 

categories, and the separate pharmacy 

overhead payment applicable to the 

category would be made when each of 

the separately payable drugs or 

biologicals was paid. 

In the CY 2010 OPPS/ASC proposed 

rule (74 FR 35332), we acknowledged 

the limitations of our data and our 

availability to find a method to improve 

that data in a way that did not impose 

unacceptable administrative burdens on 

providers. Accepting that charge 

compression was a reasonable but 

unverifiable supposition, we proposed 

to redistribute between one-third and 

one-half of the estimated overhead cost 

associated with coded packaged drugs 

and biologicals with an ASP, which 

resulted in our proposal to pay for the 

acquisition and pharmacy overhead 

costs of separately payable drugs and 

biologicals that did not have passthrough payment status at ASP+4 

percent. We calculated estimated 

overhead cost for coded packaged drugs 

and biologicals by determining the 

difference between the aggregate claims 

cost for coded packaged drugs and 

biologicals with an ASP and the ASP 

dollars (ASP multiplied by the drug’s or 

biological’s units in the claims data) for 

those same coded drugs and biologicals; 

this difference was our estimated 

overhead cost for coded packaged drugs 

and biologicals. In our rationale 

described in the CY 2010 OPPS/ASC 

proposed rule (74 FR 35326 through 

35333), we stated that we believed that 

approximately $150 million of the 

estimated $395 million total in 

pharmacy overhead cost, specifically 

between one-third and one-half of that 

cost, included in our claims data for 

coded packaged drugs and biologicals 

with reported ASP data should be 

attributed to separately payable drugs 

and biologicals and that the $150 

million serves as the adjustment for the 

pharmacy overhead costs of separately 

payable drugs and biologicals. As a 

result, we also proposed to reduce the 

costs of coded drugs and biologicals that 

are packaged into payment for 

procedural APCs to offset the $150 

million adjustment to payment for 

separately payable drugs and 

biologicals. In addition, we proposed 

that any redistribution of pharmacy 

overhead cost that may arise from the 

CY 2010 final rule data would occur 

only from some drugs and biologicals to 

other drugs and biologicals, thereby 

maintaining the estimated total cost of 

drugs and biologicals that we calculate 

based on the charges and costs reported 

by hospitals on claims and cost reports. 

As a result of this approach, no 

redistribution of cost would occur from 

other services to drugs and biologicals 

or vice versa. 

Using our CY 2010 proposed rule 

data, and applying our longstanding 

methodology for calculating the total 

cost of separately payable drugs and 

biologicals in our claims compared to 

the ASP dollars for the same drugs and 

biologicals, without applying the 

proposed overhead cost redistribution, 

we determined that the estimated 

aggregate cost of separately payable 

drugs and biologicals (status indicators 

‘‘K’’ and ‘‘G’’), including acquisition and 

pharmacy overhead costs, was 

equivalent to ASP–2 percent. Therefore, 

under the standard methodology for 

establishing payment for separately 

payable drugs and biologicals, we 

would have paid for those drugs and 

biologicals at ASP–2 percent for CY 

2010, their equivalent average ASPbased payment rate. We also determined 

that the estimated aggregate cost of 

coded packaged drugs and biologicals 

with an ASP (status indicator ‘‘N’’), 

including acquisition and pharmacy 

overhead costs, was equivalent to 

ASP+247 percent. 

While we had no way of assessing 

whether this current distribution of 

overhead cost to coded packaged drugs 

and biologicals with an ASP was 

appropriate, we acknowledged that the 

established method of converting billed 

charges to costs had the potential to 

‘‘compress’’ the calculated costs to some 

degree. Further, we recognized that the 

attribution of pharmacy overhead costs 

to packaged or separately payable drugs 

and biologicals through our standard 

drug payment methodology of a 

combined payment for acquisition and 

pharmacy overhead costs depends, in 

part, on the treatment of all drugs and 

biologicals each year under our annual 

drug packaging threshold. Changes to 

the packaging threshold may result in 

changes to payment for the overhead 

cost of drugs and biologicals that do not 

reflect actual changes in hospital 

pharmacy overhead cost for those 

products. For these reasons, we stated 

that we believed some portion, but not 

all, of the total overhead cost that is 

associated with coded packaged drugs 

and biologicals (the difference between 

aggregate cost for those drugs and 

biologicals on the claims and ASP 

dollars for the same drugs and 

biologicals), based on our standard drug 

payment methodology, should, at least 

for CY 2010, be attributed to separately 

payable drugs and biologicals. 

We acknowledged that the observed 

combined payment for acquisition and 

pharmacy overhead costs of ASP–2 

percent for separately payable drugs and 

biologicals may be too low and 

ASP+247 percent for coded packaged 

drugs and biologicals with reported ASP 

data in the CY 2010 claims data may be 

too high (74 FR 35327 and 35328). In 

addition, we stated that we believed that 

the pharmacy stakeholders’ 

recommendation to set packaged drug 

and biological dollars to ASP+6 percent 

was inappropriate, given our 

understanding that an equal allocation 

of indirect overhead costs among 

packaged and separately payable drugs 

and biologicals would lead to a higher 

observed ASP+X percent than ASP+6 

percent for packaged drugs and 

biologicals. Further, we indicated that 

indirect overhead costs that are common 

to all drugs and biologicals have no 

relationship to the cost of an individual 

drug or biological or to the complexity 

of the handling, preparation, or storage 

of that individual drug or biological. 

Therefore, we indicated that we 

believed that indirect overhead cost 

alone for an inexpensive drug or 

biological which would be packaged 

could be far in excess of the ASP for that 

inexpensive product. We also explained 

that layered on these indirect costs are 

direct costs of staff, supplies, and 

equipment that are directly attributable 

only to the storage, handling, 

preparation, and distribution of drugs 

and biologicals and which do vary, 

sometimes considerably, depending 

upon the drug being furnished. 

Therefore, we stated that a middle 

ground would represent the most 

accurate redistribution of pharmacy 

overhead cost. Our assumption was that 

approximately one-third to one-half of 

the total pharmacy overhead cost 

currently associated with coded 

packaged drugs and biologicals in the 

CY 2008 claims data offered a more 

appropriate allocation of drug and 

biological cost to separately payable 

drugs and biologicals. One third of the 

$395 million of pharmacy overhead cost 

associated with packaged drugs and 

biologicals was $132 million, whereas 

one-half was $198 million. 

Within the one-third to one-half 

parameters, we proposed that 

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reallocating $150 million in drug and 

biological cost observed in the claims 

data from coded packaged drugs and 

biologicals with an ASP to separately 

payable drugs and biologicals for CY 

2010 would more appropriately 

distribute pharmacy overhead cost 

among packaged and separately payable 

drugs and biologicals. Based on this 

redistribution, we proposed a CY 2010 

payment rate for separately payable 

drugs and biologicals of ASP+4 percent. 

Redistributing $150 million represented 

a reduction in cost of coded packaged 

drugs and biologicals with reported ASP 

data in the CY 2010 proposed rule 

claims data of 27 percent. 

We also proposed that any 

redistribution of pharmacy overhead 

cost that may arise from CY 2010 final 

rule data would occur only from some 

drugs and biologicals to other drugs and 

biologicals, thereby maintaining the 

estimated total cost of drugs and 

biologicals in our claims data (no 

redistribution of cost would occur from 

other services to drugs and biologicals 

or vice versa). We further proposed that 

the claims data for 340B hospitals be 

included in the calculation of payment 

for drugs and biologicals under the CY 

2010 OPPS, and that hospitals that 

participate in the 340B program would 

be paid the same amounts for separately 

payable drugs and biologicals as 

hospitals that do not participate in the 

340B program (74 FR 35332 through 

35333). Finally, we proposed that, in 

accordance with our standard drug 

payment methodology, the estimated 

payments for separately payable drugs 

and biologicals would be taken into 

account in the calculation of the weight 

scaler that would apply to the relative 

weights for all procedural services (but 

would not apply to separately payable 

drugs and biologicals) paid under the 

OPPS, as required by section 

1833(t)(14)(H) of the Act (74 FR 35333). 

In the CY 2010 OPPS final rule with 

comment period, we adopted a 

transitional payment rate of ASP+4 

percent based on a pharmacy overhead 

adjustment methodology for CY 2010 

that redistributed $200 million from 

packaged drug and biological cost to 

separately payable drug cost. This $200 

million included the proposed $150 

million redistribution from the 

pharmacy overhead cost of coded 

packaged drugs and biologicals for 

which an ASP is reported and an 

additional $50 million dollars from the 

total uncoded drug and biological cost 

to separately payable drugs and 

biologicals as a conservative estimate of 

the pharmacy overhead cost of uncoded 

packaged drugs and biologicals that 

should be appropriately associated with 

the cost of separately payable drugs and 

biologicals (74 FR 60517). We believed 

that our proposal to reallocate $150 

million of costs from coded packaged 

drugs and biologicals, or one-third of 

the pharmacy overhead costs of these 

products, based upon the claims data 

available for the CY 2010 final rule, to 

separately payable drugs and biologicals 

was appropriate (74 FR 60511). We also 

acknowledged that, to some unknown 

extent, there are pharmacy overhead 

costs being attributed to the items and 

services reported under the pharmacy 

revenue code without HCPCS codes that 

are likely pharmacy overhead for 

separately payable drugs. Therefore, we 

reallocated $50 million or 8 percent of 

the total cost of uncoded packaged drug 

and biological cost in order to represent 

the pharmacy overhead cost of uncoded 

packaged drugs and biologicals that 

should be appropriately associated with 

the cost of separately payable drugs and 

biologicals. This was an intentionally 

conservative estimate as we could not 

identify definitive evidence that 

uncoded packaged drug and biological 

cost included a pharmacy overhead 

amount comparable to that of coded 

packaged drugs and biologicals with an 

ASP. We stated that we could not know 

the amount of overhead associated with 

these drugs without making significant 

assumptions about the amount of 

pharmacy overhead cost associated with 

the drug and biologicals captured by 

these uncoded packaged drug costs (74 

FR 60511 through 60513). 

We noted that our final CY 2010 

payment policy for separately payable 

drugs and biologicals at ASP+4 percent 

fell within the range of ASP–3 percent 

(that would have resulted from no 

pharmacy overhead cost redistribution 

from packaged to separately payable 

drugs and biologicals), to ASP+7 

percent (that would have resulted from 

redistribution of pharmacy overhead 

cost based on expansive assumptions 

about the nature of uncoded packaged 

drug and biological cost). We finalized 

a policy of redistributing pharmacy 

overhead cost from some drugs and 

biologicals to other drugs and 

biologicals, thereby maintaining the 

estimated total cost of drugs and 

biologicals in our claims data (no 

redistribution of cost would occur from 

other services to drugs and biologicals 

or vice versa). We also reiterated our 

commitment to continue in our efforts 

to refine our analyses. 

For CY 2011, we continued the CY 

2010 pharmacy overhead adjustment 

methodology (74 FR 60500 through 

60512). We determined the total cost of 

separately payable drugs using CY 2009 

claims data and compared these costs to 

the ASP dollars (April 2010 ASP 

quarterly payment rates multiplied by 

units for the separately payable drugs 

and biologicals in the claims data) for 

the same drugs and biologicals. We 

determined that the total estimated 

payment for separately payable drugs 

and biologicals (status indicators ‘‘K’’ 

and ‘‘G’’), including acquisition and 

pharmacy overhead costs, was ASP–1 

percent, which also would be the ASPbased payment rate under the standard 

methodology that we established in CY 

2006 (75 FR 46275). Additionally, we 

determined that the total estimated 

aggregate cost for packaged drugs and 

biologicals with a HCPCS code for 

which manufacturers report ASP data 

(status indicator ‘‘N’’), including 

acquisition and pharmacy overhead 

costs, was equivalent to ASP+296 

percent. Finally, we determined that the 

total estimated cost for both packaged 

drugs and biologicals with a HCPCS 

code and separately payable drugs and 

biologicals (status indicators ‘‘N,’’ ‘‘K,’’ 

and ‘‘G’’) for which we also have ASP 

data, including acquisition and 

pharmacy overhead costs, was ASP+13 

percent. Consistent with our 

supposition that the combined payment 

for average acquisition and pharmacy 

overhead costs under our standard 

methodology may understate the cost of 

separately payable drugs and biologicals 

and related pharmacy overhead for 

those drugs and biologicals, we 

redistributed $150 million from the 

pharmacy overhead cost of coded 

packaged drugs and biologicals with an 

ASP and redistributed $50 million from 

the cost of uncoded packaged drugs and 

biologicals, for a total redistribution of 

$200 million from costs for coded and 

uncoded packaged drugs to separately 

payable drugs and biologicals, with the 

result that we pay separately paid drugs 

and biologicals at ASP+5 percent for CY 

2011. The redistribution amount of $150 

million in overhead cost from coded 

packaged drugs and biologicals with an 

ASP and $50 million in costs from 

uncoded packaged drugs and biologicals 

without an ASP were within the 

parameters established in the CY 2010 

OPPS/ASC final rule. In addition, as in 

prior years, we described some of our 

work to improve our analyses during the 

preceding year, and reiterated our 

commitment to continue to refine our 

drug pricing methodology. 

b. Proposed Payment Policy 

Section 1833(t)(14)(A)(iii) of the Act, 

as described above, continues to be 

applicable to determining payments for 

SCODs for CY 2012. This provision 

requires that payment for SCODs be 

equal to the average acquisition cost for 

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the drug for that year as determined by 

the Secretary, subject to any adjustment 

for overhead costs and taking into 

account the hospital acquisition cost 

survey data collected by the GAO in 

CYs 2004 and 2005 and later periodic 

surveys conducted by the Secretary as 

set forth in the statute. If hospital 

acquisition cost data are not available, 

section 1833(t)(14)(A)(iii)(II) of the Act 

requires that payment be equal to 

payment rates established under the 

methodology described in section 

1842(o) of the Act, section 1847A of the 

Act (ASP+6 percent as paid for 

physician Part B drugs), or section 

1847B of the Act (CAP), as the case may 

be, as calculated and adjusted by the 

Secretary as necessary. In accordance 

with sections 1842(o) and 1847A of the 

Act, payments for most Medicare nonOPPS Part B drugs furnished on or after 

January 1, 2005, are paid based on the 

ASP methodology. Medicare Part B 

drugs generally fall into three categories: 

physician-administered drugs (drugs 

furnished incident to a physician’s 

service), drugs delivered through DME 

(drugs furnished under the durable 

medical equipment benefit), and drugs 

specifically covered by a statutory 

provision (certain oral anti-cancer and 

immunosuppressive drugs). Section 

1833(t)(14)(E)(ii) of the Act authorizes, 

but does not require, the Secretary to 

adjust APC weights to take into account 

the 2005 MedPAC report relating to 

overhead and related expenses, such as 

pharmacy services and handling costs. 

As discussed in V.B.3.a. of this 

proposed rule, since CY 2006, we have 

used ASP data and costs estimated from 

charges on hospital claims data as a 

proxy for the sum of the average 

hospital acquisition cost that the statute 

requires for payment of SCODs and the 

associated pharmacy overhead cost in 

order to establish a combined payment 

rate for acquisition cost and pharmacy 

overhead. Prior to CY 2010, we applied 

this methodology to payment for all 

separately payable drugs and biologicals 

without pass-through status, including 

both SCODs and other drugs and 

biologicals that do not meet the 

statutory definition of SCODs. 

For the CY 2010 OPPS, as part of our 

ongoing efforts to improve the validity 

of our payments, we revised the 

standard methodology to include an 

adjustment for pharmacy overhead. As 

explained previously, we have 

acknowledged, and continue to believe, 

that the established method of 

converting billed charges to costs had 

the potential to ‘‘compress’’ the 

calculated costs to some degree. We 

recognized that the attribution of 

pharmacy overhead costs to packaged or 

separately payable drugs and biologicals 

through our standard drug payment 

methodology of a combined payment for 

acquisition and pharmacy overhead 

costs depends, in part, on the treatment 

of all drugs and biologicals each year 

under our annual drug packaging 

threshold. To some unknown extent, we 

believe that some pharmacy overhead 

costs attributed to packaged drugs and 

biologicals may include pharmacy 

overhead costs for separately payable 

drugs. 

For this CY 2012 OPPS/ASC proposed 

rule, we are proposing to continue to 

use our standard methodology for 

determining the total cost of separately 

payable drugs and biologicals in our CY 

2010 claims data and comparing these 

costs to the ASP dollars (April 2011 

ASP quarterly payment rates multiplied 

by units for the separately payable drugs 

and biologicals in the claims data) for 

the same drugs and biologicals. We 

determined that the total estimated 

payment for separately payable drugs 

and biologicals (status indicators ‘‘K’’ 

and ‘‘G’’), including acquisition and 

pharmacy overhead costs, is ASP–2 

percent, which also would be the ASPbased payment rate under the standard 

methodology that we established in CY 

2006 (75 FR 46275). Additionally, we 

determined that the total estimated 

aggregate cost for packaged drugs and 

biologicals with a HCPCS code for 

which manufacturers report ASP data 

(status indicator ‘‘N’’), including 

acquisition and pharmacy overhead 

costs, is equivalent to ASP+188 percent. 

Finally, we determined that the total 

estimated cost for both packaged drugs 

and biologicals with a HCPCS code and 

separately payable drugs and biologicals 

(status indicators ‘‘N,’’ ‘‘K,’’ and ‘‘G’’) 

for which we also have ASP data, 

including acquisition and pharmacy 

overhead costs, is ASP+11 percent. 

Table 31 below displays our findings 

with regard to the percentage of ASP in 

comparison to the cost for packaged 

coded drugs and biologicals and for 

separately payable coded drugs and 

biologicals before application of the 

proposed overhead adjustment 

methodology. 

TABLE 31—CY 2012 PROPOSED RULE DATA: ASP+X CALCULATION UNDER STANDARD METHODOLOGY

Total ASP dollars for drugs 

and biologicals 

in claims data 

(in millions)* 

Total cost of 

drugs and 

biologicals in 

claims data (in 

millions)** 

Ratio of cost 

to ASP (column 3/column 

2) 

ASP+X 

percent 

Uncoded Packaged Pharmaceutical Revenue Code Costs ............................ Unknown * * *$502 Unknown Unknown 

Coded Packaged Drugs and Biologicals with a reported ASP ....................... $244 705 2.88 ASP+188 

Separately Payable Drugs and Biologicals with a reported ASP .................... 3,536 3,476 0.98 ASP–2 

All Coded Drugs and Biologicals with a reported ASP ................................... 3,780 4,181 1.11 ASP+11 

* Total April 2011 ASP dollars (ASP multiplied by drug or biologicals units in CY 2010 claims) for drugs and biologicals with a HCPCS code 

and ASP information. 

** Total cost in the CY 2010 claims data for drugs and biologicals. 

*** Pharmacy revenue code costs without HCPCS codes. 

We acknowledge that the combined 

payment for average acquisition and 

pharmacy overhead costs under our 

standard methodology may understate 

the cost of separately payable drugs and 

biologicals and related pharmacy 

overhead for those drugs and 

biologicals. Specifically, we recognize 

that payment at ASP–2 percent for such 

costs may not be sufficient. We also 

acknowledge that ASP +188 percent 

may overstate the combined acquisition 

and pharmacy overhead cost of 

packaged drugs and biologicals. 

Therefore, given this issue, for CY 2012, 

we are proposing to continue the CY 

2010 and CY 2011 overhead adjustment 

methodology, which redistributes $200 

million in cost from packaged drugs 

with an ASP and uncoded packaged 

drugs, as first implemented in the CY 

2010 OPPS/ASC final rule with 

comment period (74 FR 60501 through 

60517). 

For CY 2012, because we are 

proposing to continue to make an 

overhead adjustment for another year, 

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we believe it is appropriate to account 

for inflation that has occurred since the 

overhead redistribution amount of $200 

million was applied in CY 2011. 

Therefore, we are proposing to apply an 

inflation allowance to account for 

inflation and changes in the prices of 

pharmaceuticals in the overall economy. 

We are proposing to adjust the overhead 

redistribution amount of $200 million 

using the PPI for Pharmaceuticals for 

Human Use. The PPI for 

Pharmaceuticals for Human Use 

(Prescription) (Bureau of Labor Statistics 

(BLS) series code WPUSI07003), 

provided through CMS’ Office of the 

Actuary (OACT) is a price series that 

reflects price changes associated with 

the average mix of all pharmaceuticals 

in the overall economy. We refer to this 

series generally as the PPI for 

Prescription Drugs. We believe that this 

price series is appropriate to use to 

update the overhead redistribution 

amount because the PPI for Prescription 

Drugs is publicly available and regularly 

published and because we have 

successfully utilized the PPI for 

Prescription Drugs for the past 5 years 

to update the drug packaging threshold 

as described in section V.B.2.a. of this 

proposed rule. 

In order to apply the inflation 

allowance to the overhead redistribution 

amount for CY 2012, we used the most 

recent forecast of yearly index levels 

provided in the PPI for Prescription 

Drugs to calculate an updated overhead 

redistribution amount. After adjusting 

the $200 million overhead 

redistribution amount for inflation using 

the PPI for Prescription Drugs, we 

determined that $161 million would 

need to be redistributed from coded 

packaged drugs and biologicals with 

reported ASP data and $54 million 

would need to be redistributed from the 

cost of uncoded packaged drugs and 

biologicals without an ASP to separately 

payable drugs and biologicals. The 

proposed redistribution amount of $161 

million in overhead cost from coded 

packaged drugs and biologicals is 

within the redistribution parameters 

established in the CY 2010 OPPS/ASC 

final rule with comment period of 

roughly one-third to one-half of 

overhead cost in coded packaged drugs 

and biologicals. The total proposed 

redistribution amount from both coded 

and uncoded packaged drugs and 

biologicals to separately paid drugs and 

biologicals would therefore be $215 

million. Having determined to 

redistribute overhead, we also continue 

to believe that the methodology to 

redistribute a portion of drug overhead 

cost from packaged coded and uncoded 

drugs and biologicals to separately 

payable drugs and biologicals while 

keeping the total cost of drugs and 

biologicals in the claims data constant 

continues to be appropriate for the 

reasons set forth in the CY 2010 OPPS/ 

ASC final rule with comment period (74 

FR 60501 through 60517). Therefore, for 

CY 2012, we are proposing to 

redistribute a total overhead 

redistribution amount, adjusted for 

inflation, of $215 million from coded 

and uncoded packaged drugs and 

biologicals to separately payable drugs 

and biologicals. 

In the CY 2010 OPPS/ASC final rule 

with comment period, we reallocated 

$150 million in overhead cost from 

coded packaged drugs and biologicals 

with an ASP to separately payable drugs 

and biologicals with an ASP, or onethird of the pharmacy overhead cost of 

these products based upon the claims 

data available for the CY 2010 final rule. 

In addition, we noted that some of the 

cost associated with uncoded packaged 

drugs and biologicals was appropriate to 

redistribute to separately payable drugs 

and biologicals. Therefore, we made a 

conservative estimate, as compared with 

the case of coded packaged drugs and 

biologicals with an ASP for which we 

had a specific pharmacy overhead cost 

estimate in relationship to their known 

ASPs, and reallocated $50 million, or 8 

percent of the total cost of uncoded 

packaged drugs and biologicals with no 

ASP. We made the assumption that 

whatever pharmacy overhead cost 

inappropriately associated with 

uncoded packaged drugs and biologicals 

would not be less than 8 percent of total 

uncoded drugs and biologicals cost. 

For this CY 2012 OPPS/ASC proposed 

rule, we note that continuing to 

redistribute $200 million (or $215 

million with the adjustment for 

inflation) falls within the parameters 

originally established in the CY 2010 

OPPS/ASC final rule with comment 

period. A redistribution amount of $161 

million in overhead cost from coded 

packaged drugs and biologicals with an 

ASP or approximately 35 percent falls 

within one-third to one-half of the 

estimated pharmacy overhead cost. In 

addition, we note that a redistribution 

amount of $54 million in overhead cost 

from uncoded packaged drugs and 

biologicals, or approximately 11 

percent, is not less than 8 percent of the 

total cost of uncoded packaged drugs 

and biologicals. Therefore, our proposal 

to redistribute $215 million is consistent 

with the overhead adjustment 

methodology first implemented in CY 

2010. We continue to believe that a 

middle ground of approximately onethird to one-half of the total pharmacy 

overhead cost currently associated with 

coded packaged drugs and biologicals in 

the CY 2010 claims data represents the 

most accurate redistribution of 

pharmacy overhead cost. 

We estimate the overhead cost for 

coded packaged drugs to be $544 

million ($705 million in total cost for 

coded packaged drugs and biologicals 

with a reported ASP, less $161 million 

in total ASP dollars for coded packaged 

drugs and biologicals with a reported 

ASP). As we did in CY 2010 and CY 

2011, we are proposing for CY 2012 that 

any redistribution of pharmacy 

overhead cost would occur only among 

drugs and biologicals in our claims data, 

that no redistribution of cost would 

occur from other services to drugs and 

biologicals or vice versa. We believe that 

redistributing $215 million from 

packaged to separately payable drugs 

and biologicals, which includes an 

adjustment for inflation, is an 

appropriate redistribution of pharmacy 

overhead costs to address any charge 

compression in the standard 

methodology. This would result in a 

proposed CY 2012 payment rate for 

separately payable drugs and biologicals 

of ASP+4 percent. We note that, in past 

years, the proposed ASP+X amount 

decreased by at least 1 percentage point 

when we updated the ASP data, claims 

data, and cost report data between the 

proposed rule and the final rule with 

comment period. Therefore, it is 

possible that the proposed methodology 

would result in an ASP+X amount that 

is different from ASP+4. 

As indicated in Table 31 above, if we 

were to propose to establish payment for 

separately payable drugs and biologicals 

under the standard methodology 

established in CY 2006 without 

applying a pharmacy overhead 

adjustment, we would have to propose 

to pay for separately payable drugs and 

biologicals at ASP-2 percent. However, 

because we are concerned about the 

possibility of underpaying for separately 

payable drugs and biologicals, we 

believe that a pharmacy overhead 

adjustment using a redistribution 

methodology for determining the 

amount of payment for drugs and 

biologicals, as we did for CY 2011, is 

appropriate for CY 2012. We 

acknowledge that the observed ASP-2 

percent may reflect some amount of 

charge compression and variability 

attributable to the choice of a packaging 

threshold. 

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TABLE 32—CY 2012 PROPOSED PHARMACY OVERHEAD ADJUSTMENT PAYMENT METHODOLOGY: ASP+X CALCULATION

Total ASP dollars for drugs 

and biologicals 

in claims Data 

(in millions) * 

Total cost of 

drugs and 

biologicals in 

claims data 

after adjustment (in millions) * * 

Ratio of cost 

to ASP (column 3/column 

2) 

ASP+X percent 

Uncoded Packaged Pharmaceutical Revenue Code Costs ............................ Unknown * * * $448 Unknown Unknown 

Coded Packaged Drugs and Biologicals with a reported ASP ....................... 244 544 2.23 ASP+123 

Separately Payable Drugs and Biologicals with a reported ASP .................... 3,536 3,691 1.04 ASP+4 

All Coded Drugs and Biologicals with a reported ASP ................................... 3,780 4,181 1.11 ASP+11 

* Total April 2011 ASP dollars (ASP multiplied by drug or biological units in CY 2010 claims) for drugs and biologicals with a HCPCS code and 

ASP information. 

** Total cost in the CY 2010 claims data for drugs and biologicals. 

*** Pharmacy revenue code costs without HCPCS codes. 

We note that although it is CMS’ 

longstanding policy under the OPPS to 

refrain from instructing hospitals on the 

appropriate revenue code to use to 

charge for specific services, we continue 

to encourage hospitals to bill all drugs 

and biologicals with HCPCS codes, 

regardless of whether they are 

separately payable or packaged, and to 

ensure that drug costs are completely 

reported, using appropriate revenue 

codes. We note that we make packaging 

determinations for drugs and biologicals 

annually based on cost information 

reported under HCPCS codes, and the 

OPPS ratesetting is best served when 

hospitals report charges for all items 

and services with HCPCS codes when 

they are available, whether or not 

Medicare makes separate payment for 

the items and services. 

In summary, for the reasons set forth 

above and considering the data 

limitations we have previously 

discussed, we are proposing to continue 

our prior CY 2010 and CY 2011 

acquisition cost proxy methodology and 

pharmacy overhead redistribution 

methodology. In addition, we are 

proposing to adjust the $200 million 

redistribution amount finalized in CY 

2011 for inflation. Therefore, we are 

proposing to redistribute $161 million 

in overhead costs from coded packaged 

drugs and biologicals and $54 million in 

overhead costs from uncoded packaged 

drugs and biologicals to result in $215 

million in costs redistributed from 

packaged coded and uncoded drugs and 

biologicals to separately payable drugs 

and biologicals for CY 2012. The 

proposed redistribution amount of $161 

million in overhead cost from coded 

packaged drugs and biologicals is 

within the redistribution parameters 

established in the CY 2010 OPPS/ASC 

final rule with comment period of 

roughly one-third to one-half of 

overhead cost in coded packaged drugs 

and biologicals. Approximately 11 

percent of drug cost in uncoded 

packaged drugs and biologicals would 

be redistributed to separately payable 

drugs for CY 2012, and therefore, this 

amount continues to be no less than 8 

percent of the total uncoded drug and 

biological cost. The result of this 

proposed methodology when applied 

using April 2011 ASPs, data for claims 

for services furnished during CY 2010 

and processed through the Common 

Working File before January 1, 2010, 

and the most current submitted cost 

reports as of January 1, 2011, is a 

proposed ASP+4 percent amount for CY 

2012. 

Further, we are proposing to continue 

to include the claims data for 340B 

hospitals in the calculation of payment 

for drugs and biologicals under the CY 

2012 OPPS because we believe 

excluding data from hospitals that 

participate in the 340B program from 

our ASP+X calculation, but paying 

those hospitals at that derived payment 

amount, would effectively redistribute 

payment to drugs or biologicals from 

payment for other services under the 

OPPS. Furthermore, we do not believe 

it would be appropriate to exclude 

claims from this subset of hospitals in 

the context of a proposed CY 2012 drug 

and biological payment policy that pays 

all hospitals the same rate for separately 

payable drugs and biologicals (74 FR 

60517). In addition, we are proposing 

that 340B hospitals continue to be paid 

the same amounts for separately payable 

drugs and biologicals as hospitals that 

do not participate in the 340B program 

for CY 2012 because commenters have 

generally opposed differential payment 

for hospitals based on their 340B 

participation status. In addition, we are 

proposing to include claims from 340B 

hospitals in our assessment of average 

acquisition cost under section 

1833(t)(14)(A)(iii) of the Act. We are 

proposing that the estimated payments 

for separately payable drugs and 

biologicals be taken into account in the 

calculation of the weight scaler that 

would apply to the relative weights for 

all procedural services (but would not 

apply to separately payable drugs and 

biologicals) paid under the OPPS, as 

required by section 1833(t)(14)(H) of the 

Act. 

We note that we continue to pursue 

the most appropriate methodology for 

establishing payment for drugs and 

biologicals under the OPPS. Because we 

are always trying to improve the 

integrity of our data, we have previously 

proposed multiple mechanisms to 

improve the cost data available to us, 

but have not implemented those 

proposals due to hospital concerns 

about the administrative burden. We 

continue to be interested in developing 

mechanisms that improve the cost data 

available to us while minimizing to the 

extent possible the administrative 

burden on hospitals. For the past 3 

years, we have proposed an internal 

adjustment to redistribute an amount 

from packaged coded and uncoded 

drugs and biologicals to separately 

payable drugs and biologicals, because 

the results of our standard drug 

payment methodology are unlikely to 

accurately reflect the full cost of 

acquisition and pharmacy overhead for 

separately payable and packaged drugs 

and biologicals due to hospital charging 

practices and our use of an annual drug 

packaging threshold. As we continue to 

work to refine our payment systems, a 

goal to which we have been consistently 

committed over the past several years, 

we encourage public input on 

determining alternative cost-based 

methodologies to aid in our ongoing 

evaluation of alternative cost-based 

methodologies that could improve upon 

the current methodology. 

c. Proposed Payment Policy for 

Therapeutic Radiopharmaceuticals 

Beginning in the CY 2005 OPPS final 

rule with comment period, we 

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exempted radiopharmaceutical 

manufacturers from reporting ASP data 

for all radiopharmaceuticals for 

payment purposes under the OPPS. (For 

more information, we refer readers to 

the CY 2005 OPPS final rule with 

comment period (69 FR 65811) and the 

CY 2006 OPPS final rule with comment 

period (70 FR 68655).) Consequently, 

we did not have ASP data for 

radiopharmaceuticals for consideration 

for OPPS ratesetting until we began 

collecting ASP for nonpass-through 

separately paid therapeutic 

radiopharmaceuticals for CY 2010. In 

accordance with section 

1833(t)(14)(B)(i)(I) of the Act, we have 

classified radiopharmaceuticals under 

the OPPS as SCODs. As such, we have 

paid for radiopharmaceuticals at average 

acquisition cost as determined by the 

Secretary and subject to any adjustment 

for overhead costs. For CYs 2006 and 

2007, we used mean unit cost data from 

hospital claims to determine each 

radiopharmaceutical’s packaging status 

and implemented a temporary policy to 

pay for separately payable 

radiopharmaceuticals based on the 

hospital’s charge for each 

radiopharmaceutical adjusted to cost 

using the hospital’s overall CCR. The 

methodology of providing separate 

radiopharmaceutical payment based on 

charges adjusted to cost through 

application of an individual hospital’s 

overall CCR for CYs 2006 and 2007 was 

finalized as an interim proxy for average 

acquisition cost. 

In CY 2008, we packaged payment for 

all diagnostic radiopharmaceuticals and 

we proposed and finalized a 

methodology to provide prospective 

payment for therapeutic 

radiopharmaceuticals (defined as those 

Level II HCPCS codes that include the 

term ‘‘therapeutic’’ along with a 

radiopharmaceutical in their long code 

descriptors) using mean costs derived 

from the CY 2006 claims data, where the 

costs were determined using our 

standard methodology of applying 

hospital-specific departmental CCRs to 

radiopharmaceutical charges, defaulting 

to hospital-specific overall CCRs only if 

appropriate departmental CCRs were 

unavailable (72 FR 66772). Following 

issuance of the CY 2009 OPPS/ASC 

proposed rule, section 142 of the 

Medicare Improvements for Patients and 

Providers Act of 2008 (Pub. L. 110–275) 

amended section 1833(t)(16)(C) of the 

Act, as amended by section 106(a) of the 

Medicare, Medicaid, and SCHIP 

Extension Act of 2007 (Pub. L. 110– 

173), to further extend the payment 

period for therapeutic 

radiopharmaceuticals based on 

hospitals’ charges adjusted to cost 

through December 31, 2009. Therefore, 

for CY 2009, we finalized a policy to 

continue to pay hospitals for therapeutic 

radiopharmaceuticals at charges 

adjusted to cost through the end of CY 

2009. 

For CY 2010, we proposed and 

finalized a policy to pay for separately 

paid therapeutic radiopharmaceuticals 

under the ASP methodology adopted for 

separately payable drugs and 

biologicals. We allowed manufacturers 

to submit the ASP data in a patientspecific dose or patient-ready form in 

order to properly calculate the ASP 

amount for a given HCPCS code. This 

resulted in payment for nonpassthrough separately paid therapeutic 

radiopharmaceuticals at ASP+4 percent 

for CY 2010 for products for which the 

manufacturer submitted ASP. We also 

finalized a policy to base therapeutic 

radiopharmaceutical payment on CY 

2008 mean unit cost data derived from 

hospital claims if ASP information was 

unavailable. For CY 2011, we continued 

to pay for nonpass-through separately 

paid therapeutic radiopharmaceuticals 

under the ASP methodology adopted for 

separately payable drugs and 

biologicals, resulting in a payment rate 

for nonpass-through separately paid 

therapeutic radiopharmaceuticals of 

ASP+5 percent. We also continued to 

base therapeutic radiopharmaceutical 

payment on CY 2009 mean unit cost 

data derived from hospital claims if ASP 

information was unavailable. 

We believe that the rationale outlined 

in the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60524 

through 60525) for applying the 

principles of separately payable drug 

pricing to therapeutic 

radiopharmaceuticals continues to be 

appropriate for nonpass-through 

separately payable therapeutic 

radiopharmaceuticals in CY 2012. 

Therefore, we are proposing to continue 

to pay all nonpass-through, separately 

payable therapeutic 

radiopharmaceuticals under the ASP+X 

payment level established using the 

proposed pharmacy overhead 

adjustment based on a redistribution 

methodology to set payment for 

separately payable drugs and biologicals 

(proposed at ASP+4 percent, as 

discussed in section V.B.3.b. of this 

proposed rule) based on ASP 

information, if available, for a ‘‘patient 

ready’’ dose and updated on a quarterly 

basis for products for which 

manufacturers report ASP data. For a 

full discussion of how a ‘‘patient ready’’ 

dose is defined, we refer readers to the 

CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60520 through 

60521). We also are proposing to rely on 

CY 2010 mean unit cost data derived 

from hospital claims data for payment 

rates for therapeutic 

radiopharmaceuticals for which ASP 

data are unavailable and to update the 

payment rates for separately payable 

therapeutic radiopharmaceuticals, 

according to our usual process for 

updating the payment rates for 

separately payable drugs and 

biologicals, on a quarterly basis if 

updated ASP information is available. 

The proposed CY 2012 payment rates 

for nonpass-through separately payable 

therapeutic radiopharmaceuticals are 

included in Addenda A and B to this 

proposed rule (which is referenced in 

section XVII. of this proposed rule and 

available via the Internet). 

4. Proposed Payment for Blood Clotting 

Factors 

For CY 2011, we provided payment 

for blood clotting factors under the same 

methodology as other nonpass-through 

separately payable drugs and biologicals 

under the OPPS and continued paying 

an updated furnishing fee. That is, for 

CY 2011, we provided payment for 

blood clotting factors under the OPPS at 

ASP+5 percent, plus an additional 

payment for the furnishing fee. We note 

that when blood clotting factors are 

provided in physicians’ offices under 

Medicare Part B and in other Medicare 

settings, a furnishing fee is also applied 

to the payment. The CY 2011 updated 

furnishing fee is $0.176 per unit. 

For CY 2012, we are proposing to pay 

for blood clotting factors at ASP+4 

percent, consistent with our proposed 

payment policy for other nonpassthrough separately payable drugs and 

biologicals, and to continue our policy 

for payment of the furnishing fee using 

an updated amount. Our rationale for 

this proposed policy was first 

articulated in the CY 2006 OPPS final 

rule with comment period (70 FR 

68661) and then later discussed in the 

CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66765). The 

proposed furnishing fee update is based 

on the percentage increase in the 

Consumer Price Index (CPI) for medical 

care for the 12-month period ending 

with June of the previous year. Because 

the Bureau of Labor Statistics releases 

the applicable CPI data after the MPFS 

and OPPS/ASC proposed rules are 

published, we are not able to include 

the actual updated furnishing fee in the 

proposed rules. Therefore, in 

accordance with our policy, as finalized 

in the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66765), we 

would announce the actual figure for 

the percent change in the applicable CPI 

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and the updated furnishing fee 

calculated based on that figure through 

applicable program instructions and 

posting on the CMS Web site at: 

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

McrPartBDrugAvgSalesPrice/. 

5. Proposed Payment for NonpassThrough Drugs, Biologicals, and 

Radiopharmaceuticals with HCPCS 

Codes, but without OPPS Hospital 

Claims Data 

The Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (Pub. L. 108–173) does not address 

the OPPS payment in CY 2005 and after 

for drugs, biologicals, and 

radiopharmaceuticals that have assigned 

HCPCS codes, but that do not have a 

reference AWP or approval for payment 

as pass-through drugs or biologicals. 

Because there is no statutory provision 

that dictated payment for such drugs, 

biologicals, and radiopharmaceuticals in 

CY 2005, and because we had no 

hospital claims data to use in 

establishing a payment rate for them, we 

investigated several payment options for 

CY 2005 and discussed them in detail 

in the CY 2005 OPPS final rule with 

comment period (69 FR 65797 through 

65799). 

For CYs 2005 to 2007, we 

implemented a policy to provide 

separate payment for new drugs, 

biologicals, and radiopharmaceuticals 

with HCPCS codes (specifically those 

new drug, biological, and 

radiopharmaceutical HCPCS codes in 

each of those calendar years that did not 

crosswalk to predecessor HCPCS codes) 

but which did not have pass-through 

status, at a rate that was equivalent to 

the payment they received in the 

physician’s office setting, established in 

accordance with the ASP methodology 

for drugs and biologicals, and based on 

charges adjusted to cost for 

radiopharmaceuticals. For CYs 2008 and 

2009, we finalized a policy to provide 

payment for new drugs (excluding 

contrast agents and diagnostic 

radiopharmaceuticals) and biologicals 

(excluding implantable biologicals for 

CY 2009) with HCPCS codes, but which 

did not have pass-through status and 

were without OPPS hospital claims 

data, at ASP+5 percent and ASP+4 

percent, respectively, consistent with 

the final OPPS payment methodology 

for other separately payable drugs and 

biologicals. New therapeutic 

radiopharmaceuticals were paid at 

charges adjusted to cost based on the 

statutory requirement for CY 2008 and 

CY 2009 and payment for new 

diagnostic radiopharmaceuticals was 

packaged in both years. For CY 2010, we 

continued to provide payment for new 

drugs (excluding contrast agents), and 

nonimplantable biologicals with HCPCS 

codes that do not have pass-through 

status and are without OPPS hospital 

claims data, at ASP+4 percent, 

consistent with the CY 2010 payment 

methodology for other separately 

payable nonpass-through drugs, and 

nonimplantable biologicals. We also 

finalized a policy to extend the CY 2009 

payment methodology to new 

therapeutic radiopharmaceutical HCPCS 

codes, consistent with our final policy 

in the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60581 

through 60526), providing separate 

payment for therapeutic 

radiopharmaceuticals that do not 

crosswalk to CY 2009 HCPCS codes, do 

not have pass-through status, and are 

without OPPS hospital claims data, at 

ASP+4 percent. This policy was 

continued in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71970 through 71973), paying for new 

drugs, nonimplantable biologicals and 

radiopharmaceuticals that do not 

crosswalk to CY 2010 HCPCS codes, do 

not have pass-through status, and are 

without OPPS hospital claims data at 

ASP+5 percent. 

For CY 2012, we are proposing to 

continue our payment policies for new 

drugs (excluding contrast agents and 

diagnostic radiopharmaceuticals), 

nonimplantable biologicals, and 

therapeutic radiopharmaceuticals that 

have HCPCS codes that do not 

crosswalk to CY 2011 HCPCS codes, do 

not have pass-through status, and are 

without OPPS hospital claims data. We 

are proposing to provide payment for 

new CY 2012 drugs (excluding contrast 

agents and diagnostic 

radiopharmaceuticals), nonimplantable 

biologicals, and therapeutic 

radiopharmaceuticals, at ASP+4 

percent, consistent with the proposed 

CY 2012 payment methodology for other 

separately payable nonpass-through 

drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals. We 

believe this proposed policy would 

ensure that new nonpass-through drugs, 

nonimplantable biologicals and 

therapeutic radiopharmaceuticals would 

be treated like other drugs, 

nonimplantable biologicals, and 

therapeutic radiopharmaceuticals under 

the OPPS, unless they are granted passthrough status. Only if they are passthrough drugs, nonimplantable 

biologicals, or therapeutic 

radiopharmaceuticals would they 

receive a different payment for CY 2012, 

generally equivalent to the payment 

these drugs and biologicals would 

receive in the physician’s office setting, 

consistent with the requirements of the 

statute. 

We also are proposing to continue our 

CY 2011 policy of packaging payment 

for all new nonpass-through diagnostic 

radiopharmaceuticals, contrast agents, 

and implantable biologicals with 

HCPCS codes but without claims data 

(those new CY 2012 diagnostic 

radiopharmaceuticals, contrast agents, 

and implantable biological HCPCS 

codes that do not crosswalk to 

predecessor HCPCS codes), consistent 

with the proposed packaging of all 

existing nonpass-through diagnostic 

radiopharmaceuticals, contrast agents 

and implantable biologicals, as 

discussed in more detail in section 

V.B.2.d. and IV.A.2. of this proposed 

rule. 

In accordance with the OPPS ASP 

methodology, in the absence of ASP 

data, for CY 2012, we are proposing to 

continue the policy we implemented 

beginning in CY 2005 of using the WAC 

for the product to establish the initial 

payment rate for new nonpass-through 

drugs and biologicals with HCPCS 

codes, but which are without OPPS 

claims data. However, we note that if 

the WAC is also unavailable, we would 

make payment at 95 percent of the 

product’s most recent AWP. We also are 

proposing to assign status indicator ‘‘K’’ 

(separately paid nonpass-through drugs 

and nonimplantable biologicals, 

including therapeutic 

radiopharmaceuticals) to HCPCS codes 

for new drugs and nonimplantable 

biologicals without OPPS claims data 

and for which we have not granted passthrough status. With respect to new, 

nonpass-through drugs, nonimplantable 

biologicals, and therapeutic 

radiopharmaceuticals, for which we do 

not have ASP data, we are proposing 

that once their ASP data become 

available in later quarterly submissions, 

their payment rates under the OPPS 

would be adjusted so that the rates 

would be based on the ASP 

methodology and set to the finalized 

ASP-based amount (proposed for CY 

2012 at ASP+4 percent) for items that 

have not been granted pass-through 

status. This proposed policy, which is 

consistent with prior years’ policies for 

these items, would ensure that new 

nonpass-through drugs, nonimplantable 

biologicals, and therapeutic 

radiopharmaceuticals would be treated 

like other drugs, nonimplantable 

biologicals, and therapeutic 

radiopharmaceuticals under the OPPS, 

unless they are granted pass-through 

status. Only if they are pass-through 

drugs, nonimplantable biologicals, or 

therapeutic radiopharmaceuticals would 

they receive a different payment for CY 

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2012, generally equivalent to the 

payment these drugs and biologicals 

would receive in the physician’s office 

setting, consistent with the 

requirements of the statute. 

Similarly, we are proposing to 

continue our CY 2011 policy to base the 

initial payment for new therapeutic 

radiopharmaceuticals with HCPCS 

codes, but which do not have passthrough status and are without claims 

data, on the WACs for these products if 

ASP data for these therapeutic 

radiopharmaceuticals are not available. 

If the WACs are also unavailable, we are 

proposing to make payment for new 

therapeutic radiopharmaceutical at 95 

percent of the products’ most recent 

AWP because we would not have mean 

costs from hospital claims data upon 

which to base payment. As we are 

proposing with new drugs and 

biologicals, we are proposing to 

continue our policy of assigning status 

indicator ‘‘K’’ to HCPCS codes for new 

therapeutic radiopharmaceuticals 

without OPPS claims data for which we 

have not granted pass-through status. 

Consistent with other ASP-based 

payment, for CY 2012 we are proposing 

to announce any changes to the 

payment amounts for new drugs and 

biologicals in the CY 2012 OPPS/ASC 

final rule with comment period and also 

on a quarterly basis on the CMS Web 

site during CY 2012 if later quarter ASP 

submissions (or more recent WACs or 

AWPs) indicate that changes to the 

payment rates for these drugs and 

biologicals are necessary. The payment 

rates for new therapeutic 

radiopharmaceuticals would also be 

changed accordingly, based on later 

quarter ASP submissions. We note that 

the new CY 2012 HCPCS codes for 

drugs, biologicals and therapeutic 

radiopharmaceuticals are not available 

at the time of development of this 

proposed rule. However, these agents 

will be included in Addendum B to the 

CY 2012 OPPS/ASC final rule with 

comment period where they will be 

assigned comment indicator ‘‘NI’’ 

(which is referenced in section XVII. of 

this proposed rule and available via the 

Internet on the CMS Web site) to reflect 

that their interim final OPPS treatment 

is open to public comment on the CY 

2012 OPPS/ASC final rule with 

comment period. 

There are several nonpass-through 

drugs and biologicals that were payable 

in CY 2010 and/or CY 2011 for which 

we do not have CY 2010 hospital claims 

data available for this proposed rule and 

for which there are no other HCPCS 

codes that describe different doses of 

the same drug, but which have pricing 

information available for the ASP 

methodology. We note that there are 

currently no therapeutic 

radiopharmaceuticals in this category. 

In order to determine the packaging 

status of these products for CY 2012, we 

calculated an estimate of the per day 

cost of each of these items by 

multiplying the payment rate of each 

product based on ASP+4 percent, 

similar to other nonpass-through drugs 

and biologicals paid separately under 

the OPPS, by an estimated average 

number of units of each product that 

would typically be furnished to a 

patient during one day in the hospital 

outpatient setting. This rationale was 

first adopted in the CY 2006 OPPS/ASC 

final rule with comment period (70 FR 

68666 and 68667). We are proposing to 

package items for which we estimated 

the per day administration cost to be 

less than or equal to $80, which is the 

general packaging threshold that we are 

proposing for drugs, nonimplantable 

biologicals, and therapeutic 

radiopharmaceuticals in CY 2012. We 

are proposing to pay separately for items 

with an estimated per day cost greater 

than $80 (with the exception of 

diagnostic radiopharmaceuticals, 

contrast agents, and implantable 

biologicals, which we are proposing to 

continue to package regardless of cost as 

discussed in more detail in section 

V.B.2.d. of this proposed rule) in CY 

2012. We are proposing that the CY 

2012 payment for separately payable 

items without CY 2010 claims data 

would be ASP+4 percent, similar to 

payment for other separately payable 

nonpass-through drugs and biologicals 

under the OPPS. In accordance with the 

ASP methodology paid in the 

physician’s office setting, in the absence 

of ASP data we are proposing to use the 

WAC for the product to establish the 

initial payment rate. However, we note 

that if the WAC is also unavailable, we 

would make payment at 95 percent of 

the most recent AWP available. 

The proposed estimated units per day 

and status indicators for these items are 

displayed in Table 33 below. 

TABLE 33—DRUGS AND BIOLOGICALS WITHOUT CY 2010 CLAIMS DATA

CY 2012 HCPCS Code CY 2012 Long descriptor 

Estimated average number 

of units per 

day 

Proposed CY 

2012 SI 

Proposed CY 

2012 APC 

J0205 ........................... Injection, alglucerase, per 10 units .................................................... 420 K 0900 

J0364 ........................... Injection, apomorphine hydrochloride, 1 mg ..................................... 12 N N/A 

J0630 ........................... Injection, calcitonin salmon, up to 400 units ..................................... 1.5 N N/A 

J1680 ........................... Injection, human fibrinogen concentrate, 100 mg ............................. 49 K 1290 

J2513 ........................... Injection, pentastarch, 10% solution, 100 ml ..................................... 4 K 1222 

J2724 ........................... Injection, protein c concentrate, intravenous, human, 10 iu ............. 1540 K 1139 

J3355 ........................... Injection, urofollitropin, 75 IU ............................................................. 2 K 1741 

J9216 ........................... Injection, interferon, gamma 1-b, 3 million units ............................... 1 K 0838 

Q0515 .......................... Injection, sermorelin acetate, 1 microgram ....................................... 70 K 3050 

Finally, there were five drugs and 

biologicals, shown in Table 34 below, 

that were payable in CY 2010, but for 

which we lacked CY 2010 claims data 

and any other pricing information for 

the ASP methodology for the CY 2012 

OPPS/ASC proposed rule. In CY 2009, 

for similar items without CY 2007 

claims data and without pricing 

information for the ASP methodology, 

we previously stated that we were 

unable to determine their per day cost 

and we packaged these items for the 

year, assigning these items status 

indicator ‘‘N.’’ 

For CY 2010, we finalized a policy to 

change the status indicator for drugs 

and biologicals previously assigned a 

payable status indicator to status 

indicator ‘‘E’’ (Not paid by Medicare 

when submitted on outpatient claims 

(any outpatient bill type)) whenever we 

lacked claims data and pricing 

information and were unable to 

determine the per day cost. In addition, 

we noted that we would provide 

separate payment for these drugs and 

biologicals if pricing information 

reflecting recent sales becomes available 

mid-year in CY 2010 for the ASP 

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methodology. If pricing information 

became available, we would assign the 

products status indicator ‘‘K’’ and pay 

for them separately for the remainder of 

CY 2010. In the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71973), for CY 2011, we continued our 

CY 2010 policy to assign status 

indicator ‘‘E’’ to drugs and biologicals 

that lacked CY 2009 claims data and 

pricing information for the ASP 

methodology. We also continued our 

policy to change the status indicator for 

these products to ‘‘K’’ if pricing 

information became available and pay 

for them separately for the remainder of 

CY 2011. 

For CY 2012, we are proposing to 

continue our CY 2011 policy to assign 

status indicator ‘‘E’’ to drugs and 

biologicals that lack CY 2010 claims 

data and pricing information for the 

ASP methodology. All drugs and 

biologicals without CY 2010 hospital 

claims data and data based on the ASP 

methodology that are assigned status 

indicator ‘‘E’’ on this basis at the time 

of this proposed rule for CY 2012 are 

displayed in Table 34 below. If pricing 

information becomes available, we are 

proposing to assign the products status 

indicator ‘‘K’’ and pay for them 

separately for the remainder of CY 2012. 

TABLE 34—DRUGS AND BIOLOGICALS WITHOUT CY 2010 CLAIMS DATA AND WITHOUT PRICING INFORMATION FOR THE

ASP METHODOLOGY

CY 2012 HCPCS code CY 2012 long descriptor Proposed CY 

2012 SI 

J2940 .............................. Injection, somatrem, 1 mg ................................................................................................................... E 

J3305 .............................. Injection, trimetrexate glucuronate, per 25 mg ................................................................................... E 

J8650 .............................. Nabilone, oral, 1 mg ............................................................................................................................ E 

J9165 .............................. Injection, diethylstilbestrol diphosphate, 250 mg ................................................................................ E 

J9213 .............................. Injection, interferon, alfa-2a, recombinant, 3 million units .................................................................. E 

VI. Proposed Estimate of OPPS 

Transitional Pass-Through Spending 

for Drugs, Biologicals, 

Radiopharmaceuticals, and Devices 

A. Background 

Section 1833(t)(6)(E) of the Act limits 

the total projected amount of 

transitional pass-through payments for 

drugs, biologicals, 

radiopharmaceuticals, and categories of 

devices for a given year to an 

‘‘applicable percentage’’ (currently 2.0 

percent, as stated below) of total 

program payments estimated to be made 

for all covered services under the 

hospital OPPS furnished for that year. 

For a year (or portion of a year) before 

CY 2004, the applicable percentage was 

2.5 percent; for CY 2004 and subsequent 

years, the applicable percentage is a 

percentage specified by the Secretary up 

to (but not to exceed) 2.0 percent. 

If we estimate before the beginning of 

the calendar year that the total amount 

of pass-through payments in that year 

would exceed the applicable percentage, 

section 1833(t)(6)(E)(iii) of the Act 

requires a uniform prospective 

reduction in the amount of each of the 

transitional pass-through payments 

made in that year to ensure that the 

limit is not exceeded. We make an 

estimate of pass-through spending to 

determine not only whether payments 

exceed the applicable percentage, but 

also to determine the appropriate pro 

rata reduction to the conversion factor 

for the projected level of pass-through 

spending in the following year in order 

to ensure that total estimated passthrough spending for the prospective 

payment year is budget neutral, as 

required by section 1883(t)(6)(E) of the 

Act. 

For devices, developing an estimate of 

pass-through spending in CY 2012 

entails estimating spending for two 

groups of items. The first group of items 

consists of device categories that were 

recently made eligible for pass-through 

payment and that will continue to be 

eligible for pass-through payment in CY 

2012. The CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66778) 

describes the methodology we have 

used in previous years to develop the 

pass-through spending estimate for 

known device categories continuing into 

the applicable update year. The second 

group contains items that we know are 

newly eligible, or project may be newly 

eligible, for device pass-through 

payment in the remaining quarters of 

CY 2011 or beginning in CY 2012. 

Beginning in CY 2010, the pass-through 

evaluation process and pass-through 

payment for implantable biologicals 

newly approved for pass-through 

payment beginning on or after January 

1, 2010, that are surgically inserted or 

implanted (through a surgical incision 

or a natural orifice; also referred to 

herein as ‘‘implantable biologicals’’) is 

the device pass-through process and 

payment methodology only (74 FR 

60476). For CY 2012, we are proposing 

that the estimate of pass-through 

spending for implantable biologicals 

newly eligible for pass-through payment 

beginning in CY 2012 be included in the 

pass-through spending estimate for this 

second group of device categories. The 

sum of the CY 2012 pass-through 

estimates for these two groups of device 

categories would equal the total CY 

2012 pass-through spending estimate for 

device categories with pass-through 

status. 

For devices eligible for pass-through 

payment, section 1833(t)(6)(D)(ii) of the 

Act establishes the pass-through 

payment amount as the amount by 

which the hospital’s charges for the 

device, adjusted to cost, exceeds the 

portion of the otherwise applicable 

OPPS fee schedule payment that the 

Secretary determines is associated with 

the device. As discussed in section 

IV.A.2. of this proposed rule, we deduct 

from the pass-through payment for an 

identified device category eligible for 

pass-through payment an amount that 

reflects the portion of the APC payment 

amount that we determine is associated 

with the cost of the device, defined as 

the device APC offset amount, when we 

believe that the predecessor device costs 

for the device category newly approved 

for pass-through payment are already 

packaged into the existing APC 

structure. For each device category that 

becomes newly eligible for device passthrough payment, including implantable 

biologicals from CY 2010 forward, we 

estimate pass-through spending to be 

the difference between payment for the 

device category and the device APC 

offset amount, if applicable, for the 

procedures that would use the device. If 

we determine that the predecessor 

device costs for the new device category 

are not already included in the existing 

APC structure, the pass-through 

spending estimate for the device 

category is the full payment at charges 

adjusted to cost. 

For drugs and biologicals eligible for 

pass-through payment, section 

1833(t)(6)(D)(i) of the Act establishes the 

pass-through payment amount as the 

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amount by which the amount 

authorized under section 1842(o) of the 

Act (or, if the drug or biological is 

covered under a competitive acquisition 

contract under section 1847B of the Act, 

an amount determined by the Secretary 

equal to the average price for the drug 

or biological for all competitive 

acquisition areas and year established 

under such section as calculated and 

adjusted by the Secretary) exceeds the 

portion of the otherwise applicable fee 

schedule amount that the Secretary 

determines is associated with the drug 

or biological. Because we are proposing 

to pay for most nonpass-through 

separately payable drugs and 

nonimplantable biologicals under the 

CY 2012 OPPS at ASP+4 percent, which 

represents the otherwise applicable fee 

schedule amount associated with most 

pass-through drugs and biologicals, and 

because we are proposing to pay for CY 

2012 pass-through drugs and 

nonimplantable biologicals at ASP+6 

percent or the Part B drug CAP rate, if 

applicable, our estimate of drug and 

nonimplantable biological pass-through 

payment for CY 2012 would not be zero, 

as discussed below. Furthermore, 

payment for certain drugs, specifically 

diagnostic radiopharmaceuticals, 

contrast agents, and implantable 

biologicals without pass-through status, 

will always be packaged into payment 

for the associated procedures because 

these products will never be separately 

paid. However, all pass-through 

diagnostic radiopharmaceuticals and 

contrast agents with pass-through status 

approved prior to CY 2012 would be 

paid at ASP+6 percent or the Part B drug 

CAP rate, if applicable, like other passthrough drugs and biologicals. 

Therefore, our estimate of pass-through 

payment for all diagnostic 

radiopharmaceuticals and contrast 

agents with pass-through status 

approved prior to CY 2012 is also not 

zero. We note that there are no 

implantable biologicals proposed to 

continue on pass-through status for CY 

2012 and, therefore, we are not 

proposing to include implantable 

biologicals in our estimate of passthrough payment. Payment for nonpassthrough implantable biologicals will 

continue to be packaged into the 

payment for the associated procedure as 

described in section V.B.2.d of this 

proposed rule. 

In section V.A.4. of this proposed 

rule, we discuss our proposed policy to 

determine if the cost of certain ‘‘policypackaged’’ drugs, including diagnostic 

radiopharmaceuticals and contrast 

agents, are already packaged into the 

existing APC structure. If we determine 

that a ‘‘policy-packaged’’ drug approved 

for pass-through payment resembles 

predecessor diagnostic 

radiopharmaceuticals or contrast agents 

already included in the costs of the 

APCs that would be associated with the 

drug receiving pass-through payment, 

we are proposing to offset the amount of 

pass-through payment for diagnostic 

radiopharmaceuticals and contrast 

agents. For these drugs, the APC offset 

amount would be the portion of the APC 

payment for the specific procedure 

performed with the pass-through 

diagnostic radiopharmaceutical or 

contrast agent that is attributable to 

diagnostic radiopharmaceuticals or 

contrast agents, which we refer to as the 

‘‘policy-packaged’’ drug APC offset 

amount. If we determine that an offset 

is appropriate for a specific diagnostic 

radiopharmaceutical or contrast agent 

receiving pass-through payment, we 

would reduce our estimate of passthrough payment for these drugs by this 

amount. 

We note that the Part B drug CAP 

program has been postponed beginning 

January 1, 2009. We refer readers to the 

Medicare Learning Network (MLN) 

Matters Special Edition article SE0833 

for more information, available via the 

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

MLNMattersArticles/downloads/ 

SE0833.pdf. As of the publication of this 

proposed rule, the postponement of the 

Part B drug CAP program is still in 

effect. As in past years, for this 

proposed rule, we do not have an 

effective Part B drug CAP rate for passthrough drugs and biologicals. 

Similar to pass-through estimates for 

devices, the first group of drugs and 

nonimplantable biologicals requiring a 

pass-through payment estimate consists 

of those products that were recently 

made eligible for pass-through payment 

and that will continue to be eligible for 

pass-through payment in CY 2012. The 

second group contains drugs and 

nonimplantable biologicals that we 

know are newly eligible, or project will 

be newly eligible, in the remaining 

quarters of CY 2011 or beginning in CY 

2012. The sum of the CY 2012 passthrough estimates for these two groups 

of drugs and biologicals would equal the 

total CY 2012 pass-through spending 

estimate for drugs and biologicals with 

pass-through status. 

B. Proposed Estimate of Pass-Through 

Spending 

We are proposing to set the applicable 

pass-through payment percentage limit 

at 2.0 percent of the total projected 

OPPS payments for CY 2012, consistent 

with our OPPS policy from CY 2004 

through CY 2011 (75 FR 71975). 

For the first group of devices for passthrough payment estimate purposes, 

there currently is one device category, 

C1749 (Endoscope, retrograde imaging/ 

illumination colonoscope device 

(implantable)) that became effective 

October 1, 2010, has been paid as a 

pass-through device for CY 2011, and 

will continue to be eligible for CY 2012. 

We estimate that CY 2012 pass-through 

expenditures related to C1749 will be 

approximately $35 million. 

In estimating our proposed CY 2012 

pass-through spending for device 

categories in the second group, which 

also includes any estimate for 

implantable biologicals that are eligible 

for pass-through payment, we include: 

Device categories that we know at the 

time of the development of this 

proposed rule would be newly eligible 

for pass-through payment in CY 2012 (of 

which there are none); additional device 

categories (including categories that 

describe implantable biologicals) that 

we estimate could be approved for passthrough status subsequent to the 

development of this proposed rule and 

before January 1, 2012; and contingent 

projections for new device categories 

(including categories that describe 

implantable biologicals) established in 

the second through fourth quarters of 

CY 2012. We are proposing to use the 

general methodology described in the 

CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66778), while 

also taking into account recent OPPS 

experience in approving new passthrough device categories. For this 

proposed rule, the estimate of CY 2012 

pass-through spending for this second 

group of device categories is $10 

million. Using our established 

methodology, the total estimated passthrough spending for device categories 

for CY 2012 (spending for the first group 

of device categories ($35 million) plus 

spending for the second group of device 

categories ($10 million)) equals $45 

million. 

To estimate CY 2012 proposed passthrough spending for drugs and 

nonimplantable biologicals in the first 

group, specifically those drugs 

(including radiopharmaceuticals and 

contrast agents) and nonimplantable 

biologicals recently made eligible for 

pass-through payment and continuing 

on pass-through status for CY 2012, we 

are proposing to utilize the most recent 

Medicare physician’s office data 

regarding their utilization, information 

provided in the respective pass-through 

applications, historical hospital claims 

data, pharmaceutical industry 

information, and clinical information 

regarding those drugs or nonimplantable 

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biologicals, to project the CY 2012 OPPS 

utilization of the products. 

For the known drugs and 

nonimplantable biologicals (excluding 

diagnostic radiopharmaceuticals and 

contrast agents) that would be 

continuing on pass-through status in CY 

2012, we estimate the proposed passthrough payment amount as the 

difference between ASP+6 percent or 

the Part B drug CAP rate, as applicable, 

and the proposed payment rate for 

nonpass-through drugs and 

nonimplantable biologicals that would 

be separately paid at ASP+4 percent, 

aggregated across the projected CY 2012 

OPPS utilization of these products. 

Because payment for a diagnostic 

radiopharmaceutical or contrast agent 

would be packaged if the product were 

not paid separately due to its passthrough status, we are proposing to 

include in the proposed CY 2012 passthrough estimate the difference between 

payment for the drug or nonimplantable 

biological at ASP+6 percent (or WAC+6 

percent, or 95 percent of AWP, if ASP 

or WAC information is not available) 

and the ‘‘policy-packaged’’ drug APC 

offset amount, if we have determined 

that the diagnostic radiopharmaceutical 

or contrast agent approved for passthrough payment resembles predecessor 

diagnostic radiopharmaceuticals or 

contrast agents already included in the 

costs of the APCs that would be 

associated with the drug receiving passthrough payment. For this proposed 

rule, we are proposing to continue to 

use the methodology used in CY 2011 

to calculate a proposed spending 

estimate for this first group of drugs and 

biologicals to be approximately $5.7 

million. 

To estimate CY 2012 pass-through 

spending for drugs and nonimplantable 

biologicals in the second group (that is, 

drugs and nonimplantable biologicals 

that we know at the time of 

development of this proposed rule 

would be newly eligible for passthrough payment in CY 2012, additional 

drugs and nonimplantable biologicals 

that we estimate could be approved for 

pass-through status subsequent to the 

development of this proposed rule and 

before January 1, 2012, and projections 

for new drugs and nonimplantable 

biologicals that could be initially 

eligible for pass-through payment in the 

second through fourth quarters of CY 

2012), we are proposing to use 

utilization estimates from pass-through 

applicants, pharmaceutical industry 

data, clinical information, recent trends 

in the per unit ASPs of hospital 

outpatient drugs, and projected annual 

changes in service volume and intensity 

as our basis for making the CY 2012 

proposed pass-through payment 

estimate. We are also considering the 

most recent OPPS experience in 

approving new pass-through drugs and 

nonimplantable biologicals. Using our 

proposed methodology for estimating 

CY 2012 pass-through payments for this 

second group of drugs, we calculated a 

proposed spending estimate for this 

second group of drugs and 

nonimplantable biologicals to be 

approximately $13.8 million. 

As discussed in section V.A. of this 

proposed rule, radiopharmaceuticals are 

considered drugs for pass-through 

purposes. Therefore, we include 

radiopharmaceuticals in our proposed 

CY 2012 pass-through spending 

estimate for drugs and biologicals. Our 

proposed CY 2012 estimate for total 

pass-through spending for drugs and 

biologicals (spending for the first group 

of drugs and nonimplantable biologicals 

($5.7 million) plus spending for the 

second group of drugs and 

nonimplantable biologicals ($13.8 

million)) equals $19.5 million. 

In summary, in accordance with the 

methodology described above in this 

section, for this proposed rule, we 

estimate that total pass-through 

spending for the device categories and 

the drugs and nonimplantable 

biologicals that are continuing to receive 

pass-through payment in CY 2012 and 

those device categories, drugs, and 

nonimplantable biologicals that first 

become eligible for pass-through 

payment during CY 2012 would be 

approximately $64.5 million 

(approximately $45 million for device 

categories and approximately $19.5 

million for drugs and non-implantable 

biologicals), which represents 0.15 

percent of total OPPS projected total 

payments for CY 2012. We estimate that 

pass-through spending in CY 2012 

would not amount to 2.0 percent of total 

projected OPPS CY 2012 program 

spending. 

VII. Proposed OPPS Payment for 

Hospital Outpatient Visits 

A. Background 

Currently, hospitals report visit 

HCPCS codes to describe three types of 

OPPS services: Clinic visits; emergency 

department visits; and critical care 

services. For OPPS purposes, we 

recognize clinic visit codes as those 

codes defined in the CPT code book to 

report evaluation and management (E/ 

M) services provided in the physician’s 

office or in an outpatient or other 

ambulatory facility. We recognize 

emergency department visit codes as 

those codes used to report E/M services 

provided in the emergency department. 

Emergency department visit codes 

consist of five CPT codes that apply to 

Type A emergency departments and five 

Level II HCPCS codes that apply to Type 

B emergency departments. For OPPS 

purposes, we recognize critical care 

codes as those CPT codes used by 

hospitals to report critical care services 

that involve the ‘‘direct delivery by a 

physician(s) of medical care for a 

critically ill or critically injured 

patient,’’ as defined by the CPT code 

book. In Transmittal 1139, Change 

Request 5438, dated December 22, 2006, 

we stated that, under the OPPS, the time 

that can be reported as critical care is 

the time spent by a physician and/or 

hospital staff engaged in active face-toface critical care of a critically ill or 

critically injured patient. Under the 

OPPS, we also recognize HCPCS code 

G0390 (Trauma response team 

associated with hospital critical care 

service) for the reporting of a trauma 

response in association with critical 

care services. 

We are proposing to continue to 

recognize these CPT and HCPCS codes 

describing clinic visits, Type A and 

Type B emergency department visits, 

critical care services, and trauma team 

activation provided in association with 

critical care services for CY 2012. These 

codes are listed below in Table 35. 

TABLE 35—PROPOSED HCPCS 

CODES USED TO REPORT CLINIC

AND EMERGENCY DEPARTMENT VISITS AND CRITICAL CARE SERVICES

CY 2012 

HCPCS 

Code 

CY 2012 Descriptor 

Clinic Visit HCPCS Codes 

99201 ............. Office or other outpatient 

visit for the evaluation and 

management of a new patient (Level 1). 

99202 ............. Office or other outpatient 

visit for the evaluation and 

management of a new patient (Level 2). 

99203 ............. Office or other outpatient 

visit for the evaluation and 

management of a new patient (Level 3). 

99204 ............. Office or other outpatient 

visit for the evaluation and 

management of a new patient (Level 4). 

99205 ............. Office or other outpatient 

visit for the evaluation and 

management of a new patient (Level 5). 

99211 ............. Office or other outpatient 

visit for the evaluation and 

management of an established patient (Level 1). 

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TABLE 35—PROPOSED HCPCS 

CODES USED TO REPORT CLINIC

AND EMERGENCY DEPARTMENT VISITS AND CRITICAL CARE SERVICES— 

Continued 

CY 2012 

HCPCS 

Code 

CY 2012 Descriptor 

99212 ............. Office or other outpatient 

visit for the evaluation and 

management of an established patient (Level 2). 

99213 ............. Office or other outpatient 

visit for the evaluation and 

management of an established patient (Level 3). 

99214 ............. Office or other outpatient 

visit for the evaluation and 

management of an established patient (Level 4). 

99215 ............. Office or other outpatient 

visit for the evaluation and 

management of an established patient (Level 5). 

Emergency Department Visit HCPCS Codes 

99281 ............. Emergency department visit 

for the evaluation and 

management of a patient 

(Level 1). 

99282 ............. Emergency department visit 

for the evaluation and 

management of a patient 

(Level 2). 

99283 ............. Emergency department visit 

for the evaluation and 

management of a patient 

(Level 3). 

99284 ............. Emergency department visit 

for the evaluation and 

management of a patient 

(Level 4). 

99285 ............. Emergency department visit 

for the evaluation and 

management of a patient 

(Level 5). 

G0380 ............ Type B emergency department visit (Level 1). 

G0381 ............ Type B emergency department visit (Level 2). 

G0382 ............ Type B emergency department visit (Level 3). 

G0383 ............ Type B emergency department visit (Level 4). 

G0384 ............ Type B emergency department visit (Level 5). 

Critical Care Services HCPCS Codes 

99291 ............. Critical care, evaluation and 

management of the critically ill or critically injured 

patient; first 30–74 minutes. 

99292 ............. Critical care, evaluation and 

management of the critically ill or critically injured 

patient; each additional 30 

minutes. 

TABLE 35—PROPOSED HCPCS 

CODES USED TO REPORT CLINIC

AND EMERGENCY DEPARTMENT VISITS AND CRITICAL CARE SERVICES— 

Continued 

CY 2012 

HCPCS 

Code 

CY 2012 Descriptor 

G0390 ............ Trauma response associated 

with hospital critical care 

service. 

During the February 28–March 1 2011 

APC Panel meeting, the APC Panel 

recommended that CMS continue to 

report claims data for clinic and 

emergency department visits and 

observation, and, if CMS identifies 

changes in patterns of utilization or 

cost, it bring those issues before the 

Visits and Observation Subcommittee 

for future consideration. The APC Panel 

also recommended that the work of the 

Visits and Observation Subcommittee 

continue. We are accepting these 

recommendations and will present the 

available requested data at an upcoming 

meeting of the APC Panel. 

B. Proposed Policies for Hospital 

Outpatient Visits 

1. Clinic Visits: New and Established 

Patient Visits 

As reflected in Table 35 hospitals use 

different CPT codes for clinic visits 

based on whether the patient being 

treated is a new patient or an 

established patient. Beginning in CY 

2009, we refined the definitions of a 

new patient and an established patient 

to reflect whether or not the patient has 

been registered as an inpatient or 

outpatient of the hospital within the 

past 3 years. A patient who has been 

registered as an inpatient or outpatient 

of the hospital within the 3 years prior 

to a visit would be considered to be an 

established patient for that visit, while 

a patient who has not been registered as 

an inpatient or outpatient of the hospital 

within the 3 years prior to a visit would 

be considered to be a new patient for 

that visit. We refer readers to the CY 

2009 OPPS/ASC final rule with 

comment period (73 FR 68677 through 

68680) for a full discussion of the 

refined definitions. 

We continue to believe that defining 

new or established patient status based 

on whether the patient has been 

registered as an inpatient or outpatient 

of the hospital within the 3 years prior 

to a visit will reduce hospitals’ 

administrative burden associated with 

reporting appropriate clinic visit CPT 

codes, as we stated in the CY 2009 

OPPS/ASC final rule with comment 

period (73 FR 68677 through 68680). 

For CY 2012, we are proposing to 

continue to recognize the refined 

definitions of a new patient and an 

established patient, and applying our 

policy of calculating median costs for 

clinic visits under the OPPS using 

historical hospital claims data. As 

discussed in section II.A.2.e.(1) of the 

this proposed rule and consistent with 

our CY 2011 policy, when calculating 

the median costs for the clinic visit 

APCs (0604 through 0608), we are 

proposing to continue to utilize our 

methodology that excludes those claims 

for visits that are eligible for payment 

through the extended assessment and 

management composite APC 8002 

(Level I Extended Assessment and 

Management Composite). We continue 

to believe that this approach results in 

the most accurate cost estimates for 

APCs 0604 through 0608 for CY 2012. 

2. Emergency Department Visits 

Since CY 2007, we have recognized 

two different types of emergency 

departments for payment purposes 

under the OPPS—Type A emergency 

departments and Type B emergency 

departments. As described in greater 

detail below, by providing payment for 

two types of emergency departments, 

we recognize, for OPPS payment 

purposes, both the CPT definition of an 

emergency department, which requires 

the facility to be available 24 hours, and 

the requirements for emergency 

departments specified in the provisions 

of the Emergency Medical Treatment 

and Labor Act (EMTALA) (Pub. L. 99– 

272), which do not stipulate 24-hour 

availability but do specify other 

obligations for hospitals that offer 

emergency services. For more detailed 

information on the EMTALA provisions, 

we refer readers to the CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68680). 

In the CY 2007 OPPS/ASC final rule 

with comment period (71 FR 68132), we 

finalized the definition of a Type A 

emergency department to distinguish it 

from a Type B emergency department. A 

Type A emergency department must be 

available to provide services 24 hours a 

day, 7 days a week, and meet one or 

both of the following requirements 

related to the EMTALA definition of a 

dedicated emergency department 

specified at 42 CFR 489.24(b), 

specifically: (1) It is licensed by the 

State in which it is located under the 

applicable State law as an emergency 

room or emergency department; or (2) it 

is held out to the public (by name, 

posted signs, advertising, or other 

means) as a place that provides care for 

emergency medical conditions on an 

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urgent basis without requiring a 

previously scheduled appointment. For 

CY 2007 (71 FR 68140), we assigned the 

five CPT E/M emergency department 

visit codes for services provided in Type 

A emergency departments to five 

Emergency Visit APCs, specifically APC 

0609 (Level 1 Emergency Visits), APC 

0613 (Level 2 Emergency Visits), APC 

0614 (Level 3 Emergency Visits), APC 

0615 (Level 4 Emergency Visits), and 

APC 0616 (Level 5 Emergency Visits). 

We defined a Type B emergency 

department as any dedicated emergency 

department that incurred EMTALA 

obligations but did not meet the CPT 

definition of an emergency department. 

For example, a hospital department that 

may be characterized as a Type B 

emergency department would meet the 

definition of a dedicated emergency 

department but may not be available 24 

hours a day, 7 days a week. Hospitals 

with such dedicated emergency 

departments incur EMTALA obligations 

with respect to an individual who 

presents to the department and requests, 

or has a request made on his or her 

behalf, examination or treatment for a 

medical condition. 

To determine whether visits to Type 

B emergency departments have different 

resource costs than visits to either 

clinics or Type A emergency 

departments, in the CY 2007 OPPS/ASC 

final rule with comment period (71 FR 

68132), we finalized a set of five HCPCS 

G-codes for use by hospitals to report 

visits to all entities that meet the 

definition of a dedicated emergency 

department under the EMTALA 

regulations but that are not Type A 

emergency departments. These codes 

are called ‘‘Type B emergency 

department visit codes.’’ In the CY 2007 

OPPS/ASC final rule with comment 

period (71 FR 68132), we explained that 

these new HCPCS G-codes would serve 

as a vehicle to capture median cost and 

resource differences among visits 

provided by Type A emergency 

departments, Type B emergency 

departments, and clinics. We stated that 

the reporting of specific HCPCS G-codes 

for emergency department visits 

provided in Type B emergency 

departments would permit us to 

specifically collect and analyze the 

hospital resource costs of visits to these 

facilities in order to determine if, in the 

future, a proposal for an alternative 

payment policy might be warranted. We 

expected hospitals to adjust their 

charges appropriately to reflect 

differences in Type A and Type B 

emergency department visit costs. 

As we noted in the CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68681), the CY 2007 claims data 

used for that rulemaking were from the 

first year of claims data available for 

analysis that included hospitals’ cost 

data for these new Type B emergency 

department HCPCS visit codes. Based 

on our analysis of the CY 2007 claims 

data, we confirmed that the median 

costs of Type B emergency department 

visits were less than the median costs of 

Type A emergency department visits for 

all but the level 5 visit. In other words, 

the median costs from the CY 2007 

hospital claims represented real 

differences in the hospital resource 

costs for the same level of visits in a 

Type A or Type B emergency 

department. Therefore, for CY 2009, we 

adopted the August 2008 APC Panel 

recommendation to assign Levels 1 

through 4 Type B emergency 

department visits to their own APCs and 

to assign the Level 5 Type B emergency 

department visit to the same APC as the 

Level 5 Type A emergency department 

visit. 

As discussed in the CY 2010 OPPS/ 

ASC final rule with comment period (74 

FR 60548 through 60551), analyses of 

CY 2008 hospitals’ cost data from claims 

data used for CY 2010 ratesetting for the 

emergency department HCPCS G-codes 

demonstrated that the pattern of relative 

cost differences between Type A and 

Type B emergency department visits 

was largely consistent with the 

distributions we observed in the CY 

2007 data, with the exception that, in 

the CY 2008 data, we observed a 

relatively lower HCPCS code-specific 

median cost associated with Level 5 

Type B emergency department visits 

compared to the HCPCS code-specific 

median cost of Level 5 Type A 

emergency department visits. As a 

result, for CY 2010, we finalized a 

policy to continue to pay Levels 1 

through 4 Type B emergency 

department visits through four levels of 

APCs, and to pay for Level 5 Type B 

emergency department visits through 

new APC 0630 (Level 5 Type B 

Emergency Department Visit), to which 

the Level 5 Type B emergency 

department visit HCPCS code is the 

only service assigned. 

As we noted in the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 71987), the pattern of relative cost 

differences between Type A and Type B 

emergency department visits is 

consistent with the distributions we 

observed in the CY 2008 claims data. 

Therefore, we finalized our proposal to 

continue to pay for Type B emergency 

department visits in CY 2011 based on 

their median costs through five levels of 

APCs: APC 0626 (Level 1 Type B 

Emergency Department Visit), APC 0627 

(Level 2 Type B Emergency Department 

Visit), APC 0628 (Level 3 Type B 

Emergency Department Visit), APC 0629 

(Level 4 Type B Emergency Department 

Visit), and APC 0630. 

For CY 2012, we continue to believe 

that this configuration pays 

appropriately for each level of Type B 

emergency department visits based on 

estimated resource costs from the most 

recent CY 2010 claims data. Therefore, 

we are proposing to continue to pay for 

Type B emergency department visits in 

CY 2012 based on their median costs 

through the five levels of Type B 

emergency department APCs (APCs 

0626 through 0630). We also note that, 

as discussed in section II.A.2.e.(1) of 

this proposed rule and consistent with 

our CY 2011 policy, when calculating 

the proposed median costs for the 

emergency department visit and critical 

care APCs (0609 through 0617 and 0626 

through 0630), we are proposing to 

utilize our methodology that excludes 

those claims for visits that are eligible 

for payment through the extended 

assessment and management composite 

APC 8002. We believe that this 

approach would result in the most 

accurate cost estimates for APCs 0604 

through 0608 for CY 2012. 

Table 36 below displays the proposed 

median costs for each level of Type B 

emergency department visit APCs under 

the proposed CY 2012 configuration, 

compared to the proposed CY 2012 

median costs for each level of clinic 

visit APCs and each level of Type A 

emergency department visit APCs. 

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TABLE 36—COMPARISON OF PROPOSED MEDIAN COSTS FOR CLINIC VISIT APCS, TYPE B EMERGENCY DEPARTMENT

VISIT APCS, AND TYPE A EMERGENCY DEPARTMENT VISIT APCS

Visit level 

Proposed CY 

2012 clinic 

visit approximate APC median cost 

Proposed CY 

2012 Type B 

emergency department approximate 

APC median 

cost 

Proposed CY 

2012 Type A 

emergency 

visit approximate APC median cost 

Level 1 ......................................................................................................................................... $50 $41 $52 

Level 2 ......................................................................................................................................... 75 59 89 

Level 3 ......................................................................................................................................... 105 94 142 

Level 4 ......................................................................................................................................... 138 141 229 

Level 5 ......................................................................................................................................... 178 271 340 

For CY 2010 and in prior years, the 

AMA CPT Editorial Panel defined 

critical care CPT codes 99291 (Critical 

care, evaluation and management of the 

critically ill or critically injured patient; 

first 30–74 minutes) and 99292 (Critical 

care, evaluation and management of the 

critically ill or critically injured patient; 

each additional 30 minutes (List 

separately in addition to code for 

primary service)) to include a wide 

range of ancillary services such as 

electrocardiograms, chest X-rays and 

pulse oximetry. As we have stated in 

manual instruction, we expect hospitals 

to report in accordance with CPT 

guidance unless we instruct otherwise. 

For critical care in particular, we 

instructed hospitals that any services 

that the CPT Editorial Panel indicates 

are included in the reporting of CPT 

code 99291 (including those services 

that would otherwise be reported by and 

paid to hospitals using any of the CPT 

codes specified by the CPT Editorial 

Panel) should not be billed separately. 

Instead, hospitals were instructed to 

report charges for any services provided 

as part of the critical care services. In 

establishing payment rates for critical 

care services, and other services, CMS 

packages the costs of certain items and 

services separately reported by HCPCS 

codes into payment for critical care 

services and other services, according to 

the standard OPPS methodology for 

packaging costs (Medicare Claims 

Processing Manual, Pub. 100–04, 

Chapter 4, Section 160.1). 

For CY 2011, the AMA CPT Editorial 

Panel revised its guidance for the 

critical care codes to specifically state 

that, for hospital reporting purposes, 

critical care codes do not include the 

specified ancillary services. Beginning 

in CY 2011, hospitals that report in 

accordance with the CPT guidelines 

should report all of the ancillary 

services and their associated charges 

separately when they are provided in 

conjunction with critical care. Because 

the CY 2011 payment rate for critical 

care services is based on hospital claims 

data from CY 2009, during which time 

hospitals would have reported charges 

for any ancillary services provided as 

part of the critical care services, we 

stated in the CY 2011 OPPS/ASC final 

rule with comment period that we 

believe it is inappropriate to pay 

separately in CY 2011 for the ancillary 

services that hospitals may now report 

in addition to critical care services (75 

FR 71988). Therefore, for CY 2011, we 

continued to recognize the existing CPT 

codes for critical care services and 

established a payment rate based on our 

historical data, into which the cost of 

the ancillary services is intrinsically 

packaged, and implemented claims 

processing edits that conditionally 

package payment for the ancillary 

services that are reported on the same 

date of service as critical care services 

in order to avoid overpayment. We 

noted in the CY 2011 OPPS/ASC final 

rule with comment period that the 

payment status of the ancillary services 

will not change when they are not 

provided in conjunction with critical 

care services. We assigned status 

indicator ‘‘Q3’’ (Codes That May Be 

Paid Through a Composite APC) to the 

ancillary services to indicate that 

payment for them is packaged into a 

single payment for specific 

combinations of services and made 

through a separate APC payment or 

packaged in all other circumstances, in 

accordance with the OPPS payment 

status indicated for status indicator 

‘‘Q3’’ in Addendum D1 to the CY 2011 

OPPS/ASC final rule with comment 

period. The ancillary services that were 

included in the definition of critical 

care prior to CY 2011 and that will be 

conditionally packaged into the 

payment for critical care services when 

provided on the same date of service as 

critical care services for CY 2011 were 

listed in Addendum M to that final rule 

with comment period. 

Because the proposed CY 2012 

median costs for critical care services 

are based upon CY 2010 claims data, 

which reflect the CPT billing guidance 

that was in effect prior to CY 2011, we 

are proposing to continue the 

methodology established in the CY 2011 

OPPS/ASC final rule with comment 

period of calculating a payment rate for 

critical care services based on our 

historical data, into which the cost of 

the ancillary services is intrinsically 

packaged. We are proposing to continue 

to implement claims processing edits 

that conditionally package payment for 

the ancillary services that are reported 

on the same date of service as critical 

care services in order to avoid 

overpayment. 

3. Visit Reporting Guidelines 

Since April 7, 2000, we have 

instructed hospitals to report facility 

resources for clinic and emergency 

department hospital outpatient visits 

using the CPT E/M codes and to develop 

internal hospital guidelines for 

reporting the appropriate visit level. 

Because a national set of hospitalspecific codes and guidelines do not 

currently exist, we have advised 

hospitals that each hospital’s internal 

guidelines that determine the levels of 

clinic and emergency department visits 

to be reported should follow the intent 

of the CPT code descriptors, in that the 

guidelines should be designed to 

reasonably relate the intensity of 

hospital resources to the different levels 

of effort represented by the codes. 

As noted in detail in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 66802 through 66805), we 

observed a normal and stable 

distribution of clinic and emergency 

department visit levels in hospital 

claims over the past several years. The 

data indicated that hospitals, on 

average, were billing all five levels of 

visit codes with varying frequency, in a 

consistent pattern over time. Overall, 

both the clinic and emergency 

department visit distributions indicated 

that hospitals were billing consistently 

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over time and in a manner that 

distinguished between visit levels, 

resulting in relatively normal 

distributions nationally for the OPPS, as 

well as for specific classes of hospitals. 

The results of these analyses were 

generally consistent with our 

understanding of the clinical and 

resource characteristics of different 

levels of hospital outpatient clinic and 

emergency department visits. In the CY 

2008 OPPS/ASC proposed rule (72 FR 

42764 through 42765), we specifically 

invited public comment as to whether a 

pressing need for national guidelines 

continued at this point in the 

maturation of the OPPS, or if the current 

system where hospitals create and apply 

their own internal guidelines to report 

visits was currently more practical and 

appropriately flexible for hospitals. We 

explained that, although we have 

reiterated our goal since CY 2000 of 

creating national guidelines, this 

complex undertaking for these 

important and common hospital 

services was proving more challenging 

than we initially anticipated as we 

received new and expanded information 

from the public on current hospital 

reporting practices that led to 

appropriate payment for the hospital 

resources associated with clinic and 

emergency department visits. We stated 

our belief that many hospitals had 

worked diligently and carefully to 

develop and implement their own 

internal guidelines that reflected the 

scope and types of services they 

provided throughout the hospital 

outpatient system. Based on public 

comments, as well as our own 

knowledge of how clinics operate, it 

seemed unlikely that one set of 

straightforward national guidelines 

could apply to the reporting of visits in 

all hospitals and specialty clinics. In 

addition, the stable distribution of clinic 

and emergency department visits 

reported under the OPPS over the past 

several years indicated that hospitals, 

both nationally in the aggregate and 

grouped by specific hospital classes, 

were generally billing in an appropriate 

and consistent manner as we would 

expect in a system that accurately 

distinguished among different levels of 

service based on the associated hospital 

resources. 

Therefore, we did not propose to 

implement national visit guidelines for 

clinic or emergency department visits 

for CY 2008. As we have done since 

publication of the CY 2008 OPPS/ASC 

final rule with comment period, we 

again examined the distribution of 

clinic and Type A emergency 

department visit levels based upon 

updated CY 2010 claims data available 

for the CY 2012 proposed rule. Analysis 

of this data confirmed that we continue 

to observe a normal and relatively stable 

distribution of clinic and emergency 

department visit levels in hospital 

claims compared to CY 2009 data. We 

note that we have observed a slight shift 

over time toward higher numbers of 

level 4 and level 5 visits relative to the 

lower level visits, when comparing the 

distributions of Type A emergency 

department visit levels from CY 2005 

claims data to those from CY 2010. We 

also note that, in aggregate, hospitals’ 

charges for these higher level emergency 

department visits seem to be trending 

upward year over year. We welcome 

comment on whether this is consistent 

with individual hospitals’ experiences 

in developing, implementing, and 

refining their own guidelines over the 

last several years. We continue to 

believe that generally, hospitals are 

billing in an appropriate and consistent 

manner that distinguishes among 

different levels of visits based on their 

required hospital resources. We are 

encouraging hospitals to continue to 

report visits during CY 2012 according 

to their own internal hospital 

guidelines. As originally noted in detail 

in the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66648), we 

continue to expect that hospitals will 

not purposely change their visit 

guidelines or otherwise upcode clinic 

and emergency department visits for 

purposes of extended assessment and 

management composite APC payment. 

In addition, we note our continued 

expectation that hospitals’ internal 

guidelines will comport with the 

principles listed in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66805). We encourage hospitals with 

more specific questions related to the 

creation of internal guidelines to contact 

their servicing fiscal intermediary or 

MAC. 

VIII. Proposed Payment for Partial 

Hospitalization Services 

A. Background 

Partial hospitalization is an intensive 

outpatient program of psychiatric 

services provided to patients as an 

alternative to inpatient psychiatric care 

for individuals who have an acute 

mental illness. Sections 1861(ff)(1) and 

(ff)(2) of the Act specify the items and 

services that are defined as partial 

hospitalization services and some 

conditions under which Medicare 

payment for the items and services will 

be made. Section 1861(ff)(3) of the Act 

specifies that a partial hospitalization 

program (PHP) is one that is furnished 

by a hospital or community mental 

health center (CMHC) that meets the 

requirements specified under that 

subsection of the Act. 

In CY 2011, in accordance with 

section 1301(b) of the Health Care and 

Education Reconciliation Act of 2010 

(HCERA 2010), we amended the 

description of a PHP in our regulations 

to specify that the program must be a 

distinct and organized intensive 

ambulatory treatment program offering 

less than 24-hour daily care ‘‘other than 

in an individual’s home or in an 

inpatient or residential setting.’’ In 

addition, in accordance with section 

1301(a) of HCERA 2010, we revised the 

definition of a CMHC in the regulations 

to conform to the definition set forth at 

section 1861(ff)(3)(B) of the Act. We 

discussed our finalized policies for 

these two provisions of HCERA 2010 

under section X.C. of the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 71990). Section 

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

Secretary with the authority to designate 

the OPD services to be covered under 

the OPPS. The existing Medicare 

regulations that implement this 

provision specify, at 42 CFR 419.21, that 

payments under the OPPS will be made 

for partial hospitalization services 

furnished by CMHCs as well as those 

services furnished by hospitals to their 

outpatients. Section 1833(t)(2)(C) of the 

Act, in pertinent part, requires the 

Secretary to ‘‘establish relative payment 

weights for covered OPD services (and 

any groups of such services described in 

subparagraph (B)) based on median (or, 

at the election of the Secretary, mean) 

hospital costs’’ using data on claims 

from 1996 and data from the most recent 

available cost reports. In pertinent part, 

subparagraph (B) provides that the 

Secretary may establish groups of 

covered OPD services, within a 

classification system developed by the 

Secretary for covered OPD services, so 

that services classified within each 

group are comparable clinically and 

with respect to the use of resources. In 

accordance with these provisions, CMS 

developed the APCs. Section 

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

Secretary to ‘‘review not less often than 

annually and revise the groups, the 

relative payment weights, and the wage 

and other adjustments described in 

paragraph (2) to take into account 

changes in medical practice, changes in 

technology, the addition of new 

services, new cost data, and other 

relevant information and factors.’’ 

Because a day of care is the unit that 

defines the structure and scheduling of 

partial hospitalization services, we 

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established a per diem payment 

methodology for the PHP APCs, 

effective for services furnished on or 

after August 1, 2000 (65 FR 18452 

through 18455). Under this 

methodology, the median per diem costs 

are used to calculate the relative 

payment weights for PHP APCs. 

From CY 2003 through CY 2006, the 

median per diem cost for CMHCs 

fluctuated significantly from year to 

year, while the median per diem cost for 

hospital-based PHPs remained relatively 

constant. We were concerned that 

CMHCs may have increased and 

decreased their charges in response to 

Medicare payment policies. Therefore, 

we began efforts to strengthen the PHP 

benefit through extensive data analysis 

and policy and payment changes in the 

CY 2008 update (72 FR 66670 through 

66676). We made two refinements to the 

methodology for computing the PHP 

median: the first remapped 10 revenue 

codes that are common among hospitalbased PHP claims to the most 

appropriate cost centers; and the second 

refined our methodology for computing 

the PHP median per diem costs by 

computing a separate per diem cost for 

each day rather than for each bill. A 

complete discussion of these 

refinements can be found in the CY 

2008 OPPS/ASC final rule with 

comment period (72 FR 66671 through 

66676). 

In CY 2009, we implemented several 

regulatory, policy, and payment 

changes, including a two-tiered 

payment approach for PHP services 

under which we pay one amount for 

days with 3 services (APC 0172 (Level 

I Partial Hospitalization)) and a higher 

amount for days with 4 or more services 

(APC 0173 (Level II Partial 

Hospitalization)). We refer readers to 

section X.C.2. of the CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68688 through 68693) for a full 

discussion of the two-tiered payment 

system. In addition, for CY 2009, we 

finalized our policy to deny payment for 

any PHP claims for days when fewer 

than 3 units of therapeutic services are 

provided. 

Furthermore, for CY 2009, we revised 

the regulations at 42 CFR 410.43 to 

codify existing basic PHP patient 

eligibility criteria and to add a reference 

to current physician certification 

requirements at 42 CFR 424.24 to 

conform our regulations to our 

longstanding policy (73 FR 68694 

through 68695). We believe these 

changes have helped to strengthen the 

PHP benefit. We also revised the partial 

hospitalization benefit to include 

several coding updates. We refer readers 

to section X.C.2. of the CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68695 through 68697) for a full 

discussion of these requirements. 

For CY 2010, we retained the twotiered payment approach for PHP 

services and used only hospital-based 

PHP data in computing the per diem 

payment rates. We used only hospitalbased PHP data because we were 

concerned about further reducing both 

PHP APC per diem payment rates 

without knowing the impact of the 

policy and payment changes we made 

in CY 2009. Because of the 2-year lag 

between data collection and rulemaking, 

the changes we made in CY 2009 were 

reflected for the first time in the claims 

data that we used to determine payment 

rates for the CY 2011 rulemaking. 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71994), we 

established four separate PHP APC per 

diem payment rates, two for CMHC 

PHPs (for Level I and Level II services 

for CMHCs) and two for hospital-based 

PHPs (Level I and Level II services for 

hospital-based PHPs). We proposed that 

CMHC PHP APC rates would be based 

only on CMHC data and hospital-based 

PHP APC rates would be based only on 

hospital-based PHP data (75 FR 46300). 

As stated in the CY 2011 OPPS/ASC 

proposed rule (75 FR 46300) and final 

rule with comment period (75 FR 

71991), for CY 2011, using CY 2009 cost 

data, CMHC costs had significantly 

decreased again. We attributed the 

decrease to the lower cost structure of 

CMHCs compared to hospitals, and not 

the impact of CY 2009 policies. CMHCs 

had a lower cost structure than hospitalbased PHP providers, in part because 

the data showed that CMHCs provide 

fewer PHP services in a day and use less 

costly staff than hospital-based PHPs. 

Therefore, it would be inappropriate to 

continue to treat CMHCs and hospitalbased providers in the same manner 

regarding payment, particularly in light 

of such disparate differences in costs. 

We were concerned that paying 

hospital-based PHP programs at a lower 

rate than their cost structure reflects 

could lead to closures and possible 

access problems for hospital-based 

programs for Medicare beneficiaries. 

Creating the four payment rates (two for 

CMHC PHPs and two for hospital-based 

PHPs) supported continued access to 

the PHP benefit, including a more 

intensive level of care, while also 

providing appropriate payment based 

on the unique cost structures of CMHC 

PHPs and hospital-based PHPs. In 

addition, separation of cost data by 

provider type was supported by several 

hospital-based PHP commenters who 

responded to the CY 2011 OPPS/ASC 

proposed rule (75 FR 71992). 

For CY 2011, we instituted a 2-year 

transition period for CMHC providers to 

CMHC rates based solely on CMHC data 

for the two CMHC PHP APC per diem 

payments. For the transition period, we 

calculated the CMHC PHP APC Level I 

and Level II rates by taking 50 percent 

of the difference between the CY 2010 

final hospital-based medians and the CY 

2011 final CMHC medians and then 

adding that number to the CY 2011 final 

CMHC medians. A 2-year transition 

under this methodology would move us 

in the direction of our goal, which is to 

pay appropriately for PHP services 

based on each provider type’s cost data, 

while at the same time allow providers 

time to adjust their business operations 

and protect access to care for 

beneficiaries. We refer readers to section 

X.B. of the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 71991 

through 71994) for a full discussion of 

these four payment rates. 

After publication of the CY 2011 

OPPS/ASC final rule with comment 

period, in the case of Paladin 

Community Mental Health Center v. 

Sebelius (No. 1:10–CV–00949–LY (W.D. 

Tex.)), a CMHC and one of its 

outpatients challenged the OPPS rates 

for PHP services provided by CMHCs in 

CY 2011 as adopted in the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 71995). Specifically, the 

plaintiffs in the case challenged the use 

of cost data derived from both hospitals 

and CMHCs in determining the relative 

payment weights for the OPPS rates for 

PHP services furnished by CMHCs. The 

plaintiffs alleged that section 

1833(t)(2)(C) of the Act requires that 

such relative payment weights be based 

on cost data derived solely from 

hospitals. The Secretary has filed a 

motion to dismiss in this case, which is 

pending before the district court. 

In addition to raising various 

jurisdictional defenses in the Paladin 

case, the Secretary argued that the 

agency had permissibly interpreted the 

statute in determining the relative 

payment weights for the OPPS rates for 

PHP services for CMHCs in CY 2011 on 

the basis of cost data derived from both 

hospitals and CMHCs. As discussed 

above, section 1833(t)(2)(C) of the Act 

requires the Secretary to ‘‘establish 

relative payment weights for covered 

OPD services (and any groups of such 

services * * *) * * * based on * * * 

hospital costs.’’ Numerous courts have 

held that ‘‘based on’’ does not mean 

‘‘based exclusively on.’’ Thus, it was 

reasonable to interpret the statute to 

permit the use of cost data from CMHCs 

as well as from hospitals. 

For CY 2012, as discussed in section 

VII.B. of this proposed rule, we are 

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proposing to determine the relative 

payment weights for PHP services by 

CMHCs based on cost data derived 

solely from CMHCs and the relative 

payment weights for hospital-based PHP 

services based exclusively on hospital 

cost data. We believe that, for purposes 

of this proposed rule for CY 2012, the 

statute is reasonably interpreted to 

allow the relative payment weights for 

the OPPS rates for PHP services 

provided by CMHCs to be based solely 

on CMHC cost data, whereas the 

corresponding relative payment weights 

for hospital-provided PHP services 

would be based exclusively on hospital 

cost data. Section 1833(t)(2)(C) of the 

Act requires the Secretary to ‘‘establish 

relative payment weights for covered 

OPD services (and any groups of such 

services described in subparagraph (B)) 

based on * * * hospital costs.’’ In 

pertinent part, subparagraph (B) 

provides that ‘‘the Secretary may 

establish groups of covered OPD 

services * * * so that services classified 

within each group are comparable 

clinically and with respect to the use of 

resources.’’ In accordance with 

subparagraph (B), CMS developed the 

APCs, as set forth in § 419.31 of the 

regulations (65 FR 18446 and 18447; 63 

FR 47559 and 47560). As discussed in 

section X.B. of this proposed rule, PHP 

services are grouped into APCs. 

Based on section 1833(t)(2)(C) of the 

Act, we believe that the word 

‘‘establish’’ can be interpreted as 

applying to APCs at the inception of the 

OPPS in 2000 or whenever a new APC 

is added to the OPPS. In creating the 

original APC for PHP services (APC 

0033), we did ‘‘establish’’ the initial 

relative payment weight for PHP 

services, provided in hospital-based and 

CMHC-based settings, on the basis of 

only hospital data. Subsequently, from 

CY 2003 through CY 2008, the relative 

payment weights for PHP services were 

based on a combination of hospital and 

CMHC data. Similarly, we subsequently 

established new APCs for PHP services 

based exclusively on hospital costs. For 

CY 2009, we adopted a two-tiered APC 

methodology (in lieu of the original APC 

0033) under which CMS paid one rate 

for days with 3 services (APC 0172) and 

a different payment rate for days with 4 

or more services (APC 0173). These two 

new APCs were established using only 

hospital data. For CY 2011, we added 

two new APCs (APCs 0175 and 0176) 

for PHP services provided by hospitals 

and based the relative payment weights 

for these APCs solely on hospital data. 

APCs 0172 and 0173 were designated 

for PHP services provided by CMHCs 

and were based on a mixture of hospital 

and CMHC data. As the Secretary 

argued in the Paladin case, the courts 

have consistently held that the phrase 

‘‘based on’’ does not mean ‘‘based solely 

on.’’ Thus, the relative payment weights 

for the two APCs for CMHC-provided 

PHP services in CY 2011 were ‘‘based 

on’’ hospital data, no less than the 

relative payment weights for the two 

APCs for hospital-provided PHP 

services. 

Although we used only hospital data 

to establish the original relative 

payment weights for APC 0033 and later 

used hospital data to establish four new 

relative payment weights for PHP 

services, we believe that we have the 

authority to discontinue the use of 

hospital data after the original 

establishment of the relative payment 

weights for a given APC. Other parts of 

section 1833(t)(2)(C) of the Act make 

plain that the data source for the relative 

payment weights is subject to change 

from one period to another. Section 

1833(t)(2)(C) of the Act provides that, in 

establishing the relative payment 

weights, ‘‘the Secretary shall [ ] us[e] 

data on claims from 1996 and us[e] data 

from the most recent available cost 

reports.’’ However, we used 1996 data 

(plus 1997 data) in determining only the 

original relative payment weights for 

2000; in the ensuing calendar year 

updates, we continually used more 

recent cost report data. 

Moreover, section 1833(t)(9)(A) of the 

Act requires the Secretary to ‘‘review 

not less often than annually and revise 

the groups, the relative payment 

weights, and the wage and other 

adjustments described in paragraph (2) 

to take into account changes in medical 

practice, changes in technology, the 

addition of new services, new cost data, 

and other relevant information and 

factors.’’ For purposes of the CY 2012 

update, we exercised our authority 

under section 1833(t)(9)(A) of the Act to 

change the data source for the relative 

payment weights for PHP services by 

CMHCs based on ‘‘new cost data, and 

other relevant information and factors.’’ 

B. Proposed PHP APC Update for CY 

2012 

To develop the proposed payment 

rates for the PHP APCs for CY 2012, we 

used CY 2010 claims data and 

computed median per diem costs in the 

following categories: (1) days with 3 

services; and (2) days with 4 or more 

services. These proposed median per 

diem costs were computed separately 

for CMHC PHPs and hospital-based 

PHPs, as shown in Table 37 below. 

TABLE 37—PROPOSED PHP MEDIAN PER DIEM COSTS FOR CMHC AND HOSPITAL-BASED PHPS, BY CATEGORY, BASED

ON CY 2010 CLAIMS DATA

Category CMHC PHPs Hospital-based 

PHPs 

Days with 3 services ................................................................................................................................................ $97.78 $162.34 

Days with 4 or more services .................................................................................................................................. 113.62 189.87 

Using CY 2010 claims data and the 

refined methodology for computing PHP 

per diem costs adopted in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 66671 through 66676), we 

computed proposed median per diem 

costs for CY 2012 for each provider type 

using its own claims data. The data 

results indicate that, although both 

CMHCs and hospital-based PHPs have 

decreased costs for Level I and Level II 

services from CY 2011 to CY 2012, the 

median per diem costs for CMHC PHPs 

continue to be substantially lower than 

the median per diem costs for hospitalbased PHPs, given the same units of 

service. The approximate median per 

diem costs for 3 services are $98 for 

CMHC PHPs compared to $162 for 

hospital-based PHPs. Furthermore, the 

approximate median per diem costs for 

4 or more services are $114 for CMHC 

PHPs compared to $190 for hospitalbased PHPs. The difference in costs 

between CMHC PHPs and hospitalbased PHPs underscores the need to pay 

each provider type based on use of its 

own data. 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71991), we 

noted that CMHCs’ costs decreased from 

$139 in CY 2009 (using CY 2007 data) 

to $118 for CY 2011 (using CY 2009 

claims data) for Level I services (3 

services); and from $172 for CY 2009 to 

$123 for CY 2011 for Level II services 

(4 or more services). For this CY 2012 

proposed rule, our analysis of claims 

data (using CY 2010 claims data) shows 

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that CMHCs’ approximate median per 

diem costs continue to decrease from 

$118 for CY 2011 (using CY 2009 claims 

data) to $98 for CY 2012 for Level I 

services (3 services), and from $123 for 

CY 2011 (using CY 2009 claims data) to 

$114 for CY 2012 for Level II services 

(4 or more services). We can reasonably 

attribute some of the decrease in costs 

to targeted fraud and abuse efforts 

implemented by the Department’s 

Center for Program Integrity and the 

Office of Inspector General, and by the 

U.S. Department of Justice, collectively. 

We note that hospital-based PHPs also 

show a decrease in costs for CY 2012 

(using CY 2010 claims data). Although 

hospital-based PHPs have historically 

been consistent in their median costs 

since the inception of the OPPS, the CY 

2010 claims data indicated a decrease in 

their median per diem costs since last 

year. Hospital-based PHPs’ approximate 

median per diem costs decreased from 

$184 for CY 2011 (using CY 2009 claims 

data) to $162 for CY 2012 (using CY 

2010 claims data) for Level I services (3 

services), and from $236 for CY 2011 

(using CY 2009 claims data) to $190 for 

CY 2012 (using CY 2010 claims data) for 

Level II services (4 or more services). 

We can attribute this decrease in costs 

to one provider whose costs inflated the 

CY 2011 hospital-based cost data and 

increased the CY 2011 hospital-based 

PHP median for Level II services by 

approximately $30. We included this 

provider in the CY 2011 ratesetting 

because this provider had paid claims in 

CY 2009. Subsequently, this provider 

did not bill for PHP services during CY 

2010 and, therefore, was not included in 

the proposed CY 2012 ratesetting. 

Based on the results of our analysis of 

the CY 2010 claims data, for CY 2012, 

we are proposing to calculate the 

proposed CMHC PHP APC per diem 

payment rates for Level I and Level II 

services using only CMHC data and 

calculating the proposed hospital-based 

PHPs APC per diem payment rates for 

Level I and Level II services using only 

hospital-based PHP data. Basing 

payment rates specific to each type of 

provider’s own data would continue to 

support access to the PHP benefit, 

including a more intensive level of care, 

while also providing appropriate 

payment commensurate with the cost 

structures of CMHC PHPs and hospitalbased PHPs. We invite public comments 

on our proposal to calculate the CMHC 

PHP APC per diem payment rates using 

only CMHC claims data and the 

hospital-based PHP APC per diem rates 

using only hospital data. 

We are proposing the following APC 

median per diem costs for PHP services 

for CY 2012: 

TABLE 38—PROPOSED CY 2012 MEDIAN PER DIEM COSTS FOR CMHC PHP SERVICES

Proposed APC Group title 

Proposed 

median per 

diem costs 

0172 ............................... Level I Partial Hospitalization (3 services) for CMHCs .......................................................................... $97.78 

0173 ............................... Level II Partial Hospitalization (4 or more services) for CMHCs ............................................................ 113.62 

TABLE 39—PROPOSED CY 2012 MEDIAN PER DIEM COSTS FOR HOSPITAL–BASED PHP SERVICES

Proposed APC Group title 

Proposed 

median per 

diem costs 

0175 ............................... Level I Partial Hospitalization (3 services) for hospital-based PHPs ..................................................... $162.34 

0176 ............................... Level II Partial Hospitalization (4 or more services) for hospital-based PHPs ...................................... 189.87 

C. Proposed Separate Threshold for 

Outlier Payments to CMHCs 

In the CY 2004 OPPS final rule with 

comment period (68 FR 63469 through 

63470), we indicated that, given the 

difference in PHP charges between 

hospitals and CMHCs, we did not 

believe it was appropriate to make 

outlier payments to CMHCs using the 

outlier percentage target amount and 

threshold established for hospitals. Prior 

to that time, there was a significant 

difference in the amount of outlier 

payments made to hospitals and CMHCs 

for PHP services. In addition, further 

analysis indicated that using the same 

OPPS outlier threshold for both 

hospitals and CMHCs did not limit 

outlier payments to high-cost cases and 

resulted in excessive outlier payments 

to CMHCs. Therefore, beginning in CY 

2004, we established a separate outlier 

threshold for CMHCs. The separate 

outlier threshold for CMHCs has 

resulted in more commensurate outlier 

payments. 

The separate outlier threshold for 

CMHCs resulted in $1.8 million in 

outlier payments to CMHCs in CY 2004 

and $0.5 million in outlier payments to 

CMHCs in CY 2005. In contrast, in CY 

2003, more than $30 million was paid 

to CMHCs in outlier payments. We 

believe this difference in outlier 

payments indicates that the separate 

outlier threshold for CMHCs has been 

successful in keeping outlier payments 

to CMHCs in line with the percentage of 

OPPS payments made to CMHCs. 

We are proposing to continue our 

policy of identifying 1.0 percent of the 

aggregate total payments under the 

OPPS for outlier payments for CY 2012. 

We are proposing that a portion of that 

1.0 percent, an amount equal to 0.14 

percent of outlier payments (or 0.0014 

percent of total OPPS payments), would 

be allocated to CMHCs for PHP outlier 

payments. In section II.G. of this 

proposed rule, we are proposing to set 

a dollar threshold in addition to an APC 

multiplier threshold for OPPS outlier 

payments. However, because the PHP 

APCs are the only APCs for which 

CMHCs may receive payment under the 

OPPS, we would not expect to redirect 

outlier payments by imposing a dollar 

threshold. Therefore, we are not 

proposing to set a dollar threshold for 

CMHC outlier payments. We are 

proposing to set the outlier threshold for 

CMHCs for CY 2012 at 3.40 times the 

APC payment amount and the CY 2012 

outlier payment percentage applicable 

to costs in excess of the threshold at 50 

percent. Specifically, we are proposing 

to establish that if a CMHC’s cost for 

partial hospitalization services, paid 

under either APC 0172 or APC 0173, 

exceeds 3.40 times the payment 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. 

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IX. Proposed Procedures That Would 

Be Paid Only as Inpatient Procedures 

A. Background 

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

gives the Secretary broad authority to 

determine the services to be covered 

and paid for under the OPPS. Before 

implementation of the OPPS in August 

2000, Medicare paid reasonable costs for 

services provided in the HOPD. The 

claims submitted were subject to 

medical review by the fiscal 

intermediaries to determine the 

appropriateness of providing certain 

services in the outpatient setting. We 

did not specify in our regulations those 

services that were appropriate to 

provide only in the inpatient setting and 

that, therefore, should be payable only 

when provided in that setting. 

In the April 7, 2000 final rule with 

comment period (65 FR 18455), we 

identified procedures that are typically 

provided only in an inpatient setting 

and, therefore, would not be paid by 

Medicare under the OPPS. These 

procedures comprise what is referred to 

as the ‘‘inpatient list.’’ The inpatient list 

specifies those services for which the 

hospital will be paid only when 

provided in the inpatient setting 

because of the nature of the procedure, 

the underlying physical condition of the 

patient, or the need for at least 24 hours 

of postoperative recovery time or 

monitoring before the patient can be 

safely discharged. As we discussed in 

that rule and in the November 30, 2001 

final rule with comment period (66 FR 

59884), we may use any of a number of 

criteria we have specified when 

reviewing procedures to determine 

whether or not they should be removed 

from the inpatient list and assigned to 

an APC group for payment under the 

OPPS when provided in the hospital 

outpatient setting. Those criteria 

include the following: 

• Most outpatient departments are 

equipped to provide the services to the 

Medicare population. 

• The simplest procedure described 

by the code may be performed in most 

outpatient departments. 

• The procedure is related to codes 

that we have already removed from the 

inpatient list. 

In the November 1, 2002 final rule 

with comment period (67 FR 66741), we 

added the following criteria for use in 

reviewing procedures to determine 

whether they should be removed from 

the inpatient list and assigned to an 

APC group for payment under the 

OPPS: 

• A determination is made that the 

procedure is being performed in 

numerous hospitals on an outpatient 

basis; or 

• A determination is made that the 

procedure can be appropriately and 

safely performed in an ASC, and is on 

the list of approved ASC procedures or 

has been proposed by us for addition to 

the ASC list. 

The list of codes that we are 

proposing to be paid by Medicare in CY 

2012 only as inpatient procedures is 

included as Addendum E to this 

proposed rule (which is referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site). 

B. Proposed Changes to the Inpatient 

List 

For the CY 2012 OPPS, we are 

proposing to use the same methodology 

described in the November 15, 2004 

final rule with comment period (69 FR 

65835) to identify a subset of procedures 

currently on the inpatient list that are 

being performed a significant amount of 

the time on an outpatient basis. Using 

this methodology, we identified two 

procedures that met the criteria for 

potential removal from the inpatient list 

for CY 2012. We then clinically 

reviewed these two potential procedures 

for possible removal from the inpatient 

list and found them to be appropriate 

candidates for removal from the 

inpatient list. During the February 28– 

March 1, 2011 meeting of the APC 

Panel, we solicited the APC Panel’s 

input on the appropriateness of 

removing these two procedures from the 

CY 2012 inpatient list: CPT codes 21346 

(Open treatment of nasomaxillary 

complex fracture (Lefort II type); with 

wiring and/or local fixation) and 54411 

(Removal and replacement of all 

components of a multi-component 

inflatable penile prosthesis through an 

infected field at the same operative 

session, including irrigation and 

debridement of infected tissue). 

As we indicated in the CY 2011 final 

rule with comment period (75 FR 

71996), we solicited the APC Panel’s 

input on the appropriateness of 

removing the procedures described by 

CPT codes 35045 (Direct repair of 

aneurysm, pseudoaneurysm, or excision 

(partial or total) and graft insertion, with 

or without patch graft; for aneurysm, 

pseudoaneurysm, and associated 

occlusive disease, radial or ulnar artery) 

and 54650 (Orchiopexy, abdominal 

approach, for intra-abdominal testis (eg, 

Fowler-Stephens)), from the CY 2012 

inpatient list. We also solicited the APC 

Panel’s input on the appropriateness of 

removing the following procedures 

identified in a comment letter addressed 

to the APC Panel: CPT codes 61154 

(Burr hole(s) with evacuation and/or 

drainage of hematoma, extradural or 

subdural); 61156 (Burr hole(s); with 

aspiration of hematoma or cyst, 

intracerebral); and 61210 (Burr hole(s); 

for implanting ventricular catheter, 

reservoir, eeg electrode(s), pressure 

recording device, or other cerebral 

monitoring device (separate procedure)). 

Following the discussion at its February 

28–March 1, 2011 meeting, the APC 

Panel recommended that CMS remove 

from the CY 2012 inpatient list CPT 

codes 21346, 54411, 35045, 54650, and 

61210. The APC Panel made no 

recommendation regarding CPT codes 

61154 and 61156. 

Additionally, during the February 28– 

March 1, 2011 meeting of the APC 

Panel, an APC Panel member requested 

removal of the following CPT codes 

from the CY 2012 inpatient list: 22551 

(Arthrodesis, anterior interbody, 

including disc space preparation, 

discectomy, osteophytectomy and 

decompression of spinal cord and/or 

nerve roots; cervical below C2); 22552 

(Arthrodesis, anterior interbody, 

including disc space preparation, 

discectomy, osteophytectomy and 

decompression of spinal cord and/or 

nerve roots; cervical below C2, each 

additional interspace (List separately in 

addition to code for separate 

procedure)); 22554 (Arthrodesis, 

anterior interbody technique, including 

minimal discectomy to prepare 

interspace (other than for 

decompression); cervical below C2); 

22585 (Arthrodesis, anterior interbody 

technique, including minimal 

discectomy to prepare interspace (other 

than for decompression); cervical below 

C2, each additional interspace (List 

separately in addition to code for 

primary procedure)); 61107 (Twist drill 

hole(s) for subdural, intracerebral, or 

ventricular puncture; for implanting 

ventricular catheter, pressure recording 

device, or other intracerebral monitoring 

device); and 63267 (Laminectomy for 

excision or evacuation of intraspinal 

lesion other than neoplasm, extradural; 

lumbar). Following the discussion at its 

February 28–March 1, 2011 meeting, the 

APC Panel recommended that CMS 

remove from the CY 2012 inpatient list 

CPT codes 22551, 22552, 22554, 22585, 

61107, and 63267. 

For CY 2012, we are proposing to 

accept the APC Panel’s 

recommendations to remove the 

procedures described by CPT codes 

21346, 35045, and 54650 from the 

inpatient list because we agree with the 

APC Panel that the procedures may be 

appropriately provided as hospital 

outpatient procedures for some 

Medicare beneficiaries, based upon the 

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evaluation criteria mentioned above. We 

also are proposing to not accept the APC 

Panel’s recommendations to remove the 

procedures described by CPT codes 

22551, 22552, 22554, 22585, 54411, 

61107, 61210, and 63267, because upon 

further clinical review subsequent to the 

February 28–March 1, 2011 APC Panel 

meeting, we do not believe that these 

procedures may be appropriately 

provided as hospital outpatient 

procedures for some Medicare 

beneficiaries, based upon the evaluation 

criteria mentioned above, due to the 

clinical intensity of services provided. 

Furthermore, according to our 

utilization data, the procedures 

described by CPT codes 22551, 22552, 

22554, 22585, 54411, 61107, 61210, and 

63267 have very low volume in the 

outpatient hospital setting. We note that 

despite its low overall volume, CPT 

code 54411 is performed a significant 

percentage of the time in the outpatient 

hospital setting; however, we do not 

believe that the outpatient procedures 

being performed are truly reflective of 

the intensity of services requisite when 

performing the procedure as described 

by the CPT code’s long descriptor. We 

invite public comment on the inclusion 

of CPT code 54411 on the CY 2012 

inpatient list. The three procedures we 

are proposing to remove from the 

inpatient list for CY 2012 and their CPT 

codes, long descriptors, proposed APC 

assignments, and proposed status 

indictors are displayed in Table 40 

below. 

TABLE 40—PROCEDURES PROPOSED FOR REMOVAL FROM THE INPATIENT LIST AND THEIR PROPOSED APC ASSIGNMENTS

FOR CY 2012 

HCPCS code Long descriptor 

Proposed 

CY 2012 APC 

assignment 

Proposed CY 

2012 status indicator 

21346 ................................. Open treatment of nasomaxillary complex fracture (Lefort II type); with wiring 

and/or local fixation.

0254 T 

35045 ................................. Direct repair of aneurysm, pseudoaneurysm, or excision (partial or total) and 

graft insertion, with or without patch graft; for aneurysm, pseudoaneurysm, 

and associated occlusive disease, radial or ulnar artery.

0093 T 

54650 ................................. Orchiopexy, abdominal approach, for intra-abdominal testis (e.g., Fowler-Stephens).0154 T 

X. Proposed Policies for the 

Supervision of Outpatient Services in 

Hospitals and CAHs 

A. Background 

In the CY 2000 OPPS final rule with 

comment period, CMS established the 

hospital OPPS and indicated that direct 

supervision is the standard for all 

hospital outpatient therapeutic services 

covered and paid by Medicare in 

hospitals and in provider-based 

departments (PBDs) of hospitals (65 FR 

18524 through 18526). Currently, as 

discussed in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

72008), this standard requires the 

supervisory practitioner to be 

immediately available to furnish 

assistance and direction throughout the 

performance of a hospital outpatient 

therapeutic service or procedure. In the 

CY 2000 OPPS final rule with comment 

period, we established in regulation at 

§ 410.28(e) that outpatient diagnostic 

services furnished in PBDs of hospitals 

must be supervised at the level 

indicated in the Medicare Physician Fee 

Schedule (MPFS) for each service, that 

is, general, direct or personal 

supervision. Since that time, we have 

clarified and refined these rules in 

several ways. In the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

71998 through 72001), we provided a 

comprehensive review of the history of 

the supervision policies for both 

outpatient therapeutic and diagnostic 

services from the inception of the OPPS 

through CY 2010. In this section, we 

provide a more condensed overview of 

our supervision policy during that time 

period, and present background on 

issues that have arisen during the CY 

2011 payment year. 

By way of overview, we have defined 

supervision in the hospital outpatient 

setting by drawing on the three levels of 

supervision that CMS defined for the 

physician office setting at § 410.32(b) 

prior to establishment of the OPPS: 

General, direct, and personal 

supervision. Over time, we have tailored 

these definitions as needed to apply 

them in the hospital outpatient setting, 

so the definitions or applications in the 

OPPS may differ slightly from those in 

the physician office setting. This is the 

case in defining direct supervision, 

where the MPFS requires presence ‘‘in 

the office suite,’’ and the OPPS 

currently does not require presence 

within any specific physical boundary 

(in the past, the OPPS rules for direct 

supervision required presence on the 

hospital campus or in the PBD) (75 FR 

72008, 72012). 

To date, for purposes of the hospital 

outpatient setting, we have only defined 

direct and general supervision, and we 

have only defined general supervision 

insofar as it applies to the provision of 

nonsurgical extended duration 

therapeutic services (extended duration 

services) for which we require direct 

supervision during an initiation period, 

followed by a minimum standard of 

general supervision for the duration of 

the service (75 FR 72012). Under the 

OPPS, general supervision means that 

the service is furnished under the 

overall direction and control of the 

physician or appropriate nonphysician 

practitioner, but his or her physical 

presence is not required during the 

performance of the service. Direct 

supervision means that the physician or 

appropriate nonphysician practitioner is 

immediately available to furnish 

assistance and direction throughout the 

performance of a therapeutic service or 

procedure; however, he or she does not 

have to be present in the room where 

the service or procedure is being 

performed. 

In the CY 2000 OPPS final rule with 

comment period (65 FR 18524 through 

18526), we adopted physician 

supervision policies as a condition of 

payment under the OPPS to ensure that 

Medicare pays for high quality hospital 

outpatient services that are furnished in 

a safe and effective manner and 

consistent with Medicare requirements. 

The agency has long divided hospital 

outpatient services into the two 

categories of ‘‘diagnostic’’ services and 

other ‘‘therapeutic’’ services that aid the 

physician in the treatment of patients 

(Section 3112 of the Medicare Part A 

Intermediary Manual (July 1987)). Thus, 

we considered all nondiagnostic 

services to be ‘‘therapeutic services’’ 

which would include, but not be limited 

to, the services listed under section 

1861(s)(2)(B) of the Act as incident to 

the services of physicians. As early as 

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1985, the agency defined therapeutic 

services as those services and supplies 

(including the use of hospital facilities) 

which are incident to the services of 

physicians in the treatment of patients 

(Section 3112.4 of the Medicare Part A 

Intermediary Manual (May 1985)). In 

recognition of this historic classification 

of services, we established a direct 

supervision standard for outpatient 

therapeutic services under our 

regulation at § 410.27, which establishes 

the conditions for payment for 

outpatient hospital services provided 

‘‘incident to’’ physicians’ services. In 

the text of § 410.27, we also established 

standards requiring that these services 

be furnished either by or under 

arrangements made by the participating 

hospital (§ 410.27(a)(1)(i)), either in the 

hospital or in a location that the agency 

designates as a department of a provider 

under § 413.65 of the regulations 

(§ 410.27(a)(1)(iii)). Since 2000, we have 

maintained the classification of services 

as either diagnostic or therapeutic in our 

manual guidance that establishes the 

conditions of payment for hospital 

outpatient services under the OPPS 

(Sections 20.4 and 20.5, Chapter 6 of the 

Medicare Benefit Policy Manual (Pub. 

100–02)). In the requirements for 

therapeutic services, in addition to the 

direct supervision standard, we applied 

the requirements of §§ 410.27(a)(1)(i) 

and (a)(1)(iii) regarding under 

arrangement and provider-based site of 

service to all outpatient therapeutic 

services that are paid under the OPPS 

(Section 20.5, Chapter 6 of the Medicare 

Benefit Policy Manual (Pub. 100–02)). 

In the CY 2000 OPPS final rule with 

comment period, we amended our 

regulation at § 410.27 to specify that 

direct supervision is required for 

outpatient hospital services and 

supplies furnished incident to a 

physician’s service in a location we 

designate as a department of a provider 

under § 413.65 of our regulations. We 

specified further in the regulation that 

direct supervision means the physician 

must be present on the premises of the 

location and immediately available to 

furnish assistance and direction 

throughout the performance of the 

service or procedure. The requirement 

to be ‘‘immediately available’’ was 

included in the regulation, although at 

that time we did not define the term. 

Although the regulation required the 

physician to be present on the premises 

of the location where services were 

being furnished, it specified that the 

physician did not have to be present in 

the room when the procedure was 

performed. In the CY 2000 OPPS final 

rule with comment period (65 FR 

18525), we emphasized the importance 

of establishing a supervision standard 

for services furnished in departments of 

the hospital that are not located on 

campus, indicating that our amendment 

applies to services furnished at an entity 

that is located off the campus of a 

hospital that we designate as having 

provider-based status in accordance 

with the provisions of § 413.65. In 

response to a commenter, we stated that, 

in accordance with Section 3112.4(A) of 

the Intermediary Manual, we assume 

the direct supervision standard is met 

when outpatient therapeutic services are 

provided incident to a physician’s 

service in an on-campus department of 

a hospital. 

In the CY 2000 OPPS final rule with 

comment period, we also defined the 

supervision standards for outpatient 

hospital diagnostic services furnished in 

PBDs of hospitals in § 410.28(e) of our 

regulations. The regulation at 

§ 410.28(e) provided that diagnostic 

services furnished at facilities having 

provider-based status must be 

performed under the level of 

supervision indicated for the diagnostic 

test under the MPFS in accordance with 

the definitions in §§ 410.32(b)(3)(i), 

(b)(3)(ii), and (b)(3)(iii). In the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60588 through 60591, and 

60680), we revised § 410.28(e) to extend 

the supervision standards we had 

established for outpatient diagnostic 

tests furnished in PBDs to also apply to 

services furnished in the hospital setting 

or any other location where diagnostic 

services may be provided under 

arrangement. The supervision rules for 

diagnostic services under the regulation 

at § 410.28(e) explicitly apply to 

hospitals that are paid in accordance 

with section 1833(t) of the Act, which 

is the statutory authority for the OPPS. 

As noted in the CY 2010 OPPS/ASC 

final rule with comment period, 

Medicare makes payments to CAHs in 

accordance with section 1834(g) of the 

Act. Accordingly, CAHs are not subject 

to the supervision requirements for 

outpatient diagnostic services at this 

time. The supervision requirements for 

outpatient diagnostic services were also 

set forth in Section 20.4, Chapter 6, of 

the Medicare Benefit Policy Manual. 

In the years following establishment 

of the initial OPPS regulations, we 

began to receive inquiries from 

providers about the supervision 

requirements. Many of these inquiries 

led us to believe that some hospitals 

may have misunderstood our statement 

to the effect that we assume physician 

supervision requirements are met for 

services furnished on the hospital 

premises, and were providing either 

general supervision or no supervision 

for therapeutic services furnished 

incident to physicians’ services in the 

outpatient setting and for which we had 

established a requirement of direct 

supervision. Therefore, in the CY 2009 

OPPS/ASC proposed rule and final rule 

with comment period (73 FR 41518 

through 41519 and 73 FR 68702 through 

68704, respectively), we clarified and 

restated the various supervision 

requirements for outpatient hospital 

therapeutic and diagnostic services. We 

clarified that therapeutic services 

furnished in the hospital and in all 

PBDs of the hospital, specifically both 

on-campus and off-campus PBDs, must 

be provided under the direct 

supervision of physicians. We also 

reiterated that all diagnostic services 

furnished in PBDs, whether on or off the 

hospital’s main campus, should be 

supervised according to the levels 

assigned for the individual tests under 

the MPFS. We received very few public 

comments regarding this clarification 

and restatement during the comment 

period. 

In response to concerns about our 

policy restatement articulated by 

stakeholders after publication of the CY 

2009 OPPS/ASC final rule with 

comment period, we further refined our 

supervision policies in the CY 2010 

OPPS/ASC proposed rule and final rule 

with comment period (74 FR 35365 and 

74 FR 60679 through 60680, 

respectively). We established rules for 

diagnostic services furnished in 

locations other than PBDs (that is, in the 

hospital and under arrangement in 

nonhospital facilities). Accordingly, we 

expanded and refined the regulatory 

language regarding direct supervision of 

diagnostic services in those locations to 

refer to presence of the supervisory 

practitioner in the hospital or PBD (for 

services furnished in those locations) or 

in the office suite (for services furnished 

under arrangement in nonhospital 

space). For therapeutic services, we 

increased hospitals’ flexibility regarding 

the direct supervision requirement by 

allowing all nonphysician practitioners 

whose services are those the practitioner 

is legally authorized to perform under 

State law that ‘‘would otherwise be 

covered if furnished by a physician or 

as an incident to a physician’s service’’ 

(‘‘would be physicians’ services’’) to 

supervise outpatient therapeutic 

services that are within their scope of 

practice under State law and their 

hospital-granted or CAH-granted 

privileges (sections 1861(s)(2)(K) 

through (N) of the Act; §§ 410.71 

through 410.77 of the regulations). 

However, in implementing the new 

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benefits for pulmonary rehabilitation 

(PR), cardiac rehabilitation (CR) and 

intensive cardiac rehabilitation (ICR) 

services, we required that direct 

supervision of those services furnished 

in the hospital outpatient setting must 

be provided by a doctor of medicine or 

a doctor of osteopathy because, as we 

discussed in the CY 2010 and CY 2011 

OPPS/ASC final rules with comment 

period (74 FR 60573 and 60582 and 75 

FR 72009, respectively), the statute 

specifies that these services are 

physician-supervised (section 144(a) of 

the Medicare Improvements for Patients 

and Providers Act of 2008, Pub. L. 110– 

275). In addition, in the CY 2011 OPPS/ 

ASC final rule with comment period, we 

revised our regulations at § 410.27 to 

remove the physical boundary 

requirements for direct supervision, and 

instead to allow the supervisory 

practitioner simply to be ‘‘immediately 

available,’’ meaning physically present, 

interruptible, and able to furnish 

assistance and direction throughout the 

performance of the procedure, but 

without reference to any particular 

physical boundary. 

In the CY 2010 OPPS/ASC final rule 

with comment period, we finalized a 

technical correction to the regulation at 

§ 410.27 to clarify that the direct 

supervision requirement under that 

section applies to services furnished in 

CAHs as well as hospitals. Specifically, 

we added the phrase ‘‘or CAH’’ in the 

title and throughout the regulation text 

wherever the text referred only to 

‘‘hospital,’’ to clarify that the 

requirements for payment of hospital 

outpatient therapeutic services in that 

section apply to CAHs as well as other 

types of hospitals. As we discussed in 

the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 72000), we 

viewed this as a technical correction 

because the Act applies the same 

regulations to hospitals and CAHs when 

appropriate (CAHs are included if ‘‘the 

context otherwise requires’’ under 

section 1861(e) of the Act). 

In response to our clarification that 

CAHs are subject to the direct 

supervision standard for payment of 

outpatient therapeutic services, CAHs 

and the hospital community at large 

suggested that CAHs should be exempt 

from this requirement because the 

requirement is at odds with 

longstanding and prevailing practices of 

many CAHs. For example, commenters 

noted that, due to low volume of 

services, a practitioner retained on the 

campus of a small rural hospital or CAH 

to meet supervision requirements may 

not have other concurrent 

responsibilities or patient care, which 

could lead to inefficiencies. In their 

correspondence and discussion in 

public forums, CAHs and small rural 

hospitals explicitly raised concerns 

about services that extend after regular 

operating hours, especially observation 

services. They asserted that direct 

supervision is not clinically necessary 

for some services that have a significant 

monitoring component that is typically 

performed by nursing or other auxiliary 

staff, including IV hydration, blood 

transfusions, and chemotherapy. They 

stated that their facilities have protocols 

to safely deliver all of these services, 

relying on nursing or other hospital staff 

to provide the service and having a 

physician or nonphysician practitioner 

available by phone to furnish assistance 

and direction throughout the duration of 

the therapeutic service. 

We provided guidance regarding the 

flexibility that we believe exists within 

our requirement for direct supervision 

for an emergency physician or 

nonphysician practitioner, who would 

be the most likely practitioners staffing 

a small rural hospital or CAH, to 

provide the supervision, on the CMS 

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

HospitalOutpatientPPS/

05_OPPSGuidance.asp#TopOfPage. 

However, these hospitals continued to 

express difficulty in meeting the 

standard. Small rural hospitals and 

CAHs indicated that, regulations 

notwithstanding, many of them did not 

have appropriate staff arrangements to 

provide the required supervision of 

some services, particularly services 

being provided after hours or consisting 

of a significant monitoring component 

that last for an extended period of time. 

In addition, the broader hospital 

community began requesting that we 

modify our policy to permit a lower 

level of supervision for therapeutic 

services for all hospitals. 

After consideration of these requests, 

on March 15, 2010, we issued a Federal 

Register notice of nonenforcement of 

the requirement for direct supervision of 

outpatient therapeutic services in CAHs 

(which is available on the CMS Web site 

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

OutpatientPPS/Downloads/

CMS_1504FC_OPPS_2011_

FR_Physician_Supervision_Nonenf_

Notice.pdf). While CAHs remained 

subject to the direct supervision 

standard, we instructed our contractors 

not to evaluate or enforce the standard 

in CY 2010 until the agency could 

revisit the supervision policy during the 

CY 2011 rulemaking cycle. 

As indicated above, in the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 71998 through 72013), we 

further adjusted the direct supervision 

standard to increase flexibility for 

hospitals while maintaining an 

appropriate level of quality and safety 

and consistent with the incident to 

statutory provision. Specifically, we 

redefined direct supervision to remove 

all requirements that the supervisory 

practitioner remain present within a 

particular physical boundary, although 

we continued to require immediate 

availability. We also established a new 

category of services, ‘‘nonsurgical 

extended duration therapeutic services’’ 

(extended duration services), which 

have a substantial monitoring 

component. We specified that direct 

supervision is required for these 

services during an initiation period, but 

once the supervising physician or 

nonphysician practitioner has 

determined the patient is stable, the 

service can continue under general 

supervision. 

In addition, in response to concerns 

expressed by the industry about 

appropriate levels of supervision for 

certain services furnished in various 

settings (for example, chemotherapy 

administration, and post-operative 

recovery services), we stated our intent 

to create through the CY 2012 

rulemaking cycle an independent 

advisory review process for 

consideration of stakeholder requests for 

assignment of supervision levels other 

than direct supervision for specific 

outpatient hospital therapeutic services. 

We stated that the review entity would 

evaluate services for assignment of both 

higher (personal) and lower (general) 

levels of supervision because, in the 

course of evaluating a given service, the 

review entity may find that personal 

supervision is the most appropriate 

level (75 FR 72006). We also indicated 

that, as an interim measure while we are 

in the process of establishing an 

advisory review body, we would extend 

the nonenforcement policy for direct 

supervision of outpatient therapeutic 

services provided in CAHs for a second 

year through CY 2011 (which is 

available at the CMS Web site at: 

http://www.cms.gov/

HospitalOutpatientPPS/Downloads/

CMS_1504FC_OPPS_2011_

FR_Physician_Supervision_Nonenf_

Notice.pdf). In addition, we expanded 

the nonenforcement notice to include 

small and rural hospitals that have 100 

or fewer beds, as defined by TOPs 

criteria, because we believe that these 

hospitals experience resource 

constraints that are similar to CAHs. 

We indicated that we would consider 

the Federal Advisory Ambulatory 

Payment Classification (APC) Panel as a 

potential candidate to serve as the 

independent review entity to consider 

requests for alternative service-specific 

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supervision standards, and we 

requested public comment both on that 

idea and on other aspects of the review 

process, such as evaluation criteria and 

the potential structure of the process. 

We suggested the APC Panel could serve 

as the review entity because it is already 

funded and established by law under 

the Federal Advisory Committee Act 

(FACA, Pub. L. 92–463) to make 

independent recommendations to CMS. 

The APC Panel membership is 

geographically diverse, and it includes 

members with clinical as well as 

administrative, hospital billing, and 

coding expertise. In response to our 

discussion in the CY 2011 OPPS/ASC 

final rule with comment period, we 

received public comments and other 

considerable input on these topics from 

the hospital and CAH community and 

from rural stakeholders. In this 

proposed rule, we discuss these 

comments and our proposals for the 

independent review process in CY 2012, 

taking into account the comments 

received in response to the CY 2011 

OPPS/ASC final rule with comment 

period. 

With respect to outpatient hospital 

diagnostic services, following our 

revisions to the regulation at § 410.28(e) 

in the CY 2010 OPPS/ASC final rule 

with comment period described above, 

we have received very few comments 

from stakeholders regarding our revised 

policy. Therefore, we are not proposing 

any changes to those requirements in 

this proposed rule. 

B. Issues Regarding the Supervision of 

Hospital Outpatient Therapeutic 

Services Raised by Hospitals and Other 

Stakeholders 

1. Independent Review Process 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72012), we 

stated our intent to develop an 

independent technical review process 

through our CY 2012 rulemaking. Public 

comments that we received on this 

statement of intent focused on three 

primary topics: the potential nature of 

the review entity; the potential nature 

and structure of the review process; and 

potential means of evaluating services. 

Commenters were generally favorable 

towards the establishment of an 

independent review entity, including 

use of the APC Panel as that entity, 

provided that CMS expand the APC 

Panel charter and its membership to 

include representatives of CAHs. They 

also were concerned that CMS ensure an 

adequate representation of clinicians on 

the Panel to provide the appropriate 

clinical review of supervision levels. 

Some commenters supported creation 

by law of a new committee comprised 

solely of clinicians (at least 15 multispecialty physicians and mid-levels). 

Citing the potentially significant impact 

of the supervision rules on rural and 

CAH providers, these commenters also 

recommended that at least 50 percent of 

committee members be comprised of 

representatives of CAHs and other 

providers from rural States, with 

recommendations for supervision levels 

decided by majority vote. Other 

commenters preferred use of an existing 

body (for example, the APC Panel or the 

Relative Value Scale Update Committee 

(RUC)) and emphasized inclusion of 

nonclinical professionals with expertise 

in hospital/facility resource 

consumption in order to balance the 

panel’s expertise. Some commenters 

sought to assure that if the APC Panel 

were selected, it would remain 

appropriately balanced and qualified to 

carry out its current role in APC 

deliberations under section 

1833(t)(9)(A) of the Act. Commenters 

also were supportive of CMS using its 

authority to convene a Technical Expert 

Panel (TEP) as the review entity, but 

noted potential lack of available 

funding. 

In considering these issues, we 

believe that the best course of action is 

to obtain independent advice with the 

transparency, formality and process 

associated with a Federal advisory 

committee. Stakeholders may view the 

recommendations of a FACA Committee 

as having greater legitimacy and, thus, 

its recommendations could be more 

useful to CMS than the 

recommendations that would be offered 

by other types of groups such as the 

American Medical Association’s 

Relative Value Update Committee or a 

TEP. A TEP might be more conducive to 

in-depth research and data analysis, but 

unless the TEP complies with the 

Federal Advisory Committee Act, the 

TEP as a group cannot provide advice to 

CMS. 

At this time, funding is not available 

to CMS to convene a new entity; 

therefore, we believe the most realistic 

and appropriate option is to use an 

existing body for reviewing supervision 

levels. We agree with commenters that 

the review body should be 

representative of all types of facilities 

that are subject to the supervision rules 

for payment, but we disagree that it 

should be 50 percent representative of a 

specific class of hospitals, particularly if 

those hospitals represent a minority of 

hospital outpatient service volume and 

payments. In addition, while we agree 

with commenters that clinical expertise 

is critical to this review process, we 

believe that additional perspectives 

should be represented, including those 

of hospital administrators and coding 

representatives. Under the FACA, 

committees and their subcommittees 

must have balanced membership with 

respect to points of view represented 

and the topics that are under their 

consideration; therefore, a Federal 

advisory review entity would be 

required to have a balanced 

representation of geographic interests, 

including those of CAHs and rural 

hospitals. It also would be required to 

have a balanced representation of 

clinical as well as any other relevant 

expertise. 

With respect to structure of the actual 

review process, most commenters 

requested that we subject the 

recommendations of the review entity 

and CMS’ decisions to notice and 

comment rulemaking. However, most 

commenters also requested a ‘‘realtime’’ process that would be more 

flexible than annual rulemaking and 

allow for continuous evaluation of 

services. Commenters further requested 

that there be a mechanism for 

reconsideration of CMS’ decisions. In 

addition, they requested that CMS not 

allow any information presented to the 

review entity in the course of the review 

process to be used for enforcement 

purposes. 

We believe that employing a 

subregulatory process to establish CMS’ 

final decisions may best serve the 

interests of beneficiaries and also meet 

the needs of other stakeholders. While 

rulemaking would arguably provide 

some additional procedural protections 

to stakeholders in terms of an 

opportunity for notice and comment, 

due to the time involved in rulemaking, 

stakeholders would only be able to 

request changes in supervision levels 

once a year. Similarly, if confined to 

annual rulemaking, CMS would not be 

able to make swift changes to address 

any problems associated with 

supervision levels, for example access to 

care. Historically, CMS has used 

subregulatory processes rather than 

rulemaking to issue changes in certain 

administrative specifications at the level 

of individual CPT codes due to a need 

for agility in making such changes. For 

example, CMS has used a subregulatory 

process to set supervision levels for 

individual diagnostic services under the 

MPFS, which are adopted for provision 

of those services in the hospital 

outpatient setting. Given the strong 

stakeholder interest in policy changes in 

supervision levels for outpatient 

hospital therapeutic services, we believe 

we should provide an opportunity for 

public comment on our proposed 

decisions (which would be based upon 

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the review entity’s recommendations) 

prior to finalizing them. 

We agree with commenters that there 

should be a means of requesting 

reevaluation of CMS’ decisions. 

However, because there is a potential for 

significant administrative burden in 

reconsidering requests for reevaluation, 

we believe that stakeholders should be 

required to provide significant 

justification to support consideration of 

a request for a change in supervision 

levels that has previously been 

considered, such as new clinical 

evidence, new technology, or new 

techniques in how patient care is 

furnished. In addition, we believe that 

new consideration of previously 

considered requests should receive the 

same independent evaluation as the 

initial request. Therefore, once we 

decide to consider a decision, we would 

request a new review by the 

independent review entity and follow 

the same process as a new request. The 

review entity would then deliberate and 

make a new recommendation to CMS, 

and CMS would then make another 

determination based on the new 

recommendation. 

We received substantial comment on 

how we might structure the evaluation 

process. First, stakeholders continued to 

request that we establish a default 

supervision standard of general 

supervision for all therapeutic services, 

and assign direct supervision only as 

indicated through the review process. 

Commenters believed it was important 

that the review entity and CMS not 

consider services for assignment of 

personal supervision because many 

services that might qualify for personal 

supervision are already personally 

performed by a physician or 

nonphysician practitioner. Commenters 

also noted that certain services are not 

furnished personally by these 

practitioners and instead are furnished 

personally by auxiliary personnel such 

as technicians or registered nurses 

(RNs). However, commenters 

maintained that hospitals currently 

furnish adequate supervision of those 

services by higher-level practitioners. 

Further, they requested that any 

evaluation for personal supervision be 

based on clinical evidence and evidence 

of a current deficiency in the quality of 

care. 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72006), we 

expressed our belief that direct 

supervision is the most appropriate 

level of supervision for most hospital 

outpatient therapeutic services due to 

the ‘‘incident to’’ nature of most 

hospital outpatient therapeutic services. 

We discussed how our historic 

requirements for physician (or 

nonphysician practitioner) orders and 

direct physician involvement in patient 

care stem from our interpretation of the 

nature of incident to services under the 

law. We reviewed our regulations and 

other guidance over the years which 

reflect these beliefs and interpretations 

(75 FR 71999 and 72005). 

We continue to believe that, while the 

statute does not explicitly mandate 

direct supervision, direct supervision is 

the most appropriate level of 

supervision for most hospital outpatient 

services that are authorized for payment 

as ‘‘incident to’’ physicians’ services 

unless personal supervision is 

appropriate. We also believe that the 

‘‘incident to’’ nature of hospital 

outpatient therapeutic services under 

the law permits us to recognize specific 

circumstances in which general 

supervision is appropriate, as we have 

for extended duration services, and that 

CMS has authority to accept a 

recommendation by the review entity of 

general supervision for a given service. 

However, we continue to believe that 

direct supervision is the most 

appropriate level of supervision for the 

great majority of hospital outpatient 

therapeutic services and, as such, it is 

the proper choice for a default 

supervision standard. 

In the course of evaluating a 

stakeholder request for review of the 

supervision level required for a given 

service, the independent review entity 

may recommend that personal 

supervision is the most appropriate 

level of supervision for the service. It 

may also be appropriate to assign 

personal supervision to certain services 

to ensure that auxiliary personnel or 

personnel in training (such as medical 

students) are adequately supervised. As 

we indicated in last year’s final rule 

with comment period, our supervision 

policy is designed to preserve both the 

quality and safety of purchased hospital 

outpatient services for Medicare 

beneficiaries. Accordingly, we believe 

that the review entity should have 

authority to recommend personal 

supervision for a service if, in the course 

of its evaluation, it believes that 

personal supervision is most 

appropriate and safe. 

We believe that the review entity 

should base its recommendations on 

any clinical evidence that is available. It 

should also take into consideration any 

known impacts of supervision on the 

quality of care. As we have previously 

noted (75 FR 72005), while literature or 

clinical opinions may exist on the risk 

of adverse outcomes and susceptibility 

to medical error associated with the 

provision of specific hospital outpatient 

procedures when a physician is not 

present, we do not know of any analyses 

that have directly examined levels of 

supervision and patient outcomes in the 

hospital outpatient setting. This may be 

an area for future study. 

With respect to an initial agenda of 

services for the review entity, 

commenters recommended that CMS 

begin evaluating services with work 

Relative Value Units (RVUs) < 1.0 

(approximately 160 services), which 

they believe would include many 

extended duration services. They also 

requested that CMS evaluate surgical 

procedures (especially minor surgical 

procedures) and portions of the surgical 

recovery period for general supervision. 

We continue to support direct 

supervision as the default supervision 

level for all hospital outpatient 

therapeutic services. We believe it 

would be appropriate to solicit services 

for evaluation from stakeholders, in a 

process similar to that currently used to 

solicit agenda items for the APC Panel 

meetings. Also, it will be important for 

CMS to be able to place services on the 

Panel agenda as issues arise, similar to 

the way the agency brings inpatient only 

procedures before the APC Panel for 

consideration of removal from the 

inpatient only list. If we received an 

unmanageable number of requests 

during a particular period, we propose 

to prioritize requests according to 

service volume, total expenditures for 

the service, frequency of requests, and 

the repetition of requests from prior 

public comments. In addition, we 

propose to require the submitter of a 

request to furnish a justification for the 

request, supported to the extent possible 

with clinical evidence. We would use 

the justifications to assist in prioritizing 

agenda items. 

Commenters suggested that evaluation 

criteria include the general categories of 

risk, complexity, the type of 

professional and scope of practice of the 

professional furnishing the service, and 

whether the service is furnished in a 

CAH or rural facility, taking into 

consideration the workforce typically 

available to those hospitals. We agree 

with the suggested general parameters of 

risk and complexity, and we offer 

several similar potential measures 

below for the public’s consideration. In 

recommending a level of supervision 

that would apply for a particular service 

described by a CPT code, we also 

believe that the review entity could take 

into consideration the varied 

environments in which the service 

described by that code may be 

delivered. We anticipate that 

representatives of different types of 

facilities on the Panel will facilitate an 

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understanding of any potential variation 

in conditions at different types of 

facilities. 

Under the conditions of participation 

for hospitals at § 482.11(a), hospitals 

must comply with applicable Federal 

law related to the health and safety of 

patients. Under § 482.11(c), hospitals 

must also assure that personnel are 

licensed or meet other applicable 

standards of State or local law. 

Registered nurses (RNs) are not 

authorized to independently furnish 

services that would be physicians’ 

services if furnished by a physician as 

described in section 1861(s)(2)(K) of the 

Act. In addition, under their State scope 

of practice, RNs are not licensed to 

independently furnish these services. 

Under the condition of participation 

regulation at § 482.11, hospitals must 

comply with these Federal and State 

rules. Because under the law RNs are 

not permitted to furnish ‘‘would be’’ 

physicians’ services, we do not believe 

RNs should be permitted to supervise 

those services. Therefore, under the 

regulations at §§ 410.27 and 482.11, RNs 

cannot supervise ‘‘would be’’ 

physicians’ services that they may not 

independently furnish (though they may 

furnish some of them under the 

supervision of an appropriately higher 

level practitioner), even in a CAH or 

rural facility that may be experiencing 

difficulty obtaining a higher level 

practitioner to supervise or furnish 

those services. In this case, the statute 

and the regulations determine at the 

service level which nonphysician 

professionals can and cannot supervise 

therapeutic services. 

Furthermore, we note that we 

anticipate extending the notice of 

nonenforcement for direct supervision 

of outpatient therapeutic services in 

both CAHs and small rural hospitals 

another year through CY 2012, which 

we discuss in section X.C.2. of this 

proposed rule. 

2. Conditions of Payment and Hospital 

Outpatient Therapeutic Services 

Described by Different Benefit 

Categories 

Another issue that has been raised to 

us is the applicability of the payment 

conditions for hospital outpatient 

therapeutic services in § 410.27 to 

services described in paragraphs or 

subparagraphs of section 1861(s) of the 

Act other than section 1861(s)(2)(B) of 

the Act, which describes outpatient 

hospital services incident to physicians’ 

services. Over the years, and 

particularly in recent months, we have 

received inquiries asking that we 

explain or clarify our application of the 

payment conditions under our 

regulation at § 410.27, which explicitly 

applies to ‘‘hospital services and 

supplies furnished incident to a 

physician service to outpatients,’’ to 

outpatient therapeutic services other 

than those specified under section 

1861(s)(2)(B) of the Act. For example, 

we have received inquiries as to 

whether it is permissible for hospitals to 

furnish radiation therapy (described 

under section 1861(s)(4) of the Act) or 

ambulatory surgical center services 

(described under section 1832(a)(2)(F)(i) 

of the Act) under arrangement in 

locations that are not provider-based. 

Some have suggested that the language 

in § 410.27 is not applicable to services 

described by benefit categories in 

section 1861(s) of the Act other than 

section 1861(s)(2)(B) of the Act because 

§ 410.27 only refers to ‘‘incident to’’ 

services. 

Although we acknowledge the 

language of § 410.27 could be read as 

limited to services and supplies 

described under section 1861(s)(2)(B) of 

the Act, hospital services incident to 

physicians’ services furnished to 

outpatients, we have not interpreted the 

regulation so narrowly. For instance, in 

the CY 2010 OPPS/ASC final rule with 

comment period, we noted that, long 

before the OPPS, we required that 

hospital services and supplies furnished 

to outpatients incident to a physician’s 

service must be furnished ‘‘on a 

physician’s order by hospital personnel 

and under a physician’s supervision’’ 

(section 3112.4 of the Medicare 

Intermediary Manual). We also clearly 

treated all nondiagnostic services that 

are furnished to hospital outpatients as 

‘‘incident to services’’ (sections 3112 

and 3112.4 of the Medicare 

Intermediary Manual; Section 20.5, 

Chapter 6, of the Medicare Benefit 

Policy Manual (Pub. 100–02)). While we 

have not delineated this position as 

clearly in the regulations, and while the 

regulation text of § 410.27 only 

explicitly refers to ‘‘incident to’’ 

services, we note that our policy is 

longstanding and, in fact, predates the 

OPPS. In longstanding manual 

guidance, we have expressed our view 

that direct supervision is required for 

hospital outpatient therapeutic services, 

and suggested that this requirement 

stems from the ‘‘incident to’’ nature of 

those services. In the CY 2010 OPPS/ 

ASC final rule with comment period, we 

stated, ‘‘Therapeutic services and 

supplies which hospitals provide on an 

outpatient basis are those services and 

supplies (including the use of hospital 

facilities) which are incident to the 

services of physicians and practitioners 

in the treatment of patients’’ (74 FR 

60584 through 60585). We indicated 

that outpatient therapeutic services and 

supplies must be furnished under the 

order of a physician or other appropriate 

nonphysician practitioner, and by 

hospital personnel under the direct 

supervision of a physician or 

appropriate nonphysician practitioner. 

Thus, we have long maintained that 

all hospital outpatient therapeutic 

services are, in some sense, furnished 

‘‘incident to’’ a physician’s service even 

when described by benefit categories 

other than the specific ‘‘incident to’’ 

provision in section 1861(s)(2)(B) of the 

Act. Because hospital outpatient 

therapeutic services are furnished 

‘‘incident to’’ a physician’s professional 

service, we believe the conditions for 

payment, including the direct 

supervision standard, should apply to 

all of these services. As discussed 

above, because the statute includes 

specific requirements for physician 

supervision of PR, CR, and ICR, we 

believe that those statutory 

specifications take precedence over the 

agency’s general requirements. 

C. Proposed Policies on Supervision 

Standards for Outpatient Therapeutic 

Services in Hospitals and CAHs 

In this proposed rule, we are 

proposing policies for the independent 

review process, grouped under three key 

topics: selection of a review body; 

structure of the review process; and 

evaluation criteria. 

1. Selection of Review Entity 

We are proposing that the existing 

APC Panel serve as the independent 

review entity. However, we would make 

some modifications to the APC Panel 

scope and composition in order to 

create a body that is prepared to address 

supervision standards and reflects the 

full range of parties subject to the 

standards. Specifically, we would use 

the discretionary authority in the Panel 

charter to expand its scope to include 

the topic of supervision standards. We 

are proposing to add several (2 to 4) 

representatives of CAHs as Panel 

members so that all hospitals subject to 

the supervision rules for payment 

would be represented. However, CAHs 

would not participate in deliberations 

about APC assignments under the OPPS, 

as these assignments do not affect 

CAHs. According to customary practice 

for the APC Panel, we are proposing to 

create a supervision subcommittee on 

the Panel, with balanced representation, 

that is charged to evaluate appropriate 

supervision standards for individual 

services and present its deliberations to 

the full Panel. Each member of the full 

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Panel would then vote to decide on the 

Panel’s recommendation to CMS. 

We are proposing to use the APC 

Panel for many reasons. As we 

discussed above, funding is not 

available to CMS at this time to convene 

a new entity. Also, it is not clear that the 

entire resources of a new body are 

necessary to accomplish the 

consideration of service-specific 

supervision standards, especially once 

initial determinations are made 

regarding key services. We are also 

proposing to use the APC Panel because 

we believe it is important to obtain 

advice that carries the weight of a 

Federal advisory recommendation, 

which may have greater legitimacy both 

with stakeholders and with CMS 

compared to the opinions of other types 

of groups. 

In addition to being already 

established and funded, the APC Panel 

would necessarily be inclusive and 

well-balanced because it is subject to 

the FACA rules. Consistent with 

stakeholders’ requests that the review 

entity have balanced representation 

from all hospitals that are subject to the 

supervision rules, the Federal Advisory 

APC Panel would be required by the 

FACA to have balanced membership on 

committees and their subcommittees 

with respect to the topics—in this case, 

supervision—that are under their 

consideration. In addition, the Panel 

incorporates clinical as well as facility, 

administrative, and coding perspectives. 

Commenters have been generally 

favorable towards selection of the APC 

Panel, provided we make the changes to 

the APC Panel that we are proposing in 

this proposed rule. 

2. Review Process 

We are proposing to issue agency 

decisions based on APC Panel 

recommendations through subregulatory guidance. We would use a 

process similar to the one currently 

used to set supervision levels for 

diagnostic services under the MPFS, 

which are adopted for provision of those 

services in the hospital outpatient 

setting. CMS’ decisions (which would 

be based upon the Panel’s 

recommendations) would be posted on 

the OPPS Web site for public review 

and comment, and would be effective 

either in July or January following the 

most recent APC Panel meeting, or only 

in January of the upcoming payment 

year. In setting the diagnostic 

supervision levels under the MPFS, 

there is no provision for public 

comment. However, given the strong 

stakeholder interest in this topic and the 

extent of prior dialogue with the various 

stakeholders, we believe it is important 

to provide some means of notice and 

comment on our proposed decisions 

prior to finalizing them. 

The flexibility of a subregulatory 

process in comparison to rulemaking 

would allow stakeholders to submit 

requests for evaluations of services on a 

more frequent basis (at least twice a year 

at APC Panel meetings) rather than only 

annually, which most commenters 

requested. It also would give CMS the 

ability to respond more rapidly to any 

issues that may arise in access to care 

or patterns of care. Subjecting CMS’ 

decisions to notice and comment 

rulemaking would provide a more 

structured, formal review of decisions, 

but changes could only be requested or 

made once a year due to the annual 

OPPS/ASC rulemaking cycle. 

3. Evaluation Criteria 

To begin evaluating services in CY 

2012, we are proposing to use the same 

APC Panel process that is used to solicit 

services or categories of services from 

stakeholders to construct the agenda to 

solicit potential services for 

consideration of a change in supervision 

level. In addition, as discussed in 

section X.C.2. of this proposed rule, we 

are proposing that CMS would have the 

ability independently to ask the Panel to 

review the supervision level for one or 

more services as necessary. If we receive 

an unmanageable number of requests, 

we are proposing to prioritize requests 

by service volume, total expenditures 

and/or frequency of requests. We also 

are proposing to prioritize services 

requested for review through public 

comment on the CY 2010 and CY 2011 

OPPS/ASC proposed rules. We are 

proposing to require requests to include 

justification for the change in 

supervision level that is sought, 

supported to the extent possible with 

clinical evidence. We also would 

consider these justifications in deciding 

which services to forward to the APC 

Panel for evaluation. 

We are proposing to charge the Panel 

with recommending a supervision level 

(general, direct, or personal) to ensure 

an appropriate level of quality and 

safety for delivery of a given service, as 

defined by a CPT code. The Panel 

should take into consideration the 

context in which the service is 

delivered, that is, the clinical, payment, 

and quality context of a patient 

encounter. In recommending a 

supervision level to CMS, we are 

proposing that the Panel assess whether 

there is a significant likelihood that the 

supervisory practitioner would need to 

reassess the patient and modify 

treatment during or immediately 

following the therapeutic intervention, 

or provide guidance or advice to the 

individual who provides the service. In 

answering that question, the Panel 

would consider— 

• Complexity of the service; 

• Acuity of the patients receiving the 

service; 

• Probability of unexpected or 

adverse patient event; and 

• Expectation of rapid clinical 

changes during the therapeutic service 

or procedure. 

These criteria include, but extend 

well beyond, the likelihood of the need 

to manage medical emergencies during 

or after the provision of the service. As 

we have stated in previous rules (74 FR 

60580 and 75 FR 72007 and 72010), the 

supervisory responsibility is more than 

the mere capacity to respond to an 

emergency. It also includes being 

available to reassess the patient and 

potentially modify treatment as needed 

on a nonemergency basis. It includes the 

ability to redirect or take over 

performance of the service and to issue 

any additional necessary orders. 

We are proposing that, in the event 

there has been a previous consideration 

and decision on the supervision 

standard for a service, we would 

consider the request and, as warranted, 

forward the request to the APC Panel for 

its review. For requests for review of a 

service that has already been 

considered, we are proposing to require 

the requestor to submit new evidence to 

support a change in policy, for example, 

evidence of a change in clinical practice 

patterns due to new techniques or new 

technology. If sufficient new 

information was provided with the 

request, CMS would send the request to 

the APC Panel, and the Panel would 

reconsider the service and make another 

recommendation to CMS, which could 

be the same or a different level of 

supervision than the current level for 

the service. 

Finally, in the interim period while 

we work toward establishing the 

independent review process, we 

anticipate that we will extend the notice 

of nonenforcement of the requirement 

for direct supervision in CAHs and 

small rural hospitals as defined by the 

notice (available on the CMS Web site 

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

HospitalOutpatientPPS/ 

01_overview.asp) another year, through 

CY 2012. The purpose of this proposed 

policy would continue to be to allow 

these facilities time to meet the direct 

supervision standard while we continue 

to deliberate on any policy alternatives. 

Under our current timeline, we would 

not complete policy decisions on many 

key services until sometime in 2012. 

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We note that we have not yet defined 

the terms ‘‘personal supervision’’ or 

‘‘general supervision’’ for the hospital 

outpatient setting, except, as explained 

above, for general supervision in 

relation to extended duration services in 

§ 410.27(a)(1)(v)(A). Because we are 

proposing to allow the independent 

review entity to recommend that CMS 

assign either personal or general 

supervision to other hospital outpatient 

therapeutic services, we are proposing 

to define these terms in the regulations 

at proposed new § 410.27(b)(1)(vi). We 

are proposing to use the definitions 

established for purposes of the MPFS as 

specified at § 410.32(b)(3). Specifically, 

‘‘personal supervision’’ would have the 

same meaning as the definition 

specified at § 410.32(b)(3)(iii) and 

‘‘general supervision’’ would have the 

same meaning as the definition 

specified in § 410.32(b)(3)(i), which is 

the same definition that we established 

for the general supervision portion of an 

extended duration service. 

4. Conditions of Payment and Hospital 

Outpatient Therapeutic Services 

Described by Different Benefit 

Categories 

With respect to the issue of 

application of the payment conditions 

in § 410.27 to services described by 

benefit categories other than section 

1861(s)(2)(B) of the Act, we are 

proposing to amend our regulations to 

clarify our policy. Therapeutic services 

and supplies described by benefit 

categories other than the hospital 

outpatient ‘‘incident to’’ services under 

section 1861(s)(2)(B) of the Act are 

nevertheless subject to the conditions of 

payment in § 410.27 when they are 

furnished to hospital outpatients and 

paid under the OPPS or to CAHs under 

section 1834(g) of the Act. 

We believe that this clarification 

could most readily be accomplished by 

more specifically defining the services 

and supplies described in the regulation 

text to which the requirements at 

§ 410.27 apply. Accordingly, we are 

proposing to revise the description of 

the services and supplies addressed in 

§ 410.27(a) by adding the term 

‘‘therapeutic’’ so that paragraph (a) 

would read, ‘‘Medicare Part B pays for 

therapeutic hospital or CAH services 

and supplies furnished incident to a 

physician’s or nonphysician 

practitioner’s service’’ to outpatients. 

We are proposing to define these 

services, similar to the way they are 

currently defined in Section 20.5, 

Chapter 6, of the Medicare Benefit 

Policy Manual, to mean ‘‘all services 

and supplies furnished to hospital or 

CAH outpatients that are not diagnostic 

services and that aid the physician or 

practitioner in the treatment of the 

patient.’’ We would also add the term 

‘‘therapeutic’’ to the title of § 410.27 so 

that it would read, ‘‘Therapeutic 

outpatient hospital or CAH services and 

supplies incident to a physician’s or 

nonphysician practitioner’s service: 

Conditions.’’ 

We believe it is important that we 

continue to apply the requirements in 

§ 410.27 to all hospital outpatient 

therapeutic services and supplies that 

are paid under the OPPS and to services 

furnished in CAHs that are paid under 

section 1834(g) of the Act. In addition 

to the supervision rules, the payment 

conditions in § 410.27 include rules 

regarding services furnished under 

arrangements and in PBDs. The goals of 

the ‘‘under arrangements’’ and PBD 

rules are different from the safety and 

quality goals of the supervision rules. 

They ensure clinical and financial 

integration between the main hospital 

and any on-campus or off-campus 

departments of hospitals. In particular, 

§ 410.27(a)(1)(iii) subjects hospital 

outpatient services to the requirements 

in § 413.65 for PBDs of hospitals. The 

provider-based regulations in § 413.65 

govern numerous aspects of PBD 

operations including quality assurance, 

accountability to hospital medical 

director staff, licensure, personnel 

management, how far the departments 

can be located from the main hospital, 

and assurance that the departments are 

serving the same population as the main 

provider. Section 410.27(e) subjects 

services to the ‘‘under arrangement’’ 

regulations at § 410.42(a) which govern 

the liabilities of the beneficiary and 

other parties when hospitals contract 

services out. It is important to reiterate 

that § 410.27 is applicable to all hospital 

outpatient therapeutic services. We 

note, for example, that ASCs are not 

permitted to enter into arrangements 

with hospitals to furnish hospital 

outpatient services. We believe we 

should clarify and reinforce our 

longstanding policy that hospitals are 

not permitted to furnish therapeutic 

services or surgery under arrangement 

with ASCs because under 

§ 413.65(a)(1)(ii)(A), CMS does not make 

provider-based determinations 

regarding ASCs and under 

§ 410.27(a)(1)(iii) therapeutic services 

must be furnished in provider-based 

space. Moreover, a hospital is not 

permitted to furnish services to hospital 

outpatients under arrangements with an 

ASC because ASCs are paid under 

section 1833(i)(2)(D) of the Act (the ASC 

payment system), not under section 

1833(t) of the Act (the OPPS payment 

system). As a result, an ASC could not 

be a provider-based department of a 

hospital for purposes of § 410.27. If 

§ 410.27 did not apply, an ASC could 

furnish hospital outpatient therapeutic 

services under arrangements and obtain 

payment at the OPPS rate rather than 

the ASC rate. This practice would 

distort the financial incentives within 

those payment systems, and would be 

contrary to the advice and 

determinations that have historically 

been made by CMS and other 

enforcement bodies such as the Office of 

the Inspector General. 

In addition, § 410.27(a)(1)(ii) subjects 

hospital outpatient services to the 

incident to rules that CMS has 

historically applied to all therapeutic 

services. As we discussed above, these 

rules ensure that services are ordered by 

a physician (or appropriate 

nonphysician practitioner) and that he 

or she is directly involved in the 

delivery of care. Sections 410.27(b) and 

(c) subject services to other significant 

rules governing drugs and biologicals 

and emergency services. 

Additionally, we believe that there is 

a similar level of clinical risk in the 

therapeutic hospital outpatient services 

covered under other benefit categories 

that are not explicitly defined as 

‘‘incident to’’ services. For example, 

stereotactic radiosurgery (a radiation 

therapy service under section 1861(s)(4) 

of the Act) is a high risk and technically 

demanding surgical procedure. We do 

not believe that the current 

requirements under § 410.27 regarding 

supervision, under arrangement, 

provider-based, and other aspects of 

service, were intended to apply only to 

a subset of hospital outpatient 

therapeutic services and supplies, or 

that the agency ever intended to omit 

large classes of services that are 

routinely furnished to hospital 

outpatients from being governed by this 

regulation. 

5. Technical Corrections to the 

Supervision Standards for Hospital 

Outpatient Therapeutic Services 

Furnished in Hospitals or CAHs 

We recently noted that the text of 

§§ 410.27(b) and (c) includes crossreferences to section § 410.168 of the 

regulations, which is obsolete. We 

believe that § 410.27(b) refers to 

§ 410.168 in error and should instead 

reference § 410.29 (Limitations on drugs 

and biologicals). We are proposing to 

correct § 410.27(b) so that it crossreferences § 410.29. It would then read, 

‘‘Drugs and biological are also subject to 

the limitations specified in § 410.29.’’ In 

addition, we are proposing to update 

§ 410.27(c) to cross-reference the 

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sections of the regulation that have 

replaced § 410.168, that is, Part 424, 

Subparts G and H. For this update, we 

are proposing to revise paragraph (c) to 

read, ‘‘Rules on emergency services 

furnished to outpatients by 

nonparticipating hospitals are specified 

in subpart G of Part 424 of this chapter’’ 

and to add a new paragraph (d) to read, 

‘‘Rules on emergency services furnished 

to outpatients in a foreign country are 

specified in subpart H of Part 424 of this 

chapter’’. Accordingly, we are proposing 

to redesignate the existing paragraphs 

(d) through (f) of § 410.27 as paragraphs 

(e) through (g), respectively. 

In addition, we noted that CAHs are 

not specifically named in the definition 

of nonsurgical extended duration 

therapeutic services at 

§ 410.27(a)(1)(iv)(E). We are making a 

technical correction to insert the words 

‘‘or CAH’’ after ‘‘hospital’’ in this 

paragraph. This is the same technical 

correction that we made throughout 

§ 410.27 in the CY 2010 OPPS/ASC final 

rule with comment period, discussed 

above. This technical correction clarifies 

that CAHs are subject to all of the 

requirements of § 410.27 in the same 

manner as all other types of hospitals. 

6. Summary 

In summary, we are proposing to 

establish the Federal Advisory APC 

Panel as an independent review body 

that would evaluate individual 

outpatient therapeutic services for 

potential assignment by CMS of general 

(lower) or personal (higher) supervision. 

We are proposing to amend the APC 

Panel charter to render the Panel more 

appropriate for this task by expanding 

its scope to include the topic of 

supervision. We also are proposing to 

add two to four members to the Panel 

who would be representative of CAHs, 

so that there is broad representation of 

the types of hospitals that are subject to 

the supervision rules for payment. We 

are proposing to use the standard APC 

Panel protocols with respect to 

frequency of meetings and receiving 

requests for evaluation and 

reconsideration of services. However, 

CMS’ decisions based on the Panel’s 

recommendations would not be subject 

to notice and comment rulemaking, in 

contrast to recommendations by the 

Panel on issues other than supervision. 

We are proposing several means of 

prioritizing requests for evaluations, 

particularly if the Panel agenda could 

not accommodate all timely requests at 

a particular meeting. We also are 

proposing clinical and other evaluation 

criteria that the Panel would use in 

recommending a supervision level that 

would apply at the individual CPT code 

level. As we have not yet defined 

personal supervision or general 

supervision for all hospital outpatient 

therapeutic services, we are proposing 

definitions for these terms in this 

proposed rule. 

We anticipate extending the notice of 

nonenforcement for direct supervision 

in CAHs and small rural hospitals as 

defined by the notice through CY 2012, 

because, even if the new APC Panel 

review process is adopted, we likely 

will not have finalized our policy 

decisions on many key services that are 

reviewed during that year. In addition, 

we are proposing to clarify our policy 

that the requirements under § 410.27 

apply to outpatient therapeutic services 

and supplies furnished in hospitals and 

in CAHs, which includes services and 

supplies described by Medicare benefit 

categories other than section 

1861(s)(2)(B) of the Act. To that end, we 

are proposing to redefine the services 

described in that section to clarify the 

nature and scope of the included 

services. 

XI. Proposed OPPS Payment Status and 

Comment Indicators 

A. Proposed OPPS Payment Status 

Indicator Definitions 

Payment status indicators (SIs) that 

we assign to HCPCS codes and APCs 

play an important role in determining 

payment for services under the OPPS. 

They indicate whether a service 

represented by a HCPCS code is payable 

under the OPPS or another payment 

system and also whether particular 

OPPS policies apply to the code. The 

proposed CY 2012 status indicator 

assignments for APCs and HCPCS codes 

are shown in Addendum A and 

Addendum B, respectively on the CMS 

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

HospitalOutpatientPPS. We note that, in 

the past, a majority of the Addenda 

referred to throughout the preamble of 

our OPPS/ASC proposed and final rules 

appeared in the printed version of the 

Federal Register as part of the annual 

rulemakings. However, beginning with 

this CY 2012 proposed rule, the 

Addenda will no longer appear in the 

printed version of the OPPS/ASC rules 

that are found in the Federal Register. 

Instead, these Addenda will be 

published and available only via the 

Internet on the CMS Web site at: 

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

HospitalOutpatientPPS. 

For CY 2012, we are not proposing to 

make any changes to the definitions of 

status indicators that were listed in 

Addendum D1 of the CY 2011 OPPS/ 

ASC final rule with comment period. 

The proposed CY 2012 status indicators 

and their definitions are listed in the 

tables under sections XI.A.1., 2., 3., and 

4. of this proposed rule. 

1. Proposed Payment Status Indicators 

to Designate Services That Are Paid 

under the OPPS 

Indicator Item/code/service OPPS payment status 

G ......................... Pass-Through Drugs and Biologicals ........................ Paid under OPPS; separate APC payment. 

H .......................... Pass-Through Device Categories ............................. Separate cost-based pass-through payment; not subject to copayment. 

K .......................... Nonpass-Through Drugs and Nonimplantable 

Biologicals, including Therapeutic Radiopharmaceuticals.

Paid under OPPS; separate APC payment. 

N .......................... Items and Services Packaged into APC Rates ........ Paid under OPPS; payment is packaged into payment for other services. Therefore, there is no separate APC payment. 

P .......................... Partial Hospitalization ................................................ Paid under OPPS; per diem APC payment. 

Q1 ....................... STVX-Packaged Codes ............................................. Paid under OPPS; Addendum B displays APC assignments when 

services are separately payable. 

(1) Packaged APC payment if billed on the same date of service as a 

HCPCS code assigned status indicator ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ or ‘‘X.’’ 

(2) In all other circumstances, payment is made through a separate 

APC payment. 

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Indicator Item/code/service OPPS payment status 

Q2 ....................... T-Packaged Codes .................................................... Paid under OPPS; Addendum B displays APC assignments when 

services are separately payable. 

(1) Packaged APC payment if billed on the same date of service as a 

HCPCS code assigned status indicator ‘‘T.’’ 

(2) In all other circumstances, payment is made through a separate 

APC payment. 

Q3 ....................... Codes that may be paid through a composite APC Paid under OPPS; Addendum B displays APC assignments when 

services are separately payable. Addendum M displays composite 

APC assignments when codes are paid through a composite APC. 

(1) Composite APC payment based on OPPS composite-specific 

payment criteria. Payment is packaged into a single payment for 

specific combinations of services. 

(2) In all other circumstances, payment is made through a separate 

APC payment or packaged into payment for other services. 

R .......................... Blood and Blood Products ......................................... Paid under OPPS; separate APC payment. 

S .......................... Significant Procedure, Not Discounted When Multiple.Paid under OPPS; separate APC payment. 

T .......................... Significant Procedure, Multiple Reduction Applies ... Paid under OPPS; separate APC payment. 

U .......................... Brachytherapy Sources ............................................. Paid under OPPS; separate APC payment. 

V .......................... Clinic or Emergency Department Visit ...................... Paid under OPPS; separate APC payment. 

X .......................... Ancillary Services ...................................................... Paid under OPPS; separate APC payment. 

We are not proposing any changes to 

the definitions of status indicators listed 

above for the CY 2012 OPPS. The 

proposed CY 2012 status indicators and 

their definitions are displayed in both 

the table above and in Addendum D1 on 

the CMS Web site at: http:// 

www.cms.hhs.gov/ 

HospitalOutpatientPPS. 

2. Proposed Payment Status Indicators 

to Designate Services That Are Paid 

under a Payment System Other Than the 

OPPS 

We are not proposing to make any 

changes to the definitions of status 

indicators listed below for the CY 2012 

OPPS. 

Indicator Item/code/service OPPS payment status 

A ................ Services furnished to a hospital outpatient that are paid under a 

fee schedule or payment system other than OPPS, for example.

Not paid under OPPS. Paid by fiscal intermediaries/MACs 

under a fee schedule or payment system other than OPPS. 

Services are subject to the deductible and coinsurance unless indicated otherwise. 

• Ambulance Services 

• Clinical Diagnostic Laboratory Services Not subject to deductible or coinsurance. 

• Non-Implantable Prosthetic and Orthotic Devices 

• EPO for ESRD Patients 

• Physical, Occupational, and Speech Therapy 

• Routine Dialysis Services for ESRD Patients Provided in a 

Certified Dialysis Unit of a Hospital 

• Diagnostic Mammography 

• Screening Mammography Not subject to deductible or coinsurance. 

C ................ Inpatient Procedures ..................................................................... Not paid under OPPS. Admit patient. Bill as inpatient. 

F ................ Corneal Tissue Acquisition; Certain CRNA Services; and Hepatitis B Vaccines.Not paid under OPPS. Paid at reasonable cost. 

L ................ Influenza Vaccine; Pneumococcal Pneumonia Vaccine .............. Not paid under OPPS. Paid at reasonable cost; not subject to 

deductible or coinsurance. 

M ............... Items and Services Not Billable to the Fiscal Intermediary/MAC Not paid under OPPS. 

Y ................ Non-Implantable Durable Medical Equipment .............................. Not paid under OPPS. All institutional providers other than 

home health agencies bill to DMERC. 

The proposed CY 2012 status 

indicators and their definitions 

displayed in the table above are also 

displayed in Addendum D1 on the CMS 

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

HospitalOutpatientPPS. 

3. Proposed Payment Status Indicators 

to Designate Services That Are Not 

Recognized under the OPPS But That 

May Be Recognized by Other 

Institutional Providers 

We are not proposing changes to the 

definitions of status indicators listed 

below for the CY 2012 OPPS. 

Indicator Item/code/service OPPS payment status 

B ................ Codes that are not recognized by OPPS when submitted on an 

outpatient hospital Part B bill type (12x and13x).

Not paid under OPPS. 

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Indicator Item/code/service OPPS payment status 

• May be paid by fiscal intermediaries/MACs when submitted 

on a different bill type, for example, 75x (CORF), but not paid 

under OPPS. 

• An alternate code that is recognized by OPPS when submitted on an outpatient hospital Part B bill type (12x and 13x) 

may be available. 

The proposed status indicators and 

their definitions listed in the table above 

are also displayed in Addendum D1 on 

the CMS Web site at: http:// 

www.cms.hhs.gov/ 

HospitalOutpatientPPS. 

4. Proposed Payment Status Indicators 

to Designate Services That Are Not 

Payable by Medicare on Outpatient 

Claims 

We are not proposing changes to the 

definitions of payment status indicators 

listed below for the CY 2012 OPPS. 

Indicator Item/code/service OPPS payment status 

D ................. Discontinued Codes ..................................................................... Not paid under OPPS or any other Medicare payment system. 

E .................. Items, Codes, and Services: 

• That are not covered by any Medicare outpatient benefit 

based on statutory exclusion.

Not paid by Medicare when submitted on outpatient claims 

(any outpatient bill type). 

• That are not covered by any Medicare outpatient benefit 

for reasons other than statutory exclusion.

• That are not recognized by Medicare for outpatient 

claims; alternate code for the same item or service may 

be available.

• For which separate payment is not provided on outpatient claims.

The proposed CY 2012 payment 

status indicators and their definitions 

listed in the table above are also 

displayed in Addendum D1 on the CMS 

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

HospitalOutpatientPPS. 

B. Proposed Comment Indicator 

Definitions 

For the CY 2012 OPPS, we are 

proposing to use the same two comment 

indicators that are in effect for the CY 

2011 OPPS. 

• ‘‘CH’’—Active HCPCS codes in 

current and next calendar year; status 

indicator and/or APC assignment have 

changed or active HCPCS code that will 

be discontinued at the end of the 

current calendar year. 

• ‘‘NI’’—New code for the next 

calendar year or existing code with 

substantial revision to its code 

descriptor in the next calendar year as 

compared to current calendar year, 

interim APC assignment; comments will 

be accepted on the interim APC 

assignment for the new code. 

We are using the ‘‘CH’’ indicator in 

this proposed rule to call attention to 

proposed changes in the payment status 

indicator and/or APC assignment for 

HCPCS codes for CY 2012 compared to 

their assignment as of June 30, 2011. We 

believe that using the ‘‘CH’’ indicator in 

this proposed rule will help facilitate 

the public’s review of the changes that 

we are proposing for CY 2012. 

We are proposing to use the ‘‘CH’’ 

comment indicator in the CY 2012 

OPPS/ASC final rule with comment 

period to indicate HCPCS codes for 

which the status indicator or APC 

assignment, or both, would change in 

CY 2012 compared to their assignment 

as of December 31, 2011. We believe 

that using the ‘‘CH’’ indicator in the CY 

2012 OPPS/ASC final rule with 

comment period will facilitate the 

public’s review of the changes that we 

will make for CY 2012. The use of the 

comment indicator ‘‘CH’’ in association 

with a composite APC indicates that the 

configuration of the composite APC has 

changed from the CY 2012 OPPS/ASC 

final rule with comment period. 

We are proposing to continue our 

current policy regarding the use of 

comment indicator ‘‘NI.’’ 

Any existing HCPCS code numbers 

with substantial revisions to the code 

descriptors for CY 2012 compared to the 

CY 2011 descriptors will be labeled 

with comment indicator ‘‘NI’’ in 

Addendum B to the CY 2012 OPPS/ASC 

final rule with comment period. 

However, in order to receive the 

comment indicator ‘‘NI,’’ the CY 2012 

revision to the code descriptor 

(compared to the CY 2011 descriptor) 

must be significant such that the new 

code descriptor describes a new service 

or procedure for which the OPPS 

treatment may change. We use comment 

indicator ‘‘NI’’ to indicate that these 

HCPCS codes are open to comment on 

the CY 2012 OPPS/ASC final rule with 

comment period. Like all codes labeled 

with comment indicator ‘‘NI,’’ we will 

respond to public comments and 

finalize their OPPS treatment in the CY 

2013 OPPS/ASC final rule with 

comment period. 

In accordance with our usual practice, 

CPT and Level II HCPCS code numbers 

that are new for CY 2012 will also be 

labeled with comment indicator ‘‘NI’’ in 

Addendum B to the CY 2012 OPPS/ASC 

final rule with comment period. 

Only HCPCS codes with comment 

indicator ‘‘NI’’ in the CY 2012 OPPS/ 

ASC final rule with comment period 

will be subject to comment. HCPCS 

codes that do not appear with comment 

indicator ‘‘NI’’ in the CY 2012 OPPS/ 

ASC final rule with comment period 

will not be open to public comment, 

unless we specifically request 

additional comments elsewhere in the 

final rule with comment period. The CY 

2012 treatment of HCPCS codes that 

appear in the CY 2012 OPPS/ASC final 

rule with comment period to which 

comment indicator ‘‘NI’’ is not 

appended will be open to public 

comment during the comment period 

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for this proposed rule, and we will 

respond to those comments in the CY 

2012 OPPS/ASC final rule with 

comment period. 

For the CY 2012 OPPS, we are not 

proposing any changes to the definitions 

of the OPPS comment indicators for CY 

2012. Their proposed definitions are 

listed in Addendum D2 on the CMS 

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

HospitalOutpatientPPS. 

XII. OPPS Policy and Payment 

Recommendations 

A. MedPAC Recommendations 

MedPAC was established under 

section 1805 of the Act to advise the 

U.S. Congress on issues affecting the 

Medicare program. As required under 

the statute, MedPAC submits reports to 

Congress not later than March and June 

of each year that contain its Medicare 

payment policy recommendations. This 

section describes recent 

recommendations relevant to the OPPS 

that have been made by MedPAC. 

The March 1, 2011 MedPAC ‘‘Report 

to Congress: Medicare Payment Policy’’ 

included the following recommendation 

relating to the Medicare hospital IPPS 

and, in part, to the Medicare hospital 

OPPS: 

Recommendation 3: ‘‘The Congress 

should increase payment rates for the 

acute care hospital inpatient and 

outpatient prospective payment systems 

in 2012 by 1 percent. The Congress 

should also require the Secretary of 

Health and Human Services to make 

adjustments to inpatient payment rates 

in future years to fully recover all 

overpayments due to documentation 

and coding improvements.’’ (page 60) 

MedPAC further stated that: ‘‘For 

outpatient hospital services, the 

Commission is concerned that 

significant payment disparities among 

Medicare’s ambulatory care settings 

(hospital outpatient departments, 

ambulatory surgical centers, and 

physician offices) for similar services 

are fostering undesirable financial 

incentives. Physician practices and 

ambulatory surgical centers are being 

reorganized as hospital outpatient 

entities in part to receive higher 

reimbursements. The Commission 

believes that Medicare should seek to 

pay similar amounts for similar services, 

taking into account differences in 

quality of care and in the relative risks 

of the patient populations. The 

Commission is concerned by the trend 

to reorganize for higher reimbursement 

and will examine this issue. However, 

in the interim, the modest update of 1 

percent is warranted in the hospital 

outpatient setting to slow the growing 

payment rate disparities among 

ambulatory care settings.’’ (page 61) 

CMS Response: We note that 

MedPAC’s recommendation is for the 

Congress to increase IPPS and OPPS 

payment rates by 1 percent in 2010. 

Absent action by Congress, we are 

proposing to follow the statutory 

requirements that govern the amount of 

the annual OPD fee schedule increase 

factor to the OPPS for CY 2012. We 

discuss the proposed CY 2012 OPD fee 

schedule increase factor in section II.B. 

of this proposed rule. 

We look forward to reviewing the 

results of MedPAC’s examination of 

what it perceives as a trend towards 

reorganization of ambulatory surgical 

centers and physician offices as hospital 

outpatient departments to maximize 

program payment. 

The full March 2011 MedPAC report 

can be downloaded from MedPAC’s 

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

documents/Mar11_EntireReport.pdf. 

B. APC Panel Recommendations 

Recommendations made by the APC 

Panel meeting held on February 28 and 

March 1, 2011 are discussed in the 

sections of this proposed rule that 

correspond to topics addressed by the 

APC Panel. The reports and 

recommendations from the APC Panel’s 

February 28 and March 1, 2011 meeting 

regarding payment under the OPPS for 

CY 2012 are available on the CMS Web 

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

AdvisoryPanelonAmbulatory

PaymentClassificationGroups.asp. 

C. OIG Recommendations 

The mission of the Office of the 

Inspector General (OIG), as mandated by 

Public Law 95–452, as amended, is to 

protect the integrity of the U.S. 

Department of Health and Human 

Services (HHS) programs, as well as the 

health and welfare of beneficiaries 

served by those programs. This statutory 

mission is carried out through a 

nationwide network of audits, 

investigations, and inspections. 

On October 22, 2010, the OIG 

published a memorandum report 

entitled ‘‘Payment for Drugs under the 

Hospital Outpatient Prospective 

Payment System’’ (OIG–03–09–00420). 

The report may be viewed on the Web 

site at: http://oig.hhs.gov/oei/reports/ 

oei-03-09-00420.pdf. The OIG did not 

make any recommendations to CMS 

regarding Medicare payment for drugs 

and biologicals under the OPPS. 

CMS Response: We appreciate the 

work of the OIG regarding the payment 

for drugs under the OPPS, and we will 

take the findings in its report into 

consideration in the development of our 

proposed payment policy for CY 2012. 

XIII. Proposed Updates to the 

Ambulatory Surgical Center (ASC) 

Payment System 

A. Background 

1. Legislative Authority for the ASC 

Payment System 

Section 1832(a)(2)(F)(i) of the Act 

provides that benefits under Medicare 

Part B include payment for facility 

services furnished in connection with 

surgical procedures specified by the 

Secretary that are performed in an 

Ambulatory Surgical Center (ASC). To 

participate in the Medicare program as 

an ASC, a facility must meet the 

standards specified in section 

1832(a)(2)(F)(i) of the Act, which are set 

forth in 42 CFR Part 416, Subpart B and 

Subpart C of our regulations. The 

regulations at 42 CFR Part 416, Subpart 

B describe the general conditions and 

requirements for ASCs, and the 

regulations at Subpart C explain the 

specific conditions for coverage for 

ASCs. 

Section 141(b) of the Social Security 

Act Amendments of 1994, Public Law 

103–432, required establishment of a 

process for reviewing the 

appropriateness of the payment amount 

provided under section 1833(i)(2)(A)(iii) 

of the Act for intraocular lenses (IOLs) 

that belong to a class of new technology 

intraocular lenses (NTIOLs). That 

process was the subject of a final rule 

entitled ‘‘Adjustment in Payment 

Amounts for New Technology 

Intraocular Lenses Furnished by 

Ambulatory Surgical Centers,’’ 

published on June 16, 1999, in the 

Federal Register (64 FR 32198). 

Section 626(b) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA), 

Public Law 108–173, added 

subparagraph (D) to section 1833(i)(2) of 

the Act, which required the Secretary to 

implement a revised ASC payment 

system to be effective not later than 

January 1, 2008. Section 626(c) of the 

MMA amended section 1833(a)(1) of the 

Act by adding new subparagraph (G), 

which requires that, beginning with 

implementation of the revised ASC 

payment system, payment for surgical 

procedures furnished in ASCs shall be 

80 percent of the lesser of the actual 

charge for the services or the amount 

determined by the Secretary under the 

revised payment system. 

Section 109(b) of the Medicare 

Improvements and Extension Act of 

2006 of the Tax Relief and Health Care 

Act of 2006 (MIEA–TRHCA), Public 

Law 109–432, amended section 1833(i) 

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of the Act by redesignating clause (iv) as 

clause (v) and adding a new clause (iv) 

to paragraph (2)(D) and by adding new 

paragraph (7). 

Section 1833(i)(2)(D)(iv) of the Act 

authorizes, but does not require, the 

Secretary to implement the revised ASC 

payment system ’’ in a manner so as to 

provide for a reduction in any annual 

update for failure to report on quality 

measures in accordance with paragraph 

(7).’’ Section 1833(i)(7)(A) of the Act 

states that the Secretary may provide 

that any ASC that does not submit 

quality measures to the Secretary in 

accordance with paragraph (7) will 

incur a 2.0 percentage point reduction 

to any annual increase provided under 

the revised ASC payment system for 

such year. 

Section 1833(i)(7)(B) of the Act 

provides that, ‘‘[e]xcept as the Secretary 

may otherwise provide,’’ the hospital 

outpatient quality data provisions of 

subparagraphs (B) through (E) of section 

1833(t)(17) of the Act, added by section 

109(a) of the MIEA–TRHCA, shall apply 

to ASCs in a similar manner to the 

manner in which they apply under 

these paragraphs to hospitals under the 

Hospital OQR Program. 

Sections 4104 and 10406 of the 

Affordable Care Act, Public Law 111– 

148, amended section 1833(a)(1) and 

(b)(1) of the Act to waive the 

coinsurance and the Part B deductible 

for those preventive services under 

section 1861(ddd)(3)(A) of the Act as 

described in section 1861(ww)(2) of the 

Act (excluding electrocardiograms) that 

are recommended by the United States 

Preventive Services Task Force 

(USPSTF) with a grade of A or B for any 

indication or population and that are 

appropriate for the individual. Section 

4104(c) of the Affordable Care Act 

amended section 1833(b)(1) of the Act to 

waive the Part B deductible for 

colorectal cancer screening tests that 

become diagnostic. These provisions 

apply to these items and services 

furnished in an ASC on or after January 

1, 2011. 

Section 3401(k) of the Affordable Care 

Act amended section 1833(i)(2)(D) of the 

Act to require that, effective for CY 2011 

and subsequent years, any annual 

update under the ASC payment system 

be reduced by a productivity 

adjustment, which is equal to the 10- 

year moving average of changes in 

annual economy-wide private nonfarm 

business multi-factor productivity (as 

projected by the Secretary for the 10- 

year period ending with the applicable 

fiscal year, year, cost reporting period, 

or other annual period). Application of 

this productivity adjustment to the ASC 

payment system may result in the 

update to the ASC payment system 

being less than zero for a year and may 

result in payment rates under the ASC 

payment system for a year being less 

than such payment rates for the 

preceding year. 

For a detailed discussion of the 

legislative history related to ASCs, we 

refer readers to the June 12, 1998 

proposed rule (63 FR 32291 through 

32292). 

2. Prior Rulemaking 

On August 2, 2007, we published in 

the Federal Register (72 FR 42470) the 

final rule for the revised ASC payment 

system, effective January 1, 2008 (the 

‘‘August 2, 2007 final rule’’). In that 

final rule, we revised our criteria for 

identifying surgical procedures that are 

eligible for Medicare payment when 

furnished in ASCs and adopted the 

method we would use to set payment 

rates for ASC covered surgical 

procedures and covered ancillary 

services furnished in association with 

those covered surgical procedures 

beginning in CY 2008. We also 

established a policy for treating new and 

revised Healthcare Common Procedure 

Coding System (HCPCS) and Current 

Procedural Terminology (CPT) codes 

under the ASC payment system. This 

policy is consistent with the OPPS to 

the extent possible (72 FR 42533). 

In addition, we established a standard 

ASC ratesetting methodology that bases 

payment for most services on the list of 

ASC covered surgical procedures on the 

OPPS relative payment weight 

multiplied by the ASC conversion 

factor. We also established 

modifications to this methodology for 

subsets of services, such as deviceintensive services (where the estimated 

device portion of the ASC payment is 

the same as that paid under the OPPS) 

and services that are predominantly 

performed in the office setting and 

covered ancillary radiology services 

(where ASC payment may be based on 

the MPFS non-facility practice expense 

(PE) Relative Value Units (RVUs)). 

Additionally, we established a policy 

for updating the conversion factor, the 

relative payment weights, and the ASC 

payment rates on an annual basis. We 

also annually update the list of 

procedures for which Medicare does not 

make an ASC payment. 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66827), we 

updated and finalized the CY 2008 ASC 

rates and lists of covered surgical 

procedures and covered ancillary 

services. We also made regulatory 

changes to 42 CFR Parts 411, 414, and 

416 related to our final policies to 

provide payments to physicians who 

perform non-covered ASC procedures in 

ASCs based on the facility PE RVUs, to 

exclude covered ancillary radiology 

services and covered ancillary drugs 

and biologicals from the categories of 

designated health services (DHS) that 

are subject to the physician self-referral 

prohibition, and to reduce ASC 

payments for surgical procedures when 

the ASC receives full or partial credit 

toward the cost of the implantable 

device. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68722), we 

updated and finalized the CY 2009 ASC 

rates and lists of covered surgical 

procedures and covered ancillary 

services. 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60596), we 

updated and finalized the CY 2010 ASC 

rates and lists of covered surgical 

procedures and covered ancillary 

services. We also corrected some of 

those ASC rates in a correction notice 

published in the Federal Register on 

December 31, 2009 (74 FR 69502). In 

that correction notice, we revised the 

ASC rates to reflect changes in the 

MPFS conversion factor and PE RVUs 

listed for some CPT codes in Addendum 

B to the CY 2010 MPFS final rule with 

comment period (74 FR 62017), which 

were incorrect due to methodological 

errors and were subsequently corrected 

in a correction notice to that final rule 

with comment period (74 FR 65449). We 

also published a second correction 

notice in the Federal Register, to 

address changes to the ASC rates 

resulting from corrections to the PE 

RVUs identified subsequent to 

publication of the December 31, 2009 

correction notice (75 FR 45700). Finally, 

we published a notice in the Federal 

Register, to reflect changes to CY 2010 

ASC payment rates for certain ASC 

services due to changes to the OPPS and 

MPFS under the Affordable Care Act 

and to reflect technical changes to the 

ASC payment rates announced in prior 

correction notices (75 FR 45769). 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71800), we 

updated and finalized the CY 2011 ASC 

rates and lists of covered surgical 

procedures and covered ancillary 

services. We corrected some of the ASC 

rates that were published in Addenda 

AA and BB, as well as errors in the 

preamble text, in a correction notice 

published in the Federal Register on 

March 11, 2011 (76 FR 13292). The 

corrections to the ASC Addenda were 

primarily due to changes to the MPFS 

conversion factor and PE RVUs listed 

for some CPT codes in Addendum B 

and Addendum C to the MPFS for CY 

2011 which, in turn, affected officemstockstill on DSK4VPTVN1PROD with PROPOSALS2

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based and ancillary radiology payment 

under the ASC payment system. 

Following legislative changes to the 

MPFS for CY 2011 associated with 

passage of section 101 of the Medicare 

and Medicaid Extenders Act of 2010 

that occurred after publication of the CY 

2011 OPPS/ASC and MPFS final rules 

with comment periods, we posted 

revised ASC Addenda on our Web site 

to reflect associated changes to officebased and ancillary radiology payment 

under the ASC payment system. 

3. Policies Governing Changes to the 

Lists of Codes and Payment Rates for 

ASC Covered Surgical Procedures and 

Covered Ancillary Services 

The August 2, 2007 final rule 

established our policies for determining 

which procedures are ASC covered 

surgical procedures and covered 

ancillary services. Under §§ 416.2 and 

416.166 of the regulations, subject to 

certain exclusions, covered surgical 

procedures are surgical procedures that 

are separately paid under the OPPS, that 

would not be expected to pose a 

significant risk to beneficiary safety 

when performed in an ASC, and that 

would not be expected to require active 

medical monitoring and care at 

midnight following the procedure 

(‘‘overnight stay’’). We adopted this 

standard for defining which surgical 

procedures are covered surgical 

procedures under the ASC payment 

system as an indicator of the complexity 

of the procedure and its appropriateness 

for Medicare payment in ASCs. We use 

this standard only for purposes of 

evaluating procedures to determine 

whether or not they are appropriate for 

Medicare beneficiaries in ASCs. We 

define surgical procedures as those 

described by Category I CPT codes in 

the surgical range from 10000 through 

69999, as well as those Category III CPT 

codes and Level II HCPCS codes that 

crosswalk or are clinically similar to 

ASC covered surgical procedures (72 FR 

42478). We note that we added over 800 

surgical procedures to the list of covered 

surgical procedures for ASC payment in 

CY 2008, the first year of the revised 

ASC payment system, based on the 

criteria for payment that we adopted in 

the August 2, 2007 final rule as 

described above in this section. 

In the August 2, 2007 final rule, we 

also established our policy to make 

separate ASC payments for the 

following ancillary items and services 

when they are provided integral to ASC 

covered surgical procedures: 

Brachytherapy sources; certain 

implantable items that have passthrough status under the OPPS; certain 

items and services that we designate as 

contractor-priced, including, but not 

limited to, procurement of corneal 

tissue; certain drugs and biologicals for 

which separate payment is allowed 

under the OPPS; and certain radiology 

services for which separate payment is 

allowed under the OPPS. These covered 

ancillary services are specified in 

§ 416.164(b) and, as stated previously, 

are eligible for separate ASC payment 

(72 FR 42495). Payment for ancillary 

items and services that are not paid 

separately under the ASC payment 

system is packaged into the ASC 

payment for the covered surgical 

procedure. 

We update the lists of, and payment 

rates for, covered surgical procedures 

and covered ancillary services in 

conjunction with the annual proposed 

and final rulemaking process to update 

the OPPS and the ASC payment system 

(§ 416.173; 72 FR 42535). In addition, as 

discussed in detail in section XIII.B. of 

this proposed rule, because we base 

ASC payment policies for covered 

surgical procedures, drugs, biologicals, 

and certain other covered ancillary 

services on the OPPS payment policies, 

we also provide quarterly updates for 

ASC services throughout the year 

(January, April, July, and October). The 

updates are to implement newly created 

Level II HCPCS and Category III CPT 

codes for ASC payment and to update 

the payment rates for separately paid 

drugs and biologicals based on the most 

recently submitted ASP data. New 

Category I CPT codes, except vaccine 

codes, are released only once a year and, 

therefore, are implemented through the 

January quarterly update. New Category 

I CPT vaccine codes are released twice 

a year and thus are implemented 

through the January and July quarterly 

updates. 

In our annual updates to the ASC list 

of, and payment rates for, covered 

surgical procedures and covered 

ancillary services, we undertake a 

review of excluded surgical procedures 

(including all procedures newly 

proposed for removal from the OPPS 

inpatient list), new procedures, and 

procedures for which there is revised 

coding, to identify any that we believe 

meet the criteria for designation as ASC 

covered surgical procedures or covered 

ancillary services. Updating the lists of 

covered surgical procedures and 

covered ancillary services, as well as 

their payment rates, in association with 

the annual OPPS rulemaking cycle is 

particularly important because the 

OPPS relative payment weights and, in 

some cases, payment rates, are used as 

the basis for the payment of covered 

surgical procedures and covered 

ancillary services under the revised ASC 

payment system. This joint update 

process ensures that the ASC updates 

occur in a regular, predictable, and 

timely manner. 

B. Proposed Treatment of New Codes 

1. Proposed Process for Recognizing 

New Category I and Category III CPT 

Codes and Level II HCPCS Codes 

CPT and Level II HCPCS codes are 

used to report procedures, services, 

items, and supplies under the ASC 

payment system. Specifically, we 

recognize the following codes on ASC 

claims: (1) Category I CPT codes, which 

describe medical services and 

procedures; (2) Category III CPT codes, 

which describe new and emerging 

technologies, services, and procedures; 

and (3) Level II HCPCS codes, which are 

used primarily to identify products, 

supplies, temporary procedures, and 

services not described by CPT codes. 

CPT codes are established by the 

American Medical Association (AMA) 

and the Level II HCPCS codes are 

established by the CMS HCPCS 

Workgroup. These codes are updated 

and changed throughout the year. CPT 

and HCPCS code changes that affect 

ASCs are addressed both through the 

ASC quarterly update Change Requests 

(CRs) and through the annual 

rulemaking cycle. CMS releases new 

Level II HCPCS codes to the public or 

recognizes the release of new CPT codes 

by the AMA and makes these codes 

effective (that is, the codes are 

recognized on Medicare claims) outside 

of the formal rulemaking process via 

ASC quarterly update CRs. This 

quarterly process offers ASCs access to 

codes that may more accurately describe 

items or services furnished and/or 

provides payment or more accurate 

payment for these items or services in 

a more timely manner than if we waited 

for the annual rulemaking process. We 

solicit comments on the new codes 

recognized for ASC payment and 

finalize our proposals related to these 

codes through our annual rulemaking 

process. 

We finalized a policy in the August 2, 

2007 final rule to evaluate each year all 

new Category I and Category III CPT 

codes and Level II HCPCS codes that 

describe surgical procedures, and to 

make preliminary determinations in the 

annual OPPS/ASC final rule with 

comment period regarding whether or 

not they meet the criteria for payment 

in the ASC setting as covered surgical 

procedures and, if so, whether they are 

office-based procedures (72 FR 42533 

through 42535). In addition, we identify 

new codes as ASC covered ancillary 

services based upon the final payment 

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policies of the revised ASC payment 

system. 

In Table 41 below, we summarize our 

proposed process for updating the 

HCPCS codes recognized under the ASC 

payment system. 

TABLE 41—PROPOSED COMMENT TIMEFRAME FOR NEW HCPCS CODES

OPPS/ASC quarterly 

update CR Type of code Effective date Comments sought When finalized 

April 1, 2011 ............. Level II HCPCS codes ............ April 1, 2011 ........... CY 2012 OPPS/ASC proposed 

rule.

CY 2012 OPPS/ASC final rule 

with comment period. 

July 1, 2011 .............. Level II HCPCS codes ............ July 1, 2011 ............ CY 2012 OPPS/ASC proposed 

rule.

CY 2012 OPPS/ASC final rule 

with comment period. 

Category I (certain vaccine 

codes) and III CPT codes.

July 1, 2011 ............ CY 2012 OPPS/ASC proposed 

rule.

CY 2012 OPPS/ASC final rule 

with comment period. 

October 1, 2011 ........ Level II HCPCS codes ............ October 1, 2011 ...... CY 2012 OPPS/ASC final rule 

with comment period.

CY 2013 OPPS/ASC final rule 

with comment period. 

January 1, 2012 ........ Level II HCPCS codes ............ January 1, 2012 ...... CY 2012 OPPS/ASC final rule 

with comment period.

CY 2013 OPPS/ASC final rule 

with comment period. 

Category I and III CPT Codes January 1, 2012 ...... CY 2012 OPPS/ASC final rule 

with comment period.

CY 2013 OPPS/ASC final rule 

with comment period. 

This process is discussed in detail 

below. We have separated our 

discussion into two sections based on 

whether we are proposing to solicit 

public comments in this CY 2012 OPPS/ 

ASC proposed rule (and responding to 

those comments in the CY 2012 OPPS/ 

ASC final rule with comment period) or 

whether we will be soliciting public 

comments in the CY 2012 OPPS/ASC 

final rule with comment period (and 

responding to those comments in the CY 

2013 OPPS/ASC final rule with 

comment period). We note that we 

sought public comment in the CY 2011 

OPPS/ASC final rule with comment 

period on the new CPT and Level II 

HCPCS codes that were effective 

January 1, 2011. We also sought public 

comments in the CY 2011 OPPS/ASC 

final rule with comment period on the 

new Level II HCPCS codes effective 

October 1, 2010. These new codes, with 

an effective date of October 1, 2010, or 

January 1, 2011, were flagged with 

comment indicator ‘‘N1’’ in Addendum 

AA and BB to the CY 2011 OPPS/ASC 

final rule with comment period to 

indicate that we were assigning them an 

interim payment status and payment 

rate, if applicable, which were subject to 

public comment following publication 

of the CY 2011 OPPS/ASC final rule 

with comment period. We will respond 

to public comments and finalize our 

proposed ASC treatment of these codes 

in the CY 2012 OPPS/ASC final rule 

with comment period. 

2. Proposed Treatment of New Level II 

HCPCS Codes and Category III CPT 

Codes Implemented in April and July 

2011 for Which We Are Soliciting 

Public Comments in This CY 2012 

OPPS/ASC Proposed Rule 

In the April and July CRs, we made 

effective for April 1 or July 1, 2011, a 

total of 13 new Level II HCPCS codes 

and 6 new Category III CPT codes that 

were not addressed in the CY 2011 

OPPS/ASC final rule with comment 

period. The 13 new Level II HCPCS 

codes describe covered ancillary 

services. 

In the April 2011 ASC quarterly 

update (Transmittal 2185, CR 7343, 

dated March 25, 2011), we added four 

new drug and biological Level II HCPCS 

codes to the list of covered ancillary 

services. Specifically, as displayed in 

Table 42 below, these included HCPCS 

codes C9280 (Injection, eribulin 

mesylate, 1 mg), C9281 (Injection, 

pegloticase, 1 mg), C9282 (Injection, 

ceftaroline fosamil, 10 mg), and Q2040 

(Injection, incobotulinumtoxin A, 1 

unit). We note that HCPCS code Q2040 

replaced HCPCS code C9278 (Injection, 

incobotulinumtoxin A, 1 unit) 

beginning April 1, 2011. HCPCS code 

C9278 was effective January 1, 2011, 

and deleted for dates of service April 1, 

2011 and forward, because it was 

replaced with HCPCS code Q2040. 

In the July 2011 quarterly update 

(Transmittal 2235, Change Request 

7445, dated June 03, 2011), we added 

nine new drug and biological Level II 

HCPCS codes to the list of covered 

ancillary services. Specifically, as 

displayed in Table 43, we provided 

separate payment for HCPCS codes 

C9283 (Injection, acetaminophen, 10 

mg), C9284 (Injection, ipilimumab, 1 

mg), C9285 (Lidocaine 70 mg/tetracaine 

70mg, per patch), C9365 (Oasis Ultra 

Tri-Layer matrix, per square centimeter), 

C9406 (Iodine I–123 ioflupane, 

diagnostic, per study dose, up to 5 

millicuries), Q2041 (Injection, von 

willebrand factor complex (human), 

Wilate, 1 i.u. vwf:rco), Q2042 (Injection, 

hydroxyprogesterone caproate, 1 mg), 

Q2043 (Sipuleucel-t, minimum of 50 

million autologous cd54+ cells activated 

with pap-gm-csf, including 

leukapheresis and all other preparatory 

procedures, per infusion), and Q2044 

(Injection, belimumab, 10 mg). We note 

that HCPCS code Q2041 is replacing 

HCPCS code J7184 and HCPCS code 

Q2043 is replacing HCPCS code C9273 

beginning July 1, 2011. 

We assigned payment indicator ‘‘K2’’ 

(Drugs and biologicals paid separately 

when provided integral to a surgical 

procedure on the ASC list; payment 

based on OPPS rate) to these 13 new 

Level II HCPCS codes to indicate that 

they are separately paid when provided 

in ASCs. We are soliciting public 

comment on the proposed CY 2012 ASC 

payment indicators and payment rates 

for the drugs and biologicals, as listed 

in Tables 42 and 43 below. Those 

HCPCS codes became payable in ASCs, 

beginning in April or July 2011, 

respectively, and are paid at the ASC 

rates posted for the appropriate calendar 

quarter on the CMS Web site at http:// 

www.cms.gov/ASCPayment/. 

The HCPCS codes listed in Table 42 

are included in Addendum BB to this 

proposed rule. We note that all ASC 

addenda are referenced in section XVII. 

of this proposed rule and are only 

available via the Internet on the CMS 

Web site. Because HCPCS codes that 

became effective for July (listed in Table 

43) are not available to us in time for 

incorporation into the Addenda to this 

OPPS/ASC proposed rule, our policy is 

to include these HCPCS codes and their 

proposed payment indicators and 

payment rates in the preamble to the 

proposed rule but not in the Addenda 

to the proposed rule. These codes and 

their final payment indicators and rates 

will be included in the appropriate 

Addendum to the CY 2012 OPPS/ASC 

final rule with comment period. Thus, 

the codes implemented by the July 2011 

ASC quarterly update CR and their 

proposed CY 2012 payment rates (based 

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on July 2011 ASP data) that are 

displayed in Table 43 are not included 

in Addendum BB to this proposed rule. 

The final list of covered ancillary 

services and the associated payment 

weights and payment indicators will be 

included in Addendum BB to the CY 

2012 OPPS/ASC final rule with 

comment period, consistent with our 

annual update policy. 

TABLE 42—NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY SERVICES IMPLEMENTED IN APRIL 2011 

CY 2011 

HCPCS 

Code 

CY 2011 Long descriptor 

Proposed 

CY 2012 

payment 

indicator 

C9280 ...... Injection, eribulin mesylate, 1 mg ...................................................................................................................................... K2 

C9281 ...... Injection, pegloticase, 1 mg ............................................................................................................................................... K2 

C9282 ...... Injection, ceftaroline fosamil, 10 mg .................................................................................................................................. K2 

Q2040 ...... Injection, incobotulinumtoxin A, 1 unit ............................................................................................................................... K2 

TABLE 43—NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY SERVICES IMPLEMENTED IN JULY 2011 

CY 2011 

HCPCS 

Code 

CY 2011 Descriptor 

Proposed CY 

2012 payment 

indicator 

Proposed CY 

2012 ASC 

payment rate 

C9283 ...... Injection, acetaminophen, 10 mg ...................................................................................................... K2 $0.11 

C9284 ...... Injection, ipilimumab, 1 mg ................................................................................................................ K2 127.20 

C9285 ...... Lidocaine 70 mg/tetracaine 70mg, per patch .................................................................................... K2 13.57 

C9365 ...... Oasis Ultra Tri-Layer matrix, per square centimeter ......................................................................... K2 10.60 

C9406 ...... Iodine I–123 ioflupane, diagnostic, per study dose, up to 5 millicuries ............................................ K2 1,908.00 

Q2041 ...... Injection, von willebrand factor complex (human), Wilate, 1 i.u. vwf:rco .......................................... K2 0.88 

Q2042 ...... Injection, hydroxyprogesterone caproate, 1 mg ................................................................................ K2 2.90 

Q2043 ...... Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated with pap-gm-csf, including 

leukapheresis and all other preparatory procedures, per infusion.

K2 32,860.00 

Q2044 ...... Injection, belimumab, 10 mg ............................................................................................................. K2 39.15 

Through the July 2011 quarterly 

update CR, we also implemented ASC 

payment for six new Category III CPT 

codes as ASC covered surgical 

procedures, effective July 1, 2011. These 

codes are listed in Table 44 below, along 

with their proposed payment indicators 

and proposed payment rates for CY 

2011. Because new Category III CPT and 

Level II HCPCS codes that become 

effective for July are not available to us 

in time for incorporation into the 

Addenda to the OPPS/ASC proposed 

rule, our policy is to include the codes, 

their proposed payment indicators, and 

proposed payment rates in the preamble 

to the proposed rule but not in the 

Addenda to the proposed rule. These 

codes and their final payment indicators 

and rates will be included in 

Addendum AA to the CY 2012 OPPS/ 

ASC final rule with comment period. 

We are proposing to assign payment 

indicator ‘‘G2’’ (Non-office-based 

surgical procedure added in CY 2008 or 

later; payment based on OPPS relative 

payment weight) to all six of the new 

Category III CPT codes to be 

implemented in July 2011. We believe 

that these procedures would not pose a 

significant safety risk to Medicare 

beneficiaries or would not require an 

overnight stay if performed in ASCs. We 

are soliciting public comment on these 

proposed payment indicators and the 

payment rates for the new Category III 

CPT codes that were newly recognized 

as ASC covered surgical procedures in 

July 2011 through the quarterly update 

CR, as listed in Table 44 below. We are 

proposing to finalize their payment 

indicators and their payment rates in 

the CY 2012 OPPS/ASC final rule with 

comment period. 

TABLE 44—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2011 AS ASC COVERED SURGICAL PROCEDURES

CY 2011 HCPCS Code CY 2011 Long descriptor 

Proposed CY 

2012 payment 

indicator 

Proposed CY 

2012 ASC 

payment rate 

0263T ................................ Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if 

performed; complete procedure including unilateral or bilateral bone marrow 

harvest.

G2 $1,218.58 

0264T ................................ Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if 

performed; complete procedure excluding bone marrow harvest.

G2 1,218.58 

0265T ................................ Intramuscular autologous bone marrow cell therapy, with preparation of harvested cells, multiple injections, one leg, including ultrasound guidance, if 

performed; unilateral or bilateral bone marrow harvest only for intramuscular 

autologous bone marrow cell therapy.

G2 1,218.58 

0269T ................................ Revision or removal of carotid sinus baroreflex activation device; total system 

(includes generator placement, unilateral or bilateral lead placement, intraoperative interrogation, programming, and repositioning, when performed).

G2 1,444.14 

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TABLE 44—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2011 AS ASC COVERED SURGICAL PROCEDURES— 

Continued 

CY 2011 HCPCS Code CY 2011 Long descriptor 

Proposed CY 

2012 payment 

indicator 

Proposed CY 

2012 ASC 

payment rate 

0270T ................................ Revision or removal of carotid sinus baroreflex activation device; lead only, 

unilateral (includes intra-operative interrogation, programming, and repositioning, when performed).

G2 841.60 

0271T ................................ Revision or removal of carotid sinus baroreflex activation device; pulse generator only (includes intra-operative interrogation, programming, and repositioning, when performed).G2 1,126.88 

In summary, for CY 2011, we are 

soliciting public comments on the 

proposed payment indicators and the 

payment rates, if applicable, for the new 

Level II HCPCS codes and Category III 

CPT codes that were newly recognized 

in April or July 2011 through the 

respective quarterly update CRs. These 

codes are listed in Tables 42, 43 and 44 

of this proposed rule. We are proposing 

to finalize their payment indicators and 

their payment rates, if applicable, in the 

CY 2012 OPPS/ASC final rule with 

comment period. 

3. Proposed Process for New Level II 

HCPCS Codes and Category I and III 

CPT Codes for Which We Will Be 

Soliciting Public Comments in the CY 

2012 OPPS/ASC Final Rule With 

Comment Period 

As has been our practice in the past, 

we incorporate those new Category I 

and Category III CPT codes and new 

Level II HCPCS codes that are effective 

January 1 in the final rule with 

comment period updating the ASC 

payment system for the following 

calendar year. These codes are released 

to the public via the CMS HCPCS (for 

Level II HCPCS codes) and AMA Web 

sites (for CPT codes), and also through 

the January ASC quarterly update CRs. 

In the past, we also have released new 

Level II HCPCS codes that are effective 

October 1 through the October ASC 

quarterly update CRs and incorporated 

these new codes in the final rule with 

comment period updating the ASC 

payment system for the following 

calendar year. All of these codes are 

flagged with comment indicator ‘‘NI’’ in 

Addenda AA and BB to the OPPS/ASC 

final rule with comment period to 

indicate that we are assigning them an 

interim payment status which is subject 

to public comment. The payment 

indicator and payment rate, if 

applicable, for all such codes flagged 

with comment indicator ‘‘NI’’ are open 

to public comment in the OPPS/ASC 

final rule with comment period, and we 

respond to these comments in the final 

rule with comment period for the next 

calendar year’s OPPS/ASC update. 

We are proposing to continue this 

process for CY 2012. Specifically, for CY 

2012, we are proposing to include in 

Addenda AA and BB to the CY 2012 

OPPS/ASC final rule with comment 

period the new Category I and III CPT 

codes effective January 1, 2012 that 

would be incorporated in the January 

2012 ASC quarterly update CR and the 

new Level II HCPCS codes, effective 

October 1, 2011 or January 1, 2012, that 

would be released by CMS in its 

October 2011 and January 2012 ASC 

quarterly update CRs. These codes 

would be flagged with comment 

indicator ‘‘NI’’ in Addenda AA and BB 

to the CY 2012 OPPS/ASC final rule 

with comment period to indicate that 

we have assigned them an interim 

payment status. Their payment 

indicators and payment rates, if 

applicable, would be open to public 

comment in the CY 2012 OPPS/ASC 

final rule with comment period and 

would be finalized in the CY 2013 

OPPS/ASC final rule with comment 

period. 

C. Proposed Update to the Lists of ASC 

Covered Surgical Procedures and 

Covered Ancillary Services 

1. Covered Surgical Procedures 

a. Proposed Additions to the List of ASC 

Covered Surgical Procedures 

We conducted a review of all HCPCS 

codes that currently are paid under the 

OPPS, but not included on the ASC list 

of covered surgical procedures, to 

determine if changes in technology and/ 

or medical practice changed the clinical 

appropriateness of these procedures for 

the ASC setting. Upon review, we did 

not identify any procedures that are 

currently excluded from the ASC list of 

procedures that met the definition of a 

covered surgical procedure based on our 

expectation that they would not pose a 

significant safety risk to Medicare 

beneficiaries or would require an 

overnight stay if performed in ASCs. 

Therefore, we are not proposing 

additions to the list of ASC covered 

surgical procedures for CY 2012. 

b. Proposed Covered Surgical 

Procedures Designated as Office-Based 

(1) Background 

In the August 2, 2007 ASC final rule, 

we finalized our policy to designate as 

‘‘office-based’’ those procedures that are 

added to the ASC list of covered 

surgical procedures in CY 2008 or later 

years that we determine are performed 

predominantly (more than 50 percent of 

the time) in physicians’ offices based on 

consideration of the most recent 

available volume and utilization data for 

each individual procedure code and/or, 

if appropriate, the clinical 

characteristics, utilization, and volume 

of related codes. In that rule, we also 

finalized our policy to exempt all 

procedures on the CY 2007 ASC list 

from application of the office-based 

classification (72 FR 42512). The 

procedures that were added to the ASC 

list of covered surgical procedures 

beginning in CY 2008 that we 

determined were office-based were 

identified in Addendum AA to that rule 

by payment indicator ‘‘P2’’ (Officebased surgical procedure added to ASC 

list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on 

OPPS relative payment weight); ‘‘P3’’ 

(Office-based surgical procedures added 

to ASC list in CY 2008 or later with 

MPFS non-facility PE RVUs; payment 

based on MPFS non-facility PE RVUs); 

or ‘‘R2’’ (Office-based surgical 

procedure added to ASC list in CY 2008 

or later without MPFS non-facility PE 

RVUs; payment based on OPPS relative 

payment weight), depending on whether 

we estimated it would be paid according 

to the standard ASC payment 

methodology based on its OPPS relative 

payment weight or at the MPFS nonfacility PE RVU-based amount. 

Consistent with our final policy to 

annually review and update the list of 

surgical procedures eligible for payment 

in ASCs, each year we identify surgical 

procedures as either temporarily officebased, permanently office-based, or nonmstockstill on DSK4VPTVN1PROD with PROPOSALS2

42294 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

office-based, after taking into account 

updated volume and utilization data. 

(2) Proposed Changes for CY 2012 to 

Covered Surgical Procedures Designated 

as Office-Based 

In developing this proposed rule, we 

followed our policy to annually review 

and update the surgical procedures for 

which ASC payment is made and to 

identify new procedures that may be 

appropriate for ASC payment, including 

their potential designation as officebased. We reviewed CY 2010 volume 

and utilization data and the clinical 

characteristics for all surgical 

procedures that are assigned payment 

indicator ‘‘G2’’ in CY 2011, as well as 

for those procedures assigned one of the 

temporary office-based payment 

indicators, specifically ‘‘P2*,’’ ‘‘P3*,’’ or 

‘‘R2*’’ in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72033 

through 72038). 

Based on our review of the CY 2010 

volume and utilization data, we 

identified ten surgical procedures that 

we believe meet the criteria for 

designation as office-based. The data 

indicate that the procedures are 

performed more than 50 percent of the 

time in physicians’ offices. Our medical 

advisors believe the services are of a 

level of complexity consistent with 

other procedures performed routinely in 

physicians’ offices. The 10 CPT codes 

we are proposing to permanently 

designate as office-based are listed in 

Table 45 below. 

TABLE 45—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR PERMANENT OFFICE-BASED DESIGNATION FOR 2012 

CY 2011 CPT code CY 2011 long descriptor 

CY 2011 ASC 

payment indicator 

Proposed CY 

2012 ASC payment indicator 

0213T ............................... Injection(s), diagnostic or therapeutic agent, paravertebral facet 

(zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, cervical or thoracic; single level.

G2 R2 

0214T ............................... Injection(s), diagnostic or therapeutic agent, paravertebral facet 

(zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, cervical or thoracic; second level (list separately in addition to code 

for primary procedure).

G2 R2 

0215T ............................... Injection(s), diagnostic or therapeutic agent, paravertebral facet 

(zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, cervical or thoracic; third and any additional level(s) (list separately in 

addition to code for primary procedure).

G2 R2 

0216T ............................... Injection(s), diagnostic or therapeutic agent, paravertebral facet 

(zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, lumbar or sacral; single level.

G2 R2 

0217T ............................... Injection(s), diagnostic or therapeutic agent, paravertebral facet 

(zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, lumbar or sacral; second level (list separately in addition to code for 

primary procedure).

G2 R2 

0218T ............................... Injection(s), diagnostic or therapeutic agent, paravertebral facet 

(zygapophyseal) joint (or nerves innervating that joint) with ultrasound guidance, lumbar or sacral; third and any additional level(s) (list separately in 

addition to code for primary procedure).

G2 R2 

35475 ............................... Transluminal balloon angioplasty, percutaneous; brachiocephalic trunk or 

branches, each vessel.

G2 P3 

35476 ............................... Transluminal balloon angioplasty, percutaneous; venous .................................. G2 P3 

41530 ............................... Submucosal ablation of the tongue base, radiofrequency, one or more sites, 

per session.

G2 P2 

69801 ............................... Labyrinthotomy, with or without cryosurgery including other nonexcisional destructive procedures or perfusion of vestibuloactive drugs (single or multiple 

perfusions); transcanal.

G2 P3 

We also reviewed CY 2010 volume 

and utilization data and other 

information for the 23 procedures 

finalized for temporary office-based 

status in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72036 

through 72038). Among these 23 

procedures, there were very few claims 

data for eight procedures: CPT code 

0099T (Implantation of intrastromal 

corneal ring segments); CPT code 0124T 

(Conjunctival incision with posterior 

extrascleral placement of 

pharmacological agent (does not include 

supply of medication)); CPT code 0226T 

(Anoscopy, high resolution (HRA) (with 

magnification and chemical agent 

enhancement); diagnostic, including 

collection of specimen(s) by brushing or 

washing when performed); CPT code 

0227T (Anoscopy, high resolution 

(HRA) (with magnification and chemical 

agent enhancement); with biopsy(ies)); 

CPT code 0232T (Injection(s), platelet 

rich plasma, any tissue, including image 

guidance, harvesting and preparation 

when performed); CPT code C9800 

(Dermal injection procedure(s) for facial 

lipodystrophy syndrome (LDS) and 

provision of Radiesse or Sculptra 

dermal filler, including all items and 

supplies); CPT code 37761 (Ligation of 

perforator vein(s), subfascial, open, 

including ultrasound guidance, when 

performed, 1 leg); and CPT code 67229 

(Treatment of extensive or progressive 

retinopathy, one or more sessions; 

preterm infant (less than 37 weeks 

gestation at birth), performed from birth 

up to 1 year of age (e.g., retinopathy of 

prematurity), photocoagulation or 

cryotherapy). Consequently, we are 

proposing to maintain their temporary 

office-based designations for CY 2012. 

As a result of our review of the 

remaining fifteen procedures that have 

temporary office-based designations for 

CY 2011 for which we do have claims 

data, we are proposing that none of the 

procedures be designated as office-based 

in CY 2012. The 15 surgical procedure 

codes are: 

• CPT code 21015 (Radical resection 

of tumor (e.g., malignant neoplasm), soft 

tissue of face or scalp; less than 2 cm); 

• CPT code 21555 (Excision, tumor, 

soft tissue of neck or anterior thorax, 

subcutaneous; less than 3 cm); 

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• CPT code 21930 (Excision, tumor, 

soft tissue of back or flank, 

subcutaneous; less than 3 cm); 

• CPT code 23075 (Excision, tumor, 

soft tissue of shoulder area, 

subcutaneous; less than 3 cm); 

• CPT code 24075 (Excision, tumor, 

soft tissue of upper arm or elbow area, 

subcutaneous; less than 3 cm); 

• CPT code 25075 (Excision, tumor, 

soft tissue of forearm and/or wrist area, 

subcutaneous; less than 3 cm); 

• CPT code 26115 (Excision, tumor or 

vascular malformation, soft tissue of 

hand or finger, subcutaneous; less than 

1.5 cm); 

• CPT code 27047 (Excision, tumor, 

soft tissue of pelvis and hip area, 

subcutaneous; less than 3 cm); 

• CPT code 27327 (Excision, tumor, 

soft tissue of thigh or knee area, 

subcutaneous; less than 3 cm); 

• CPT code 27618 (Excision, tumor, 

soft tissue of leg or ankle area, 

subcutaneous; less than 3 cm); 

• CPT code 28039 (Excision, tumor, 

soft tissue of foot or toe, subcutaneous; 

1.5 cm or greater); 

• CPT code 28041 (Excision, tumor, 

soft tissue of foot or toe, subfascial (e.g., 

intramuscular); 1.5 cm or greater); 

• CPT code 28043 (Excision, tumor, 

soft tissue of foot or toe, subcutaneous; 

less than 1.5 cm); 

• CPT code 28045 (Excision, tumor, 

soft tissue of foot or toe, subfascial (e.g., 

intramuscular); less than 1.5 cm); and 

• CPT code 28046 (Radical resection 

of tumor (e.g., malignant neoplasm), soft 

tissue of foot or toe; less than 3 cm). 

The volume and utilization data for 

these CPT codes are sufficient to 

indicate that these procedures are not 

performed predominantly in physicians’ 

offices and, therefore, should not be 

assigned an office-based payment 

indicator in CY 2012. 

The proposed CY 2012 payment 

indicator designations for the 23 

procedures that were temporarily 

designated as office-based in CY 2011 

are displayed in Table 46 below. The 

procedures for which the proposed 

office-based designations for CY 2012 

are temporary also are indicated by 

asterisks in Addendum AA to this 

proposed rule (which is referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site). 

TABLE 46—PROPOSED CY 2012 PAYMENT INDICATORS FOR ASC COVERED SURGICAL PROCEDURES DESIGNATED AS

TEMPORARILY OFFICE-BASED IN THE CY 2011 OPPS/ASC FINAL RULE WITH COMMENT PERIOD

CY 2011 

CPT code CY 2011 long descriptor 

CY 2011 ASC 

payment 

indicator 

Proposed CY 

2012 ASC 

payment 

indicator ** 

21015 ....... Radical resection of tumor (e.g., malignant neoplasm), soft tissue of face or scalp; less than 2 

cm).

R2 * G2 

21555 ....... Excision, tumor, soft tissue of neck or anterior thorax, subcutaneous; less than 3 cm ................... P3 * G2 

21930 ....... Excision, tumor, soft tissue of back or flank, subcutaneous; less than 3 cm ................................... P3 * G2 

23075 ....... Excision, tumor, soft tissue of shoulder area, subcutaneous; less than 3 cm ................................. P3 * G2 

24075 ....... Excision, tumor, soft tissue of upper arm or elbow area, subcutaneous; less than 3 cm ................ P3 * G2 

25075 ....... Excision, tumor, soft tissue of forearm and/or wrist area, subcutaneous; less than 3 cm ............... P3 * G2 

26115 ....... Excision, tumor or vascular malformation, soft tissue of hand or finger, subcutaneous; less than 

1.5 cm.

P3 * G2 

27047 ....... Excision, tumor, soft tissue of pelvis and hip area, subcutaneous; less than 3 cm ......................... P3 * G2 

27327 ....... Excision, tumor, soft tissue of thigh or knee area, subcutaneous; less than 3 cm .......................... P3 * G2 

27618 ....... Excision, tumor, soft tissue of leg or ankle area, subcutaneous; less than 3 cm ............................ P3 * G2 

28039 ....... Excision, tumor, soft tissue of foot or toe, subcutaneous; 1.5 cm or greater ................................... P3 * G2 

28041 ....... Excision, tumor, soft tissue of foot or toe, subfascial (e.g., intramuscular); 1.5 cm or greater ........ R2 * G2 

28043 ....... Excision, tumor, soft tissue of foot or toe, subcutaneous; less than 1.5 cm .................................... P3 * G2 

28045 ....... Excision, tumor, soft tissue of foot or toe, subfascial (e.g., intramuscular); less than 1.5 cm ......... P3 * G2 

28046 ....... Radical resection of tumor (e.g., malignant neoplasm), soft tissue of foot or toe; less than 3 cm .. R2 * G2 

37761 ....... Ligation of perforator vein(s), subfascial, open, including ultrasound guidance, when performed, 1 

leg.

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 (e.g., retinopathy of 

prematurity), photocoagulation or cryotherapy.

R2 * R2 * 

0099T ...... Implantation of intrastromal corneal ring segments .......................................................................... R2 * R2 * 

0124T ...... Conjunctival incision with posterior extrascleral placement of pharmacological agent (does not include supply of medication).R2 * R2 * 

0226T ...... Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); diagnostic, including collection of specimen(s) by brushing or washing when performed.R2 * R2 * 

0227T ...... Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); with biopsy(ies).R2 * R2 * 

0232T ...... Injection(s), platelet rich plasma, any tissue, including image guidance, harvesting and preparation when performed.R2 * R2 * 

C9800 ...... Dermal injection procedure(s) for facial lipodystrophy syndrome (LDS) and provision of Radiesse 

or Sculptra dermal filler, including all items and supplies.

R2 * R2 * 

* If designation is temporary. 

** Payment indicators are based on a comparison of the proposed rates according to the ASC standard ratesetting methodology and the MPFS 

proposed rates. At the time this proposed rule is being finalized for publication, current law authorizes a negative update to the MPFS payment 

rates for CY 2012. For a discussion of those rates, we refer readers to the CY 2012 MPFS proposed rule. 

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42296 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

We invite public comment on these 

proposals. 

c. ASC Covered Surgical Procedures 

Designated as Device-Intensive 

(1) Background 

As discussed in the August 2, 2007 

final rule (72 FR 42503 through 42508), 

we adopted a modified payment 

methodology for calculating the ASC 

payment rates for covered surgical 

procedures that are assigned to the 

subset of OPPS device-dependent APCs 

with a device offset percentage greater 

than 50 percent of the APC cost under 

the OPPS, in order to ensure that 

payment for the procedure is adequate 

to provide packaged payment for the 

high-cost implantable devices used in 

those procedures. We assigned payment 

indicators ‘‘H8’’ (Device-intensive 

procedure on ASC list in CY 2007; paid 

at adjusted rate) and ‘‘J8’’ (Deviceintensive procedure added to ASC list 

in CY 2008 or later; paid at adjusted 

rate) to identify the procedures that 

were eligible for ASC payment 

calculated according to the modified 

methodology, depending on whether the 

procedure was included on the ASC list 

of covered surgical procedures prior to 

CY 2008 and, therefore, subject to 

transitional payment as discussed in the 

CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68739 through 

68742). 

As discussed in section XIII.F.2. of 

this proposed rule, because the 4-year 

transition to the ASC payment rates 

under the standard methodology is 

complete and, therefore, identification 

of device-intensive procedures that are 

subject to transitional payment 

methodology is no longer necessary, we 

are proposing to delete payment 

indicator ‘‘H8’’ (Device-intensive 

procedure on ASC list in CY 2007; paid 

at adjusted rate). The device-intensive 

procedures for which the deviceintensive payment methodology will 

apply in CY 2012 or later will be 

assigned payment indicator ‘‘J8’’ 

(Device-intensive procedure; paid at 

adjusted rate). 

(2) Proposed Changes to List of Covered 

Surgical Procedures Designated as 

Device-Intensive for CY 2012 

We are proposing to update the ASC 

list of covered surgical procedures that 

are eligible for payment according to the 

device-intensive procedure payment 

methodology for CY 2012, consistent 

with the proposed OPPS devicedependent APC update, reflecting the 

proposed APC assignments of 

procedures, designation of APCs as 

device-dependent, and APC device 

offset percentages based on the CY 2010 

OPPS claims and cost report data 

available for this proposed rule. The 

OPPS device-dependent APCs are 

discussed further in section II.A.2.d.(1) 

of this proposed rule. 

The ASC covered surgical procedures 

that we are proposing to designate as 

device-intensive and that would be 

subject to the device-intensive 

procedure payment methodology for CY 

2012 are listed in Table 47 below. The 

CPT code, the CPT code short 

descriptor, the proposed CY 2012 ASC 

payment indicator, the proposed CY 

2012 OPPS APC assignment and title, 

and the proposed CY 2012 OPPS APC 

device offset percentage are also listed 

in Table 47 below. All of these 

procedures are included in Addendum 

AA to this proposed rule (which is 

referenced in section XVII. of this 

proposed rule and available via the 

Internet on the CMS Web site). 

TABLE 47—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR DEVICE–INTENSIVE DESIGNATION FOR CY 2012 

CPT 

Code Short descriptor 

Proposed CY 

2012 ASC payment indicator 

Proposed 

CY 2012 

OPPS APC 

Proposed CY 2012 OPPS APC title 

Proposed 

CY 2012 

device-dependent 

APC offset 

percentage 

24361 ......... Reconstruct elbow joint ............ J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

24363 ......... Replace elbow joint .................. J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

24366 ......... Reconstruct head of radius ...... J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

25441 ......... Reconstruct wrist joint .............. J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

25442 ......... Reconstruct wrist joint .............. J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

25446 ......... Wrist replacement .................... J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

27446 ......... Revision of knee joint ............... J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

33206 ......... Insertion of heart pacemaker ... J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes.71 

33207 ......... Insertion of heart pacemaker ... J8 0089 Insertion/Replacement of Permanent Pacemaker and Electrodes.71 

33208 ......... Insertion of heart pacemaker ... J8 0655 Insertion/Replacement/Conversion of a permanent dual chamber pacemaker.73 

33212 ......... Insertion of pulse generator ..... J8 0090 Insertion/Replacement of Pacemaker Pulse 

Generator.

73 

33213 ......... Insertion of pulse generator ..... J8 0654 Insertion/Replacement of a permanent dual 

chamber pacemaker.

74 

33214 ......... Upgrade of pacemaker system J8 0655 Insertion/Replacement/Conversion of a permanent dual chamber pacemaker.73 

33224 ......... Insert pacing lead & connect ... J8 0655 Insertion/Replacement/Conversion of a permanent dual chamber pacemaker.73 

33225 ......... Lventric pacing lead add-on ..... J8 0108 Insertion/Replacement/Repair of CardioverterDefibrillator Leads.87 

33240 ......... Insert pulse generator .............. J8 0107 Insertion of Cardioverter-Defibrillator ................ 88 

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TABLE 47—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR DEVICE–INTENSIVE DESIGNATION FOR CY 2012— 

Continued 

CPT 

Code Short descriptor 

Proposed CY 

2012 ASC payment indicator 

Proposed 

CY 2012 

OPPS APC 

Proposed CY 2012 OPPS APC title 

Proposed 

CY 2012 

device-dependent 

APC offset 

percentage 

33249 ......... Eltrd/insert pace-defib .............. J8 0108 Insertion/Replacement/Repair of CardioverterDefibrillator Leads.87 

33282 ......... Implant pat-active ht record ..... J8 0680 Insertion of Patient Activated Event Recorders 72 

53440 ......... Male sling procedure ................ J8 0385 Level I Prosthetic Urological Procedures .......... 61 

53444 ......... Insert tandem cuff .................... J8 0385 Level I Prosthetic Urological Procedures .......... 61 

53445 ......... Insert uro/ves nck sphincter ..... J8 0386 Level II Prosthetic Urological Procedures ......... 70 

53447 ......... Remove/replace ur sphincter ... J8 0386 Level II Prosthetic Urological Procedures ......... 70 

54400 ......... Insert semi-rigid prosthesis ...... J8 0385 Level I Prosthetic Urological Procedures .......... 61 

54401 ......... Insert self-contd prosthesis ...... J8 0386 Level II Prosthetic Urological Procedures ......... 70 

54405 ......... Insert multi-comp penis pros .... J8 0386 Level II Prosthetic Urological Procedures ......... 70 

54410 ......... Remove/replace penis prosth .. J8 0386 Level II Prosthetic Urological Procedures ......... 70 

54416 ......... Remv/repl penis contain pros .. J8 0386 Level II Prosthetic Urological Procedures ......... 70 

55873 ......... Cryoablate prostate .................. J8 0674 Prostate Cryoablation ........................................ 57 

61885 ......... Insrt/redo neurostim 1 array ..... J8 0039 Level I Implantation of Neurostimulator Generator.85 

61886 ......... Implant neurostim arrays ......... J8 0315 Level II Implantation of Neurostimulator Generator.88 

62361 ......... Implant spine infusion pump .... J8 0227 Implantation of Drug Infusion Device ................ 81 

62362 ......... Implant spine infusion pump .... J8 0227 Implantation of Drug Infusion Device ................ 81 

63650 ......... Implant neuroelectrodes ........... J8 0040 Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

55 

63655 ......... Implant neuro-electrodes ......... J8 0061 Level II Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

64 

63663 ......... Revise spine eltrd perq aray .... J8 0040 Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

55 

63664 ......... Revise spine eltrd plate ........... J8 0040 Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

55 

63685 ......... Insrt/redo spine n generator ..... J8 0039 Level I Implantation of Neurostimulator Generator.85 

64553 ......... Implant neuro-electrodes ......... J8 0040 Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

55 

64555 ......... Implant neuro-electrodes ......... J8 0040 Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

55 

64560 ......... Implant neuro-electrodes ......... J8 0040 Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

55 

64561 ......... Implant neuro-electrodes ......... J8 0040 Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

55 

64565 ......... Implant neuro-electrodes ......... J8 0040 Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes.

55 

64568 ......... Implant neuro-electrodes ......... J8 0318 Implantation of Neurostimulator Electrodes, 

Cranial Nerve.

86 

64575 ......... Implant neuro-electrodes ......... J8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr.64 

64577 ......... Implant neuro-electrodes ......... J8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr.64 

64580 ......... Implant neuro-electrodes ......... J8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr.64 

64581 ......... Implant neuro-electrodes ......... J8 0061 Laminectomy, Laparoscopy, or Incision for Implantation of Neurostimulator Electr.64 

64590 ......... Insrt/redo pn/gastr stimul ......... J8 0039 Level I Implantation of Neurostimulator Generator.85 

65770 ......... Revise cornea with implant ...... J8 0293 Level VI Anterior Segment Eye Procedures ..... 67 

69714 ......... Implant temple bone w/stimul .. J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

69715 ......... Temple bne implnt w/stimulat .. J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

69717 ......... Temple bone implant revision .. J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

69718 ......... Revise temple bone implant .... J8 0425 Level II Arthroplasty or Implantation with Prosthesis.60 

69930 ......... Implant cochlear device ........... J8 0259 Level VII ENT Procedures ................................. 83 

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42298 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

We invite public comment on these 

proposals. 

d. ASC Treatment of Surgical 

Procedures Proposed for Removal From 

the OPPS Inpatient List for CY 2012 

As we discussed in the CY 2009 

OPPS/ASC final rule with comment 

period (73 FR 68724), we adopted a 

policy to include in our annual 

evaluation of the ASC list of covered 

surgical procedures, a review of the 

procedures that are being proposed for 

removal from the OPPS inpatient list for 

possible inclusion on the ASC list of 

covered surgical procedures. We 

evaluated each of the three procedures 

we are proposing to remove from the 

OPPS inpatient list for CY 2012 

according to the criteria for exclusion 

from the list of covered ASC surgical 

procedures. We believe that these three 

procedures should continue to be 

excluded from the ASC list of covered 

surgical procedures for CY 2012 because 

they would be expected to pose a 

significant risk to beneficiary safety or 

to require an overnight stay in ASCs. A 

full discussion about the APC Panel’s 

recommendations regarding the 

procedures we are proposing to remove 

from the OPPS inpatient list for CY 2012 

may be found in section IX.B. of this 

proposed rule. The HCPCS codes for 

these three procedures and their long 

descriptors are listed in Table 48 below. 

TABLE 48—PROCEDURES PROPOSED FOR EXCLUSION FROM THE ASC LIST OF COVERED PROCEDURES FOR CY 2012 

THAT ARE PROPOSED FOR REMOVAL FROM THE CY 2012 OPPS INPATIENT LIST

CPT Code Long descriptor 

21346 .............................................. Open treatment of nasomaxillary complex fracture (Lefort II type); with wiring and/or local fixation. 

35045 .............................................. Direct repair of aneurysm, pseudoaneurysm, or excision (partial or total) and graft insertion, with or without 

patch graft; for aneurysm, pseudoaneurysm, and associated occlusive disease, radial or ulnar artery. 

54650 .............................................. Orchiopexy, abdominal approach, for intra-abdominal testis (e.g., Fowler-Stephens). 

We invite public comment on this 

proposal. 

2. Covered Ancillary Services 

Consistent with the established ASC 

payment system policy, we are 

proposing to update the ASC list of 

covered ancillary services to reflect the 

proposed payment status for the 

services under the CY 2012 OPPS. 

Maintaining consistency with the OPPS 

may result in proposed changes to ASC 

payment indicators for some covered 

ancillary items and services because of 

changes that are being proposed under 

the OPPS for CY 2012. For example, a 

covered ancillary service that was 

separately paid under the revised ASC 

payment system in CY 2011 may be 

proposed for packaged status under the 

CY 2012 OPPS and, therefore, also 

under the ASC payment system for CY 

2012. Comment indicator ‘‘CH,’’ 

discussed in section XIII.F. of this 

proposed rule, is used in Addendum BB 

to this proposed rule (which is 

referenced in section XVII. of this 

proposed rule and available via the 

Internet on the CMS Web site) to 

indicate covered ancillary services for 

which we are proposing a change in the 

ASC payment indicator to reflect a 

proposed change in the OPPS treatment 

of the service for CY 2012. 

Except for the Level II HCPCS codes 

listed in Table 43 of this proposed rule, 

all ASC covered ancillary services and 

their proposed payment indicators for 

CY 2012 are included in Addendum BB 

to this proposed rule. 

D. Proposed ASC Payment for Covered 

Surgical Procedures and Covered 

Ancillary Services 

1. Proposed Payment for Covered 

Surgical Procedures 

a. Background 

Our ASC payment policies for 

covered surgical procedures under the 

revised ASC payment system are fully 

described in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 

66828 through 66831). Under our 

established policy for the revised ASC 

payment system, the ASC standard 

ratesetting methodology of multiplying 

the ASC relative payment weight for the 

procedure by the ASC conversion factor 

for that same year is used to calculate 

the national unadjusted payment rates 

for procedures with payment indicator 

‘‘G2.’’ For procedures assigned payment 

indicator ‘‘A2,’’ our final policy 

established blended rates to be used 

during the transitional period and, 

beginning in CY 2011, ASC rates 

calculated according to the ASC 

standard ratesetting methodology. The 

rate calculation established for deviceintensive procedures (payment indicator 

‘‘J8’’) is structured so that the packaged 

device payment amount is the same as 

under the OPPS, and only the service 

portion of the rate is subject to the ASC 

standard ratesetting methodology. In the 

CY 2011 OPPS/ASC final rule with 

comment period (75 FR 72024 through 

72064), we updated the CY 2010 ASC 

payment rates for ASC covered surgical 

procedures with payment indicators of 

‘‘A2,’’ ‘‘G2,’’ ‘‘H8,’’ and ‘‘J8’’ using CY 

2009 data, consistent with the CY 2011 

OPPS update. Payment rates for deviceintensive procedures also were updated 

to incorporate the CY 2011 OPPS device 

offset percentages. Because transitional 

payments were no longer required in CY 

2011, we calculated CY 2011 payments 

for procedures formerly subject to the 

transitional payment methodology 

(payment indicators ‘‘A2’’ and ‘‘H8’’) 

using the standard rate setting 

methodology, incorporating the deviceintensive methodology, as appropriate. 

Payment rates for office-based 

procedures (payment indicators ‘‘P2,’’ 

‘‘P3,’’ and ‘‘R2’’) are the lower of the 

MPFS non-facility PE RVU-based 

amount (we refer readers to the CY 2012 

MPFS proposed rule) or the amount 

calculated using the ASC standard 

ratesetting methodology for the 

procedure. In the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 

72024 through 72064), we updated the 

payment amounts for office-based 

procedures (payment indicators ‘‘P2,’’ 

‘‘P3,’’ and ‘‘R2’’) using the most recent 

available MPFS and OPPS data. We 

compared the estimated CY 2011 rate 

for each of the office-based procedures, 

calculated according to the ASC 

standard ratesetting methodology, to the 

MPFS nonfacility PE RVU-based 

amount to determine which was lower 

and, therefore, would be the CY 2011 

payment rate for the procedure 

according to the final policy of the 

revised ASC payment system 

(§ 416.171(d)). 

b. Proposed Update to ASC-Covered 

Surgical Procedure Payment Rates for 

CY 2012 

We are proposing to update ASC 

payment rates for CY 2012 using the 

established rate calculation 

methodologies under § 416.171. Under 

§ 416.171(c)(4), the transitional payment 

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rates are no longer used for CY 2011 and 

subsequent calendar years for a covered 

surgical procedure designated in 

accordance with § 416.166. Thus, we are 

proposing to calculate CY 2012 

payments for procedures formerly 

subject to the transitional payment 

methodology (payment indicators ‘‘A2’’ 

and ‘‘H8’’) using the proposed CY 2012 

ASC rate calculated according to the 

ASC standard ratesetting methodology, 

incorporating the device-intensive 

procedure methodology, as appropriate. 

We are proposing to continue to use the 

amount calculated under the ASC 

standard ratesetting methodology for 

procedures assigned payment indicator 

‘‘G2.’’ We are proposing to modify or 

delete the payment indicators for 

procedures that were subject to 

transitional payment prior to CY 2011 

(we refer readers to our discussion in 

section XIII.F.2. of this proposed rule). 

We are proposing that payment rates 

for office-based procedures (payment 

indicators ‘‘P2,’’ ‘‘P3,’’ and ‘‘R2’’) and 

device-intensive procedures that were 

not subject to transitional payment 

(payment indicator ‘‘J8’’) be calculated 

according to our established policies, 

incorporating the device-intensive 

procedure methodology as appropriate. 

Thus, we are proposing to update the 

payment amounts for device-intensive 

procedures based on the CY 2012 OPPS 

proposal that reflects updated OPPS 

device offset percentages, and to make 

payment for office-based procedures at 

the lesser of the CY 2012 proposed 

MPFS non-facility PE RVU-based 

amount or the proposed CY 2012 ASC 

payment amount calculated according 

to the standard ratesetting methodology. 

c. Proposed Adjustment to ASC 

Payments for No Cost/Full Credit and 

Partial Credit Devices 

Our ASC policy with regard to 

payment for costly devices implanted in 

ASCs at no cost or with full or partial 

credit as set forth in § 416.179 is 

consistent with the OPPS policy. The 

proposed CY 2012 OPPS APCs and 

devices subject to the adjustment policy 

are discussed in section IV.B.2. of this 

proposed rule. The established ASC 

policy includes adoption of the OPPS 

policy for reduced payment to providers 

when a specified device is furnished 

without cost or with full or partial credit 

for the cost of the device for those ASC 

covered surgical procedures that are 

assigned to APCs under the OPPS to 

which this policy applies. We refer 

readers to the CY 2009 OPPS/ASC final 

rule with comment period for a full 

discussion of the ASC payment 

adjustment policy for no cost/full credit 

and partial credit devices (73 FR 68742 

through 68745). 

Consistent with the OPPS, we are 

proposing to update the list of ASC 

covered device-intensive procedures 

and devices that would be subject to the 

no cost/full credit and partial credit 

device adjustment policy for CY 2012. 

Table 49 below displays the ASC 

covered device-intensive procedures 

that we are proposing would be subject 

to the no cost/full credit and partial 

credit device adjustment policy for CY 

2012. Specifically, when a procedure 

that is listed in Table 49 is performed 

to implant a device that is listed in 

Table 50 below, where that device is 

furnished at no cost or with full credit 

from the manufacturer, the ASC would 

append the HCPCS ‘‘FB’’ modifier on 

the line with the procedure to implant 

the device. The contractor would reduce 

payment to the ASC by the device offset 

amount that we estimate represents the 

cost of the device when the necessary 

device is furnished without cost to the 

ASC or with full credit. We would 

provide the same amount of payment 

reduction based on the device offset 

amount in ASCs that would apply under 

the OPPS under the same 

circumstances. We continue to believe 

that the reduction of ASC payment in 

these circumstances is necessary to pay 

appropriately for the covered surgical 

procedure being furnished by the ASC. 

We also are proposing to reduce the 

payment for implantation procedures 

listed in Table 49 by one-half of the 

device offset amount that would be 

applied if a device was provided at no 

cost or with full credit, if the credit to 

the ASC is 50 percent or more of the 

cost of the new device. The ASC would 

append the HCPCS ‘‘FC’’ modifier to the 

HCPCS code for a surgical procedure 

listed in Table 49 when the facility 

receives a partial credit of 50 percent or 

more of the cost of a device listed in 

Table 50 below. In order to report that 

they received a partial credit of 50 

percent or more of the cost of a new 

device, ASCs would have the option of 

either: (1) Submitting the claim for the 

device replacement procedure to their 

Medicare contractor after the 

procedure’s performance but prior to 

manufacturer acknowledgment of credit 

for the device, and subsequently 

contacting the contractor regarding a 

claim adjustment once the credit 

determination is made; or (2) holding 

the claim for the device implantation 

procedure until a determination is made 

by the manufacturer on the partial credit 

and submitting the claim with the ‘‘FC’’ 

modifier appended to the implantation 

procedure HCPCS code if the partial 

credit is 50 percent or more of the cost 

of the replacement device. Beneficiary 

coinsurance would continue to be based 

on the reduced payment amount. 

TABLE 49—PROPOSED CY 2012 PROCEDURES TO WHICH THE NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE

ADJUSTMENT POLICY WOULD APPLY

CPT code Short descriptor 

Proposed 

CY 2012 

ASC 

payment 

indicator 

Proposed 

CY 2012 

OPPS APC 

OPPS APC title 

Proposed 

CY 2012 

OPPS full 

APC offset 

percentage 

Proposed 

CY 2012 

OPPS 

partial 

APC offset 

percentage 

24361 ...... Reconstruct elbow joint ...... J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

24363 ...... Replace elbow joint ............ J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

24366 ...... Reconstruct head of radius J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

25441 ...... Reconstruct wrist joint ........ J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

25442 ...... Reconstruct wrist joint ........ J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

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TABLE 49—PROPOSED CY 2012 PROCEDURES TO WHICH THE NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE

ADJUSTMENT POLICY WOULD APPLY—Continued 

CPT code Short descriptor 

Proposed 

CY 2012 

ASC 

payment 

indicator 

Proposed 

CY 2012 

OPPS APC 

OPPS APC title 

Proposed 

CY 2012 

OPPS full 

APC offset 

percentage 

Proposed 

CY 2012 

OPPS 

partial 

APC offset 

percentage 

25446 ...... Wrist replacement ............... J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

27446 ...... Revision of knee joint ......... J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

33206 ...... Insertion of heart pacemaker.J8 0089 Insertion/Replacement of Permanent 

Pacemaker and Electrodes.

71 35 

33207 ...... Insertion of heart pacemaker.J8 0089 Insertion/Replacement of Permanent 

Pacemaker and Electrodes.

71 35 

33208 ...... Insertion of heart pacemaker.J8 0655 Insertion/Replacement/Conversion of a 

permanent dual chamber pacemaker.

74 37 

33212 ...... Insertion of pulse generator J8 0090 Insertion/Replacement of Pacemaker 

Pulse Generator.

73 37 

33213 ...... Insertion of pulse generator J8 0654 Insertion/Replacement of a permanent 

dual chamber pacemaker.

74 37 

33214 ...... Upgrade of pacemaker system.J8 0655 Insertion/Replacement/Conversion of a 

permanent dual chamber pacemaker.

73 37 

33224 ...... Insert pacing lead & connect.J8 0655 Insertion/Replacement/Conversion of a 

permanent dual chamber pacemaker.

73 37 

33225 ...... Lventric pacing lead add-on J8 0108 Insertion/Replacement/Repair of 

Cardioverter-Defibrillator Leads.

87 43 

33240 ...... Insert pulse generator ......... J8 0107 Insertion of Cardioverter-Defibrillator ........ 88 44 

33249 ...... Eltrd/insert pace-defib ......... J8 0108 Insertion/Replacement/Repair of 

Cardioverter-Defibrillator Leads.

87 43 

33282 ...... Implant pat-active ht record J8 0680 Insertion of Patient Activated Event Recorders.72 36 

53440 ...... Male sling procedure .......... J8 0385 Level I Prosthetic Urological Procedures .. 61 30 

53444 ...... Insert tandem cuff ............... J8 0385 Level I Prosthetic Urological Procedures .. 61 30 

53445 ...... Insert uro/ves nck sphincter J8 0386 Level II Prosthetic Urological Procedures 70 35 

53447 ...... Remove/replace ur sphincter.J8 0386 Level II Prosthetic Urological Procedures 70 35 

54400 ...... Insert semi-rigid prosthesis J8 0385 Level I Prosthetic Urological Procedures .. 61 30 

54401 ...... Insert self-contd prosthesis J8 0386 Level II Prosthetic Urological Procedures 70 35 

54405 ...... Insert multi-comp penis 

pros.

J8 0386 Level II Prosthetic Urological Procedures 70 35 

54410 ...... Remove/replace penis 

prosth.

J8 0386 Level II Prosthetic Urological Procedures 70 35 

54416 ...... Remv/repl penis contain 

pros.

J8 0386 Level II Prosthetic Urological Procedures 70 35 

61885 ...... Insrt/redo neurostim 1 array J8 0039 Level I Implantation of Neurostimulator 

Generator.

85 43 

61886 ...... Implant neurostim arrays .... J8 0315 Level II Implantation of Neurostimulator 

Generator.

88 44 

62361 ...... Implant spine infusion pump J8 0227 Implantation of Drug Infusion Device ........ 81 40 

62362 ...... Implant spine infusion pump J8 0227 Implantation of Drug Infusion Device ........ 81 40 

63650 ...... Implant neuroelectrodes ..... J8 0040 Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.55 27 

63655 ...... Implant neuroelectrodes ..... J8 0061 Level II Implantation/Revision/Replacement of Neurostimulator Electrodes.64 32 

63663 ...... Revise spine eltrd perq aray J8 0040 Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.55 27 

63664 ...... Revise spine eltrd plate ...... J8 0040 Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.55 27 

63685 ...... Insrt/redo spine n generator J8 0039 Level I Implantation of Neurostimulator 

Generator.

85 43 

64553 ...... Implant neuroelectrodes ..... J8 0040 Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.55 27 

64555 ...... Implant neuroelectrodes ..... J8 0040 Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.55 27 

64560 ...... Implant neuroelectrodes ..... J8 0040 Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.55 27 

64561 ...... Implant neuroelectrodes ..... J8 0040 Percutaneous Implantation of 

Neurostimulator Electrodes.

55 27 

64565 ...... Implant neuroelectrodes ..... J8 0040 Percutaneous Implantation of 

Neurostimulator Electrodes.

55 27 

64568 ...... Implant neuroelectrodes ..... J8 0318 Implantation of Neurostimulator Electrodes, Cranial Nerve.86 43 

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TABLE 49—PROPOSED CY 2012 PROCEDURES TO WHICH THE NO COST/FULL CREDIT AND PARTIAL CREDIT DEVICE

ADJUSTMENT POLICY WOULD APPLY—Continued 

CPT code Short descriptor 

Proposed 

CY 2012 

ASC 

payment 

indicator 

Proposed 

CY 2012 

OPPS APC 

OPPS APC title 

Proposed 

CY 2012 

OPPS full 

APC offset 

percentage 

Proposed 

CY 2012 

OPPS 

partial 

APC offset 

percentage 

64575 ...... Implant neuroelectrodes ..... J8 0061 Laminectomy, Laparoscopy, or Incision for 

Implantation of Neurostimulator Electr.

64 32 

64577 ...... Implant neuroelectrodes ..... J8 0061 Laminectomy, Laparoscopy, or Incision for 

Implantation of Neurostimulator Electr.

64 32 

64580 ...... Implant neuroelectrodes ..... J8 0061 Laminectomy, Laparoscopy, or Incision for 

Implantation of Neurostimulator Electr.

64 32 

64581 ...... Implant neuroelectrodes ..... J8 0061 Laminectomy, Laparoscopy, or Incision for 

Implantation of Neurostimulator Electr.

64 32 

64590 ...... Insrt/redo pn/gastr stimul .... J8 0039 Level I Implantation of Neurostimulator 

Generator.

85 43 

69714 ...... Implant temple bone w/ 

stimul.

J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

69715 ...... Temple bne implnt w/ 

stimulat.

J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

69717 ...... Temple bone implant revision.J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

69718 ...... Revise temple bone implant J8 0425 Level II Arthroplasty or Implantation with 

Prosthesis.

60 30 

69930 ...... Implant cochlear device ...... J8 0259 Level VII ENT Procedures ........................ 83 41 

TABLE 50—PROPOSED DEVICES FOR

WHICH THE ‘‘FB’’ OR ‘‘FC’’ MODIFIER MUST BE REPORTED WITH THE

PROCEDURE CODE IN CY 2012 

WHEN FURNISHED AT NO COST OR

WITH FULL OR PARTIAL CREDIT

CY 2011 

Device 

HCPCS 

code 

CY 2011 Short descriptor 

C1721 .... AICD, dual chamber. 

C1722 .... AICD, single chamber. 

C1762 .... Conn tiss, human(inc fascia). 

C1763 .... Conn tiss, non-human. 

C1764 .... Event recorder, cardiac. 

C1767 .... Generator, neurostim, imp. 

C1771 .... Rep dev, urinary, w/sling. 

C1772 .... Infusion pump, programmable. 

C1776 .... Joint device (implantable). 

C1778 .... Lead, neurostimulator. 

C1779 .... Lead, pmkr, transvenous VDD. 

C1781 .... Mesh (implantable). 

C1785 .... Pmkr, dual, rate-resp. 

C1786 .... Pmkr, single, rate-resp. 

C1813 .... Prosthesis, penile, inflatab. 

C1815 .... Pros, urinary sph, imp. 

C1820 .... Generator, neuro rechg bat sys. 

C1881 .... Dialysis access system. 

C1882 .... AICD, other than sing/dual. 

C1891 .... Infusion pump, non-prog, perm. 

C1897 .... Lead, neurostim, test kit. 

C1898 .... Lead, pmkr, other than trans. 

C1900 .... Lead coronary venous. 

C2618 .... Probe, cryoablation. 

C2619 .... Pmkr, dual, non rate-resp. 

C2620 .... Pmkr, single, non rate-resp. 

C2621 .... Pmkr, other than sing/dual. 

C2622 .... Prosthesis, penile, non-inf. 

C2626 .... Infusion pump, non-prog, temp. 

C2631 .... Rep dev, urinary, w/o sling. 

L8614 ..... Cochlear device/system. 

L8680 ..... Implt neurostim elctr each. 

L8685 ..... Implt nrostm pls gen sng rec. 

TABLE 50—PROPOSED DEVICES FOR

WHICH THE ‘‘FB’’ OR ‘‘FC’’ MODIFIER MUST BE REPORTED WITH THE

PROCEDURE CODE IN CY 2012 

WHEN FURNISHED AT NO COST OR

WITH FULL OR PARTIAL CREDIT— 

Continued 

CY 2011 

Device 

HCPCS 

code 

CY 2011 Short descriptor 

L8686 ..... Implt nrostm pls gen sng non. 

L8687 ..... Implt nrostm pls gen dua rec. 

L8688 ..... Implt nrostm pls gen dua non. 

L8690 ..... Aud osseo dev, int/ext comp. 

We invite public comment on these 

proposals. 

d. Waiver of Coinsurance and 

Deductible for Certain Preventive 

Services 

Section 1833(a)(1) and (b)(1) of the 

Act waives the coinsurance and the Part 

B deductible for those preventive 

services under section 1861(ddd)(3)(A) 

of the Act as described in section 

1861(ww)(2) of the Act (excluding 

electrocardiograms) that are 

recommended by the United States 

Preventive Services Task Force 

(USPSTF) with a grade of A or B for any 

indication or population and that are 

appropriate for the individual. Section 

1833(b) of the Act also waives the Part 

B deductible for colorectal cancer 

screening tests that become diagnostic. 

In the CY 2011 OPPS/ASC final rule 

with comment period, we finalized our 

policies with respect to these provisions 

and identified the ASC covered surgical 

and ancillary services that are 

preventive services that are 

recommended by the USPSTF with a 

grade of A or B for which the 

coinsurance and the deductible are 

waived. For a complete discussion of 

our policies and identified services, 

please see the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72047 

through 72049). We are proposing no 

changes to our policies or the list of 

services. We have identified these 

services with a double asterisk in 

Addenda AA and BB to this proposed 

rule. 

e. Proposed Payment for the Cardiac 

Resynchronization Therapy Composite 

Cardiac resynchronization therapy 

(CRT) uses electronic devices to 

sequentially pace both sides of the heart 

to improve its output. CRT utilizes a 

pacing electrode implanted in 

combination with either a pacemaker or 

an implantable cardioverter defibrillator 

(ICD). CRT performed by the 

implantation of an ICD along with a 

pacing electrode is referred to as ‘‘CRT– 

D.’’ As detailed in section II.A.2.e.(6) of 

this proposed rule, we are proposing to 

create an OPPS composite APC 

(Composite APC 8009 (Cardiac 

Resynchronization Therapy—ICD Pulse 

Generator and Leads)) which would be 

used when CPT code 33225 (Insertion of 

pacing electrode, cardiac venous 

system, for left ventricular pacing, at 

time of insertion of pacing cardioverterdefibrillator or pacemaker pulse 

generator (including upgrade to dual 

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chamber system)) and CPT code 33249 

(Insertion or repositioning of electrode 

lead(s) for single or dual chamber 

pacing cardioverter-defibrillator and 

insertion of pulse generator) are 

performed on the same date of service. 

We also are proposing to cap the OPPS 

payment rate for composite APC 8009 at 

the most comparable Medicare severity 

diagnosis-related group (MS–DRG) 

payment rate established under the IPPS 

that would be provided to acute care 

hospitals for providing CRT–D services 

to hospital inpatients. In other words, 

we are proposing to pay APC 8009 at the 

lesser of the APC 8009 median cost or 

the IPPS standardized payment rate for 

MS–DRG 227 (Cardiac Defibrillator 

Implant without Cardiac Catheterization 

without Major Complication or 

Comorbidity). This would ensure 

appropriate and equitable payment to 

hospitals and that we do not create an 

inappropriate payment incentive to 

provide CRT–D services in one setting 

of care over another by paying more for 

CRT–D in the outpatient setting 

compared to the inpatient setting. 

Specifically, for the CY 2012 OPPS, we 

are proposing that if the APC 8009 

median cost that we will calculate for 

the CY 2012 OPPS/ASC final rule with 

comment period exceeds the FY 2012 

IPPS standardized payment rate for MS– 

DRG 227, we would establish the OPPS 

payment amount at the FY 2012 IPPS 

standardized payment amount for MS– 

DRG 227 (currently estimated at 

$26,365). 

Because CPT code 33225 and CPT 

code 33249 are on the list of ASC 

covered surgical procedures, we are 

proposing to establish an ASC payment 

rate that is based on the OPPS payment 

rate applicable to APC 8009 when these 

procedures are performed on the same 

date of service in an ASC. Again, we do 

not want to create an inappropriate 

payment incentive to provide CRT–D 

services in one setting of care over 

another by paying more for CRT–D in 

ASCs compared to the hospital 

outpatient setting. Because CPT codes 

33225 and 33249 are on the proposed 

list of device-intensive procedures for 

CY 2012, we are proposing to apply the 

usual device-intensive methodology 

based on the OPPS payment rate 

applicable to APC 8009 (which is the 

lesser of the APC 8009 median cost that 

we will calculate for the CY 2012 OPPS/ 

ASC final rule with comment period or 

the FY 2012 IPPS standardized payment 

rate for MS–DRG 227). We also are 

proposing to create a HCPCS Level II Gcode so that ASCs can properly report 

when the procedures described by CPT 

codes 33225 and 33249 are performed 

on the same date of service to receive 

the appropriate CRT–D composite 

payment. 

In a related issue, as detailed in 

section III.D.6 of this proposed rule, 

CPT codes 33225 and 33249 are the only 

procedures proposed for inclusion in 

APC 0108. We are proposing that these 

codes would be paid under APC 0108 

only if they are not reported on the same 

date of service. Further, we are 

proposing to pay the OPPS payment rate 

for services that are assigned to APC 

0108 at the lesser of the APC 0108 

median cost or the IPPS standardized 

payment rate for MS–DRG 227. For ASC 

payment in CY 2012, we are proposing 

to apply the device-intensive 

methodology to calculate payment for 

CPT codes 33225 and 33249 based on 

the OPPS payment rate applicable to 

APC 0108 (which is the lesser of the 

APC 0108 median cost that we will 

calculate for the CY 2012 OPPS/ASC 

final rule with comment period or the 

FY 2012 IPPS standardized payment 

rate for MS–DRG 227). 

We invite public comment on these 

proposals. 

2. Proposed Payment for Covered 

Ancillary Services 

a. Background 

Our final payment policies under the 

revised ASC payment system for 

covered ancillary services vary 

according to the particular type of 

service and its payment policy under 

the OPPS. Our overall policy provides 

separate ASC payment for certain 

ancillary items and services integrally 

related to the provision of ASC covered 

surgical procedures that are paid 

separately under the OPPS and provides 

packaged ASC payment for other 

ancillary items and services that are 

packaged under the OPPS. Thus, we 

established a final policy to align ASC 

payment bundles with those under the 

OPPS (72 FR 42495). In all cases, in 

order for those ancillary services also to 

be paid, ancillary items and services 

must be provided integral to the 

performance of ASC covered surgical 

procedures for which the ASC bills 

Medicare. 

Our ASC payment policies provide 

separate payment for drugs and 

biologicals that are separately paid 

under the OPPS at the OPPS rates, while 

we generally pay for separately payable 

radiology services at the lower of the 

MPFS non-facility PE RVU-based (or 

technical component) amount or the 

rate calculated according to the ASC 

standard ratesetting methodology (72 FR 

42497). However, as finalized in the CY 

2011 OPPS/ASC final rule with 

comment period (75 FR 72050), 

payment indicators for all nuclear 

medicine procedures (defined as CPT 

codes in the range of 78000 through 

78999) that are designated as radiology 

services that are paid separately when 

provided integral to a surgical 

procedure on the ASC list are set to 

‘‘Z2’’ so that payment is made based on 

the OPPS relative payment weights 

rather than the MPFS non-facility RE 

RVU amount, regardless of which is 

lower. This modification to the ASC 

payment methodology for ancillary 

services was finalized in response to a 

CY 2011 OPPS/ASC proposed rule 

comment that suggested it is 

inappropriate to use the MPFS-based 

payment methodology for nuclear 

medicine procedures because the 

associated diagnostic 

radiopharmaceutical, though packaged 

under the ASC payment system, is 

separately paid under the MFPS. We set 

the payment indicator to ‘‘Z2’’ for 

nuclear medicine procedures in the ASC 

setting so that payment for these 

procedures would be based on the OPPS 

relative payment weight rather than the 

MPFS non-facility PE RVU-based 

amount to ensure that the ASC will be 

compensated for the cost associated 

with the diagnostic 

radiopharmaceuticals. 

ASC payment policy for 

brachytherapy sources generally mirrors 

the payment policy under the OPPS. We 

finalized our policy in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 42499) to pay for 

brachytherapy sources applied in ASCs 

at the same prospective rates that were 

adopted under the OPPS or, if OPPS 

rates were unavailable, at contractorpriced rates. After publication of that 

rule, section 106 of the Medicare, 

Medicaid, and SCHIP Extension Act of 

2007 (Pub. L. 110–173) mandated that, 

for the period January 1, 2008 through 

June 30, 2008, brachytherapy sources be 

paid under the OPPS at charges adjusted 

to cost. Therefore, consistent with our 

final overall ASC payment policy, we 

paid ASCs at contractor-priced rates for 

brachytherapy sources provided in 

ASCs during that period of time. 

Beginning July 1, 2008, brachytherapy 

sources applied in ASCs were to be paid 

at the same prospectively set rates that 

were finalized in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 67165 through 67188). Immediately 

prior to the publication of the CY 2009 

OPPS/ASC proposed rule, section 142 of 

the Medicare Improvements for Patients 

and Providers Act of 2008 (Pub. L. 110– 

275) amended section 1833(t)(16)(C) of 

the Act (as amended by section 106 of 

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the Medicare, Medicaid, and SCHIP 

Extension Act of 2007, Pub. L. 110–173) 

to extend the requirement that 

brachytherapy sources be paid under 

the OPPS at charges adjusted to cost 

through December 31, 2009. Therefore, 

consistent with final ASC payment 

policy, ASCs continued to be paid at 

contractor-priced rates for 

brachytherapy sources provided integral 

to ASC covered surgical procedures 

during that period of time. 

Other separately paid covered 

ancillary services in ASCs, specifically 

corneal tissue acquisition and device 

categories with OPPS pass-through 

status, do not have prospectively 

established ASC payment rates 

according to the final policies of the 

revised ASC payment system (72 FR 

42502 and 42509; § 416.164(b)). Under 

the revised ASC payment system, 

corneal tissue acquisition is paid based 

on the invoiced costs for acquiring the 

corneal tissue for transplantation. 

Devices that are eligible for passthrough payment under the OPPS are 

separately paid under the ASC payment 

system. Currently, the only device that 

is eligible for pass-through payment in 

the OPPS is described by HCPCS code 

C1749 (Endoscope, retrograde imaging/ 

illumination colonoscope device 

(Implantable)). Payment for HCPCS code 

C1749 under the ASC payment system 

is contractor priced. 

b. Proposed Payment for Covered 

Ancillary Services for CY 2012 

For CY 2012, we are proposing to 

update the ASC payment rates and make 

changes to ASC payment indicators as 

necessary to maintain consistency 

between the OPPS and ASC payment 

system regarding the packaged or 

separately payable status of services and 

the proposed CY 2012 OPPS and ASC 

payment rates. The proposed CY 2012 

OPPS payment methodologies for 

separately payable drugs and biologicals 

and brachytherapy sources are 

discussed in section II.A. and section 

V.B. of this proposed rule, respectively, 

and we are proposing to set the CY 2012 

ASC payment rates for those services 

equal to the proposed CY 2012 OPPS 

rates. 

Consistent with established ASC 

payment policy (72 FR 42497), the 

proposed CY 2012 payment for 

separately payable covered radiology 

services is based on a comparison of the 

CY 2012 proposed MPFS non-facility PE 

RVU-based amounts (we refer readers to 

the CY 2012 MPFS proposed rule) and 

the proposed CY 2012 ASC payment 

rates calculated according to the ASC 

standard ratesetting methodology and 

then set at the lower of the two 

amounts. Alternatively, payment for a 

radiology service may be packaged into 

the payment for the ASC covered 

surgical procedure if the radiology 

service is packaged under the OPPS. 

The payment indicators in Addendum 

BB to this proposed rule indicate 

whether the proposed payment rates for 

radiology services are based on the 

MPFS nonfacility PE RVU-based 

amount or the ASC standard ratesetting 

methodology, or whether payment for a 

radiology service is packaged into the 

payment for the covered surgical 

procedure (payment indicator ‘‘N1’’). 

Radiology services that we are 

proposing to pay based on the ASC 

standard ratesetting methodology are 

assigned payment indicator ‘‘Z2’’ 

(Radiology service paid separately when 

provided integral to a surgical 

procedure on ASC list; payment based 

on OPPS relative payment weight) and 

those for which the proposed payment 

is based on the MPFS non-facility PE 

RVU-based amount are assigned 

payment indicator ‘‘Z3’’ (Radiology 

service paid separately when provided 

integral to a surgical procedure on ASC 

list; payment based on MPFS nonfacility PE RVUs). 

As finalized in the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 72050), payment indicators for all 

nuclear medicine procedures (defined 

as CPT codes in the range of 78000 

through 78999) that are designated as 

radiology services that are paid 

separately when provided integral to a 

surgical procedure on the ASC list are 

set to ‘‘Z2’’ so that payment is made 

based on the OPPS relative payment 

weights rather than the MPFS nonfacility PE RVU-based amount, 

regardless of which is lower. We are 

proposing to continue this modification 

to the payment methodology and, 

therefore, set the payment indicator to 

‘‘Z2’’ for these nuclear medicine 

procedures in CY 2012. In addition, 

because the same issue exists for 

radiology procedures that use contrast 

agents (the contrast agent is packaged 

under the ASC payment system but is 

separately paid under the MFPS), we are 

proposing to set the payment indicator 

to ‘‘Z2’’ for radiology services that use 

contrast agents so that payment for these 

procedures will be based on the OPPS 

relative payment weight and will, 

therefore, include the cost for the 

contrast agent. We have made proposed 

changes to the regulation text at 

§ 416.171(d) to reflect this proposal. 

Most covered ancillary services and 

their proposed payment indicators are 

listed in Addendum BB to this proposed 

rule (which is referenced in section 

XVII. of this proposed rule and available 

via the Internet on the CMS Web site). 

E. New Technology Intraocular Lenses 

(NTIOLs) 

1. NTIOL Cycle and Evaluation Criteria 

In the CY 2007 OPPS/ASC final rule 

with comment period (71 FR 68176), we 

finalized our current process for 

reviewing applications to establish new 

classes of new technology intraocular 

lenses (NTIOLs) and for recognizing 

new candidate intraocular lenses (IOLs) 

inserted during or subsequent to 

cataract extraction as belonging to an 

NTIOL class that is qualified for a 

payment adjustment. Specifically, we 

established the following process: 

• We announce annually in the 

proposed rule updating the ASC and 

OPPS payment rates for the following 

calendar year, a list of all requests to 

establish new NTIOL classes accepted 

for review during the calendar year in 

which the proposal is published and the 

deadline for submission of public 

comments regarding those requests. In 

accordance with section 141(b)(3) of 

Public Law 103–432 and our regulations 

at § 416.185(b), the deadline for receipt 

of public comments is 30 days following 

publication of the list of requests. 

• In the final rule updating the ASC 

and OPPS payment rates for the 

following calendar year, we— 

Æ Provide a list of determinations 

made as a result of our review of all new 

NTIOL class requests and public 

comments; and 

Æ Announce the deadline for 

submitting requests for review of an 

application for a new NTIOL class for 

the following calendar year. 

In the CY 2007 OPPS/ASC final rule 

with comment period (71 FR 68227), we 

finalized our proposal to base our 

determinations on consideration of the 

following three major criteria set out at 

42 CFR 416.195: 

• Criterion 1 (42 CFR 416.195(a)(1), 

(2)): The IOL must have been approved 

by the FDA and claims of specific 

clinical benefits and/or lens 

characteristics with established clinical 

relevance in comparison with currently 

available IOLs must have been approved 

by the FDA for use in labeling and 

advertising; 

• Criterion 2 (42 CFR 416.195(a)(3)): 

The IOL is not described by an active or 

expired NTIOL class; that is, it does not 

share the predominant, class-defining 

characteristic associated with the 

improved clinical outcome with 

designated members of an active or 

expired NTIOL class; and 

• Criterion 3 (42 CFR 416.195(a)(4)): 

Evidence demonstrates that use of the 

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IOL results in measurable, clinically 

meaningful, improved outcomes in 

comparison with use of currently 

available IOLs. The statute requires us 

to consider the following superior 

outcomes: 

Æ Reduced risk of intraoperative or 

postoperative complication or trauma; 

Æ Accelerated postoperative recovery; 

Æ Reduced induced astigmatism; 

Æ Improved postoperative visual 

acuity; 

Æ More stable postoperative vision; or 

Æ Other comparable clinical 

advantages. 

Since implementation of the process 

for adjustment of payment amounts for 

NTIOLs that was established in the June 

16, 1999 Federal Register, we have 

approved three classes of NTIOLs, as 

shown in the table entitled CMS 

Approved NTIOLs, with the associated 

qualifying IOL models, posted on the 

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

ASCPayment/ 

08_NTIOLs.asp#TopOfPage. 

2. NTIOL Application Process for 

Payment Adjustment 

For a request to be considered 

complete, we require submission of the 

information that is found in the 

guidance document entitled 

‘‘Application Process and Information 

Requirements for Requests for a New 

Class of New Technology Intraocular 

Lens (NTIOL)’’ posted on the CMS Web 

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

ASCPayment/ 

08_NTIOLs.asp#TopOfPage. For each 

completed request for a new class that 

is received by the established deadline, 

a determination is announced annually 

in the final rule updating the ASC and 

OPPS payment rates for the next 

calendar year. 

We also summarize briefly in the final 

rule with comment period the evidence 

that we reviewed, the public comments 

we received timely, and the basis for our 

determinations in consideration of 

applications for establishment of a new 

NTIOL class. When a new NTIOL class 

is created, we identify the predominant 

characteristic of NTIOLs in that class 

that sets them apart from other IOLs 

(including those previously approved as 

members of other expired or active 

NTIOL classes) and that is associated 

with an improved clinical outcome. The 

date of implementation of a payment 

adjustment in the case of approval of an 

IOL as a member of a new NTIOL class 

would be set prospectively as of 30 days 

after publication of the ASC payment 

update final rule, consistent with the 

statutory requirement. 

3. Requests to Establish New NTIOL 

Classes for CY 2012 and Deadline for 

Public Comments 

We received four requests for review 

to establish a new NTIOL class for CY 

2012 by the March 5, 2011 due date. 

Summaries of these requests follow. 

a. Requestor/Manufacturer: Alcon 

Laboratories, Inc. (Alcon). 

Lens Model Numbers: Acrysof Natural 

IQ and Acrysof Natural IOLs, Models 

SN60WF (aspheric optic, single piece), 

SN60AT (spherical optic, single piece), 

MN60MA (spherical optic, multi-piece), 

MN60AC (spherical optic, multi-piece). 

Summary of the Request: Alcon 

submitted a request for CMS to 

determine that its Acrysof Natural IOLs 

meet the criteria for recognition as 

NTIOLs and to concurrently establish a 

new class of NTIOLs for ‘‘blue-lightfiltering IOLs that improve driving 

safety under glare conditions,’’ with 

these IOLs as members of the class. We 

reviewed a similar request by Alcon 

during the CY 2011 NTIOL application 

cycle (75 FR 72052). As part of its CY 

2012 request, Alcon submitted 

descriptive information about the 

candidate IOLs as outlined in the 

guidance document that is available on 

the CMS Web site for the establishment 

of a new class of NTIOLs, as well as 

information regarding approval of the 

candidate IOLs by the FDA. This 

information included the approved 

labeling for the candidate IOLs, a 

summary of the IOLs’ safety and 

effectiveness, a copy of the FDA’s 

approval notifications, and instructions 

for their use. 

In its CY 2012 request, Alcon asserts 

that its request is based on studies 

demonstrating that the Acrysof Natural 

IOLs with a blue-light-filtering 

chromophore filter light in a manner 

that approximates the human crystalline 

lens in the 400–475 nm blue light 

wavelength range to reduce glare that 

impairs the ability of the eye to 

differentiate objects from the 

background. Alcon further states that 

glare reduction can help beneficiaries 

avoid hazards that can be caused by 

glare. Alcon also states that at present 

there are no active or expired NTIOL 

classes that describe IOLs similar to the 

Acrysof Natural IOLs. 

We established in the CY 2007 OPPS/ 

ASC final rule with comment period 

that when reviewing a request for 

recognition of an IOL as an NTIOL and 

a concurrent request to establish a new 

class of NTIOLs, we would base our 

determination on consideration of the 

three major criteria at 42 CFR 416.195(a) 

and listed above. We have begun our 

review of Alcon’s request to recognize 

its Acrysof Natural IOLs as NTIOLs and 

concurrently establish a new class of 

NTIOLs. We are soliciting public 

comment on these candidate IOLs with 

respect to the established three major 

NTIOL criteria. 

First, for an IOL to be recognized as 

an NTIOL we require that the IOL must 

have been approved by the FDA and 

claims of specific clinical benefits and/ 

or lens characteristics with established 

clinical relevance in comparison with 

currently available IOLs must have been 

approved by the FDA for use in labeling 

and advertising. The approved labels for 

the Alcon IOLs all state the following: 

‘‘Alcon’s proprietary blue light filtering 

chromophore filters light in a manner 

that approximates the human crystalline 

lens in the 400–475 nm blue light 

wavelength range.’’ The FDA labels for 

these IOLs do not otherwise reference 

specific clinical benefits of blue light 

filtering. We are interested in public 

comments on the clinical relevance of 

blue light filtering in an IOL. 

Specifically, we are interested in public 

comments regarding the assertion that 

the specific blue light filtering 

properties associated with the candidate 

IOLs improve driving safety via the 

reduction of glare disability. 

Second, according to 42 CFR 

416.195(a)(3), we also require that the 

candidate IOL not be described by an 

active or expired NTIOL class; that is, it 

does not share the predominant, classdefining characteristic associated with 

improved clinical outcomes with 

designated members of an active or 

expired NTIOL class. In the CY 2007 

OPPS final rule, in response to a 

comment we explained our 

interpretation of 42 CFR 416.195(a)(3) as 

follows: 

‘‘[R]evised § 416.195(a)(3) does not 

preclude from consideration as a 

member of a new class of NTIOL a lens 

that includes as one of its characteristics 

a class-defining characteristic associated 

with members of an active or expired 

class. Only if that shared characteristic 

were the predominant characteristic of 

the lens would it be precluded from 

approval as a new class of NTIOL. 

However, if the lens featured other 

characteristics, one or more of which 

predominated, that were clearly tied 

with improved clinical outcomes, the 

lens would not be disqualified from 

consideration as an NTIOL just because 

it also shared a characteristic with 

members of an active or expired class.’’ 

(71 FR 68178). 

As noted above, since implementation 

of the process for adjustment of 

payment amounts for NTIOLs that was 

established in the June 16, 1999 Federal 

Register, we have approved three 

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classes of NTIOLs: Multifocal and 

Reduction in Preexisting Astigmatism 

classes, both of which were created in 

2000 and expired in 2005, and the 

Reduced Spherical Aberration class, 

which was created in 2006 and expired 

on February 26, 2011. As mentioned 

above, a table entitled CMS Approved 

NTIOLs, with the associated qualifying 

IOL models, is posted on the CMS Web 

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

ASCPayment/ 

08_NTIOLs.asp#TopOfPage. The classdefining characteristic specific to IOLs 

that are members of these three expired 

classes is evident in the name assigned 

to the class. For example, IOLs 

recognized as members of the reduced 

spherical aberration class are 

characterized by their aspheric design 

that results in reduced spherical 

aberration. Based on the information in 

the table entitled CMS Approved 

NTIOLs, a candidate IOL’s predominant 

characteristic may not be described by 

any of the three expired NTIOL classes. 

In the case of one of four of Alcon’s 

candidate IOLs, the Acrysof Natural IQ 

Aspheric IOL model SN60WF, it is a 

member of the expired reduced 

spherical aberration NTIOL class (75 FR 

72052). For the purposes of satisfying 

§ 416.195(a)(3), CMS must be able to 

determine which lens characteristic is 

predominant for Alcon’s model 

SN60WF, asphericity (resulting in 

reduced spherical aberration) or bluelight filtering. If the predominant 

characteristic is asphericity, then the 

model SN60WF IOL would be 

disqualified under § 416.195(a)(3). This 

determination is particularly relevant 

given that the clinical benefit attributed 

to both of these lens characteristics is 

improved night driving. To our 

knowledge, Alcon has not compared the 

IOL model SN60WF (a blue-light 

filtering aspheric IOL) to a non-bluelight filtering aspheric IOL to determine 

if there are any night driving benefits 

attributable to the blue-light filtering 

characteristic in addition to the 

improved night driving attributable to 

the aspheric optic. Such information 

would assist us in evaluating whether 

blue-light filtering predominates or is 

subordinate to the IOL’s asphericity. We 

are soliciting public comments on 

whether blue-light filtering can be 

considered the predominant IOL 

characteristic for the model SN60WF 

IOL. We also welcome public comments 

that address whether blue light-filtering 

and the associated clinical benefits of 

the other three of Alcon’s candidate 

IOLs (that is, SN60AT, MN60MA, 

MN60AC) are described by any of the 

expired NTIOL classes. 

Third, our NTIOL evaluation criteria 

also require that an applicant submit 

evidence demonstrating that use of the 

IOL results in measurable, clinically 

meaningful, improved outcomes in 

comparison to currently available IOLs. 

We note that in the CY 2007 OPPS/ASC 

final rule with comment period, we 

sought comments as to what constitutes 

currently available IOLs for purposes of 

such comparisons, and we received 

several comments in response to our 

solicitation (71 FR 68178). We agreed 

with commenters that we should remain 

flexible with respect to our view of 

‘‘currently available lenses’’ for 

purposes of reviewing NTIOL requests, 

in order to allow for consideration of 

technological advances in lenses over 

time. This means that we do not expect 

that ‘‘currently available lenses’’ would 

remain static over time and always 

necessarily default to the classic 

spherical monofocal IOL for every 

candidate NTIOL class. Therefore, we 

believe that ‘‘currently available lenses’’ 

for purposes of reviewing NTIOL 

requests should depend upon the classdefining characteristic and the 

associated purported improved clinical 

outcome of the candidate NTIOL. For 

example, for some candidate NTIOLs 

the most appropriate comparison IOL 

would be a spherical monofocal IOL, 

while other candidate NTIOLs may be 

more appropriately compared to 

aspheric IOLs. 

For purposes of reviewing Alcon’s 

request to establish a new NTIOL class 

for CY 2012, we are proposing that 

aspheric monofocal IOLs represent the 

currently available IOLs against which 

the candidate NTIOLs should be 

compared in order to establish a new 

class. According to publicly available 

data from Market Scope, LLC, IOLs with 

aspheric optics accounted for over 86 

percent of the IOLs implanted in the 

United States during 2010. In addition, 

data submitted by Alcon shows that the 

overwhelming majority of IOLs sold by 

Alcon have aspheric optics. 

Furthermore, the aspheric design that 

results in reduced spherical aberration 

was the class defining characteristic for 

IOLs recognized as members of the 

expired reduced spherical aberration 

NTIOL class. The primary clinical 

outcome associated with reduced 

spherical aberration (for purposes of 

establishing it as an NTIOL class) was 

safer night driving (71 FR 4588). Alcon 

asserts that what makes its candidate 

IOLs superior to other currently 

available IOLs is improved driving 

safety under glare conditions. Glare 

conditions during driving primarily 

occur at night due to headlights from 

oncoming cars. The primary improved 

clinical outcome from reduced spherical 

aberration IOLs (an expired NTIOL 

class) was safer night driving and the 

purported primary improved clinical 

outcome from Alcon’s blue lightfiltering IOLs is also safer night driving. 

Therefore, the most relevant type of 

currently available IOLs against which 

the Alcon blue filtering IOLs should be 

compared is aspheric IOLs. In 

particular, the relevant comparison 

would be the performance of an 

aspheric blue-light filtering IOL versus 

an aspheric non-blue light filtering IOL. 

This comparison would test the 

hypothesis of whether blue-light 

filtering improved night driving in 

comparison to aspheric optics, which 

has been shown to improve night 

driving. We seek public comment on 

our view of ‘‘currently available lenses’’ 

for the purposes of evaluating Alcon’s 

candidate IOLs against currently 

available IOLs. 

We are reviewing the evidence 

submitted with Alcon’s CY 2012 

request. Although Alcon submitted 

various types of literature in support of 

its application, it relies primarily on two 

studies in support of its hypothesis that 

blue light filtering IOLs improve driving 

safety under glare conditions as 

compared to currently available IOLs. 

The first of these two submitted articles 

is: Hammond B, et al. Contralateral 

comparison of blue-filtering intraocular 

lenses: glare disability, heterochromic 

contrast, and photostress recovery, 

Clinical Ophthalmology. 2010;4:1465– 

1473 (Hammond 2010). This article 

compared visual performance (as 

measured by glare disability, 

heterochromic contrast threshold, and 

photostress recovery time) in eyes with 

blue-light-filtering IOLs versus 

contralateral eyes with IOLs that do not 

filter blue light. The second article, 

which Alcon describes as its ‘‘pivotal 

study,’’ is: Gray R, et al. Reduced effect 

of glare disability on driving 

performance in patients with blue lightfiltering intraocular lenses, J Cataract 

Refract Surg. 2011;37:38–44. This study 

compared the effects of glare on driving 

performance using a driving simulator 

in patients who had implantation of a 

blue light-filtering acrylic IOL and those 

who had implantation of an acrylic IOL 

with no blue-light filter. Overall, the 

evidence submitted provides us with 

important information that is critical to 

our review of this request. However, in 

making our decision as to whether to 

establish a new class of NTIOL based on 

the primary characteristic of the 

candidate lenses, we are also interested 

in what other information the public 

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can contribute related to the asserted 

benefits of the blue light filtering IOL. 

Specifically, we are seeking public 

comment and relevant data on the 

following: 

• Are there other peer-reviewed 

studies or other information that would 

support or disprove the claims of 

clinical benefit made by Alcon? 

• How do you interpret the results of 

the Hammond 2010 study, given that 

the blue light-filtering group included 

patients with spherical blue light 

filtering IOLs and patients with aspheric 

blue light filtering IOLs? 

• Does the Maxwellian optical system 

that was employed in the Hammond 

2010 study mitigate the impact of the 

aspheric optics of some of the study 

subjects in the blue light-filtering group? 

• Is the sample size used in both 

studies sufficient to conclude that a blue 

light-filtering IOL would reduce glare 

disability and improve driving safety in 

the Medicare population? 

• What kind of study design would be 

appropriate to prove the claim of 

significant clinical benefit due to glare 

reduction on which the new class 

would be based? 

• Are the submitted data enough to 

prove that the blue filtering optic is 

responsible for reduction in glare 

disability as asserted by applicant? 

• Did these studies use an 

appropriate comparator IOL? 

Furthermore, in accordance with our 

established NTIOL review process, we 

are also seeking public comments on all 

of the review criteria for establishing a 

new NTIOL class that would be based 

on the ability of the Acrysof Natural 

IOLs to filter blue light and 

subsequently help beneficiaries avoid 

hazards that can be caused by glare 

while driving. We will give all 

comments full consideration regarding 

Alcon’s candidate IOLs. 

b. Requestor/Manufacturer: Bausch & 

Lomb, Inc. (B&L). 

Lens Model Numbers: Xact Foldable 

Hydrophobic Acrylic Ultraviolet LightAbsorbing Posterior Chamber 

Intraocular Lenses, Models X–60 and X– 

70 (Xact IOLs). 

Summary of the Request: B&L 

submitted a request for CMS to 

determine that its Xact IOLs meet the 

criteria for recognition as NTIOLs and to 

concurrently establish a new class of 

NTIOLs for ‘‘glistening-free’’ IOLs. 

Glistenings are fluid-filled 

microvacuoles that can form within an 

IOL optic when the IOL is in an aqueous 

environment. According to B&L, 

‘‘glistenings have been associated with 

decreased contrast sensitivity, increased 

glare, decreased visual acuity, and 

impaired fundus visualization.’’ B&L 

further states that ‘‘in some cases, this 

has led to IOL explantation and 

exchange, which carries significant risks 

that increase the longer the IOL is 

implanted.’’ As part of its request, B&L 

submitted descriptive information about 

the candidate IOLs as outlined in the 

guidance document that is available on 

the CMS Web site for the establishment 

of a new class of NTIOLs, as well as 

information regarding approval of the 

candidate IOL by the FDA. This 

information included draft FDA labeling 

for the Xact IOLs. Final FDA labeling is 

currently pending. 

In its CY 2012 request, B&L asserts 

that because the Xact IOLs are 

glistening-free, they eliminate the 

decreased contrast sensitivity, increased 

glare, decreased visual acuity, and 

impaired fundus visualization 

associated with glistenings, and may 

likewise decrease the need for 

explantations associated with those 

conditions. B&L also concludes that use 

of a glistening-free IOL results in 

measurable, clinically meaningful, 

improved outcomes in comparison with 

currently available IOLs. B&L also states 

that the glistening-free characteristic is 

not described by a previously-approved 

NTIOL class. 

As with the other CY 2012 NTIOL 

applications discussed in this proposed 

rule, we will base our determination of 

the B&L application on consideration of 

the three major evaluation criteria that 

are discussed above. We have begun our 

review of B&L’s request to recognize its 

Xact IOLs as NTIOLs and concurrently 

establish a new class of NTIOLs. We are 

soliciting public comment on these 

candidate IOLs with respect to the 

established NTIOL criteria as discussed 

above. 

First, for an IOL to be recognized as 

an NTIOL we require that the IOL must 

have been approved by the FDA and 

claims of specific clinical benefits and/ 

or lens characteristics with established 

clinical relevance in comparison with 

currently available IOLs must have been 

approved by the FDA for use in labeling 

and advertising. The submitted FDA 

label for the Xact IOLs states the 

following: 

‘‘In the IDE [investigational device 

exemption] clinical trial, ‘glistenings’ 

were observed in some cases. 

Glistenings, known to sometimes occur 

in some other hydrophobic acrylic IOLs, 

are microscopic vacuoles within the 

optic of the IOL that are visible through 

the slit lamp as multiple small refractile 

specks. Analysis of the clinical data 

confirmed no effect of glistenings on 

visual outcomes.’’ [Emphasis added.] 

‘‘Testing established that glistenings 

were eliminated by a change in the IOL 

hydration solution from 10.0% saline to 

0.9% saline. This was confirmed in an 

additional clinical trial conducted 

outside of the United States. In this 

study, 172 eyes of 142 patients were 

examined at least once between 1 and 

6 months, and 123 eyes of 101 patients 

were examined at least once between 6 

months and 2 years. No glistenings were 

observed at any time.’’ 

The FDA label for the Xact IOLs does 

not otherwise reference specific clinical 

benefits of the glistening-free property. 

In fact, the italicized sentence in the 

above-quoted language on the IDE study 

from the FDA label states that an 

‘‘[a]nalysis of the clinical data 

confirmed no effect of glistenings on 

visual outcomes.’’ We are interested in 

public comments on the clinical 

relevance of glistenings in IOLs, and the 

incidence of glistenings severe enough 

to cause measurable visual symptoms in 

recently pseudophakic Medicare 

beneficiaries. In addition, we are 

interested in public comments regarding 

the assertion by B&L that the glisteningfree property associated with the Xact 

IOLs would eliminate the decreased 

contrast sensitivity, increased glare, 

decreased visual acuity, and impaired 

fundus visualization associated with 

glistenings, and may likewise decrease 

the need for explantations associated 

with those conditions. 

Second, we also require that the 

candidate IOL not be described by an 

active or expired NTIOL class; that is, it 

does not share the predominant, classdefining characteristic associated with 

improved clinical outcomes with 

designated members of an active or 

expired NTIOL class. We refer readers to 

the discussion above for more 

information on the three expired NTIOL 

classes. The proposed class-defining 

characteristic and associated clinical 

benefits of the Xact IOLs, specifically 

the glistening-free property, cannot be 

similar to the class-defining 

characteristics and associated benefits of 

the three expired NTIOL classes. We 

welcome public comments that address 

whether the proposed class-defining 

characteristic and associated clinical 

benefits of the candidate B&L IOLs are 

described by the expired NTIOL classes. 

Third, our NTIOL evaluation criteria 

also require that an applicant submit 

evidence demonstrating that use of the 

IOL results in measurable, clinically 

meaningful, improved outcomes in 

comparison to currently available IOLs. 

As discussed above, we remain flexible 

with respect to our view of ‘‘currently 

available lenses’’ for purposes of 

reviewing NTIOL requests, in order to 

allow for consideration of technological 

advances in lenses over time. We also 

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believe that ‘‘currently available lenses’’ 

for purposes of reviewing NTIOL 

requests should depend upon the classdefining characteristic and the 

associated purported improved clinical 

outcome of the candidate NTIOL class. 

For purposes of reviewing B&L’s request 

to establish a new NTIOL class for CY 

2012, we believe that the full spectrum 

of currently available IOL materials 

should be represented in the comparator 

IOLs, but that the particular design of 

the optic (for example, aspheric versus 

spherical) is less critical to evaluating 

the benefits of glistening-free IOLs as 

glistenings are related more to the IOL 

optic material than to the optical surface 

characteristics of the IOL. We are 

seeking public comment on our view of 

‘‘currently available lenses’’ for the 

purposes of evaluating B&L’s candidate 

IOLs against currently available IOLs. 

We are reviewing the evidence 

submitted with B&L’s CY 2012 request. 

B&L submitted a variety of articles 

including studies and case reports 

focused on IOLs with glistenings. It is 

apparent from these articles that 

glistenings are a real phenomenon and 

that glistenings are primarily associated 

with acrylic hydrophobic IOLs, but they 

can also occur to some degree in IOLs 

of other material types. However, there 

are several significant questions with 

respect to glistenings, and we solicit 

public comment on these questions as 

follows: 

• Is there a particular IOL material 

type that is more likely to result in 

symptomatic glistenings relative to 

other material types? 

• What is the clinical significance 

(from the patient’s perspective) of 

glistenings? More specifically, what 

evidence is available to demonstrate 

that glistenings cause any of the 

following: 

Æ Decreased contrast sensitivity; 

Æ Increased glare disability; 

Æ Decreased visual acuity; 

Æ Impaired fundus visualization; 

Æ Symptoms resulting in IOL 

explantations. 

• What is the incidence of glistenings 

in IOLs currently available in the United 

States? 

• If a certain level of severity of 

glistenings is required before they cause 

symptoms, what is the incidence of 

glistenings of this severity level in IOLs 

currently available in the United States? 

c. Requestor/Manufacturer: Hoya 

Surgical Optics, Inc. (Hoya). 

Lens Model Numbers: iSert IOL 

System, Model PY–60R. 

Summary of the Request: Hoya 

submitted a request for CMS to 

determine that its iSert IOL System 

satisfies the criteria for recognition as an 

NTIOL and to concurrently establish a 

new class of NTIOLs for ‘‘aseptically 

integrated IOL and injector systems.’’ 

The iSert IOL System is an IOL 

preloaded in a plastic, sterile, 

disposable injection system. According 

to Hoya, the iSert System provides a 

lens injector with an integrated IOL 

inside it within a single, sterile package 

for delivery to the operating field. 

According to Hoya, the iSert System has 

the following benefits, in that compared 

to other IOLs it: 

• Eliminates the risk of complications 

associated with improper processing of 

reusable forceps or injectors used for all 

other foldable IOLs; 

• Accelerates postoperative recovery 

through decreased risk of ocular damage 

due to complications associated with 

improper processing of reusable forceps 

or injectors used for other foldable IOLs; 

• Provides a clinical advantage 

compared to existing IOLs by allowing 

the IOL to be placed in the eye without 

contacting external ocular tissues or 

reusable injection instruments; and 

• Improves overall safety of cataract/ 

IOL surgery by reducing the number of 

reusable instruments that must be 

properly cleaned and sterilized between 

cases. 

As part of its request, Hoya submitted 

descriptive information about the iSert 

System as outlined in the guidance 

document described above that is 

available on the CMS Web site for the 

establishment of a new class of NTIOLs, 

as well as information regarding 

approval of the candidate IOL by the 

FDA. This information included the 

FDA labeling, the FDA letter of 

approval, and the summary of safety 

and effectiveness for the iSert System. 

As with the other CY 2012 NTIOL 

requests, we will base our determination 

of the Hoya request on consideration of 

the three major criteria that are 

discussed above. We have begun our 

review of Hoya’s request to recognize its 

iSert System as an NTIOL and 

concurrently establish a new class of 

NTIOLs. We are soliciting public 

comment on this candidate IOL with 

respect to the established NTIOL 

criteria. 

First, for an IOL to be recognized as 

an NTIOL we require that the IOL must 

have been approved by the FDA and 

claims of specific clinical benefits and/ 

or lens characteristics with established 

clinical relevance in comparison with 

currently available IOLs must have been 

approved by the FDA for use in labeling 

and advertising. The FDA label for the 

iSert System states the following under 

the heading DEVICE DESCRIPTION: 

‘‘The Hoya iSertTM Model PY–60R 

Intraocular Lens (IOL) is an ultraviolet 

absorbing posterior chamber intraocular 

lens designed to be implanted posterior 

to the iris where the lens will replace 

the optical function of the natural 

crystalline lens. However, 

accommodation will not be replaced. 

PY–60R is loaded in a disposable 

injector consists [sic] of Case, Tip, Body, 

Slider, Rod, Plunger, and Screw.’’ 

The FDA label for the iSert System 

states the following under the heading 

INDICATIONS: 

‘‘The Hoya iSertTM Model PY–60R 

Intraocular Lens is indicated for primary 

implantation in the capsular bag of the 

eye for the visual correction of aphakia 

in adult patients in whom a cataractous 

lens has been removed.’’ 

The FDA label for the iSertTM System 

does not otherwise reference claims of 

specific clinical benefits and/or lens 

characteristics with established clinical 

relevance in comparison with currently 

available IOLs. Section 416.195(a)(2) 

requires that ‘‘[c]laims of specific 

clinical benefits and/or lens 

characteristics with established clinical 

relevance in comparison with currently 

available IOLs are approved by the FDA 

for use in labeling and advertising.’’ The 

FDA label for the iSert System lacks any 

such claims. The only statement in the 

above-quoted language from the FDA 

label that is any different from the 

typical device description and 

indications for a standard spherical 

monofocal IOL is the statement that the 

‘‘PY–60R is loaded in a disposable 

injector consists [sic] of Case, Tip, Body, 

Slider, Rod, Plunger, and Screw.’’ 

However, this statement merely 

describes the IOL as loaded in a 

disposable injector. It does not appear to 

describe a benefit or characteristic of the 

IOL itself. Therefore, it would appear 

that the Hoya iSert System PY–60R IOL 

would not satisfy the requirements of 42 

CFR 416.195(a)(2). However, we are 

soliciting public comments on this 

matter and will give all comments full 

consideration regarding Hoya’s 

candidate IOL. 

d. Requestor/Manufacturer: Lenstec, Inc. 

(Lenstec) 

Lens Model Numbers: Softec HD PS. 

Summary of the Request: Lenstec 

submitted a request for CMS to 

determine that its Softec HD PS meets 

the criteria for recognition as an NTIOL 

and to concurrently establish a new 

class of NTIOLs that result in a 

‘‘reduction of postoperative residual 

refractive error.’’ According to Lenstec, 

the Softec HD PS IOL achieves a 

‘‘reduction of postoperative residual 

refractive error’’ by its availability in 

0.25 diopter (D) increments with a 

tolerance of ±0.11 D, while all other 

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current monofocal IOLs are available in 

only 0.50 D increments with tolerances 

allowed up to ±0.40 D. According to 

Lenstec, patients implanted with the 

Softec HD PS are much more likely to 

be closer to the intended refractive 

outcome than those implanted with 

IOLs available only in 0.50 D 

increments. This greater refractive 

accuracy of the Softec HD PS is due to 

the chosen IOL power likely being 

closer to the calculated (desired) IOL 

power and because the tighter tolerance 

of the 0.25 D increment IOL results in 

the actual power of the implanted IOL 

to be closer to the power that the 

surgeon expects to implant into the 

patient. Lenstec also asserts that because 

the 0.25 D increment IOL provides 

greater IOL power accuracy, patients 

have less postoperative residual 

refractive error and hence reduced 

postoperative blur. As part of its 

request, Lenstec submitted descriptive 

information about the candidate IOLs as 

outlined in the guidance document that 

is available on the CMS Web site for the 

establishment of a new class of NTIOLs, 

as well as information regarding 

approval of the candidate IOL by the 

FDA. This information included the 

FDA labeling, FDA approval letter, and 

summary of safety and effectiveness for 

the Softec HD PS IOL. 

As with the other three CY 2012 

NTIOL applications discussed above, 

we will base our determination of the 

Lenstec application on consideration of 

the three major evaluation criteria that 

are discussed above. We have begun our 

review of Lenstec’s request to recognize 

its Softec HD PS IOL as an NTIOL and 

concurrently establish a new class of 

NTIOLs. We are soliciting public 

comment on this candidate IOL with 

respect to the established NTIOL criteria 

as discussed above. 

First, for an IOL to be recognized as 

an NTIOL we require that the IOL must 

have been approved by the FDA and 

claims of specific clinical benefits and/ 

or lens characteristics with established 

clinical relevance in comparison with 

currently available IOLs must have been 

approved by the FDA for use in labeling 

and advertising. The submitted FDA 

label for the Softec HD PS IOL states 

under the heading DEVICE 

DESCRIPTION that ‘‘[t]he [LENSTEC 

Softec HD PS] IOL is offered in quarter 

diopter increments from 15.0 to 25.0.’’ 

The FDA label for the Softec HD PS IOL 

does not otherwise reference claims of 

specific clinical benefits and/or lens 

characteristics with established clinical 

relevance in comparison with currently 

available IOLs. We are interested in 

public comments on whether an IOL 

being offered in quarter diopter 

increments can be considered a ‘‘lens 

characteristic with established clinical 

relevance in comparison with currently 

available IOLs,’’ as required by 42 CFR 

416.195(a)(2), or whether IOL 

availability quarter diopter increments 

is more appropriately considered not a 

lens characteristic per se, but instead 

just a manufacturer specification. We 

are also interested in public comments 

on the clinical relevance of an IOL being 

available in quarter diopter increments. 

Second, as required by 42 CFR 

416.195(a)(3), the candidate IOL must 

not be described by an active or expired 

NTIOL class; that is, it does not share 

the predominant, class-defining 

characteristic associated with improved 

clinical outcomes with designated 

members of an active or expired NTIOL 

class. Refer to the discussion above for 

more information on the three expired 

NTIOL classes. Lenstec states the 

following in its application: 

‘‘The Softec HD IOL, the parent to the 

Softec HD PS, was first approved for 

marketing in the United States on April 

17, 2010 and on March 15, 2006 in the 

‘‘Outside the US’’ (OUS) environment. 

This IOL is included in the just-closed 

‘‘Reduced Spherical Aberration’’ NTIOL 

category. The Softec HD PS was 

approved for marketing by the FDA on 

February 2, 2011. It is currently pending 

approval for OUS marketing. Both IOLs 

are single piece, hydrophilic acrylic, 

aspheric, monofocal IOLs. The 

difference between the two is that the 

Softec HD has previously been available 

in whole, 0.50 and 0.25 diopter 

increments, based on dioptric power. 

The Softec HD PS is offered only in the 

dioptric range of 15.0 D to 25.0 D, in 

0.25 diopter increments (each of which 

is manufactured to a tolerance of 

±0.11D).’’ 

Based on this statement by Lenstec, 

the Softec HD PS is the same lens as the 

Softec HD, but the Softec HD PS is 

available only in 0.25 D increments for 

a specific power range instead of being 

available (as is the Softec HD) in 1.0, 

0.5, and 0.25 D increments. The Softec 

HD was included in the expired 

Reduced Spherical Aberration NTIOL 

class, and both of these IOLs share the 

asphericity characteristic that defines 

the expired Reduced Spherical 

Aberration NTIOL class. It appears to us 

that the predominant characteristic of 

the Softec HD PS is asphericity, as it 

affects the optical characteristics of the 

lens. Although the availability of the 

Softec HD PS in 0.25 D increments 

allows more IOL power choices for the 

surgeon, it does not appear to affect the 

functionality of the IOL. We request 

comments regarding what characteristic 

of the Softec HD PS is predominant, 

asphericity or availability of the IOL in 

0.25 D increments. 

Third, our NTIOL evaluation criteria 

also require that an applicant submit 

evidence demonstrating that use of the 

IOL results in measurable, clinically 

meaningful, improved outcomes in 

comparison to currently available IOLs. 

As discussed above, we remain flexible 

with respect to our view of ‘‘currently 

available lenses’’ for purposes of 

reviewing NTIOL requests, in order to 

allow for consideration of technological 

advances in lenses over time. We also 

believe that ‘‘currently available lenses’’ 

for purposes of reviewing NTIOL 

requests should depend upon the classdefining characteristic and the 

associated purported improved clinical 

outcome of the candidate NTIOL class. 

For purposes of reviewing Lenstec’s 

request to establish a new NTIOL class 

for CY 2012, we believe that the full 

spectrum of currently available 

monofocal IOLs should be represented 

in the comparator IOLs. Lenstec asserts 

that what makes its candidate IOL 

superior to other currently available 

IOLs is improved IOL power accuracy as 

compared to IOLs available in 0.50 D 

increments, and because the Softec HD 

PS provides greater IOL power accuracy 

patients implanted with it have less 

postoperative residual refractive error 

and hence reduced post-operative blur. 

We are reviewing the evidence 

submitted with Lenstec’s CY 2012 

request. Lenstec submitted information 

and reviewed the literature on IOL 

optics related to the Softec HD PS. 

Lenstec relies primarily on one study 

that is the subject of an article that is 

currently in press and another 

unpublished study to support its 

hypothesis that the Softec HD PS IOL 

results in less postoperative refractive 

error than other IOLs. The first study 

submitted by Lenstec was the study that 

it conducted under an IDE for FDA 

approval of the Softec HD PS IOL. This 

study is being published in the journal, 

Contact Lens and Anterior Eye (Brown 

DC, Gills JP 3rd,& et al. Prospective 

multicenter trial assessing effectiveness, 

refractive predictability and safety of a 

new aberration free, bi-aspheric 

intraocular lens. Cont Lens Anterior 

Eye. 2011 May 24. [Epub ahead of 

print]), and is available on the Internet 

at http://www.sciencedirect.com/ 

science/article/pii/S1367048411000634. 

Refractive accuracy was not a planned 

outcome variable in this study. There 

was no control group in this study that 

would have allowed the investigators to 

control for all of the variables that 

impact post-cataract surgery refractive 

outcome and/or isolate the effect of the 

availability of the Softec HD PS IOL in 

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quarter diopter increments. Lenstec 

compared the postoperative refractive 

errors of these study subjects to the 

results from an unrelated study 

performed outside of the United States 

(using IOLs that were available only in 

0.50 D increments) and concluded based 

on this comparison that implantation of 

the Softec HD PS IOL, which is 

available in quarter diopter increments, 

results in superior refractive outcomes 

as compared to other IOLs. 

The second study is a retrospective 

study of cataract cases with aspheric 

monofocal IOL implantation between 

2009 and 2011. Of the 118 eligible eyes, 

67 were implanted with IOLs available 

in 0.25 D increments and labeled with 

a manufacturing tolerance of ±0.11D 

(the labeled group) and 51 were 

implanted with IOLs available in 0.50 D 

increments without a labeled 

manufacturing tolerance (the unlabeled 

group). Postoperative outcomes were 

assessed, and prediction error was 

calculated and compared between 

groups. Mean error of prediction was 

¥0.03 (±0.35) D for the labeled group 

and ¥0.05 (±0.46) D for the unlabeled 

group (p = 0.64) post optimization. 

Mean absolute error of prediction was 

statistically significantly smaller in the 

labeled group (0.26 ± 0.23 D) than the 

unlabeled group (0.37 ± 0.28 D, p = 

0.04). It was observed that within ± 0.25 

D prediction error was achieved in 63 

percent of the patients in the labeled 

group compared to 43 percent in the 

unlabeled group (p = 0.03), and for 

within ±0.50 D, 84 percent and 69 

percent (p = 0.06), respectively. We 

request comments from the public 

regarding the Lenstec NTIOL request 

and the evidence submitted by Lenstec, 

and in particular would like the public 

to comment on the following: 

• What is the clinical significance 

(from the patient’s perspective) of a 

small amount of residual spherical 

refractive error after cataract surgery? 

• What is the likelihood that a 

Medicare beneficiary receiving a 

monofocal IOL will require some form 

of postoperative refractive correction 

(that is, post-cataract surgery glasses), 

which is a Medicare benefit? 

• If the overwhelming majority of 

Medicare beneficiaries receiving a 

monofocal IOL will require some form 

of postoperative refractive correction 

(that is, post-cataract surgery glasses), 

does that lessen the clinical significance 

of reduced postoperative residual 

refractive error? 

• Are the studies described above 

properly designed to test Lenstec’s 

hypothesis? 

• Do the studies described above 

adequately prove Lenstec’s hypothesis? 

All comments on these requests must 

be received by August 1, 2011. The 

announcement of CMS’s determinations 

regarding these requests will appear in 

the CY 2012 OPPS/ASC final rule with 

comment period. If a determination of 

membership of the candidate IOLs in a 

new NTIOL class is made, this 

determination will be effective 30 days 

following the date that the final rule 

with comment period is published in 

the Federal Register. 

4. Proposed Payment Adjustment 

The current payment adjustment for a 

five-year period from the 

implementation date of a new NTIOL 

class is $50 per lens. Since 

implementation of the process for 

adjustment of payment amounts for 

NTIOLs in 1999, we have not revised 

the payment adjustment amount, and 

we are not proposing to revise the 

payment adjustment amount for CY 

2012. 

F. Proposed ASC Payment and 

Comment Indicators 

1. Background 

In addition to the payment indicators 

that we introduced in the August 2, 

2007 final rule, we also created final 

comment indicators for the ASC 

payment system in the CY 2008 OPPS/ 

ASC final rule with comment period (72 

FR 66855). We created Addendum DD1 

to define ASC payment indicators that 

we use in Addenda AA and BB to 

provide payment information regarding 

covered surgical procedures and 

covered ancillary services, respectively, 

under the revised ASC payment system. 

The ASC payment indicators in 

Addendum DD1 are intended to capture 

policy relevant characteristics of HCPCS 

codes that may receive packaged or 

separate payment in ASCs, such as 

whether they were on the ASC list of 

covered services prior to CY 2008; 

payment designation, such as deviceintensive or office-based, and the 

corresponding ASC payment 

methodology; and their classification as 

separately payable ancillary services 

including radiology services, 

brachytherapy sources, OPPS passthrough devices, corneal tissue 

acquisition services, drugs or 

biologicals, or NTIOLs. 

We also created Addendum DD2 that 

lists the ASC comment indicators. The 

ASC comment indicators used in 

Addenda AA and BB to the proposed 

rules and final rules with comment 

period serve to identify, for the revised 

ASC payment system, the status of a 

specific HCPCS code and its payment 

indicator with respect to the timeframe 

when comments will be accepted. The 

comment indicator ‘‘NI’’ is used in the 

OPPS/ASC final rule with comment 

period to indicate new HCPCS codes for 

the next calendar year for which the 

interim payment indicator assigned is 

subject to comment. The comment 

indicator ‘‘NI’’ is also assigned to 

existing codes with substantial revisions 

to their descriptors such that we 

consider them to be describing new 

services, as discussed in the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60622). In the CY 2012 

OPPS/ASC final rule with comment 

period, we will respond to public 

comments and finalize the ASC 

treatment of all codes that are labeled 

with comment indicator ‘‘NI’’ in ASC 

Addendum AA and BB for CY 2011. 

These addenda can be found in a file 

labeled ’’January 2011 ASC Approved 

HCPCS Code and Payment Rates to 

Reflect the Medicare and Medicaid 

Extenders Act of 2010’’ in the ASC 

Addenda Update section of the CMS 

Web site. 

The ‘‘CH’’ comment indicator is used 

in Addenda AA and BB to this CY 2012 

proposed rule (which are referenced in 

section XVII. of this proposed rule and 

available via the Internet on the CMS 

Web site) to indicate that a new 

payment indicator is proposed for 

assignment to an active HCPCS code for 

the next calendar year; an active HCPCS 

code is proposed for addition to the list 

of procedures or services payable in 

ASCs; or an active HCPCS code is 

proposed for deletion at the end of the 

current calendar year. The ‘‘CH’’ 

comment indicators that are published 

in the final rule with comment period 

are provided to alert readers that a 

change has been made from one 

calendar year to the next, but do not 

indicate that the change is subject to 

comment. The full definitions of the 

proposed payment indicators and 

comment indicators are provided in 

Addenda DD1 and DD2 to this proposed 

rule (which are referenced in section 

XVII. of this proposed rule and available 

via the Internet on the CMS Web site). 

2. Proposed ASC Payment and 

Comment Indicators 

The revised ASC payment system 

included a four-year transition to 

payment rates under the standard 

methodology for the procedures on the 

ASC list in CY 2007. CY 2011 was the 

first year of full payment under the 

standard methodology for the revised 

ASC payment system. Payment 

indicators ‘‘A2’’ (Surgical procedure on 

ASC list in CY 2007, payment based on 

OPPS relative payment weight) and 

‘‘H8’’ (Device-intensive procedure on 

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ASC list in CY 2007; paid at adjusted 

rate) were developed to identify 

procedures that were included on the 

list of ASC covered surgical procedures 

in CY 2007 and were, therefore, subject 

to transitional payment prior to CY 

2011. 

Because the four-year transitional 

payment period has ended and it is no 

longer necessary to identify deviceintensive procedures that are subject to 

transitional payments, we are proposing 

to delete the ASC payment indicator 

‘‘H8.’’ We are proposing that all deviceintensive procedures, for which the 

modified rate calculation methodology 

will apply, be assigned payment 

indicator ‘‘J8’’ in CY 2012 and later. In 

addition, we are proposing to modify 

the definition for payment indicator 

‘‘J8’’ by removing ‘‘added to ASC list in 

CY 2008 or later’’ as this distinction is 

no longer necessary. 

Although payment indicator ‘‘A2’’ is 

no longer required to identify surgical 

procedures subject to transitional 

payment, we are proposing to retain 

payment indicator ‘‘A2’’ because it is 

used to identify procedures that are 

exempted from application of the officebased designation. 

As detailed in section XIV.K. of this 

proposed rule, we are proposing to 

establish an ASC Quality Reporting 

Program with the collection of seven 

claims-based quality measures 

beginning in CY 2012. We are proposing 

to require ASCs to report on ASC claims 

a quality data code (QDC) to be used for 

reporting quality data. We are proposing 

that an ASC would need to add a QDC 

to any claim involving a proposed 

claims-based quality measure. CMS is in 

the process of developing QDCs for each 

proposed claims-based quality measure. 

The QDC will be a CPT Category II code 

or a HCPCS Level II G-code if an 

appropriate CPT code is not available. 

More information on the QDCs that will 

be associated with the proposed quality 

measures will be provided in the CY 

2012 OPPS/ASC final rule with 

comment period. Additionally, CMS is 

proposing to create a new ASC payment 

indicator ‘‘M5’’ (Quality measurement 

code used for reporting purposes only; 

no payment made) for assignment to the 

QDC to clarify that no payment is 

associated with the QDC for that claim. 

We are proposing that this proposed 

payment indicator be effective January 

1, 2012. 

We are not proposing any changes to 

the definitions of the ASC comment 

indicators for CY 2012. We refer readers 

to Addenda DD1 and DD2 to this 

proposed rule (which are referenced in 

section XVII. of this proposed rule and 

available via the Internet at the CMS 

Web site) for the complete list of ASC 

payment and comment indicators 

proposed for the CY 2012 update. 

We invite public comment on these 

proposals. 

G. ASC Policy and Payment 

Recommendations 

MedPAC was established under 

section 1805 of the Act to advise 

Congress on issues affecting the 

Medicare program. Subparagraphs (B) 

and (D) of section 1805(b)(1) of the Act 

require MedPAC to submit reports to 

Congress not later than March 1 and 

June 15 of each year that present its 

Medicare payment policy reviews and 

recommendations and its examination 

of issues affecting the Medicare 

program, respectively. The March 2011 

MedPAC ‘‘Report to the Congress: 

Medicare Payment Policy’’ included the 

following recommendation relating 

specifically to the ASC payment system 

for CY 2012: 

Recommendation 5: The Congress 

should implement a 0.5 percent increase 

in payment rates for ambulatory surgical 

center services in calendar year 2012 

concurrent with requiring ambulatory 

surgical centers to submit cost and 

quality data. 

CMS Response: In the August 2, 2007 

final rule (72 FR 42518 through 42519), 

we adopted a policy to update the ASC 

conversion factor for consistency with 

section 1833(i)(2)(C) of the Act, which 

requires that, if the Secretary has not 

updated the ASC payment amounts in a 

calendar year, the payment amounts 

shall be increased by the percentage 

increase in the Consumer Price Index 

for All Urban Consumers (CPI–U) as 

estimated by the Secretary for the 12- 

month period ending with the midpoint 

of the year involved. The statute set the 

update at zero for CY 2008 and CY 2009. 

We indicated that we planned to 

implement the annual updates through 

an adjustment to the conversion factor 

under the ASC payment system 

beginning in CY 2010 when the 

statutory requirement for a zero update 

no longer applies. Further, we noted 

that we would update the conversion 

factor for the CY 2010 ASC payment 

system by the percentage increase in the 

CPI–U, consistent with our policy as 

codified under § 416.171(a)(2). 

As we indicated in the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60622), we did not 

require ASCs to submit cost data to the 

Secretary for CY 2010. We explained 

that the 2006 GAO report, ‘‘Medicare: 

Payment for Ambulatory Surgical 

Centers Should Be Based on the 

Hospital Outpatient Payment System’’ 

(GAO–07–86), concluded that the APC 

groups in the OPPS reflect the relative 

costs of surgical procedures performed 

in ASCs in the same way they reflect the 

relative costs of the same procedures 

when they are performed in HOPDs. 

Consistent with the GAO findings, CMS 

is using the OPPS as the basis for the 

ASC payment system, which provides 

for an annual revision of the ASC 

payment rates under the budget neutral 

ASC payment system. 

In addition, we noted that, under the 

methodology of the revised ASC 

payment system, we do not utilize ASC 

cost information to set and revise the 

payment rates for ASCs, but instead rely 

on the relativity of hospital outpatient 

costs developed for the OPPS, 

consistent with the recommendation of 

the GAO. Furthermore, we explained 

that we have never required ASCs to 

routinely submit cost data and 

expressed our concern that a new 

Medicare requirement for ASCs to do so 

could be administratively burdensome 

for ASCs. 

In 2009, MedPAC made a similar 

recommendation to that made in 

Recommendation 5 above. In light of 

that MedPAC recommendation, in the 

CY 2010 OPPS/ASC proposed rule (74 

FR 35391), we solicited public comment 

on the feasibility of ASCs submitting 

cost information to CMS, including 

whether costs should be collected from 

a sample or the universe of ASCs, the 

administrative burden associated with 

such an activity, the form that such a 

submission could take considering 

existing Medicare requirements for 

other types of facilities and the scope of 

ASC services, the expected accuracy of 

such cost information, and any other 

issues or concerns of interest to the 

public on this topic. 

In the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60623), we 

summarized and responded to these 

comments. As noted in that final rule 

with comment period, commenters 

expressed varied opinions regarding the 

feasibility of requiring ASCs to submit 

cost data to the Secretary. Some 

commenters believed that requiring ASC 

to submit such data would not be an 

insurmountable obstacle and pointed 

out that other small facilities submit 

cost reports to CMS. They argued that 

ASC cost reports are necessary to assess 

the adequacy of Medicare payments and 

evaluate the ASC update. Other 

commenters, however, opposed the 

requirement that ASCs submit cost data 

to CMS because they believed such a 

requirement would be unnecessary and 

administratively burdensome. 

Commenters generally supported a 

requirement that ASCs report quality 

data. We refer readers to the CY 2010 

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OPPS/ASC final rule with comment 

period for a full discussion of the 

comments we received on the feasibility 

of requiring ASCs to report cost and 

quality data (74 FR 60623). Consistent 

with our CY 2010 policy, we proposed 

not to require ASCs to submit cost data 

to the Secretary for CY 2011 (75 FR 

46356 through 463557). We stated that 

we continue to believe that our 

established methodology results in 

appropriate payment rates for ASCs. For 

CY 2012, consistent with this policy and 

for the same reasons, we are not 

proposing to require ASCs to submit 

cost data. 

Section 109(b) of the MIEA–TRHCA 

(Pub. L. 109–432) gives the Secretary the 

authority to implement ASC quality 

measure reporting and to reduce the 

payment update for ASCs that fail to 

report those required measures. We are 

proposing to require ASCs to report 

seven quality measures in CY 2012. 

Details associated with ASC quality 

reporting proposed for CY 2012 are 

discussed in section XIV.K. of this 

proposed rule. 

Finally, we are not proposing to 

implement MedPAC’s recommended CY 

2012 ASC update of 0.5 percent. The 

annual update to the ASC payment 

system is the CPI–U. Section 3401(k) of 

the Affordable Care Act required that 

the annual ASC payment update be 

reduced by a productivity adjustment. 

As discussed in section XIII.H.2.b. of 

this proposed rule, the Secretary 

estimates that the CPI–U is 2.3 percent 

and the MFP adjustment is 1.4 percent. 

Therefore, we are proposing a 0.9 

percent update for CY 2012. 

H. Calculation of the Proposed ASC 

Conversion Factor and the Proposed 

ASC Payment Rates 

1. Background 

In the August 2, 2007 final rule (72 FR 

42493), we established our policy to 

base ASC relative payment weights and 

payment rates under the revised ASC 

payment system on APC groups and 

relative payment weights. Consistent 

with that policy and the requirement at 

section 1833(i)(2)(D)(ii) of the Act that 

the revised payment system be 

implemented so that it would be budget 

neutral, the initial ASC conversion 

factor (CY 2008) was calculated so that 

estimated total Medicare payments 

under the revised ASC payment system 

in the first year would be budget neutral 

to estimated total Medicare payments 

under the prior (CY 2007) ASC payment 

system (the ASC conversion factor is 

multiplied by the relative payment 

weights calculated for many ASC 

services in order to establish payment 

rates). That is, application of the ASC 

conversion factor was designed to result 

in aggregate Medicare expenditures 

under the revised ASC payment system 

in CY 2008 equal to aggregate Medicare 

expenditures that would have occurred 

in CY 2008 in the absence of the revised 

system, taking into consideration the 

cap on ASC payments in CY 2007 as 

required under section 1833(i)(2)(E) of 

the Act (72 FR 42522). 

We note that we consider the term 

‘‘expenditures’’ in the context of the 

budget neutrality requirement under 

section 1833(i)(2)(D)(ii) of the Act to 

mean expenditures from the Medicare 

Part B Trust Fund. We do not consider 

expenditures to include beneficiary 

coinsurance and copayments. This 

distinction was important for the CY 

2008 ASC budget neutrality model that 

considered payments across hospital 

outpatient, ASC, and MPFS payment 

systems. However, because coinsurance 

is almost always 20 percent for ASC 

services, this interpretation of 

expenditures has minimal impact for 

subsequent budget neutrality 

adjustments calculated within the 

revised ASC payment system. 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66857 

through 66858), we set out a step-bystep illustration of the final budget 

neutrality adjustment calculation based 

on the methodology finalized in the 

August 2, 2007 final rule (72 FR 42521 

through 42531) and as applied to 

updated data available for the CY 2008 

OPPS/ASC final rule with comment 

period. The application of that 

methodology to the data available for 

the CY 2008 OPPS/ASC final rule with 

comment period resulted in a budget 

neutrality adjustment of 0.65. 

For CY 2008, we adopted the OPPS 

relative payment weights as the ASC 

relative payment weights for most 

services and, consistent with the final 

policy, we calculated the CY 2008 ASC 

payment rates by multiplying the ASC 

relative payment weights by the final 

CY 2008 ASC conversion factor of 

$41.401. For covered office-based 

surgical procedures and covered 

ancillary radiology services, excluding 

nuclear medicine procedures, the 

established policy is to set the relative 

payment weights so that the national 

unadjusted ASC payment rate does not 

exceed the MPFS unadjusted nonfacility PE RVU-based amount. Further, 

as discussed in the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 

66841 through 66843), we also adopted 

alternative ratesetting methodologies for 

specific types of services (for example, 

device-intensive procedures). 

As discussed in the August 2, 2007 

final rule (72 FR 42518) and as codified 

at § 416.172(c) of the regulations, the 

revised ASC payment system accounts 

for geographic wage variation when 

calculating individual ASC payments by 

applying the pre-floor and prereclassified hospital wage indices to the 

labor-related share, which is 50 percent 

of the ASC payment amount. Beginning 

in CY 2008, CMS accounted for 

geographic wage variation in labor cost 

when calculating individual ASC 

payments by applying the pre-floor and 

pre-reclassified hospital wage index 

values that CMS calculates for payment, 

using updated Core Based Statistical 

Areas (CBSAs) issued by OMB in June 

2003. The reclassification provision 

provided at section 1886(d)(10) of the 

Act is specific to hospitals. We believe 

that using the most recently available 

raw pre-floor and pre-reclassified 

hospital wage indices results in the 

most appropriate adjustment to the 

labor portion of ASC costs. In addition, 

use of the unadjusted hospital wage data 

avoids further reductions in certain 

rural statewide wage index values that 

result from reclassification. We continue 

to believe that the unadjusted hospital 

wage indices, which are updated yearly 

and are used by many other Medicare 

payment systems, appropriately account 

for geographic variation in labor costs 

for ASCs. 

We note that in certain instances there 

might be urban or rural areas for which 

there is no IPPS hospital whose wage 

index data would be used to set the 

wage index for that area. For these areas, 

our policy has been to use the average 

of the wage indices for CBSAs (or 

metropolitan divisions as applicable) 

that are contiguous to the area that has 

no wage index (where ‘‘contiguous’’ is 

defined as sharing a border). We have 

applied a proxy wage index based on 

this methodology to ASCs located in 

CBSA 25980 Hinesville-Fort Stewart, 

GA, and CBSA 22 Rural Massachusetts. 

In CY 2011, we identified another area, 

specifically, CBSA 11340 Anderson, SC, 

for which there is no IPPS hospital 

whose wage index data would be used 

to set the wage index for that area. 

Generally, we would use the 

methodology described above; however 

in this situation all of the areas 

contiguous to CBSA 11340 Anderson, 

SC, are rural. Therefore, in the CY 2011 

OPPS/ASC final rule with comment (75 

FR 72058 through 72059), we finalized 

our proposal to set the ASC wage index 

by calculating the average of all wage 

indices for urban areas in the State 

when all contiguous areas to a CBSA are 

rural and there is no IPPS hospital 

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whose wage index data could be used to 

set the wage index for that area. In other 

situations, where there are no IPPS 

hospitals located in a relevant labor 

market area, we will continue our 

current policy of calculating an urban or 

rural area’s wage index by calculating 

the average of the wage indices for 

CBSAs (or metropolitan divisions where 

applicable) that are contiguous to the 

area with no wage index. 

2. Proposed Calculation of the ASC 

Payment Rates 

a. Updating the ASC Relative Payment 

Weights for CY 2012 and Future Years 

We update the ASC relative payment 

weights each year using the national 

OPPS relative payment weights (and 

MPFS non-facility PE RVU-based 

amounts, as applicable) for that same 

calendar year and uniformly scale the 

ASC relative payment weights for each 

update year to make them budget 

neutral (72 FR 42531 through 42532). 

Consistent with our established policy, 

we are proposing to scale the CY 2012 

relative payment weights for ASCs 

according to the following method. 

Holding ASC utilization and the mix of 

services constant from CY 2010, we are 

proposing to compare the total payment 

weight using the CY 2011 ASC relative 

payment weights (calculated under the 

ASC standard ratesetting methodology) 

with the total payment weight using the 

CY 2012 ASC relative payment weights 

(calculated under the ASC standard 

ratesetting methodology) to take into 

account the changes in the OPPS 

relative payment weights between CY 

2011 and CY 2012. We would use the 

ratio of CY 2011 to CY 2012 total 

payment weight (the weight scaler) to 

scale the ASC relative payment weights 

for CY 2012. The proposed CY 2012 

ASC scalar is 0.9373 and scaling would 

apply to the ASC relative payment 

weights of the covered surgical 

procedures and covered ancillary 

radiology services for which the ASC 

payment rates are based on OPPS 

relative payment weights. 

Scaling would not apply in the case 

of ASC payment for separately payable 

covered ancillary services that have a 

predetermined national payment 

amount (that is, their national ASC 

payment amounts are not based on 

OPPS relative payment weights), such 

as drugs and biologicals that are 

separately paid or services that are 

contractor-priced or paid at reasonable 

cost in ASCs. Any service with a 

predetermined national payment 

amount would be included in the ASC 

budget neutrality comparison, but 

scaling of the ASC relative payment 

weights would not apply to those 

services. The ASC payment weights for 

those services without predetermined 

national payment amounts (that is, 

those services with national payment 

amounts that would be based on OPPS 

relative payment weights) would be 

scaled to eliminate any difference in the 

total payment weight between the 

current year and the update year. 

For any given year’s ratesetting, we 

typically use the most recent full 

calendar year of claims data to model 

budget neutrality adjustments. We 

currently have available 98 percent of 

CY 2010 ASC claims data. 

To create an analytic file to support 

calculation of the weight scaler and 

budget neutrality adjustment for the 

wage index (discussed below), we 

summarized available CY 2010 ASC 

claims by provider and by HCPCS code. 

We used the National Provider Identifier 

for the purpose of identifying unique 

ASCs within the CY 2010 claims data. 

We used the supplier zip code reported 

on the claim to associate State, county, 

and CBSA with each ASC. This file, 

available to the public as a supporting 

data file for the proposed rule, is posted 

on the CMS Web site at: http:// 

www.cms.gov/ASCPayment/ 

01_Overview.asp#TopOfPage. 

b. Updating the ASC Conversion Factor 

Under the OPPS, we typically apply 

a budget neutrality adjustment for 

provider level changes, most notably a 

change in the wage index values for the 

upcoming year, to the conversion factor. 

Consistent with our final ASC payment 

policy, for the CY 2012 ASC payment 

system, we are proposing to calculate 

and apply the pre-floor and prereclassified hospital wage indices that 

are used for ASC payment adjustment to 

the ASC conversion factor, just as the 

OPPS wage index adjustment is 

calculated and applied to the OPPS 

conversion factor. For CY 2012, we 

calculated this proposed adjustment for 

the ASC payment system by using the 

most recent CY 2010 claims data 

available and estimating the difference 

in total payment that would be created 

by introducing the proposed CY 2012 

pre-floor and pre-reclassified hospital 

wage indices. Specifically, holding CY 

2010 ASC utilization and service-mix 

and the proposed CY 2012 national 

payment rates after application of the 

weight scaler constant, we calculated 

the total adjusted payment using the CY 

2011 pre-floor and pre-reclassified 

hospital wage indices and the total 

adjusted payment using the proposed 

CY 2012 pre-floor and pre-reclassified 

hospital wage indices. We used the 50- 

percent labor-related share for both total 

adjusted payment calculations. We then 

compared the total adjusted payment 

calculated with the CY 2011 pre-floor 

and pre-reclassified hospital wage 

indices to the total adjusted payment 

calculated with the proposed CY 2012 

pre-floor and pre-reclassified hospital 

wage indices and applied the resulting 

ratio of 1.0003 (the proposed CY 2012 

ASC wage index budget neutrality 

adjustment) to the CY 2011 ASC 

conversion factor to calculate the 

proposed CY 2012 ASC conversion 

factor. 

Section 1833(i)(2)(C)(i) of the Act 

requires that, if the Secretary has not 

updated the ASC payment amounts in a 

calendar year, the payment amounts 

‘‘shall be increased by the percentage 

increase in the Consumer Price Index 

for all urban consumers (U.S. city 

average) as estimated by the Secretary 

for the 12-month period ending with the 

midpoint of the year involved.’’ Because 

the Secretary does update the ASC 

payment amounts annually, we adopted 

a policy, which we codified at 

§ 416.171(a)(2)(ii), to update the ASC 

conversion factor using the CPI–U for 

CY 2010 and subsequent calendar years. 

Therefore, the annual update to the ASC 

payment system is the CPI–U (referred 

to as the CPI–U update factor). 

Section 3401(k) of the Affordable Care 

Act amended section 1833(i)(2)(D) of the 

Act by adding a new clause (v) which 

requires that ‘‘any annual update under 

[the ASC payment] system for the year, 

after application of clause (iv), shall be 

reduced by the productivity adjustment 

described in section 

1886(b)(3)(B)(xi)(II)’’ (which we refer to 

as the MFP adjustment) effective with 

the calendar year beginning January 1, 

2011. Clause (iv) authorizes the 

Secretary to provide for a reduction in 

any annual update for failure to report 

on quality measures. Clause (v) states 

that application of the MFP adjustment 

to the ASC payment system may result 

in the update to the ASC payment 

system being less than zero for a year 

and may result in payment rates under 

the ASC payment system for a year 

being less than such payment rates for 

the preceding year. In the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 72062 through 72064), we 

revised § 416.160 and § 416.171 to 

reflect this provision of the Affordable 

Care Act (we note that these regulations 

do not reflect any reduction in the 

annual update for failure to report on 

quality measures because CMS had not 

implemented an ASC quality reporting 

program). 

As discussed in section XIV.K. of this 

proposed rule, we are proposing that 

ASCs begin submitting data on quality 

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measures in CY 2012 for the CY 2014 

payment determination. Because any 

reduction to the annual update under 

the ASC Quality Reporting Program will 

not occur until CY 2014, we are not 

proposing any changes to the payment 

methodology. We intend to address 

payment changes based on failure to 

submit quality data under the ASC 

Quality Reporting Program in a future 

rulemaking. 

Without regard to the ASC Quality 

Reporting Program and in accordance 

with section 1833(i)(2)(C)(i) of the Act, 

before applying the MFP adjustment, 

the Secretary first determines the 

‘‘percentage increase’’ in the CPI–U, 

which we interpret cannot be a negative 

number. Thus, in the instance where the 

percentage change in the CPI–U for a 

year is negative, we are proposing to 

hold the CPI–U update factor for the 

ASC payment system to zero. Section 

1833(i)(2)(D)(v) of the Act, as added by 

section 3401(k) of the Affordable Care 

Act, then requires that the Secretary 

reduce the CPI–U update factor (which 

would be held to zero if the CPI–U 

percentage change is negative) by the 

MFP adjustment, and states that 

application of the MFP adjustment may 

reduce this percentage change below 

zero. If the application of the MFP 

adjustment to the CPI–U percentage 

increase would result in a MFP-adjusted 

CPI–U update factor that is less than 

zero, then the annual update to the ASC 

payment rates would be negative and 

payments would decrease relative to the 

prior year. Illustrative examples of how 

the MFP adjustment would be applied 

to the ASC payment system update are 

found in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72062 

through 72064). 

For this proposed rule, for the 12- 

month period ending with the midpoint 

of CY 2012, the Secretary estimates that 

the CPI–U is 2.3 percent. The Secretary 

estimates that the MFP adjustment is 1.4 

percentage points based on the 

methodology for calculating the MFP 

adjustment finalized in the CY 2011 

MPFS final rule with comment period 

(75 FR 73391 through 73399) as revised 

by the proposal discussed in the CY 

2012 MPFS proposed rule. Therefore, 

we are proposing to reduce the CPI–U 

of 2.3 percent by the MFP adjustment 

specific to this CPI–U of 1.4 percentage 

points, resulting in an MFP-adjusted 

CPI–U update factor of 0.9 percent. 

Therefore, we are proposing to apply a 

0.9 percent MFP-adjusted update to the 

CY 2011 ASC conversion factor. 

For CY 2012, we also are proposing to 

adjust the CY 2011 ASC conversion 

factor ($41.939) by the wage adjustment 

for budget neutrality of 1.0003 in 

addition to the MFP-adjusted update 

factor of 0.9 percent discussed above, 

which results in a proposed CY 2012 

ASC conversion factor of $42.329. 

3. Display of Proposed CY 2012 ASC 

Payment Rates 

Addenda AA and BB to this proposed 

rule (which are referenced in section 

XVII. of this proposed rule and available 

via the Internet on the CMS Web site) 

display the proposed updated ASC 

payment rates for CY 2012 for covered 

surgical procedures and covered 

ancillary services, respectively. These 

addenda contain several types of 

information related to the proposed CY 

2012 payment rates. Specifically, in 

Addendum AA, a ‘‘Y’’ in the column 

titled ‘‘Subject to Multiple Procedure 

Discounting’’ indicates that the surgical 

procedure will be subject to the 

multiple procedure payment reduction 

policy. As discussed in the CY 2008 

OPPS/ASC final rule with comment 

period (72 FR 66829 through 66830), 

most covered surgical procedures are 

subject to a 50-percent reduction in the 

ASC payment for the lower-paying 

procedure when more than one 

procedure is performed in a single 

operative session. Display of the 

comment indicator ‘‘CH’’ in the column 

titled ‘‘Comment Indicator’’ indicates a 

change in payment policy for the item 

or service, including identifying 

discontinued HCPCS codes, designating 

items or services newly payable under 

the ASC payment system, and 

identifying items or services with 

changes in the ASC payment indicator 

for CY 2012. Display of the comment 

indicator ‘‘NI’’ in the column titled 

‘‘Comment Indicator’’ indicates that the 

code is new (or substantially revised) 

and that the payment indicator 

assignment is an interim assignment 

that is open to comment on the final 

rule with comment period. 

The values displayed in the column 

titled ‘‘CY 2012 Payment Weight’’ are 

the proposed relative payment weights 

for each of the listed services for CY 

2012. The payment weights for all 

covered surgical procedures and 

covered ancillary services whose ASC 

payment rates are based on OPPS 

relative payment weights are scaled for 

budget neutrality. Thus, scaling was not 

applied to the device portion of the 

device-intensive procedures, services 

that are paid at the MPFS nonfacility PE 

RVU-based amount, separately payable 

covered ancillary services that have a 

predetermined national payment 

amount, such as drugs and biologicals 

that are separately paid under the OPPS, 

or services that are contractor-priced or 

paid at reasonable cost in ASCs. 

To derive the proposed CY 2012 

payment rate displayed in the ‘‘CY 2012 

Payment’’ column, each ASC payment 

weight in the ‘‘CY 2012 Payment 

Weight’’ column is multiplied by the 

proposed CY 2012 conversion factor of 

$42.329. The conversion factor includes 

a budget neutrality adjustment for 

changes in the wage index values and 

the CPI–U update factor as reduced by 

the productivity adjustment (as 

discussed in section XV.H.2.b. of this 

proposed rule). 

In Addendum BB, there are no 

relative payment weights displayed in 

the ‘‘CY 2012 Payment Weight’’ column 

for items and services with 

predetermined national payment 

amounts, such as separately payable 

drugs and biologicals. The ‘‘CY 2012 

Payment’’ column displays the 

proposed CY 2012 national unadjusted 

ASC payment rates for all items and 

services. The proposed CY 2012 ASC 

payment rates listed in Addendum BB 

for separately payable drugs and 

biologicals are based on ASP data used 

for payment in physicians’ offices in 

April 2011. 

XIV. Hospital Outpatient Quality 

Reporting Program Updates and ASC 

Quality Reporting Program 

A. Background 

1. Overview 

CMS has implemented quality 

measure reporting programs for multiple 

settings of care. These programs 

promote higher quality, more efficient 

health care for Medicare beneficiaries. 

The quality data reporting program for 

hospital outpatient care, known as the 

Hospital Outpatient Quality Reporting 

(Hospital OQR) Program, formerly 

known as the Hospital Outpatient 

Quality Data Reporting Program (HOP 

QDRP), has been generally modeled 

after the quality data reporting program 

for hospital inpatient services known as 

the Hospital Inpatient Quality Reporting 

(Hospital IQR) Program (formerly 

known as the Reporting Hospital 

Quality Data for Annual Payment 

Update (RHQDAPU) Program). Both of 

these quality reporting programs for 

hospital services, as well as the program 

for physicians and other eligible 

professionals, known as the Physician 

Quality Reporting System (formerly 

known as the Physician Quality 

Reporting Initiative (PQRI)), have 

financial incentives for the reporting of 

quality data to CMS. CMS also has 

implemented quality reporting programs 

for home health agencies and skilled 

nursing facilities that are based on 

conditions of participation, and an endstage renal disease (ESRD) Quality 

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Incentive Program (76 FR 628 through 

646) that links payment to performance. 

In implementing the Hospital OQR 

Program and other quality reporting 

programs, we have focused on measures 

that have high impact and support CMS 

and HHS priorities for improved quality 

and efficiency of care for Medicare 

beneficiaries. Our goal is ultimately to 

align the clinical quality measure 

requirements of the Hospital OQR 

Program and various other programs, 

including the Hospital IQR Program, 

and the proposed ASC Quality 

Reporting Program, with the reporting 

requirements implemented under the 

Health Information Technology for 

Economic and Clinical Health (HITECH) 

Act, so that the burden of reporting can 

be reduced. In developing this and other 

quality reporting programs, as well as 

the Hospital Inpatient Value-Based 

Purchasing (Hospital Inpatient VBP) 

Program, we applied the following 

principles for the development and use 

of measures: 

• Pay-for-reporting, public reporting, 

and value-based purchasing programs 

should rely on a mix of standards, 

processes, outcomes, and patient 

experience of care measures, including 

measures of care transitions and 

changes in patient functional status. 

Across all programs, we seek to move as 

quickly as possible to the use of 

primarily outcome and patient 

experience of care measures. To the 

extent practicable and appropriate, 

outcome and patient experience of care 

measures should be adjusted for risk 

factors or other appropriate patient 

population or provider characteristics. 

• To the extent possible and 

recognizing differences in payment 

system maturity and statutory 

authorities, measures should be aligned 

across public reporting and payment 

systems under Medicare and Medicaid. 

The measure sets should evolve so that 

they include a focused set of measures 

appropriate to the specific provider 

category that reflects the level of care 

and the most important areas of service 

and measures for that provider category. 

• The collection of information 

burden on providers should be 

minimized to the extent possible. To 

this end, we continuously seek to align 

our measures with the adoption of 

meaningful use standards for health 

information technology (HIT), so that 

data can be submitted and calculated 

via certified EHR technology with 

minimal burden. 

• To the extent practicable and 

feasible, and recognizing differences in 

statutory authorities, measures used by 

CMS should be endorsed by a national, 

multi-stakeholder organization. 

Measures should be aligned with best 

practices among other payers and the 

needs of the end users of the measures. 

We invite public comment on these 

principles. 

2. Statutory History of the Hospital 

Outpatient Quality Reporting (Hospital 

OQR) Program 

We refer readers to the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 72064) for a detailed 

discussion of the statutory history of the 

Hospital OQR Program. 

3. Technical Specification Updates and 

Data Publication 

a. Maintenance of Technical 

Specifications for Quality Measures 

Technical specifications for each 

Hospital OQR measure are listed in the 

Hospital OQR Specifications Manual, 

which is posted on the CMS QualityNet 

Web site at http://www.QualityNet.org. 

We maintain the technical 

specifications for the measures by 

updating this Hospital OQR 

Specifications Manual and including 

detailed instructions and calculation 

algorithms. In some cases where the 

specifications are available elsewhere, 

we may include links to Web sites 

hosting technical specifications. These 

resources are for hospitals to use when 

collecting and submitting data on 

required measures. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68766 

through 68767), we established a 

subregulatory process for making 

updates to the technical specifications 

that we use to calculate Hospital OQR 

measures. This process is used when 

changes to the measure specifications 

are necessary due to changes in 

scientific evidence, treatment 

guidelines, or consensus among affected 

parties. Changes due to these reasons 

may not coincide with the timing of our 

regulatory actions, but nevertheless 

should be made so that the Hospital 

OQR measures are calculated based on 

the most up-to-date scientific and 

consensus standards. We indicated that 

notification of technical changes to the 

measure specifications is made via the 

QualityNet Web site, http:// 

www.QualityNet.org, and in the 

Hospital OQR Specifications Manual. 

The notification of changes to the 

measure technical specifications occurs 

no less than 3 months before any 

changes become effective for purposes 

of reporting under the Hospital OQR 

Program. 

The Hospital OQR Specifications 

Manual is released every 6 months and 

addenda are released as necessary. This 

release schedule provides at least 3 

months of advance notice for substantial 

changes such as changes to ICD–9, CPT, 

NUBC, and HCPCS codes, and at least 

6 months of advance notice for changes 

to data elements that would require 

significant systems changes. 

b. Publication of Hospital OQR Program 

Data 

Section 1833(t)(17)(E) of the Act 

requires that the Secretary establish 

procedures to make data collected under 

Hospital OQR available to the public. It 

also states that such procedures must 

ensure that a hospital has the 

opportunity to review the data that are 

to be made public with respect to the 

hospital prior to such data being made 

public. To meet these requirements, 

data that a hospital has submitted for 

the Hospital OQR Program are typically 

displayed on CMS Web sites such as the 

Hospital Compare Web site, http:// 

www.hospitalcompare.hhs.gov, after a 

preview period. The Hospital Compare 

Web site is an interactive Web tool that 

assists beneficiaries by providing 

information on hospital quality of care. 

This information motivates beneficiaries 

to work with their doctors and hospitals 

to discuss the quality of care hospitals 

provide to patients, providing 

additional incentives to hospitals to 

improve the quality of care that they 

furnish. 

Under our current policy, we publish 

quality data by the corresponding 

hospital CCN, and indicate instances 

where data from two or more hospitals 

are combined to form the publicly 

reported measures on the Hospital 

Compare Web site. This approach is 

consistent with the approach taken 

under the Hospital IQR Program. 

Consistent with our current policy, we 

make Hospital OQR data publicly 

available whether or not the data have 

been validated for payment purposes. 

In general, we strive to display 

hospital quality measures on the 

Hospital Compare Web site as soon as 

possible after they have been adopted 

and have been reported to CMS. 

However, if there are unresolved display 

issues or pending design considerations, 

we may make the data available on 

other, non-interactive, CMS Web sites 

such as http://www.cms.hhs.gov/ 

HospitalQualityInits/. Publicly reporting 

the information in this manner, though 

not on the interactive Hospital Compare 

Web site, allows us to meet the 

requirement under section 

1833(t)(17)(E) of the Act for establishing 

procedures to make quality data 

submitted available to the public 

following a preview period. When we 

display hospital quality information on 

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non-interactive CMS Web sites, affected 

parties would be notified via CMS 

listservs, CMS e-mail blasts, national 

provider calls, and QualityNet 

announcements regarding the release of 

preview reports followed by the posting 

of data on a Web site other than 

Hospital Compare. 

We also require hospitals to complete 

and submit a registration form 

(‘‘participation form’’) in order to 

participate in the Hospital OQR 

Program. With submission of this 

participation form, participating 

hospitals agree that they will allow CMS 

to publicly report the quality measure 

data submitted under the Hospital IQR 

Program, including measures that we 

calculate using Medicare claims. 

B. Proposed Revision to Measures 

Previously Adopted for the Hospital 

OQR Program for the CY 2012, CY 2013, 

and CY 2014 Payment Determinations 

1. Background 

We refer readers to the following 

OPPS/ASC final rules with comment 

periods for a history of measures 

adopted for the Hospital OQR Program, 

including lists of: 11 measures adopted 

for the CY 2011 payment determination 

(74 FR 60637); 15 measures adopted for 

the CY 2012 payment determination (75 

FR 72083 through 72084); 23 measures 

adopted for the CY 2013 payment 

determination (75 FR 72090); and 23 

measures adopted for the CY 2014 

payment determination (75 FR 72094). 

The table below also shows the 23 

measures previously adopted for these 

payment determinations: 

HOSPITAL OQR PROGRAM MEASURES PREVIOUSLY ADOPTED FOR THE CY 2011, CY 2012, CY 2013, AND CY 2014 *** 

PAYMENT DETERMINATIONS

OP–1: Median Time to Fibrinolysis. 

OP–2: Fibrinolytic Therapy Received Within 30 Minutes. 

OP–3: Median Time to Transfer to Another Facility for Acute Coronary Intervention. 

OP–4: Aspirin at Arrival. 

OP–5: Median Time to ECG. 

OP–6: Timing of Antibiotic Prophylaxis. 

OP–7: Prophylactic Antibiotic Selection for Surgical Patients. 

OP–8: MRI Lumbar Spine for Low Back Pain. 

OP–9: Mammography Follow-up Rates. 

OP–10: Abdomen CT—Use of Contrast Material. 

OP–11: Thorax CT—Use of Contrast Material. 

OP–12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data.* 

OP–13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery.* 

OP–14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT).* 

OP–15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache.* 

OP–16: Troponin Results for Emergency Department acute myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac 

Chest Pain) Received Within 60 minutes of Arrival.** 

OP–17: Tracking Clinical Results between Visits.** 

OP–18: Median Time from ED Arrival to ED Departure for Discharged ED Patients.** 

OP–19: Transition Record with Specified Elements Received by Discharged Patients.** 

OP–20: Door to Diagnostic Evaluation by a Qualified Medical Professional.** 

OP–21: ED–Median Time to Pain Management for Long Bone Fracture.** 

OP–22: ED–Left Without Being Seen.** 

OP–23: ED–Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interpretation Within 45 

minutes of Arrival.** 

* New measure adopted beginning with the CY 2012 payment determination. 

** New measure adopted beginning with the CY 2013 payment determination. 

*** All 23 measures were adopted for the CY 2014 payment determination. 

2. Proposed Revision to Hospital OQR 

Program Measures Previously Adopted 

for the CY 2013 Payment Determination 

In the CY 2011 OPPS/ASC final rule 

with comment period, we finalized the 

adoption of the chart-abstracted 

measure OP–22—Left Without Being 

Seen (75 FR 72088 through 72089). This 

measure was endorsed (NQF #0499) as 

part of an NQF project entitled 

‘‘National Voluntary Consensus 

Standards for Emergency Care.’’ This 

measure assesses the percentage of 

patients who leave the Emergency 

Department (ED) without being 

evaluated by qualified medical 

personnel, which is an indication of ED 

overcrowding, and lack of timely access 

to care. We are proposing that beginning 

with the CY 2013 payment 

determination, hospitals would submit 

aggregate numerator and denominator 

counts once a year using a Web-based 

form available through the QualityNet 

Web site for this measure. This 

proposed process is different from that 

which is used to collect other chartabstracted measures because it would 

not require hospitals to submit patientlevel information for this measure, and 

would not require quarterly submission 

of data. We believe this proposed 

process will reduce the potential data 

collection and submission burden for 

this measure. 

We are proposing that for the CY 2013 

payment determination, data 

submission for this measure would 

occur between July 1, 2012 and August 

15, 2012. We also are proposing that for 

the CY 2013 payment determination, the 

aggregate counts for the numerator (the 

total number of patients who left 

without being evaluated by a physician/ 

advance practice nurse/physician’s 

assistant) and the denominator (total 

number of patients who signed in to be 

evaluated for emergency services) 

would be submitted by hospitals and 

would span the time period from 

January 1, 2011 through December 31, 

2011. We invite public comment on this 

proposed approach to data collection for 

OP–22 for the CY 2013 Hospital OQR 

Program and subsequent payment 

determinations, and on the time period 

to be assessed for this measure for the 

CY 2013 payment determination. The 

updated specifications for this measure 

will be made available in the July 2011 

Hospital OQR Specifications Manual. 

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42316 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

C. Proposed New Quality Measures for 

the CY 2014 and CY 2015 Payment 

Determinations 

1. Considerations in Expanding and 

Updating Quality Measures Under the 

Hospital OQR Program 

In general, when selecting measures 

for the Hospital OQR Program, we take 

into account several considerations and 

goals. These include: (a) expanding the 

types of measures beyond process of 

care measures to include an increased 

number of outcome measures, efficiency 

measures, and patients’ experience-ofcare measures; (b) expanding the scope 

of hospital services to which the 

measures apply; (c) considering the 

burden on hospitals in collecting chartabstracted data; (d) harmonizing the 

measures used in the Hospital OQR 

Program with other CMS quality 

programs to align incentives and 

promote coordinated efforts to improve 

quality; (e) seeking to use measures 

based on alternative sources of data that 

do not require chart abstraction or that 

utilize data already being reported by 

many hospitals, such as data that 

hospitals report to clinical data 

registries, or all-payer claims data bases; 

and (f) weighing the relevance and 

utility of the measures compared to the 

burden on hospitals in submitting data 

under the Hospital OQR Program. 

Specifically, we assign priority to 

quality measures that assess 

performance on: (a) conditions that 

result in the greatest mortality and 

morbidity in the Medicare population; 

(b) conditions that are high volume and 

high cost for the Medicare program; and 

(c) conditions for which wide cost and 

treatment variations have been reported, 

despite established clinical guidelines. 

We used and continue to use these 

criteria to guide our decisions regarding 

what measures to add to the Hospital 

OQR Program measure set. 

In the CY 2009 OPPS/ASC final rule 

with comment period, we adopted four 

claims–based quality measures that do 

not require a hospital to submit chartabstracted clinical data (73 FR 68766). 

This supports our goal of expanding the 

measures for the Hospital OQR Program 

while minimizing the burden upon 

hospitals and, in particular, without 

significantly increasing the chart 

abstraction burden. In addition to 

claims-based measures, we are 

considering registries and EHRs as 

alternative ways to collect data from 

hospitals. 

A registry is a collection of clinical 

data for purposes of assessing clinical 

performance, quality of care, and 

opportunities for quality improvement. 

Many hospitals submit data to and 

participate in existing registries. In 

addition, registries often capture 

outcome information and provide 

ongoing quality improvement feedback 

to registry participants. Instead of 

requiring hospitals to submit the same 

data to CMS that they are already 

submitting to registries, we could collect 

the data directly from the registries with 

the permission of the hospital, thereby 

enabling us to expand the Hospital OQR 

Program measure set without increasing 

the burden of data collection for those 

hospitals participating in the registries. 

The data that we would receive from 

registries would be used to calculate 

quality measures required under the 

Hospital OQR Program, and would be 

publicly reported like other Hospital 

OQR Program quality measures, 

encouraging improvements in the 

quality of care. In the CY 2010 OPPS/ 

ASC final rule with comment period (74 

FR 60633), we responded to public 

comments on such an approach. 

In the CY 2009 OPPS/ASC final rule 

with comment period, we also stated 

our intention to explore mechanisms for 

data submission using EHRs (73 FR 

68769). When we refer to the term 

Qualified EHR, we intend for it to have 

the same meaning as set forth by the 

Office of the National Coordinator for 

Health Information Technology (ONC) 

(45 CFR 170.102) which has adopted the 

statutory definition of Qualified EHR 

found in section 3000(13) of the Public 

Health Service Act. That section defines 

a Qualified EHR as ‘‘an electronic record 

of health-related information on an 

individual that—(A) includes patient 

demographic and clinical health 

information, such as medical history 

and problem lists; and (B) has the 

capacity—(i) to provide clinical 

decision support; (ii) to support 

physician order entry; (iii) to capture 

and query information relevant to health 

care quality; and (iv) to exchange 

electronic health information with, and 

integrate such information from other 

sources.’’ Additionally, when we refer 

to the term, Certified EHR Technology, 

we intend for it to have the same 

meaning as set forth by the ONC at 45 

CFR 170.102 as follows: ‘‘Certified EHR 

Technology’’ means (1) A complete EHR 

that meets the requirements included in 

the definition of a Qualified EHR and 

has been tested and certified in 

accordance with the certification 

program established by the National 

Coordinator as having met all applicable 

certification criteria adopted by the 

Secretary; or (2) a combination of EHR 

Modules in which each constituent EHR 

Module of the combination has been 

tested and certified in accordance with 

the certification program established by 

the National Coordinator as having met 

all applicable certification criteria 

adopted by the Secretary, and the 

resultant combination also meets the 

requirements included in the definition 

of a Qualified EHR. 

Establishing a data submission 

mechanism using EHRs will require 

interoperability between EHRs and our 

data collection systems, additional 

infrastructure development on the part 

of hospitals and CMS, and the adoption 

of standards for the capturing, 

formatting, and transmission of data 

elements that make up the measures. 

However, once these activities are 

accomplished, the adoption of measures 

that rely on data obtained directly from 

EHRs would enable us to expand the 

Hospital OQR Program measure set with 

less cost and burden to hospitals. In the 

CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60633 through 

60634), we responded to public 

comments on such an approach. 

Continuing to reduce our reliance on 

the chart-abstraction mechanism would 

allow us and hospital outpatient 

departments to devote available 

resources towards maximizing the 

potential of registries and EHRs for 

quality measurement reporting. Both 

mechanisms hold the promise of more 

sophisticated and timely reporting of 

clinical quality measures. Clinical data 

registries allow the collection of more 

detailed data, including outcomes. 

Registries can also provide feedback and 

quality improvement information based 

on reported data. Finally, clinical data 

registries can also receive data from 

EHRs, and therefore, serve as an 

alternative means to reporting clinical 

quality data extracted from an EHR. 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72071 

through 72174), we added new 

measures over a three year period for 

the CY 2012, CY 2013, and CY 2014 

payment determinations. We believe 

this process will assist hospitals in 

planning, meeting future reporting 

requirements, and implementing quality 

improvement efforts. We will also have 

more time to develop, align, and 

implement the infrastructure necessary 

to collect data on the measures and 

make payment determinations. The fact 

that we finalized measures for a three 

year period of time (for example, for the 

CY 2012, CY 2013 and CY 2014 

payment determinations in the CY 2011 

OPPS/ASC final rule with comment 

period) does not preclude us from 

proposing to adopt additional measures 

or changing the list of measures for 

these payment determinations through 

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1McKibben L., Horan, T.: Guidance on public 

reporting of healthcare-associated infections: 

recommendations of the Healthcare Infection 

Control Practices Advisory Committee. AJIC 2005; 

33:217–26. 

subsequent rulemaking cycles that affect 

these future payment determinations. 

We have previously expanded the 

Hospital OQR Program measure set 

dramatically by adopting measures over 

several payment determinations in order 

to allow hospital outpatient 

departments adequate time to plan and 

implement the reporting of quality data 

for the CY 2012, CY 2013 and CY 2014 

payment determinations. In this 

proposed rule, we are proposing to add 

new measures to the existing Hospital 

OQR measure set for the CY 2014 

payment determination and are 

proposing to add new measures for the 

CY 2015 payment determination. 

2. Proposed New Hospital OQR Program 

Quality Measures for the CY 2014 

Payment Determination 

As stated above, the CY 2014 measure 

set for the Hospital OQR Program 

currently contains 23 measures that we 

adopted in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 

72094). In this proposed rule, we are 

proposing to adopt a number of 

additional measures for the CY 2014 

measure set. 

a. Proposed New National Healthcare 

Safety Network (NHSN) Healthcare 

Associated Infection (HAI) Measure for 

the CY 2014 Payment Determination: 

Surgical Site Infection (NQF #0299) 

Healthcare Associated Infections 

(HAIs) is a topic area widely 

acknowledged by HHS, the Institute of 

Medicine (IOM), the National Priorities 

Partnership, and others as a high 

priority requiring measurement and 

improvement. HAIs are among the 

leading causes of death in the United 

States. CDC estimates that as many as 2 

million infections are acquired each 

year in hospitals and result in 

approximately 90,000 deaths.1 It is 

estimated that more Americans die each 

year from HAIs than from auto accidents 

and homicides combined. HAIs not only 

put the patient at risk, but also increase 

the days of hospitalization required for 

patients and add considerable health 

care costs. HAIs are largely preventable 

through interventions such as better 

hygiene and advanced scientifically 

tested techniques for surgical patients. 

Therefore, many health care consumers 

and organizations are calling for public 

disclosure of HAIs, arguing that public 

reporting of HAI rates provides the 

information health care consumers need 

to choose the safest hospitals, and gives 

hospitals an incentive to improve 

infection control efforts. This proposed 

measure is currently collected by the 

National Healthcare Safety Network 

(NHSN) as part of State-mandated 

reporting and surveillance requirements 

for hospitals in some States. 

Additionally, data submission for this 

measure through EHRs may be possible 

in the near future. 

The NHSN is a secure, Internet-based 

surveillance system maintained and 

managed by the CDC, and can be 

utilized by all types of healthcare 

facilities in the United States, including 

acute care hospitals, long term acute 

care hospitals, psychiatric hospitals, 

rehabilitation hospitals, outpatient 

dialysis centers, ambulatory surgery 

centers, and long term care facilities. 

The NHSN is provided free of charge to 

hospitals. The NHSN enables healthcare 

facilities to collect and use data about 

HAIs, clinical practices known to 

prevent HAIs, the incidence or 

prevalence of multidrug-resistant 

organisms within their organizations, 

and other adverse events. Some States 

use the NHSN as a means for healthcare 

facilities to submit data on HAIs 

mandated through their specific State 

legislation. Currently, 21 States require 

hospitals to report HAIs using the 

NHSN, and the CDC supports more than 

4,000 hospitals that are using NHSN. 

Increasingly, more surgical 

procedures are being performed in 

hospital outpatient department settings 

and ASCs. Therefore, we have 

determined that this measure is 

‘‘appropriate for the measurement of the 

quality of care furnished by hospitals in 

outpatient settings’’ as required under 

section 1833(t)(17)(C)(i) of the Act. This 

proposed HAI measure assesses the 

percentage of surgical site infections 

occurring within 30 days after an 

NHSN-defined operative procedure if no 

implant is left in place or within one 

year if an implant is in place, and the 

infection appears to be related to the 

operative procedure. Infections are 

identified on original admission or upon 

readmission to the facility of original 

operative procedure within the relevant 

time frame (30 days for no implants; 

within 1 year for implants). The 

specifications for this proposed HAI 

measure can be found at http:// 

www.cdc.gov/nhsn/psc.html. 

We also believe that this measure 

meets the requirement under section 

1833(t)(17)(C)(i) of the Act that 

measures selected for the Hospital OQR 

Program ‘‘reflect consensus among 

affected parties and, to the extent 

feasible and practicable, shall include 

measures set forth by one or more 

national consensus building entities.’’ 

This measure was NQF-endorsed in 

2007 and was adopted by the Hospital 

Quality Alliance in 2008. We note that 

this measure also was adopted for the 

Hospital IQR Program beginning with 

the FY 2014 payment determination (75 

FR 50211) and its adoption into the 

Hospital OQR Program would further 

our goal of aligning measures across 

programs where feasible. 

We are proposing that submission of 

data for this proposed NHSN measure 

for the CY 2014 payment determination 

would relate to infection events 

occurring between January 1, 2013 and 

June 30, 2013. We are proposing that 

hospital outpatient departments use the 

existing NHSN infrastructure and 

protocols that already exist for this 

proposed measure to report it for 

Hospital OQR Program purposes. We 

invite public comment on our proposal 

to adopt this HAI measure into the 

Hospital OQR Program for the CY 2014 

payment determination. 

b. Proposed New Chart-Abstracted 

Measures for the CY 2014 Payment 

Determination 

In the CY 2011 OPPS/ASC final rule 

with comment period, we stated that we 

would not finalize five proposed NQFendorsed diabetes care measures 

because we were in the process of 

refining the chart-abstracted numerator 

definitions for these measures (75 FR 

72091). We also stated that we intended 

to again propose to adopt these 

measures for the CY 2014 payment 

determination. We now are proposing to 

adopt these five diabetes care measures 

for the CY 2014 payment determination 

as chart-abstracted measures. These five 

measures are: (1) Hemoglobin A1c 

Management (NQF #0059); (2) Diabetes 

Measure Pair: A. Lipid Management: 

Low Density Lipoprotein Cholesterol 

(LDL–C) < 130, B. Lipid Management: 

LDL–C < 100 (NQF #0064); (3) Diabetes: 

Blood Pressure Management (NQF 

#0061); (4) Diabetes: Eye Exam (NQF 

#0055); and (5) Diabetes: Urine Protein 

Screening (NQF #0062). We note that 

these five measures are electronically 

specified. We hope to be able to collect 

such information via EHRs in the future, 

and we solicit comments on using EHR 

for data collection in the future. In 

addition, we are proposing to adopt 

another new chart-abstracted measure, 

Cardiac Rehabilitation Patient Referral 

from an Outpatient Setting (NQF 

#0643), for the CY 2014 payment 

determination. Below are descriptions 

of each of these six proposed new chartabstracted measures. 

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42318 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

2Huang, E.S., Basu, A., O’Grady, M., Capretta, 

J.C.: Projecting the future diabetes population size 

and related costs for the U.S. Diabetes Care. 2009;32 

(12):2225–29. 

3The American Association of Clinical 

Endocrinologists Medical Guidelines for the 

Management of Diabetes Mellitus: The AACE 

System of Intensive Diabetes Self-Management— 

2002 Update. 

4American Diabetes Association. Standards of 

Medical Care in Diabetes. Diabetes Care. 2008 

Jan:31 (Suppl 1):S12–54. 

5American Diabetes Association. Standards of 

Medical Care in Diabetes. Diabetes Care. 2007 

Jan;30 (Suppl 1):S8–15. 6 Das, S.R., Vaeth, P.A., Stanek, H.G., de Lemos, 

J.A., Dobbins, R.L., McGuire, D.K.: Increased 

cardiovascular risk associated with diabetes in 

Dallas County. Am Heart J 2006;151:1087–93. 

(1) Proposed Diabetes Measure: 

Hemoglobin A1c Management (NQF 

#0059) 

In general, diabetes mellitus is a 

chronic disease that impacts the lives of 

a large portion of the population and 

consumes a significant amount of U.S. 

healthcare dollars. With the prevalence 

of diabetes in the Medicare-eligible 

population expected to double, costs are 

expected to increase almost fourfold to 

$171 million.2 Uncontrolled diabetes 

often leads to biochemical imbalances 

that can lead to acute life-threatening 

events, such as diabetic ketoacidosis 

and hyperosmolar, or nonketotic coma. 

In patients with insulin-dependent 

diabetes, the risk of development or 

progression of retinopathy, 

nephropathy, and neuropathy can be 

reduced by 50 to 75 percent by intensive 

outpatient treatment of hyperglycemia 

compared to conventional treatment. 

Early treatment may help slow or halt 

the progression of diabetic 

complications, and following the 

guidelines for screening may assist 

those patients with no outward sign of 

diabetic complications to be identified 

earlier through regular screening tests. 

Some guidelines recommend that the 

HgA1c level be tested during an initial 

assessment and in follow-up 

assessments which should occur at no 

longer than 3-month intervals.3 Other 

guidelines recommend that the HgA1c 

level be tested at least twice a year in 

patients with stable glycemic control 

and who are meeting treatment goals, 

and quarterly in patients whose HgA1c 

level does not meet target glycemic 

goals.4

Section 1833(t)(17)(C)(i) of the Act 

requires the Secretary to develop 

measures appropriate for the 

measurement of the quality of care 

furnished by hospitals in outpatient 

settings, that these measures reflect 

consensus among affected parties and, 

to the extent feasible and practicable, 

that these measures include measures 

set forth by one or more national 

consensus building entities. Because 

this measure is NQF-endorsed, we 

believe that this measure meets the 

requirement of reflecting consensus 

among affected parties. However, we 

note that consensus among affected 

parties can be reflected through means 

other than NQF endorsement. As 

discussed above, this measure is 

appropriate for measuring quality of 

care in the hospital outpatient 

department setting, in which many 

patients with diabetes are treated. 

Lower HgA1c levels are associated 

with reduced microvascular and 

neuropathic complications of diabetes. 

This NQF-endorsed measure measures 

the percentage of adult patients with 

diabetes aged 18–75 years with a most 

recent HgA1c level greater than 9 

percent (poor control). The 

specifications for this measure are 

located in Appendix A (beginning page 

A–60) of the 2008 NQF Report titled 

‘‘National Voluntary Consensus 

Standards for Ambulatory Care—Part 1’’ 

available at the following link: http:// 

www.qualityforum.org/Publications/ 

2008/03/National_Voluntary_

Consensus_Standards_for_Ambulatory_

Care%E2%80%93Part_1.aspx. 

Glycosylated hemoglobin (HA1c) 

assay measures average blood glucose 

over the preceding two to three months, 

rather than just one point in time. 

HgA1c values fluctuate less frequently 

than fasting glucose values and give 

clinicians a better integrated view of the 

patient’s average blood sugar over time. 

High HgA1c is a more reliable indicator 

of chronic high blood sugar. We invite 

public comment on this proposed 

measure. 

(2) Proposed Diabetes Measure Pair: A. 

Lipid Management: Low Density 

Lipoprotein Cholesterol (LDL–C) < 130, 

B. Lipid Management: LDL–C < 100 

(NQF #0064) 

LDL–C measures the development of 

atherosclerotic plaque which increases 

the cardiac events risk for diabetic 

patients, who already face heart disease 

death rates that are about two to four 

times higher than these rates are for 

non-diabetic patients.5 Improved 

dyslipidemia management helps to 

mitigate the risk for cardiovascular 

disease. Lipid-lowering therapy for 

diabetics has been a consistent 

recommendation in several guidelines, 

prompted by randomized trials 

supporting statin therapy to lower the 

risk of cardiovascular involvement for 

this population. Despite the evidence 

basis and guideline support, only a 

minority of patients with diabetes are 

prescribed statin treatment or achieve 

target LDL–C goals.6

Section 1833(t)(17)(C)(i) of the Act 

requires the Secretary to develop 

measures appropriate for the 

measurement of the quality of care 

furnished by hospitals in outpatient 

settings, that these measures reflect 

consensus among affected parties and, 

to the extent feasible and practicable, 

that these measures include measures 

set forth by one or more national 

consensus building entities. Because 

this measure is NQF-endorsed, we 

believe that this measure meets the 

requirement of reflecting consensus 

among affected parties. However, we 

note that consensus among affected 

parties can be reflected through means 

other than NQF endorsement. As 

discussed above, this measure is 

appropriate for measuring quality of 

care in the hospital outpatient 

department setting which serves many 

patients with diabetes who often have 

high level of LDL–C. 

Early treatment of hyperlipidemia as 

indicated by high level of LDL–C may 

help to slow or halt the progression of 

cardiovascular disease and impact the 

quality of the life of the diabetic patient, 

affecting the patient’s life expectancy 

and decreasing costs involved in 

treating diabetic complications. This 

NQF-endorsed measure assesses: (i) The 

percentage of adult patients with 

diabetes aged 18–75 years whose most 

recent LDL–C test result was < 130 mg/ 

dl; and (ii) the percentage of adult 

patients with diabetes aged 18–75 years 

whose most recent LDL–C test result 

during the measurement year was < 100 

mg/dl. The specifications for this 

measure are located in Appendix A 

(beginning page A–60) of the 2008 NQF 

Report titled ‘‘National Voluntary 

Consensus Standards for Ambulatory 

Care—Part 1’’ available at the following 

link: http://www.qualityforum.org/

Publications/2008/03/

National_Voluntary_Consensus_

Standards_for_Ambulatory_

Care%E2%80%93Part_1.aspx. We 

invite public comment on this proposed 

measure. 

(3) Proposed Diabetes Measure: Blood 

Pressure Management (NQF #0061) 

Blood pressure control reduces the 

risk of cardiovascular disease and 

microvascular complications in patients 

with diabetes. Well-controlled blood 

pressure impacts the quality of the life 

of the diabetic patient, affects the 

patient’s life expectancy, and decreases 

the costs involved in treating diabetic 

complications. 

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Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 42319 

7Centers for Disease Control and Prevention. 

National diabetes fact sheet: general information 

and national estimates on diabetes in the United 

States, 20112007. Atlanta, GA: U.S. Department of 

Health and Human Services, Centers for Disease 

Control and Prevention, 20112008. 

8Centers for Disease Control and Prevention. 

National diabetes fact sheet: general information 

and national estimates on diabetes in the United 

States, 20112007. Atlanta, GA: U.S. Department of 

Health and Human Services, Centers for Disease 

Control and Prevention, 20112008. 

9American Diabetes Association. Standards of 

medical care in diabetes. Diabetes Care. 2007 Jan;30 

(Suppl 1):S8–15. 

10Centers for Disease Control and Prevention. 

National diabetes fact sheet: general information 

and national estimates on diabetes in the United 

States, 2007. Atlanta, GA: U.S. Department of 

Health and Human Services, Centers for Disease 

Control and Prevention, 2008. 

11MedPAC. Outpatient dialysis service: assessing 

payment adequacy and updating payments. Report 

to the Congress: Medicare payment policy. 2009 

Mar; 131–56. 

Section 1833(t)(17)(C)(i) of the Act 

requires the Secretary to develop 

measures appropriate for the 

measurement of the quality of care 

furnished by hospitals in outpatient 

settings, that these measures reflect 

consensus among affected parties and, 

to the extent feasible and practicable, 

that these measures include measures 

set forth by one or more national 

consensus building entities. Because 

this measure is NQF-endorsed, we 

believe that this measure meets the 

requirement of reflecting consensus 

among affected parties. However, we 

note that consensus among affected 

parties can be reflected through means 

other than NQF endorsement. This 

measure is appropriate for measuring 

the quality of care in the hospital 

outpatient departments which serve 

many patients with diabetes and suffer 

from high blood pressure. 

Early treatment of high blood pressure 

may help slow or halt the progression of 

kidney involvement and damage.7 This 

NQF-endorsed measure measures the 

percentage of patient visits with blood 

pressure measurement recorded among 

all patient visits by patients aged > 18 

years with diagnosed hypertension. The 

specifications for this measure are 

located in Appendix A (beginning page 

A–60) of the 2008 NQF Report titled 

‘‘National Voluntary Consensus 

Standards for Ambulatory Care—Part 1’’ 

available at the following link: http:// 

www.qualityforum.org/Publications/ 

2008/03/National_

Voluntary_Consensus_Standards_for_

Ambulatory_Care%E2%80%93Part_

1.aspx. We invite public comment on 

this proposed measure. 

(4) Proposed Diabetes Measure: Eye 

Exam (NQF #0055) 

A dilated eye exam helps to detect the 

risk for vision-threatening diabetic 

retinopathy which is prevalent among 

people with diabetes. Data from the 

2011 National Diabetes Fact Sheet 

shows that diabetes is the leading cause 

of new cases of blindness among adults 

aged 20–74 years.8 However, dilated eye 

exams for diabetic patients can prevent 

retinopathy through early detection 9

and stereoscopic retinal photography is 

sometimes used to grade diabetic 

retinopathy severity. 

Section 1833(t)(17)(C)(i) of the Act 

requires the Secretary to develop 

measures appropriate for the 

measurement of the quality of care 

furnished by hospitals in outpatient 

settings, that these measures reflect 

consensus among affected parties and, 

to the extent feasible and practicable, 

that these measures include measures 

set forth by one or more national 

consensus building entities. Because 

this measure is NQF-endorsed, we 

believe that this measure meets the 

requirement of reflecting consensus 

among affected parties. However, we 

note that consensus among affected 

parties can be reflected through means 

other than NQF endorsement. This 

measure is appropriate for measuring 

quality of care in the hospital outpatient 

departments which serve many patients 

with diabetes who are at risk for 

diabetic retinopathy. 

This NQF-endorsed measure 

measures the percentage of adult 

patients with diabetes age 18 to 75 years 

who received a dilated eye exam or 

seven standard field stereoscopic photos 

with interpretation by an 

ophthalmologist or optometrist, or 

imaging to verify diagnosis from 

stereoscopic photos during the reporting 

year, or during the prior year, if the 

patient is at low risk for retinopathy. A 

patient is considered low risk if the 

patient has no evidence of retinopathy 

in the prior year. The specifications for 

this measure are located in Appendix A 

(beginning page A–60) of the 2008 NQF 

Report titled ‘‘National Voluntary 

Consensus Standards for Ambulatory 

Care—Part 1’’ available at the following 

link: http://www.qualityforum.org/

Publications/2008/03/National_

Voluntary_Consensus_Standards_

for_Ambulatory_Care%E2%80%93Part_

1.aspx. We invite public comment on 

this proposed measure. 

(5) Proposed Diabetes Measure: Urine 

Protein Screening (NQF #0062) 

Urine protein screening for 

microalbumin detects an abnormal 

amount of protein albumin leaks in the 

urine by the capillaries of the kidney. 

High levels of blood sugar in 

uncontrolled diabetes can cause damage 

to the capillaries in the kidneys. 

Diabetics accounted for 44 percent of 

new cases of kidney disease. In 2005, a 

total of 178,689 diabetics with ESRD 

were on dialysis or received a kidney 

transplant in the United States and 

Puerto Rico.10 In 2009, MedPAC 

reported costs for the 330,000 Medicare 

recipients receiving dialysis treatment 

for ESRD at over $8 billion.11

Section 1833(t)(17)(C)(i) of the Act 

requires the Secretary to develop 

measures appropriate for the 

measurement of the quality of care 

furnished by hospitals in outpatient 

settings, that these measures reflect 

consensus among affected parties and, 

to the extent feasible and practicable, 

that these measures include measures 

set forth by one or more national 

consensus building entities. Because 

this measure is NQF-endorsed, we 

believe that this measure meets the 

requirement of reflecting consensus 

among affected parties. However, we 

note that consensus among affected 

parties can be reflected through means 

other than NQF endorsement. As 

discussed above, this measure is 

appropriate for measuring quality of 

care in the hospital outpatient 

departments which serve many patients 

with diabetes who are at risk for kidney 

diseases. 

Early urine screenings for 

microalbumin may prevent kidney 

disease from worsening to ESRD. This 

NQF-endorsed measure measures the 

percentage of adult diabetic patients 

ages 18–75 years with at least one test 

for microalbumin during the 

measurement year or who had evidence 

of medical attention for existing 

nephropathy (diagnosis of nephropathy 

or documentation of microalbuminuria 

or albuminuria). The specifications for 

this measure are located in Appendix A 

(beginning page A–60) of the 2008 NQF 

Report titled ‘‘National Voluntary 

Consensus Standards for Ambulatory 

Care—Part 1’’ available at the following 

link: http://www.qualityforum.org/

Publications/2008/03/

National_Voluntary_Consensus_

Standards_for_Ambulatory_

Care%E2%80%93Part_1.aspx. We 

invite public comment on this proposed 

measure. 

(6) Proposed Cardiac Rehabilitation 

Measure: Patient Referral From an 

Outpatient Setting (NQF #0643) 

Cardiac rehabilitation improves the 

quality of life, reduces modifiable 

cardiovascular risk factors, enhances 

adherence to medications, and lowers 

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42320 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

12Wenger, N.K.: Current status of cardiac 

rehabilitation. J. Am Coll Cardiol 2008; 51:1619– 

1631. 13Suaya, J.A., Shepard, D.S., Normand, S.L., et 

al.: Use of cardiac rehabilitation by Medicare 

beneficiaries after myocardial infarction or coronary 

bypass surgery. Circulation. 2007; 116:1653–62. 14Suaya, J.A., Stason, W.B.; Ades, P.A., et al.: 

Cardiac rehabilitation and survival in older 

coronary patients. J. Am Coll Cardiol. 2009;54:25– 

33. 

15Chan, P.S., Oetgen, W.J., Buchanan, D., 

Mitchell, K., et al.: Cardiac performance measure 

compliance on outpatients: the American College of 

Cardiology and National Cardiovascular Data 

Registry’s PINNACLE (Practice Innovation and 

Clinical Excellence) program. J. Am Coll Cardiol 

2010;561(1): 8–14. 

16Haynes, A.B.; Weiser, T.G.; Berry, W.G. et. al 

(2009). ‘‘A Surgical Safety Checklist to Reduce 

Morbidity and Mortality in a Global Population.’’. 

New England Journal of Medicine. 360: 491–499. 

17de Vries En, Prins HA, Crolla RMPH, et al. 

Effect of a comprehensive surgical safety system on 

patient outcomes. N Engl J Med 2010;363: 1928–37. 

18Hospital National Patient Safety Goals. The 

Joint Commission Accreditation Hospital Manual, 

2011. http://www.jointcommission.org/ 

standards_information/npsgs.aspx 

morbidity and mortality.12 Despite these 

benefits, cardiac rehabilitation is 

significantly underutilized by patients 

with heart disease and there is 

significant geographical variation in 

referral rates and lower use in women, 

non-whites, older patients and patients 

on Medicaid.13 A recent study of 

Medicare beneficiaries, using 70,040 

matched pairs of patients hospitalized 

for coronary conditions or 

revascularization procedures, found that 

mortality rates were 21 percent to 34 

percent lower in cardiac rehabilitation 

users compared to nonusers.14 Evidence 

from registries which include a cardiac 

rehabilitation performance measure 

indicated that only about 18 percent of 

eligible patients were referred to cardiac 

rehabilitation.15 Under our regulations, 

42 CFR 410.49, cardiac rehabilitation is 

covered for patients who have had one 

or more of the following: an acute 

myocardial infarction within the 

preceding 12 months, current stable 

angina, individuals who have 

undergone coronary bypass surgery, a 

percutaneous coronary intervention or 

coronary stenting, heart valve repair or 

replacement, or a heart-lung transplant. 

In May 2010, the NQF endorsed two 

cardiac rehabilitation referral 

performance measures as part of the call 

for care coordination performance 

measures. These measures are: (1) 

Cardiac Rehabilitation: Patient Referral 

From an Inpatient Setting (NQF 

#0642)—The percentage of patients 

admitted to the hospital with a 

qualifying cardiovascular disease (CVD) 

event who are referred to an early 

outpatient cardiac rehabilitation/ 

secondary prevention program; and (2) 

Cardiac Rehabilitation: Patient Referral 

From an Outpatient Setting (NQF 

#0643)—The percentage of patients 

evaluated in an outpatient setting who 

in the previous 12 months experienced 

an acute myocardial infarction or 

chronic stable angina or who have 

undergone coronary artery bypass 

(CABG) surgery, a percutaneous 

coronary intervention (PCI), cardiac 

valve surgery (CVS), or cardiac 

transplantation who have not already 

participated in an early outpatient 

cardiac rehabilitation/secondary 

prevention program for the qualifying 

event and who are referred to an early 

outpatient cardiac rehabilitation/ 

secondary prevention program unless 

there is a documented medical or 

patient oriented reason why a referral 

was not made. We are proposing to 

adopt the second (NQF #0643) of these 

measures for the CY 2014 Hospital OQR 

Program. The measure specifications are 

located in Appendix A (Pages A4 and 

A5) of the 2010 NQF consensus report 

entitled ’’ Preferred Practices and 

Performance Measures for Measuring 

and Reporting Care Coordination’’ 

which is available at the following link: 

http://www.qualityforum.org/

Publications/2010/10/Preferred_

Practices_and_Performance_Measures_

for_Measuring_and_Reporting_

Care_Coordination.aspx. 

This proposed measure targets 

patients who have experienced a 

qualifying cardiovascular event. These 

patients are commonly seen in hospital 

outpatient departments and, for this 

reason, we believe that the proposed 

measure is appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by hospitals in outpatient settings as 

required under section 1833(t)(17)(C)(i) 

of the Act. The measure also is NQFendorsed, and therefore meets the 

requirement that measures selected for 

the program ‘‘reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that these 

measures include measures set forth by 

one or more national consensus 

building entities’’ under section 

1833(t)(17)(C)(i) of the Act. 

We are proposing to adopt the NQFendorsed Cardiac Rehabilitation Patient 

Referral from an Outpatient Setting 

measure for CY 2014 payment 

determination. The goal of this measure 

is to improve the delivery of cardiac 

care in order to reduce cardiovascular 

mortality and morbidity and optimize 

the health of patients suffering from 

CVD. 

We invite public comment on this 

proposed measure. 

c. Proposed New Structural Measures 

For the CY 2014 payment 

determination, we are proposing to add 

two structural measures: 1) Safe Surgery 

Checklist Use; and 2) Hospital 

Outpatient Volume for Selected 

Outpatient Surgical Procedures. In 

general, structural measures assess the 

characteristics and capacity of the 

provider to deliver quality health care. 

(1) Proposed Safe Surgery Checklist Use 

Measure 

This proposed structural measure 

assesses whether a hospital outpatient 

department utilizes a Safe Surgery 

checklist that assesses whether effective 

communication and safe practices are 

performed during three distinct 

perioperative periods: (1) the period 

prior to the administration of 

anesthesia; (2) the period prior to skin 

incision; and (3) the period of closure of 

incision and prior to the patient leaving 

the operating room. The use of such 

checklists has been credited with 

dramatic decreases in preventable harm, 

complications and post-surgical 

mortality.16 In November 2010, the New 

England Journal of Medicine (NEJM) 

published a study concluding that 

surgical complications were reduced by 

one-third, and mortality by nearly half, 

when a safe surgery checklist was 

used.17

We believe that effective 

communication and the use of safe 

surgical practices during surgical 

procedures will significantly reduce 

preventable surgical deaths and 

complications. For example, mistakes in 

surgery can be prevented by ensuring 

that the correct surgery is performed on 

the correct patient and at the correct 

place on the patient’s body.18 A safe 

surgery checklist would also reduce the 

potential for human error, which we 

believe would increase the safety of the 

surgical environment. 

The safe surgery checklists of which 

we are aware typically include safe 

surgery practices corresponding to three 

critical perioperative periods: the period 

prior to the administration of 

anesthesia, the period prior to skin 

incision, and the period of closure of 

incision and prior to the patient leaving 

the operating room. Some examples of 

safe surgery practices that can be 

performed during each of these three 

perioperative periods are shown in the 

table below: 

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19Neily, J; Mills, PD, Young-Xu, Y. (2010). 

‘‘Association between implementation of a Medical 

Team Training Program and Surgical Mortality’’. 

JAMA. 304 (15): 1693–1700. 

20Haynes, AB; Weiser, TG; Berry, WR et al (2009) 

‘‘A Surgical Safety Checklist to Reduce Morbidity 

and Mortality in a Global Population’’. NEJM. 

360:491–499. 

21Birkmeyer, JD (2010) ‘‘Strategies for Improving 

Surgical Quality—Checklists and Beyond.’’ NEJM. 

363: 1963–1965. 

[1]Livingston, E.H.; Cao, J ‘‘Procedure Volume as 

a Predictor of Surgical Outcomes’’. JAMA. 

2010;304(1):95–97. 

[2] David R. Flum, D.R.; Salem, L.; Elrod, J.B.; 

Dellinger, E.P.; Cheadle, A. Chan, L. ‘‘Early 

Mortality Among Medicare Beneficiaries 

Undergoing Bariatric Surgical Procedures’’. JAMA. 

2005;294(15):1903–1908. 

[3]Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, 

A.M.; Warren, J.L.; Begg, C.B ‘‘Influence of Hospital 

Procedure Volume on Outcomes Following Surgery 

for Colon Cancer’’ JAMA. 2000; 284 (23): 3028– 

3035. 

First critical point (period prior to administering 

anesthesia) 

Second critical point (period prior to skin incision) 

Third critical point (period of closure of incision and prior to patient leaving the operating 

room) 

• Verbal confirmation of patient identity. 

• Mark surgical site. 

• Check anesthesia machine/medication. 

• Assessment of allergies, airway and aspiration risk. 

• Confirm surgical team members and roles. 

• Confirm patient identity, procedure, and surgical incision site. 

• Administration of antibiotic prophylaxis within 60 minutes before incision. 

• Confirm the procedure. 

• Complete count of surgical instruments and 

accessories. 

• Identify key patient concerns for recovery 

and management of the patient. 

• Communication among surgical team members of anticipated critical events. 

• Display of essential imaging as appropriate. 

One example of a checklist that lists 

safe surgery practices during each of 

these three perioperative periods is the 

World Health Organization Surgical 

Safety Checklist, which was adopted by 

The World Federation of Societies of 

Anesthesiologists as an international 

standard of practice. This checklist can 

be found at: http://www.who.int/patient

safety/safesurgery/ss_checklist/en/

index.html. 

The adoption of a structural measure 

that assesses Safe Surgery Checklist use 

would align our patient safety initiatives 

with those of several surgical specialty 

societies including: The American 

College of Surgeons’ Nora Institute for 

Patient Safety, the American Society of 

Anesthesiologists, The Joint 

Commission, the National Association 

for Healthcare Quality and the 

Association of periOperative Registered 

Nurses (AORN). For this proposed 

structural measure, a hospital outpatient 

department would indicate whether or 

not it uses a safe surgery checklist for 

its surgical procedures that includes 

safe surgery practices during each of the 

three critical perioperative periods 

discussed above. The measure would 

assess whether the hospital uses a safe 

surgery checklist in the hospital 

outpatient department for surgical 

procedures, but would not require a 

hospital to report whether it uses a 

checklist in connection with any 

individual outpatient procedures. 

The proposed Safe Surgery Checklist 

structural measure is not NQF-endorsed. 

However, we believe that consensus 

among affected parties can be reflected 

through means other than NQF 

endorsement including: consensus 

achieved during the measure 

development process; consensus shown 

through broad acceptance and use of 

measures; and consensus through public 

comment. The proposed safe surgery 

checklist measure assesses the adoption 

of a best practice for surgical care that 

is broadly accepted and in widespread 

use among affected parties. In addition 

to being adopted by The World Federal 

of Societies of Anesthesiologists, the use 

of a safe surgery checklist is one of the 

safe surgery principles endorsed by the 

Council on Surgical and Perioperative 

Safety, which is comprised of the 

American Association of Nurse 

Anesthetists, American College of 

Surgeons, American Association of 

Surgical Physician Assistants, American 

Society of Anesthesiologists, American 

Society of PeriAnesthesia Nurses, 

AORN, and Association of Surgical 

Technologists. Two State agencies 

(Oregon, South Carolina), the Veterans 

Health Administration,19 numerous 

hospital systems, State hospital 

associations (such as California, and 

South Carolina), national accrediting 

organizations and large private insurers 

have endorsed the use of a safe surgery 

checklist as a best practice for reducing 

morbidity, mortality, and medical 

errors.20, 21 Because the use of a safe 

surgery checklist is a widely accepted 

best practice for surgical care, we 

believe that the proposed structural 

measure of Safe Surgery Checklist use 

reflects consensus among affected 

parties. We also note that The Joint 

Commission has included safe surgery 

checklist practices among those to be 

used to achieve National Patient Safety 

Goals adopted for 2011 for surgeries 

performed in ambulatory settings and 

hospitals. 

For CY 2014 payment determination, 

we are proposing that data collection for 

this structural measure for hospital 

outpatient departments will be from 

July 1, 2013 through August 15, 2013 for 

the time period January 1, 2012 through 

December 31, 2012. These data will be 

collected via a Web-based tool available 

on the QualityNet Web site that is 

currently employed for the collection of 

structural measures for the Hospital IQR 

Program and the Hospital OQR Program. 

We invite public comments on our 

proposal to add this new structural 

measure to the CY 2014 Hospital OQR 

Program measure set. 

(2) Proposed Hospital Outpatient 

Department Volume for Selected 

Outpatient Surgical Procedures Measure 

There is substantial evidence in 

recent peer-reviewed clinical literature 

that volume of surgical procedures, 

particularly of high risk surgical 

procedures, is related to better patient 

outcomes, including decreased surgical 

errors and mortality [1], [2], [3]. This may 

be attributable to greater experience 

and/or surgical skill, greater comfort 

with and, hence, likelihood of 

application of standardized best 

practices, and increased experience in 

monitoring and management of surgical 

patients for the particular procedure. 

For this reason, the National Quality 

Forum has previously endorsed 

measures of total all-patient surgical 

volume for Isolated CABG and Valve 

Surgeries (NQF #0124), Percutaneous 

Coronary Intervention (PCI) (NQF 

#0165), Pediatric Heart Surgery (NQF 

#0340), Abdominal Aortic Aneurism 

Repair (NQF #357), Esophageal 

Resection (#0361), and Pancreatic 

Resection (NQF #0366). Additionally, 

many consumer-oriented Web sites that 

display health care quality information 

required to be reported under State law 

(California, New York, Texas, 

Washington, Florida, Illinois, Michigan, 

Oregon) and private organizations 

(Leapfrog Group, U.S. News & World 

Report) are reporting procedure volume, 

in addition to provider performance on 

surgical process (SCIP measures) and 

outcome measures (SSI, Patient Safety 

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42322 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

Indicators, and Mortality), in order to 

provide more context to consumers 

choosing a health care provider. The 

currently NQF-endorsed measures of 

procedure volume (noted above) relate 

to surgeries performed only in inpatient 

settings, and would not be applicable to 

the types of procedures approved to be 

performed in HOPDs and ASCs. 

The table below, which shows the 

proportion of procedures during 

calendar year 2010 performed in 

hospital outpatient departments 

stratified by broad categories, reveals 

that most hospital outpatient procedures 

(99%) fall into one of 8 categories: 

Cardiovascular, Eye, Gastrointestinal, 

Genitourinary, Musculoskeletal, 

Nervous System, Respiratory, and Skin. 

CY 2010 HOSPITAL OUTPATIENT DATA

Procedure category Percent of 

total services 

Cardiovascular ...................... 75.50 

Chest .................................... 0.00 

Ear ........................................ 0.20 

Endocrine .............................. 0.10 

Eye ........................................ 1.70 

Gastrointestinal ..................... 5.70 

Genitourinary ........................ 2.70 

Hemic & Lymphatic .............. 0.30 

Maternity ............................... 0.00 

Musculoskeletal .................... 3.80 

Nervous System ................... 2.80 

Radiology .............................. 0.10 

Respiratory ........................... 1.00 

Skin ....................................... 6.20 

CY 2010 HOSPITAL OUTPATIENT

DATA—Continued 

Procedure category Percent of 

total services 

Total ............................... 100.00 

Because surgical volume is associated 

with better quality, and surgical 

procedures are performed in hospital 

outpatient departments, we believe that 

surgical volume is appropriate for 

measuring the quality of these eight 

categories of surgical procedures 

performed in an HOPD. For the CY 2014 

payment determination, we are 

proposing that HOPDs would report allpatient volume data with respect to 

these eight categories between the dates 

July 1, 2013 and August 15, 2013 with 

respect to the time period January 1, 

2012 through December 31, 2012. In 

other words, under this proposal, an 

HOPD would report its CY 2012 allpatient volume data for these eight 

categories of procedures during the 45 

day window of July 1, 2013 to August 

15, 2013. The table below lists the 

specific HCPCS codes for each of the 8 

procedure categories for which hospitals 

would be required to report the allpatient volume data. Like the other 

structural measures in the Hospital OQR 

program, data on this proposed measure 

would be collected via an online Webbased tool that will be made available to 

HOPDs via the QualityNet Web site. 

We invite public comment on this 

proposal. 

In summary, for the CY 2014 payment 

determination, in addition to the 23 

measures we previously adopted in the 

CY 2011 OPPS/ASC final with comment 

period, we are proposing to adopt 1 new 

NHSN HAI measure, 6 additional new 

chart-abstracted measures, and 2 new 

structural measures. With respect to the 

proposed surgical site infection HAI 

measure, HOPDs would be required to 

report the data to the NHSN beginning 

with January 1, 2013 to through June 30, 

2013 infection events and would be 

required to use the procedures set out 

by the NHSN. We are proposing that 

submission of data on the five proposed 

diabetes measures and the proposed 

cardiac rehabilitation measure would 

begin with first quarter CY 2013 

(January 1, 2013 to March 31, 2013) 

encounters. With respect to the 

proposed structural measures, we are 

proposing that HOPDs submit data 

between July 1, 2013 and August 15, 

2013 with respect to a calendar year 

2012 reporting time period. 

We invite public comments on these 

proposals for the CY 2014 payment 

determination. The proposed complete 

measure set for the Hospital OQR 

Program CY 2014 payment 

determination, including the measures 

we adopted in the CY 2011 OPPS/ASC 

final rule with comment period, is 

reflected in the table below. 

CY 2014 HOSPITAL OQR PROGRAM MEASURE SET REFLECTING MEASURES PREVIOUSLY ADOPTED AND THE PROPOSED

ADDITION OF 1 NHSN HAI MEASURE, 6 CHART-ABSTRACTED MEASURES, AND 2 STRUCTURAL MEASURES

OP–1: Median Time to Fibrinolysis. 

OP–2: Fibrinolytic Therapy Received Within 30 Minutes. 

OP–3: Median Time to Transfer to Another Facility for Acute Coronary Intervention. 

OP–4: Aspirin at Arrival. 

OP–5: Median Time to ECG. 

OP–6: Timing of Antibiotic Prophylaxis. 

OP–7: Prophylactic Antibiotic Selection for Surgical Patients. 

OP–8: MRI Lumbar Spine for Low Back Pain. 

OP–9: Mammography Follow-up Rates. 

OP–10: Abdomen CT—Use of Contrast Material. 

OP–11: Thorax CT—Use of Contrast Material. 

OP–12: The Ability for Providers with HIT to Receive. Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data.* 

OP–13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery.* 

OP–14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT).* 

OP–15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache.* 

OP–16: Troponin Results for Emergency Department acute myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac 

Chest Pain) Received Within 60 minutes of Arrival.** 

OP–17: Tracking Clinical Results between Visits.** 

OP–18: Median Time from ED Arrival to ED Departure for Discharged ED Patients.** 

OP–19: Transition Record with Specified Elements Received by Discharged Patients.** 

OP–20: Door to Diagnostic Evaluation by a Qualified Medical Professional.** 

OP–21: ED–Median Time to Pain Management for Long Bone Fracture.** 

OP–22: ED–Patient Left Without Being Seen.** 

OP–23: ED–Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interpretation Within 45 

minutes of Arrival.** 

OP–24: Surgical Site Infection.*** 

OP–25: Diabetes: Hemoglobin A1c Management.*** 

OP–26: Diabetes Measure Pair: A Lipid management: low density lipoprotein cholesterol (LDL–C) <130, B Lipid management: LDL–C <100.*** 

OP–27: Diabetes: Blood Pressure Management.*** 

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22Maltezou, H.C., Drancourt, M.: Nosocomial 

influenza in children. Journal of Hospital Infection 

2003; 55:83–91 

23Hurley, J.C., Flockhart, S.: An influenza 

outbreak in a regional residential facility. Journal of 

Infection Prevention 2010; 11:58–61 

24Salgado, 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. 

25Wilde, J.A., McMillan, J.A., Serwint, J., Butta, 

J., O’Riordan, M.A., Steinhoff, M.C.: Effectiveness of 

influenza vaccine in health care professionals: a 

randomized trial. The Journal of the American 

Medical Association 1999; 281:908–913. 

26Salgado, C.D., Giannetta, E.T., Hayden, F.G., 

Farr, B.M.: Preventing influenza by improving the 

vaccine acceptance rate of clinicians. Infection 

Control and Hospital Epidemiology 2004; 25: 923– 

928. 

27Potter, J., Stott, D.J., Roberts, M.A., et al.: 

Influenza vaccination of health-care workers in 

long-term-care hospitals reduces the mortality of 

elderly patients. Journal of Infectious Diseases 1997; 

175:1–6. 

28Hayward, A.C., Harling, R., Wetten, S., et al.: 

Effectiveness of an influenza vaccine programme for 

care home staff to prevent death, morbidity, and 

health service use among residents: cluster 

randomised controlled trial. British Medical Journal 

2006; 333:1241–1246. 

29Talbot, T.R., Bradley, S.F., Cosgrove, S.E., et al.: 

SHEA position paper: Influenza vaccination of 

healthcare workers and vaccine allocation for 

healthcare workers during vaccine shortages. 

Infection Control and Hospital Epidemiology 2005; 

26:882–890 

30American College of Physicians (ACP), ACP 

policy on influenza vaccination of health care 

workers. http://www.acponline.org/running_

practice/quality_improvement/projects/adult_

immunization/flu_hcw.pdf. 

31 Greene, L.R., Cain, T.A., Dolan, S.A. et al.: 

APIC position paper: influenza immunization of 

healthcare personnel. Association of Professionals 

in Infection Control (APIC). November 2008.http:// 

www.apic.org/Content/NavigationMenu/Practice

Guidance/Topics/Influenza/APIC_Position_Paper_

Influenza_11_7_08final_revised.pdfhttp://www.

apic.org/Content/NavigationMenu/Practice

Guidance/Topics/Influenza/APIC_Position_Paper_

Influenza_11_7_08final_revised.pdf. 

32National Patient Safety Foundation (NPSF), 

Mandatory flu vaccinations for healthcare workers. 

Press Release, November 18, 2009. http:// 

www.npsf.org/pr/pressrel/2009–11-18.php. 

33 Infectious Diseases Society of America (IDSA), 

IDSA policy on mandatory immunization of health 

care workers against seasonal and 2009 H1N1 

influenza. Infectious Diseases Society of America 

(IDSA). September 30, 2009. http:// 

www.idsociety.org/HCWimmunization/. 

34Walker, F.J., Singleton, J.A., Lu, P., Wooten, 

K.G., Strikas, R.A.: Influenza vaccination of 

healthcare workers in the United States, 1989–2002. 

Infection Control and Hospital Epidemiology 2006; 

27:257–265. 

35http://www.cdc.gov/mmwr/preview/

mmwrhtml/rr55e209a1.htm Influenza Vaccination 

of Health-Care Personnel. 

Recommendations of the Healthcare Infection 

Control Practices Advisory Committee (HICPAC) 

and the Advisory Committee on Immunization 

Practices. 

CY 2014 HOSPITAL OQR PROGRAM MEASURE SET REFLECTING MEASURES PREVIOUSLY ADOPTED AND THE PROPOSED

ADDITION OF 1 NHSN HAI MEASURE, 6 CHART-ABSTRACTED MEASURES, AND 2 STRUCTURAL MEASURES—Continued 

OP–28: Diabetes: Eye Exam.*** 

OP–29: Diabetes: Urine Protein Screening.*** 

OP–30: Cardiac Rehabilitation Patient Referral From an Outpatient Setting.*** 

OP–31: Safe Surgery Checklist Use.*** 

OP–32: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures.*** 

Procedure category Corresponding HCPCS codes 

Gastrointestinal ................... 40000 through 49999, G0104, G0105, G0121, C9716, C9724, C9725, 0170T. 

Eye ..................................... 65000 through 68999, 0186, 0124T, 0099T, 0017T, 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 

0192T, 76510, 0099T. 

Nervous System ................. 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T. 

Musculoskeletal .................. 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T. 

Skin ..................................... 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727. 

Genitourinary ...................... 50000 through 58999, 0193T, 58805. 

Cardiovascular .................... 33000 through 37999. 

Respiratory ......................... 30000 through 32999. 

* New measure for the CY 2012 payment determination. 

** New measure for the CY 2013 payment determination. 

*** Proposed new measure for the CY 2014 payment determination. 

3. Proposed Hospital OQR Program 

Measures for the CY 2015 Payment 

Determination 

a. Proposed Retention of CY 2014 

Hospital OQR Measures for the CY 2015 

Payment Determination 

In general, unless otherwise specified, 

we retain measures from one payment 

determination to the next. Accordingly, 

we are proposing that all of the 

measures we finalize for the CY 2014 

payment determination continue to be 

used for the CY 2015 payment 

determination. We invite public 

comment on this proposal. 

b. Proposed New NHSN HAI Measure 

for the CY 2015 Payment Determination 

For the measure set to be used for the 

CY 2015 payment determination, we are 

proposing to adopt an additional HAI 

measure entitled Influenza Vaccination 

Coverage among Healthcare Personnel 

(HCP) (NQF #0431). This measure is 

currently collected by the CDC via the 

NHSN. 

Rates of serious illness and death 

resulting from influenza and its 

complications are increased in high-risk 

populations such as persons over 50 

years or under four years of age, and 

persons of any age who have underlying 

conditions that put them at an increased 

risk. HCP can acquire influenza from 

patients and can transmit influenza to 

patients and other HCP. Many HCP 

provide care for, or are in frequent 

contact with, patients with influenza or 

patients at high risk for complications of 

influenza. The involvement of HCP in 

influenza transmission has been a longstanding concern.22 23 24

Vaccination is an effective preventive 

measure against influenza, and can 

prevent many illnesses, deaths, and 

losses in productivity.25 HCP are 

considered a high priority for expanding 

influenza vaccine use. Achieving and 

sustaining high influenza vaccination 

coverage among HCP is intended to help 

protect HCP and their patients and 

reduce disease burden and healthcare 

costs. Results of several studies indicate 

that higher vaccination coverage among 

HCP is associated with lower incidence 

of nosocomial influenza.26 27 28 Such 

findings have led some to call for 

mandatory influenza vaccination of 

HCP.29 30 31 32 33

Until recently, vaccination coverage 

among HCP has been well below the 

national Healthy People 2010 target of 

60 percent,34 but preliminary data 

suggest 62 percent of HCP reported 

receiving seasonal influenza vaccine in 

2009–2010.35 Only 37 percent reported 

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36Centers for Disease Control and Prevention., 

Interim results: Influenza A (H1N1) 2009 and 

Monovalent Seasonal Influenza Vaccination 

Coverage Among Health-Care Personnel—United 

States August 2009- January 2010. Morbidity and 

Mortality Weekly Report (MMWR); 59:357–362. 

Available at: http://www.cdc.gov/mmwr/preview/

mmwrhtml/mm5912a1.htm. 

37Adapted from: Pearson ML., Bridges CB., 

Harper SA.,: Influenza vaccination of health-care 

personnel: Recommendations of the Healthcare 

Infection Control Practices Advisory Committee 

(HICPAC) and the Advisory Committee on 

Immunization Practices (ACIP). Morbidity and 

Mortality Weekly Report (MMWR) 2006; 55:1–16. 

Available at: http://www.cdc.gov/mmwr/preview/ 

mmwrhtml/rr5502a1.htm. 

38For additional information regarding healthcare 

facilities’ influenza vaccine policies, please see: 

http://www.immunize.org/honor%2Droll/.http:// 

www.immunize.org/honor%2Droll/. 

39Available at: http://www.cdc.gov/nhsn/ 

hps.htmlhttp://www.cdc.gov/nhsn/hps.html. 

receiving the 2009 pandemic A/H1N1 

vaccine.36

HCP refers to all personnel working in 

healthcare settings who have the 

potential for exposure to patients and/ 

or to infectious materials, including 

body substances, contaminated medical 

supplies and equipment, contaminated 

environmental surfaces, or 

contaminated air.37 HCP may include 

(but are not limited to) physicians, 

nurses, nursing assistants, therapists, 

technicians, emergency medical service 

personnel, dental personnel, 

pharmacists, laboratory personnel, 

autopsy personnel, students and 

trainees, contractual staff not employed 

by the healthcare facility, and persons 

(for example, clerical, dietary, housekeeping, laundry, security, 

maintenance, billing, and volunteers) 

not directly involved in patient care but 

potentially exposed to infectious agents 

that can be transmitted to and from HCP 

and patients. Settings in which HCP 

may work include, but are not limited 

to, acute care hospitals, long-term care 

facilities, skilled nursing facilities, 

rehabilitation centers, physicians’ 

offices, urgent care centers, outpatient 

clinics, home health agencies, and 

emergency medical services. 

Currently, four States have ‘‘offer’’ 

laws for influenza vaccination of HCP, 

meaning that vaccine must be offered to 

HCP by healthcare facilities; and three 

States (Alabama, California, and New 

Hampshire) have ‘‘ensure’’ laws for 

influenza vaccination of HCP, meaning 

that vaccination of non-immune HCP is 

mandatory in the absence of a specified 

exemption or refusal; and, additionally, 

numerous hospitals and other 

healthcare facilities have established 

policies requiring mandatory influenza 

vaccination of their HCP.38

Currently, no State requires that 

hospitals report this measure to NHSN. 

However, approximately 13 hospitals 

(including long term acute care and 

rehabilitation), outpatient hemodialysis 

centers, long term care facilities, and 

ambulatory surgical centers are 

currently reporting HCP immunization 

data to NHSN. In September 2009, CDC 

released the Healthcare Personnel Safety 

(HPS) Component of NHSN, which 

complements Patient Safety and 

Biovigilance components available in 

NHSN. The HPS Component replaced 

CDC’s National Surveillance System for 

Health Care Workers (NaSH) and is 

comprised of two modules: the Blood/ 

Body Fluid Exposure Module and the 

Influenza Vaccination and Management 

and Exposure Module.39 Currently, 

participation in either module is 

voluntary. The current Influenza 

Vaccination and Management and 

Exposure Module may soon offer 

options for healthcare facilities to 

submit vaccination summary data. 

NHSN plans to partner with vendorbased surveillance systems to permit 

periodic data extractions into NHSN. 

The modules feature basic, custom, 

and advanced analysis capabilities 

available in real-time, which allow 

individual healthcare facilities to 

compile and analyze their own data, as 

well as benchmark these results to 

aggregate NHSN estimates. The HPS 

Component can assist participating 

facilities in developing surveillance and 

analysis capabilities to permit the 

timely recognition of HCP safety 

problems and prompt interventions 

with appropriate measures. Influenza 

vaccination data submitted to CDC will 

ultimately capture regional trends on 

the yearly uptake of the vaccine, 

prophylaxis and treatment for 

healthcare personnel, as well as the 

elements within yearly influenza 

campaigns that succeed or require 

improvement. At the State and national 

levels, the HPS Component will aid in 

monitoring rates and trends. 

Due to the significant impact of HCP 

influenza vaccination on patient 

outcomes, we believe this measure is 

appropriate for measuring the quality of 

care in hospital outpatient departments. 

Healthcare Personnel (HCP) Influenza 

Vaccination is one of the HAI measures 

that we proposed to adopt for the FY 

2015 Hospital IQR Program in the FY 

2012 IPPS/LTCH PPS proposed rule. 

This measure assesses the percentage of 

healthcare personnel who have been 

immunized for influenza during the flu 

season. The specifications for this 

measure are available at http:// 

www.cdc.gov/nhsn/PDFs/HSPmanual/ 

HPS_Manual.pdf. 

The proposed HCP Influenza 

Vaccination measure is NQF-endorsed 

for the hospital setting and applies to 

the hospital outpatient setting. 

Therefore, this measure meets the 

requirement for measure selection under 

section 1833(t)(17)(C)(i) of the Act. We 

are proposing to adopt the Influenza 

Vaccination Coverage among Healthcare 

Personnel measure that is collected by 

the CDC via the NHSN. The NHSN 

proposed reporting mechanism for this 

proposed HAI measure is discussed in 

greater detail in section XIV.C.2.a. of 

this proposed rule. Data submission for 

this NHSN proposed measure would 

relate to immunizations from October 1, 

2013 through March 31, 2014 for the CY 

2015 payment determination. We are 

proposing that hospital outpatient 

departments use the NHSN 

infrastructure and protocol to report the 

measure for Hospital OQR purposes. We 

invite public comment on our proposal 

to adopt this HAI measure into the 

Hospital OQR Program for the CY 2015 

payment determination. 

PROPOSED HOSPITAL OQR PROGRAM MEASURE SET FOR THE CY 2015 PAYMENT DETERMINATION

OP–1: Median Time to Fibrinolysis. 

OP–2: Fibrinolytic Therapy Received Within 30 Minutes. 

OP–3: Median Time to Transfer to Another Facility for Acute Coronary Intervention. 

OP–4: Aspirin at Arrival. 

OP–5: Median Time to ECG. 

OP–6: Timing of Antibiotic Prophylaxis. 

OP–7: Prophylactic Antibiotic Selection for Surgical Patients. 

OP–8: MRI Lumbar Spine for Low Back Pain. 

OP–9: Mammography Follow-up Rates. 

OP–10: Abdomen CT—Use of Contrast Material. 

OP–11: Thorax CT—Use of Contrast Material. 

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PROPOSED HOSPITAL OQR PROGRAM MEASURE SET FOR THE CY 2015 PAYMENT DETERMINATION—Continued 

OP–12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data.* 

OP–13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery.* 

OP–14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT).* 

OP–15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache.* 

OP–16: Troponin Results for Emergency Department acute myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac 

Chest Pain) Received Within 60 minutes of Arrival.** 

OP–17: Tracking Clinical Results between Visits.** 

OP–18: Median Time from ED Arrival to ED Departure for Discharged ED Patients.** 

OP–19: Transition Record with Specified Elements Received by Discharged Patients.** 

OP–20: Door to Diagnostic Evaluation by a Qualified Medical Professional.** 

OP–21: ED–Median Time to Pain Management for Long Bone Fracture.** 

OP–22: ED–Patient Left Without Being Seen.** 

OP–23: ED–Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan .Interpretation Within 45 

minutes of Arrival.** 

OP–24: Surgical Site Infection (via NHSN).*** 

OP–25: Diabetes: Hemoglobin A1c Management.*** 

OP–26: Diabetes Measure Pair: A Lipid management: low density lipoprotein cholesterol (LDL–C) <130, B Lipid management: LDL–C <100.*** 

OP–27: Diabetes: Blood Pressure Management.*** 

OP–28: Diabetes: Eye Exam.*** 

OP–29: Diabetes: Urine Protein Screening.*** 

OP–30: Cardiac Rehabilitation Patient Referral From an Outpatient Setting.*** 

OP–31: Safe Surgery Checklist Use.*** 

OP–32: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures.*** 

Procedure Category Corresponding HCPCS codes 

Gastrointestinal ................... 40000 through 49999, G0104, G0105, G0121, C9716, C9724, C9725, 0170T. 

Eye ..................................... 65000 through 68999, 0186, 0124T, 0099T, 0017T, 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 

0192T, 76510, 0099T. 

Nervous System ................. 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T. 

Musculoskeletal .................. 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T. 

Skin ..................................... 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727. 

Genitourinary ...................... 50000 through 58999, 0193T, 58805. 

Cardiovascular .................... 33000 through 37999. 

Respiratory ......................... 30000 through 32999. 

OP–33: Influenza Vaccination Coverage among Healthcare Personnel (HCP).**** 

* New measure for the CY 2012 payment determination. 

** New measure for the CY 2013 payment determination. 

*** Proposed new measure for the CY 2014 payment determination. 

**** Proposed new measure for the CY 2015 payment determination. 

D. Possible Quality Measures Under 

Consideration for Future Inclusion in 

the Hospital OQR Program 

The current measure set for Hospital 

OQR includes measures that assess 

imaging efficiency patterns, care 

transitions, and the use of HIT. We are 

proposing in this proposed rule to add 

measures to the CY 2014 and CY 2015 

measure sets addressing diabetes care, 

HAIs, referrals for cardiac rehabilitation, 

and Safe Surgery Checklist use. Thus, 

the measures that we have previously 

adopted for the Hospital OQR Program, 

as well as the proposed measures being 

proposed in this proposed rule, address 

infection outcomes and infection 

control processes. In previous years’ 

rulemakings, we have provided lists of 

measures that are under consideration 

for future adoption into the Hospital 

OQR measure set. Below is a list of 

potential measurement areas that we are 

considering for future Hospital OQR 

payment determinations (beginning 

with CY 2015) for which we are 

soliciting public comment. In particular, 

we seek comment on the inclusion of 

Patient Experience of Care Measures in 

the Hospital OQR measure set for a 

future payment determination, such as 

existing Consumer Assessment of 

Healthcare Providers and Systems 

(CAHPS) surveys for clinicians/groups 

and the CAHPS Surgical Care Survey, 

sponsored and submitted by the 

American College of Surgeons (ACS) 

and the Surgical Quality Alliance 

(SQA). 

We also intend to align the surgical 

safety measures across the HOPD and 

ASC settings and would seek to utilize 

comparable data to assess patient safety 

in these settings. We seek comment on 

the potential submission of such 

measures by HOPDs via quality codes 

submitted on claims in the future. We 

also seek comment on the inclusion of 

measures of Anesthesia related 

Complications in the Hospital OQR 

measurement set. 

MEASURES AND MEASUREMENT TOPICS UNDER CONSIDERATION FOR FUTURE HOSPITAL OQR PROGRAM PAYMENT

DETERMINATIONS BEGINNING WITH CY 2015 

Measures for future development: 

Procedure Specific Measures: 

Colonoscopy and other Endoscopy measures. 

Cataract Surgery measures. 

Cancer Care: 

Adjuvant Chemotherapy is Considered or Administered within 4 Months of Surgery to Patients Under Age 80 with AJCC III Colon Cancer. 

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MEASURES AND MEASUREMENT TOPICS UNDER CONSIDERATION FOR FUTURE HOSPITAL OQR PROGRAM PAYMENT

DETERMINATIONS BEGINNING WITH CY 2015—Continued 

Adjuvant Hormonal Therapy for Patients with Breast Cancer. 

Needle Biopsy to Establish Diagnosis of Cancer Precedes Surgical Excision/Resection. 

Heart Failure: 

Heart Failure: Angiotensin-Converting Enzyme (ACE) Inhibitor or Angiotensin Receptor Blocker (ARB) Therapy for Left Ventricular Systolic 

Dysfunction (LVSD) 

Heart Failure: Left Ventricular Ejection Fraction Assessment. 

Heart Failure: Combination Medical Therapy for Left Ventricular Systolic Dysfunction. 

Heart Failure: Beta-Blocker Therapy for Left Ventricular Systolic Dysfunction. 

Heart Failure: Counseling regarding Implantable Cardioverter-Defibrillator (ICD) Implantation for Patients with Left Ventricular Systolic Dysfunction on Combination Medical Therapy. 

Heart Failure: Patients with Left Ventricular Systolic Dysfunction on Combination Medical Therapy. 

Heart Failure: Symptom Management. 

Heart Failure: Symptom and Activity Assessment. 

Heart Failure: Patient Education. 

Heart Failure: Overuse of Echocardiography. 

Heart Failure: Post-Discharge Appointment for Heart Failure Patients. 

Surgical Safety: 

Patient Fall. 

Patient Burn. 

Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant. 

Hospital Transfer/Admission. 

Patient Experience-of-Care: 

Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys for clinicians/groups. 

CAHPS Surgical Care Survey. 

Anesthesia Related Complications: 

Death. 

Cardiac Arrest. 

Perioperative Myocardial Infarction. 

Anaphylaxis. 

Hyperthermia. 

Transfusion Reaction. 

Stroke, Cerebral Vascular Accident, or Coma following anesthesia. 

Visual Loss. 

Medication Error. 

Unplanned ICU admission. 

Patient intraoperative awareness. 

Unrecognized difficult airway. 

Reintubation. 

Dental Trauma. 

Perioperative aspiration. 

Vascular access complication, including vascular injury or pneumothorax. 

Pneumothorax following attempted vascular access or regional anesthesia. 

Infection following epidural or spinal anesthesia. 

Epidural hematoma following spinal or epidural anesthesia. 

High Spinal. 

Postdural puncture headache. 

Major systemic local anesthetic toxicity. 

Peripheral neurologic deficit following regional anesthesia. 

Infection following peripheral nerve block. 

Additional Measurement Topics: 

NQF Serious Reportable Events in Healthcare. 

Medication Reconciliation. 

Chemotherapy. 

Post-discharge follow up. 

Post-discharge ED visit within 72 hours. 

Breast cancer detection rate. 

We invite public comment on these 

measures and other topics that we might 

consider proposing to adopt beginning 

with the Hospital OQR Program CY 

2015 payment determination. We also 

are seeking suggestions and rationales to 

support the adoption of measures and 

topics for the Hospital OQR Program 

which do not appear in the table above. 

E. Proposed Payment Reduction for 

Hospitals That Fail To Meet the 

Hospital OQR Program Requirements 

for the CY 2012 Payment Update 

1. Background 

Section 1833(t)(17)(A) of the Act, 

which applies to subsection (d) 

hospitals (as defined under section 

1886(d)(1)(B) of the Act), requires that 

hospitals that fail to report data required 

to be submitted on the measures 

selected by the Secretary, in the form 

and manner, and at a time, required by 

the Secretary under section 1833(t)(17) 

of the Act, incur a 2.0 percentage point 

reduction to their OPD fee schedule 

increase factor, that is, the annual 

payment update factor. Section 

1833(t)(17)(A)(ii) of the Act specifies 

that any reduction applies only to the 

payment year involved and will not be 

taken into account in computing the 

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applicable OPD fee schedule increase 

factor for a subsequent payment year. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68769 

through 68772), we discussed how the 

payment reduction for failure to meet 

the administrative, data collection, and 

data submission requirements of the 

Hospital OQR Program affected the CY 

2009 payment update applicable to 

OPPS payments for HOPD services 

furnished by the hospitals defined 

under section 1886(d)(1)(B) of the Act to 

which the program applies. The 

application of a reduced OPD fee 

schedule increase factor results in 

reduced national unadjusted payment 

rates that apply to certain outpatient 

items and services provided by 

hospitals that are required to report 

outpatient quality data and that fail to 

meet the Hospital OQR Program 

requirements. All other hospitals paid 

under the OPPS receive the full OPPS 

payment update without the reduction. 

The national unadjusted payment 

rates for many services paid under the 

OPPS equal the product of the OPPS 

conversion factor and the scaled relative 

weight for the APC to which the service 

is assigned. The OPPS conversion 

factor, which is updated annually by the 

OPD fee schedule increase factor, is 

used to calculate the OPPS payment rate 

for services with the following status 

indicators (listed in Addendum B to this 

proposed rule, which is available via the 

Internet on the CMS Web site): ‘‘P,’’ 

‘‘Q1,’’ ‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ 

‘‘U,’’ or ‘‘X.’’ In the CY 2009 OPPS/ASC 

final rule with comment period (73 FR 

68770), we adopted a policy that 

payment for all services assigned these 

status indicators would be subject to the 

reduction of the national unadjusted 

payment rates for applicable hospitals, 

with the exception of services assigned 

to New Technology APCs with assigned 

status indicator ‘‘S’’ or ‘‘T,’’ and 

brachytherapy sources with assigned 

status indicator ‘‘U,’’ which were paid at 

charges adjusted to cost in CY 2009. We 

excluded services assigned to New 

Technology APCs from the list of 

services subject to the reduced national 

unadjusted payment rates because the 

OPD fee schedule increase factor is not 

used to update the payment rates for 

these APCs. 

In addition, section 1833(t)(16)(C) of 

the Act, as amended by section 142 of 

the Medicare Improvements for Patients 

and Providers Act of 2008 (MIPPA) 

(Pub. L. 110–275), specifically required 

that brachytherapy sources be paid 

during CY 2009 on the basis of charges 

adjusted to cost, rather than under the 

standard OPPS methodology. Therefore, 

the reduced conversion factor also was 

not applicable to CY 2009 payment for 

brachytherapy sources because payment 

would not be based on the OPPS 

conversion factor and, consequently, the 

payment rates for these services were 

not updated by the OPD fee schedule 

increase factor. However, in accordance 

with section 1833(t)(16)(C) of the Act, as 

amended by section 142 of the MIPPA, 

payment for brachytherapy sources at 

charges adjusted to cost expired on 

January 1, 2010. Therefore, in the CY 

2010 OPPS/ASC final rule with 

comment period (74 FR 60641), we 

finalized our CY 2010 proposal, without 

modification, to apply the reduction to 

payment for brachytherapy sources to 

hospitals that fail to meet the quality 

data reporting requirements of the 

Hospital OQR Program for 

brachytherapy services furnished on 

and after January 1, 2010. 

The OPD fee schedule increase factor, 

or market basket update, is an input into 

the OPPS conversion factor, which is 

used to calculate OPPS payment rates. 

To implement the requirement to reduce 

the market basket update for hospitals 

that fail to meet reporting requirements, 

we calculate two conversion factors: a 

full market basket conversion factor 

(that is, the full conversion factor), and 

a reduced market basket conversion 

factor (that is, the reduced conversion 

factor). We then calculate a reduction 

ratio by dividing the reduced 

conversion factor by the full conversion 

factor. We refer to this reduction ratio as 

the ‘‘reporting ratio’’ to indicate that it 

applies to payment for hospitals that fail 

to meet their reporting requirements. 

Applying this reporting ratio to the 

OPPS payment amounts results in 

reduced national unadjusted payment 

rates that are mathematically equivalent 

to the reduced national unadjusted 

payment rates that would result if we 

multiplied the scaled OPPS relative 

weights by the reduced conversion 

factor. To determine the reduced 

national unadjusted payment rates that 

applied to hospitals that failed to meet 

their quality reporting requirements for 

the CY 2010 OPPS, we multiply the 

final full national unadjusted payment 

rate in Addendum B to the CY 2010 

OPPS/ASC final rule with comment 

period by the CY 2010 OPPS final 

reporting ratio of 0.980 (74 FR 60642). 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68771 

through 68772), we established a policy 

that the Medicare beneficiary’s 

minimum unadjusted copayment and 

national unadjusted copayment for a 

service to which a reduced national 

unadjusted payment rate applies would 

each equal the product of the reporting 

ratio and the national unadjusted 

copayment or the minimum unadjusted 

copayment, as applicable, for the 

service. Under this policy, we apply the 

reporting ratio to both the minimum 

unadjusted copayment and national 

unadjusted copayment for those 

hospitals that receive the payment 

reduction for failure to meet the 

Hospital OQR Program reporting 

requirements. This application of the 

reporting ratio to the national 

unadjusted and minimum unadjusted 

copayments is calculated according to 

§ 419.41 of our regulations, prior to any 

adjustment for a hospital’s failure to 

meet the quality reporting standards 

according to § 419.43(h). Beneficiaries 

and secondary payers thereby share in 

the reduction of payments to these 

hospitals. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68772), we 

established the policy that all other 

applicable adjustments to the OPPS 

national unadjusted payment rates 

apply in those cases when the OPD fee 

schedule increase factor is reduced for 

hospitals that fail to meet the 

requirements of the Hospital OQR 

Program. For example, the following 

standard adjustments apply to the 

reduced national unadjusted payment 

rates: the wage index adjustment; the 

multiple procedure adjustment; the 

interrupted procedure adjustment; the 

rural sole community hospital 

adjustment; and the adjustment for 

devices furnished with full or partial 

credit or without cost. We believe that 

these adjustments continue to be 

equally applicable to payments for 

hospitals that do not meet the Hospital 

OQR Program requirements. Similarly, 

outlier payments will continue to be 

made when the criteria are met. For 

hospitals that fail to meet the quality 

data reporting requirements, the 

hospitals’ costs are compared to the 

reduced payments for purposes of 

outlier eligibility and payment 

calculation. This policy conforms to 

current practice under the IPPS. We 

continued this policy in the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60642), and in the CY 

2011 OPPS/ASC final rule with 

comment period (75 FR 72099). For a 

complete discussion of the OPPS outlier 

calculation and eligibility criteria, we 

refer readers to section II.G. of this CY 

2012 OPPS/ASC proposed rule. 

2. Proposed Reporting Ratio Application 

and Associated Adjustment Policy for 

CY 2012 

We are proposing to continue our 

established policy of applying the 

reduction of the OPD fee schedule 

increase factor through the use of a 

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42328 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

reporting ratio for those hospitals that 

fail to meet the Hospital OQR Program 

requirements for the full CY 2012 

annual payment update factor. For the 

CY 2012 OPPS, the proposed reporting 

ratio is 0.980, calculated by dividing the 

proposed reduced conversion factor of 

$68.052 by the proposed full conversion 

factor of $69.420. We are proposing to 

continue to apply the reporting ratio to 

all services calculated using the OPPS 

conversion factor. For the CY 2012 

OPPS, we are proposing to apply the 

reporting ratio, when applicable, to all 

HCPCS codes to which we have 

assigned status indicators ‘‘P,’’ ‘‘Q1,’’ 

‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘V,’’ ‘‘U,’’ 

and ‘‘X’’ (other than new technology 

APCs to which we have assigned status 

indicators ‘‘S’’ and ‘‘T’’). We are 

proposing to continue to exclude 

services paid under New Technology 

APCs. We are proposing to continue to 

apply the reporting ratio to the national 

unadjusted payment rates and the 

minimum unadjusted and national 

unadjusted copayment rates of all 

applicable services for those hospitals 

that fail to meet the Hospital OQR 

Program reporting requirements. We 

also are proposing to continue to apply 

all other applicable standard 

adjustments to the OPPS national 

unadjusted payment rates for hospitals 

that fail to meet the requirements of the 

Hospital OQR Program. Similarly, we 

are proposing to continue to calculate 

OPPS outlier eligibility and outlier 

payment based on the reduced payment 

rates for those hospitals that fail to meet 

the reporting requirements. 

We invite public comments on these 

proposals. 

F. Extraordinary Circumstances 

Extension or Waiver for CY 2012 and 

Subsequent Years 

In our experience, there have been 

times when hospitals have been unable 

to submit required quality data due to 

extraordinary circumstances that are not 

within their control. It is our goal to not 

penalize hospitals for such 

circumstances and we do not want to 

unduly increase their burden during 

these times. Therefore, in the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60046 through 60047), we 

adopted a process for hospitals to 

request and for CMS to grant extensions 

or waivers with respect to the reporting 

of required quality data when there are 

extraordinary circumstances beyond the 

control of the hospital. In the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 72103), we retained these 

procedures with some modifications. 

For CY 2012 and subsequent years, we 

are proposing to retain these procedures 

with one modification. We are 

proposing to extend these procedures to 

the submission of medical record 

documentation for purposes of 

complying with our validation 

requirement for the Hospital OQR 

Program. 

Under this process, in the event of 

extraordinary circumstances, such as a 

natural disaster, not within the control 

of the hospital, for the hospital to 

receive consideration for an extension 

or waiver of the requirement to submit 

quality data or medical record 

documentation for one or more quarters, 

a hospital would submit to CMS a 

request form that would be made 

available on the QualityNet Web site. 

The following information should be 

noted on the form: 

• Hospital CCN; 

• Hospital Name; 

• CEO and any other designated 

personnel contact information, 

including name, e-mail address, 

telephone number, and mailing address 

(must include a physical address, a post 

office box address is not acceptable); 

• Hospital’s reason for requesting an 

extension or waiver; 

• Evidence of the impact of the 

extraordinary circumstances, including 

but not limited to photographs, 

newspaper and other media articles; and 

• A date when the hospital would 

again be able to submit Hospital OQR 

data and/or medical record 

documentation, and a justification for 

the proposed date. 

The request form would be signed by 

the hospital’s CEO. A request form 

would be required to be submitted 

within 45 days of the date that the 

extraordinary circumstance occurred. 

Following receipt of such a request, 

CMS would— 

(1) Provide a written 

acknowledgement using the contact 

information provided in the request, to 

the CEO and any additional designated 

hospital personnel, notifying them that 

the hospital’s request has been received; 

(2) Provide a formal response to the 

CEO and any additional designated 

hospital personnel using the contact 

information provided in the request 

notifying them of our decision; and 

(3) Complete our review of any CY 

2012 request and communicate our 

response within 90 days following our 

receipt of such a request. 

We note that we might also decide to 

grant waivers or extensions to hospitals 

that have not requested them when we 

determine that an extraordinary 

circumstance, such as an act of nature 

(for example, hurricane) affects an entire 

region or locale. If we make the 

determination to grant a waiver or 

extension to hospitals in a region or 

locale, we would communicate this 

decision to hospitals and vendors 

through routine communication 

channels, including but not limited to 

e-mails and notices on the QualityNet 

Web site. 

We invite public comment on this 

proposal to retain our existing process 

for granting extraordinary circumstances 

extensions or waivers, and to extend 

this process to the submission of 

medical record documentation, for the 

Hospital OQR Program. 

G. Proposed Requirements for Reporting 

of Hospital OQR Data for CY 2013 and 

Subsequent Years 

To participate in the Hospital OQR 

Program, hospitals must meet 

administrative, data collection and 

submission, and data validation 

requirements (if applicable). Hospitals 

that do not meet Hospital OQR Program 

requirements, as well as hospitals not 

participating in the Program and 

hospitals that withdraw from the 

Program, will not receive the full OPPS 

payment rate update. Instead, in 

accordance with section 1833(t)(17)(A) 

of the Act, those hospitals will receive 

a reduction of 2.0 percentage points to 

their OPD fee schedule increase factor 

for the applicable payment year. We 

established the payment determination 

requirements for the CY 2012 payment 

update in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72099 

through 72106). 

With respect to the payment 

determinations for CY 2013 and 

subsequent years, we are proposing to 

implement the requirements listed 

below. Most of these requirements are 

the same as the requirements we 

implemented for the CY 2012 payment 

determination, with some proposed 

modifications. 

1. Administrative Requirements for CY 

2013 and Subsequent Years 

To participate in the Hospital OQR 

Program, we are proposing that several 

administrative steps be completed. 

These steps are the same as those we 

finalized for the CY 2012 payment 

determination and would require the 

hospital to: 

• Identify a QualityNet security 

administrator who follows the 

registration process located on the 

QualityNet Web site (http:// 

www.QualityNet.org) and submits the 

information to the appropriate CMSdesignated contractor. All CMSdesignated contractors would be 

identified on the QualityNet Web site. 

The same person may be the QualityNet 

security administrator for both the 

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Hospital IQR Program and the Hospital 

OQR Program. Based on our experience, 

we believe that the QualityNet security 

administrator typically fulfills a variety 

of tasks related to the hospital’s ability 

to participate in the Hospital OQR 

Program, such as: creating, approving, 

editing and/or terminating QualityNet 

user accounts within the organization; 

monitoring QualityNet usage to 

maintain proper security and 

confidentiality measures; and serving as 

a point of contact for information 

regarding QualityNet and the Hospital 

OQR Program. However, the main 

purpose of the QualityNet 

Administrator is to serve as a contact for 

security purposes. Because of CMS 

information systems security 

requirements, the hospital would be 

required to maintain a current 

QualityNet security administrator for as 

long as the hospital participates in the 

program. While only a single QualityNet 

security administrator would be 

required for program purposes, we 

suggest to hospitals that it may be 

beneficial to have more than one 

QualityNet security administrator for 

back-up purposes. 

• Register with QualityNet, regardless 

of the method used for data submission. 

• Complete and submit an online 

participation form if this form (or a 

paper Notice of Participation form) has 

not been previously completed, if a 

hospital has previously withdrawn, or if 

the hospital acquires a new CCN. For 

Hospital OQR Program purposes, 

hospitals that share the same CCN 

would be required to complete a single 

online participation form. At this time, 

the participation form for the Hospital 

OQR Program is separate from the 

participation form required for the 

Hospital IQR Program and completing a 

form for each program is required. 

Agreeing to participate includes 

acknowledging that the data submitted 

to the CMS-designated contractor would 

be submitted to CMS, shared with one 

or more other CMS contractors that 

support the implementation of the 

Hospital OQR Program, and be publicly 

reported. 

We are proposing to retain the 

procedures and update the deadlines for 

submitting the participation form which 

we established in the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 72100): 

Hospitals with Medicare acceptance 

dates on or after January 1 of the year 

prior to the annual payment update 

affected: For the CY 2013 and 

subsequent years payment updates, we 

are proposing that any hospital that has 

a Medicare acceptance date on or after 

January 1 of the year prior to the annual 

payment update affected (for example, 

2012 would be the year prior to the 

affected CY 2013 annual payment 

update), including a new hospital and 

hospitals that have merged, must submit 

a completed participation form no later 

than 180 days from the date identified 

as its Medicare acceptance date on the 

CMS Certification and Survey Provider 

Enhanced Reporting (CASPER) system. 

Hospitals typically receive a package 

notifying them of their new CCN after 

they receive their Medicare acceptance 

date. The Medicare acceptance date is 

the earliest date that a hospital can 

receive Medicare payment for the 

services that it furnishes. Completing 

the participation form would include 

supplying the name and address of each 

hospital campus that shares the same 

CCN. 

The use of the Medicare acceptance 

date as beginning the timeline for 

Hospital OQR Program participation 

allows us to monitor more effectively 

hospital compliance with the 

requirement to complete a participation 

form because a hospital’s Medicare 

acceptance date is readily available to 

CMS through its data systems. In 

addition, providing an extended time 

period to register for the program would 

allow newly functioning hospitals 

sufficient time to get their operations 

fully functional before having to collect 

and submit quality data. 

We are aware that Medicare 

acceptance dates may be back-dated. In 

that event, we would consider a 

hospital’s request to allow additional 

time to elect to participate. 

Hospitals with Medicare acceptance 

dates before January 1 of the year prior 

to the affected annual payment update: 

For the CY 2013 and subsequent years 

payment update, we are proposing that 

any hospital that has a Medicare 

acceptance date before January 1 of the 

year prior to the affected annual 

payment update (for example, 2012 

would be the year prior to the affected 

CY 2013 annual payment update) that is 

not currently participating in Hospital 

OQR and wishes to participate in the 

Hospital OQR Program must submit a 

participation form by March 31 of the 

year prior to the affected annual 

payment update. We are proposing a 

deadline of March 31, because we 

believe it would give hospitals sufficient 

time to decide whether they wish to 

participate in the Hospital OQR 

Program, as well as put into place the 

necessary staff and resources to timely 

report data for first quarter of the year’s 

services. This requirement would apply 

to all hospitals whether or not the 

hospital billed for payment under the 

OPPS. 

For the CY 2013 and subsequent years 

payment updates, we are proposing that 

any Hospital OQR participating hospital 

that wants to withdraw may do so at any 

time from January 1 to November 1 of 

the year prior to the affected annual 

payment update. A hospital that 

withdraws during this time period for 

any annual payment update would not 

be able to later sign up to participate for 

that payment update, would receive a 

2.0 percentage point reduction to its 

OPD fee schedule increase factor for that 

year, and would be required to submit 

a new participation form in order to 

participate in any future year of the 

Hospital OQR Program. We note that 

once a hospital has submitted a 

participation form, it is considered to be 

an active Hospital OQR Program 

participant until such time as the 

hospital submits a withdrawal form to 

CMS or is designated as closed in the 

CMS CASPER system. 

We invite public comment on these 

proposed Hospital OQR Program 

administrative requirements for the CY 

2013 and subsequent years’ payment 

determinations. 

2. Form, Manner, and Timing of Data 

Submission for CY 2013 and 

Subsequent Years 

We are proposing that, to be eligible 

to receive the full OPD fee schedule 

increase factor for any payment 

determination, hospitals must comply 

with our submission requirements for 

chart-abstracted data, population and 

sampling data, claims-based measure 

data, and structural quality measure 

data, including all-patient volume data. 

a. Proposed CY 2013 and CY 2014 Data 

Submission Requirements for ChartAbstracted Measure Data Submitted 

Directly to CMS 

With respect to the proposed chartabstracted measures for which hospitals 

would submit data directly to CMS, we 

are proposing for CY 2013 and CY 2014 

that participating hospitals submit 

chart-abstracted data for each applicable 

quarter by the deadline posted on the 

QualityNet Web site; there must be no 

lapse in data submission. For the CY 

2013 program, we are proposing that the 

applicable quarters would be as follows: 

3rd quarter CY 2011, 4th quarter CY 

2011, 1st quarter CY 2012, and 2nd 

quarter CY 2012. Hospitals that did not 

participate in the CY 2012 Hospital 

OQR Program, but would like to 

participate in the CY 2013 Hospital 

OQR Program, and that have a Medicare 

acceptance date on the CASPER system 

before January 1, 2012, would begin 

data submission with respect to 1st 

quarter CY 2012 encounters using the 

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CY 2013 measure set that was finalized 

in the CY 2012 OPPS/ASC final rule 

with comment period. For those 

hospitals with Medicare acceptance 

dates on or after January 1, 2012, data 

submission must begin with the first full 

quarter following the submission of a 

completed online participation form. 

For the CY 2014 program, we are 

proposing that the applicable quarters 

for previously finalized measures would 

be as follows: 3rd quarter CY 2012, 4th 

quarter CY 2012, 1st quarter CY 2013, 

and 2nd quarter CY 2013. With respect 

to our proposed measures (5 Diabetes 

measures and 1 Cardiac Rehabilitation 

measure), the applicable quarters would 

be 1st quarter CY 2013 and 2nd quarter 

CY 2013. Hospitals that did not 

participate in the CY 2013 Hospital 

OQR Program, but would like to 

participate in the CY 2014 Hospital 

OQR Program, and that have a Medicare 

acceptance date on the CASPER system 

before January 1, 2013, would begin 

data submission with respect to 1st 

quarter CY 2013 encounters using the 

CY 2014 measure set that was finalized 

in the CY 2013 OPPS/ASC final rule 

with comment period. For those 

hospitals with Medicare acceptance 

dates on or after January 1, 2013, data 

submission must begin with the first full 

quarter following the submission of a 

completed online participation form. 

We are proposing that hospitals must 

submit all required data according to the 

data submission schedule that is made 

available on the QualityNet Web site 

(https://www.QualityNet.org). This Web 

site meets or exceeds all current HIPAA 

requirements. Submission deadlines 

would be, in general, approximately 4 

months after the last day of each 

calendar quarter. Thus, for example, the 

proposed submission deadline for data 

for services furnished during the first 

quarter of CY 2012 (January–March, 

2012) would be on or around August 1, 

2012. The actual submission deadlines 

would be posted on the http:// 

www.QualityNet.org Web site. 

We are proposing that hospitals 

submit chart-abstracted data to the 

OPPS Clinical Warehouse using either 

the CMS Abstraction and Reporting 

Tool for Outpatient Department (CART– 

OPD) measures or the tool of a thirdparty vendor that meets the measure 

specification requirements for data 

transmission to QualityNet. 

We are proposing that hospitals must 

collect Hospital OQR data from 

outpatient hospital encounters to which 

the required measures apply. In 

previous rulemakings, we have utilized 

various terms for describing the unit of 

care for outpatient hospital reporting, 

including encounter, episode, episode 

of care, and discharge. We note that for 

outpatient hospital services, the term 

encounter is explicitly used and defined 

in the Medicare Benefit Policy Manual 

(Pub. 100–02), Chapter 6, Section 20.3, 

which states ‘‘A hospital outpatient 

‘encounter’ is a direct personal contact 

between a patient and a physician, or 

other person who is authorized by State 

licensure law and, if applicable, by 

hospital or CAH staff bylaws, to order or 

furnish hospital services for diagnosis or 

treatment of the patient.’’ For Medicare 

outpatient services, the terms episode 

and episode of care also are used. When 

discussing inpatient services, the 

Medicare Benefit Policy Manual 

specifically refers to discharges; the 

term encounter is not used in reference 

to inpatient services. Thus, for Hospital 

OQR, we are examining encounters, 

episodes, or episodes of care and would 

use these terms in connection with the 

Hospital OQR Program. 

We will make every effort to ensure 

that data elements common to both 

inpatient and outpatient settings are 

defined consistently for purposes of 

quality reporting (such as ‘‘time of 

arrival’’). 

We are proposing that hospitals must 

submit quality data using the CCN 

under which the care was furnished. 

To be accepted into the OPPS Clinical 

Warehouse and to meet data submission 

requirements, data submissions, at a 

minimum, must be timely, complete, 

and accurate. Data submissions are 

considered to be ‘‘timely’’ when data are 

successfully accepted into the OPPS 

Clinical Warehouse on or before the 

reporting deadline. A ‘‘complete’’ 

submission would be determined based 

on whether the data satisfy the sampling 

criteria that are published and 

maintained in the Hospital OQR 

Specifications Manual, and must 

correspond to both the aggregate 

number of encounters submitted by a 

hospital and the number of Medicare 

claims the hospital submits for 

payment; requirements for utilizing the 

option of sampling are discussed below. 

We strongly recommend that 

hospitals review OPPS Clinical 

Warehouse feedback reports and the 

Hospital OQR Provider Participation 

Reports that are accessible through their 

QualityNet accounts. These reports 

enable hospitals to verify whether the 

data they or their vendors submitted 

were accepted into the OPPS Clinical 

Warehouse and the date/time that such 

acceptance occurred. We also note that 

irrespective of whether a hospital 

submits data to the OPPS Clinical 

Warehouse itself or uses a vendor to 

complete the submissions, the hospital 

is responsible for ensuring that Hospital 

OQR requirements are met. 

b. Eligibility To Voluntarily Sample and 

Proposed Data Submission Exception 

for Low Patient Volume for CY 2013 and 

Subsequent Years 

If a hospital has a sufficiently large 

number of eligible encounters with 

respect to a measure, the hospital has 

the option to sample those encounters 

and submit data only for these sampled 

encounters, rather than submitting data 

on all of the eligible encounters. This 

sampling scheme, which includes the 

minimum number of encounters that a 

hospital must have in order to sample, 

is set out in the Hospital OQR 

Specifications Manual at least 3 months 

in advance of each data submission 

deadline. We note that sampling is not 

required and hospitals may submit more 

cases than the minimum set by our 

sampling scheme and may submit up to 

all of their cases if they desire to do so. 

We changed the notification timeframe 

for this sampling scheme to at least 3 

months from at least 4 months to be 

consistent with the Hospital OQR 

Specifications Manual release schedule. 

If a hospital chooses to sample for a 

particular quarter, the hospital must 

meet the sampling requirements for the 

required chart-abstracted measures that 

quarter. 

In addition, to reduce the burden on 

hospitals that treat a low number of 

patients but otherwise meet the 

submission requirements for a particular 

quality measure, we are proposing to 

continue our policy that hospitals that 

have five or fewer encounters (both 

Medicare and non-Medicare) for any 

measure included in a measure topic in 

a quarter would not be required to 

submit patient level data for the entire 

measure topic for that quarter. Even if 

hospitals would not be required to 

submit patient level data because they 

have five or fewer encounters (both 

Medicare and non-Medicare) for any 

measure included in a measure topic in 

a quarter, we note that they may 

voluntarily do so. 

c. Proposed Population and Sampling 

Data Requirements Beginning With the 

CY 2013 Payment Determination and for 

Subsequent Years 

During the past three years of the 

Hospital OQR Program, the submission 

of population and sampling data was 

not required, though hospitals could 

submit, on a voluntary basis, the 

aggregate numbers of outpatient 

encounters which are eligible for 

submission under the Hospital OQR 

Program and sample size counts. These 

aggregated numbers of outpatient 

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encounters represent the number of 

outpatient encounters in the universe of 

all possible cases eligible for data 

reporting under the Hospital OQR 

Program. For the CY 2012 payment 

update, we proposed, but did not adopt, 

a policy to require submission of this 

population and sample size data. 

We are now proposing that beginning 

with the CY 2013 payment 

determination, hospitals must submit on 

a quarterly basis, aggregate population 

and sample size counts for Medicare 

and non-Medicare encounters for the 

measure populations for which chartabstracted data must be submitted. 

Under this proposal, a hospital would 

submit on a quarterly basis an aggregate 

population and sample size count with 

respect to each measure regardless of 

whether any patients met the inclusion 

criteria for the measure population. For 

example, if a hospital did not treat any 

patients who met the inclusion criteria 

for a specific measure, the hospital 

would still be required to submit a zero 

for its quarterly aggregate population 

and sample count to meet the 

requirement. 

Our analysis of third quarter CY 2010 

outpatient hospital submitted data 

shows that for hospitals that submitted 

abstracted data for encounters, at least 

99 percent of these providers 

voluntarily reported both population 

and sampling data. Data completeness 

was also assessed by comparing 

reported Medicare cases to submitted 

claim counts, minimum encounter 

count thresholds based on reported 

population sizes, and minimum sample 

size thresholds based on reported 

population sizes. We found that less 

than 10 percent of hospitals differed 

significantly in their Medicare selfreported encounters versus Medicare 

claim counts in the Clinical Warehouse, 

and less than 20 percent did not meet 

case count or sample size minimum 

thresholds. Based upon this analysis, we 

believe that hospitals have had 

sufficient time to become familiar with 

Hospital OQR data reporting and have 

developed data systems necessary to 

support this proposed requirement; in 

fact recent data suggest that the vast 

majority of hospitals have done so. 

We are proposing that the deadlines 

for the reporting of aggregate numbers of 

outpatient hospital encounters and 

sample size counts would be the same 

as those for reporting data for chart– 

abstracted measures, and these 

deadlines would be posted on the data 

submission schedule that would be 

available on the QualityNet Web site. 

Hospitals would be permitted to submit 

this information prior to the deadline; 

this would allow us to advise hospitals 

regarding their incomplete submission 

status as appropriate and give hospitals 

sufficient time to make appropriate 

revisions before the data submission 

deadline. 

We plan to use the aggregate 

population and sample size data to 

assess data submission completeness to 

the OPPS Clinical Warehouse and 

adherence to sampling requirements for 

Medicare and non-Medicare patients. 

d. Proposed Claims-Based Measure Data 

Requirements for the CY 2013 and CY 

2014 Payment Determinations 

For the claims-based measures, we are 

proposing to calculate the measures 

using the hospital’s Medicare claims 

data as specified in the Hospital OQR 

Specifications Manual; no additional 

data submission is required for 

hospitals. For the CY 2013 and CY 2014 

payment updates, we would utilize paid 

Medicare FFS claims for services 

furnished from January 1, 2010 to 

December 31, 2010 and January 1, 2011 

to December 31, 2011, respectively. 

e. Proposed Structural Measure Data 

Requirements for the CY 2013 and CY 

2014 Payment Determinations 

For the CY 2013 payment 

determination, we are proposing that 

hospitals would be required to submit 

data on the structural measures, 

including OP–17: Tracking Clinical 

Results between Visits, between July 1, 

2012 and August 15, 2012 with respect 

to the time period of January 1, 2011 to 

December 31, 2011. 

As discussed above, we are proposing 

to adopt two new structural measures 

for the CY 2014 payment determination, 

OP–31: Safe Surgery Checklist Use, and 

OP–32: Hospital Outpatient Department 

Volume for Selected Outpatient Surgical 

Procedures. We are proposing that for 

the CY 2014 payment determination, 

hospitals would be required to submit 

data on all structural measures between 

July 1, 2013 and August 15, 2013 with 

respect to the time period from January 

1, 2012 to December 31, 2012. 

f. Proposed Data Submission Deadlines 

for the Proposed NHSN HAI Surgical 

Site Infection Measure for the CY 2014 

Payment Determination 

As discussed above, we are proposing 

to adopt a new HAI measure for the CY 

2014 payment determination: surgical 

site infection. We are proposing to use 

the data submission and reporting 

standard procedures that have been set 

forth by CDC for NHSN participation in 

general and for submission of this 

measure to NHSN. We refer readers to 

the CDC’s NHSN Web site (http:// 

www.cdc.gov/nhsn) for detailed data 

submission and reporting procedures. 

We believe that these procedures are 

feasible because they are already widely 

used by over 4,000 hospitals reporting 

HAI data to the NHSN. Our proposal 

seeks to reduce hospital burden by 

aligning CMS data submission and 

reporting procedures with NHSN 

procedures currently used by hospitals, 

including hospitals complying with 28 

State HAI reporting requirements. The 

submission timeframes for the CY 2014 

payment determination that we are 

proposing to use for the proposed HAI 

measure are shown below. Hospitals 

would be required to submit their 

quarterly data to the NHSN for Hospital 

OQR purposes according to the 

schedule shown in the table below (any 

updates to this schedule made by CMS 

will be posted on the QualityNet Web 

site). 

PROPOSED SUBMISSION TIMEFRAME FOR THE PROPOSED SURGICAL SITE INFECTION MEASURE FOR THE CY 2014 

PAYMENT DETERMINATION

CY 2013 Infection events CDC–NHSN collection and quarterly report 

Final submission 

deadline for hospital 

OQR program CY 

2014 payment determination 

Q1 (Jan 1 to Mar 31, 2013) .................................................. January 31st to August 1st .................................................. August 1, 2013. 

Q2 (Apr 1 to Jun 30, 2013) ................................................... April 30th to November 1st .................................................. November 1, 2013. 

Hospitals would have until the 

Hospital OQR final submission deadline 

to submit their quarterly data to NHSN. 

After the final Hospital OQR Program 

submission deadline has occurred for 

each CY 2013 quarter to be used toward 

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40Ruan, Da, Chen, Guoguing, Kerre, Etienne E., 

and Wets, Geert, (2010), Intelligent Data Mining: 

Techniques and Applications, Studies in 

Computational Intelligence, Vol. 5, Page 318. 

the CY 2014 payment determination, we 

will obtain the hospital-specific 

calculations generated by the NHSN for 

the Hospital OQR Program. 

g. Proposed Data Submission 

Requirements for OP–22, ED–Patient 

Left Without Being Seen, for the CY 

2013 and CY 2014 Payment 

Determinations 

With respect to OP–22: ED–Patient 

Left Without Being Seen, we are 

proposing that hospitals would be 

required to submit data once for each of 

the CY 2013 and CY 2014 payment 

determinations via a Web-based tool 

located on the QualityNet Web site. For 

the CY 2013 payment determination, 

hospitals would be required to submit 

data between July 1, 2012 and August 

15, 2012 with respect to the time period 

from January 1, 2011 to December 31, 

2011. For the CY 2014 payment 

determination, hospitals would be 

required to submit data between July 1, 

2013 and August 15, 2013 with respect 

to the time period of January 1, 2012 to 

December 31, 2012. 

We invite public comment on these 

proposals for data collection and 

submission requirements. 

3. Hospital OQR Program Validation 

Requirements for Chart-Abstracted 

Measure Data Submitted Directly to 

CMS: Proposed Data Validation 

Approach for the CY 2013 Payment 

Determination 

a. Randomly Selected Hospitals 

Similar to our approach for the CY 

2012 payment determination(75 FR 

72103 through 72106), we are proposing 

to validate chart-abstracted data 

submitted directly to CMS from 

randomly selected hospitals for the CY 

2013 payment determination. To reduce 

hospital burden and to facilitate our 

efforts to reallocate resources in the 

event that we finalize the targeting 

proposal discussed below, for the CY 

2013 payment determination, we are 

proposing to reduce the number of 

randomly selected hospitals from 800 to 

450. We have found that hospitals are 

consistently reporting high accuracy 

rates for chart-abstracted measures and 

that variation among hospitals is 

relatively low. We believe that this low 

level of variation between hospitals will 

allow us to reduce the sample size while 

not diminishing our ability to make 

statistical inferences from the sample. 

Thus, we believe that we can safely 

reduce sample size and still have 

sufficient case numbers for purposes of 

validation. Because these 450 hospitals 

will be selected randomly, every 

Hospital OQR Program participating 

hospital will be eligible each year for 

validation selection. To be eligible for 

random selection for validation, a 

hospital must be coded as open in the 

OSCAR system at the time of selection 

and must have submitted at least 10 

encounters to the OPPS Clinical 

Warehouse during the data collection 

period for the CY 2013 payment 

determination. We are proposing this 10 

encounter minimum so that we have a 

sufficient sample size for calculating a 

statistically valid validation score. 

b. Proposed Use of Targeting Criteria for 

Data Validation Selection for CY 2013 

(1) Background 

In the CY 2011 OPPS/ASC proposed 

rule (75 FR 46381), we stated that we 

were considering building upon what 

we proposed as a validation approach 

for the Hospital OQR Program. We 

noted that we were considering, in 

addition to selecting a random sample 

of hospitals for validation purposes, 

selecting targeted hospitals based on 

criteria designed to measure whether 

the data these hospitals have reported 

raises a concern regarding data 

accuracy. Because hospitals had gained 

little experience with validation under 

the Hospital OQR at that time, we noted 

that we were considering this approach 

for possible use beginning with the CY 

2013 payment determination. Examples 

of targeting criteria suggested for 

inclusion: 

• Abnormal data patterns identified 

such as consistently high Hospital OQR 

measure denominator exclusion rates 

resulting in unexpectedly low 

denominator counts; 

• Whether a hospital had previously 

failed validation; 

• Whether a hospital had not been 

previously selected for validation for 2 

or more consecutive years; 

• Whether a hospital had low 

submitted case numbers relative to 

population sizes; or 

• Whether a hospital had any extreme 

outlier values for submitted data 

elements. 

We invited comment on whether, in 

addition to random sampling for 

validation, we should use targeted 

validation and, if so, what criteria for 

targeting we should adopt. 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72106) we 

responded to the comments we received 

and noted that for the CY 2013 payment 

determination, Hospital OQR Program 

data reporting will have been completed 

for four payment determinations: CYs 

2009, 2010, 2011, and 2012. Further, 

hospitals will have had the opportunity 

to learn from the validation process. We 

also stated that we intended to propose 

to implement validation targeting 

criteria for CY 2013 and subsequent 

years in the CY 2012 OPPS/ASC 

proposed rule. 

(2) Proposed Targeting Criteria for Data 

Validation Selection for CY 2013 

In addition to proposing to randomly 

select 450 hospitals for validation, we 

are proposing to select up to an 

additional 50 hospitals based upon 

targeting criteria. A hospital could be 

selected for validation based on 

targeting criteria if it: 

• Fails the validation requirement 

that applies to the CY 2012 payment 

determination; or 

• Has an outlier value for a measure 

based on the data it submits. We are 

proposing to define an ‘‘outlier value’’ 

for purposes of this targeting as a 

measure value that appears to deviate 

markedly from the measure values for 

other hospitals. For a normally 

distributed variable, nearly all values of 

the variable lie within 3 standard 

deviations of the mean; very few values 

lie past the 3 standard deviation mark. 

One definition of an outlier is a value 

that exceeds this threshold.40 In order to 

target very extreme values, we are 

proposing to target hospitals that greatly 

exceed this threshold; such extreme 

values strongly suggest that data 

submitted is inaccurate. Specifically, we 

are proposing to select hospitals for 

validation if their measure value for a 

measure is greater than 5 standard 

deviations from the mean, placing the 

expected occurrence of such a value 

outside of this range at 1 in 1,744,278. 

If more than 50 hospitals meet either of 

the above targeting criteria, then up to 

50 would be selected randomly from 

this pool of hospitals. 

c. Encounter Selection 

For each selected hospital (random or 

targeted), we are proposing to validate 

up to 48 randomly selected patient 

encounters (12 per quarter; 48 per year) 

from the total number of encounters that 

the hospital successfully submitted to 

the OPPS Clinical Warehouse. If a 

selected hospital has submitted less 

than 12 encounters in one or more 

quarters, only those encounters 

available would be validated. For each 

selected encounter, a designated CMS 

contractor would request that the 

hospital submit the supporting medical 

record documentation that corresponds 

to the encounter. 

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We continue to believe that validating 

a larger number of encounters per 

hospital for fewer hospitals at the 

measure level has several benefits. We 

believe that this approach is suitable for 

the Hospital OQR Program because it 

will: 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 

measured hospital as well as at a 

national level; and reduce overall 

burden, for example in submitting 

validation documentation, because 

hospitals most likely will not be 

selected to undergo validation each 

year, and a smaller number hospitals 

per year will be selected. 

For all selected hospitals, we will not 

be selecting cases stratified by measure 

or topic; our interest is whether the data 

submitted by hospitals accurately 

reflects the care delivered and 

documented in the medical record, not 

what the accuracy is by measure or 

whether there are differences by 

measure or topic. We are proposing to 

validate data for April 1, 2011 to March 

31, 2012 encounters as this provides a 

full year of the most recent data possible 

to use for purposes of completing the 

validation in time to make the CY 2013 

payment determinations. 

d. Validation Score Calculation 

For the CY 2013 payment 

determination, we are proposing to use 

the validation calculation approach 

finalized for the CY 2012 payment 

determination with validation being 

done for each selected hospital. 

Specifically, we are proposing to 

conduct a measures level validation by 

calculating each measure within a 

submitted record using the 

independently abstracted data and then 

comparing this to the measure reported 

by the hospital; a percent agreement 

would then be calculated. We would 

also compare the measure category for 

quality measures with continuous units 

of measurement, such as time, so that 

for these measures, both the category 

and the measure would need to match. 

To receive the full OPPS OPD fee 

schedule increase factor for CY 2013, we 

are proposing that hospitals must attain 

at least a 75 percent reliability score, 

based upon the proposed validation 

process. We are proposing to use the 

upper bound of a two-tailed 95 percent 

confidence interval to estimate the 

validation score. If the calculated upper 

limit is above the required 75 percent 

reliability threshold, we would consider 

a hospital’s data to be ‘‘validated’’ for 

payment purposes. Because we are more 

interested in whether the measure has 

been accurately reported, we would 

continue to focus on whether the 

measure data reported by the hospital 

matches the data documented in the 

medical record as determined by our 

reabstraction. We are proposing to 

calculate the validation score using the 

same methodology we finalized for the 

CY 2012 payment determination (75 FR 

72105). We also are proposing to utilize 

the same medical record documentation 

submission procedures that we also 

finalized for the CY 2012 payment 

determination (75 FR 72104) with one 

modification; we are proposing to 

shorten the time period given to 

hospitals to submit medical record 

documentation to the CMS contractor 

from 45 calendar days to 30 calendar 

days. This proposed change in 

submission timeframe will align the 

process with requirements in 42 CFR 

476.78(b)(2), which allow 30 days for 

chart submission in the context of QIO 

review. We are proposing this deadline 

of 30 days also to reduce the time for 

data validation completion to increase 

timeliness of providing hospitals with 

feedback on their abstraction accuracy. 

4. Additional Data Validation 

Conditions Under Consideration for CY 

2014 and Subsequent Years 

We continue to consider building 

upon our validation approach of 

targeting hospitals to address data 

quality concerns and to ensure that our 

payment decisions are made using 

accurate data. Thus, we are requesting 

public comment on the following 

additional targeting criteria to select 

hospitals for validation: 

• Whether a hospital that was open 

under its current CCN and had not been 

selected for validation in the previous 3 

years. This is consistent with validation 

targeting criteria we recently proposed 

to implement for the CY 2015 Hospital 

IQR Program (76 FR 25920 through 

25921). 

• Whether a hospital had submitted a 

low number of encounters relative to 

population sizes; or 

• Whether a hospital reported 

significant numbers of ‘‘Unable to 

Determine’’ data elements. 

We welcome public comment on 

these proposals, and are specifically 

interested in receiving public comments 

on definitions of what low numbers 

relative to population sizes and what 

would constitute significant numbers of 

‘‘Unable to Determine’’ data elements. 

H. Proposed Hospital OQR 

Reconsideration and Appeals 

Procedures for CY 2013 and Subsequent 

Years 

When the Hospital IQR Program was 

initially implemented, it did not include 

a reconsideration process for hospitals. 

Subsequently, we received many 

requests for reconsideration of those 

payment decisions and, as a result, 

established a process by which 

participating hospitals would submit 

requests for reconsideration. We 

anticipated similar concerns with the 

Hospital OQR Program and, therefore, in 

the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66875), we 

stated our intent to implement for the 

Hospital OQR Program a 

reconsideration process modeled after 

the reconsideration process we 

implemented for the Hospital IQR 

Program. In the CY 2009 OPPS/ASC 

final rule with comment period (73 FR 

68779), we adopted a reconsideration 

process that applied to the CY 2010 

payment decisions. In the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60654 through 60655), we 

continued this process for the CY 2011 

payment update. In the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 72106 through 72108), we continued 

this process for the CY 2012 payment 

update with some modification. 

We are proposing to continue this 

process for the CY 2013 payment 

determination and subsequent years. 

Under this proposed process, a hospital 

seeking reconsideration must— 

• Submit to CMS, via QualityNet, a 

Reconsideration Request form that will 

be made available on the QualityNet 

Web site; this form must be submitted 

by February 3 of the affected payment 

year (for example, for the CY 2013 

payment determination, the request 

must be submitted by February 3, 2013) 

and must contain the following 

information: 

oo Hospital CCN. 

oo Hospital Name. 

oo 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. 

oo Hospital basis for requesting 

reconsideration. This must identify the 

hospital’s specific reason(s) for 

believing it met the affected year’s 

Hospital OQR Program requirements 

and should receive the full OPD fee 

schedule increase factor. 

oo CEO and any additional designated 

hospital personnel contact information, 

including name, e-mail address, 

telephone number, and mailing address 

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(must include physical address, not just 

a post office box). 

oo A copy of all materials that the 

hospital submitted to comply with the 

requirements of the affected year’s 

Hospital OQR Program. Such material 

might include, but may not be limited 

to, the applicable Notice of Participation 

form or completed online registration 

form, and measure data that the hospital 

submitted via QualityNet. 

• Paper copies of all the medical 

record documentation that it submitted 

for the initial validation (if applicable). 

We are proposing that hospitals would 

submit this documentation to a 

designated CMS contractor which 

would have authority to review patient 

level information. We would post the 

address where hospitals are to send this 

documentation on the QualityNet Web 

site. 

• To the extent that the hospital is 

requesting reconsideration on the basis 

that CMS has determined it did not 

meet an affected year’s validation 

requirement, the hospital must provide 

a written justification for each appealed 

data element classified during the 

validation process as a mismatch. Only 

data elements that affect a hospital’s 

validation score would be eligible to be 

reconsidered. We would review the data 

elements that were labeled as 

mismatched as well as the written 

justifications provided by the hospital, 

and make a decision on the 

reconsideration request. 

We note that, consistent with our 

policy for CY 2012 reconsiderations, 

reconsideration request forms would not 

need to be signed by the hospital’s CEO. 

Following receipt of a request for 

reconsideration, CMS would— 

• Provide an e-mail 

acknowledgement, using the contact 

information provided in the 

reconsideration request, to the CEO and 

any additional designated hospital 

personnel notifying them that the 

hospital’s request has been received. 

• Provide a formal response to the 

hospital CEO and any additional 

designated hospital personnel, using the 

contact information provided in the 

reconsideration request, notifying the 

hospital of the outcome of the 

reconsideration process. 

We intend to complete any 

reconsideration reviews and 

communicate the results of these 

determinations within 90 days 

following the deadline for submitting 

requests for reconsideration. 

We also propose to apply the same 

policies that we finalized for the CY 

2012 payment determination regarding 

the scope of our review when a hospital 

requests reconsideration because it 

failed our validation requirement. These 

policies are as follows: 

• If a hospital requests 

reconsideration on the basis that it 

disagrees with a determination that one 

or more data elements were classified as 

mismatches, we would only consider 

the hospital’s request if the hospital 

timely submitted all requested medical 

record documentation to the CMS 

contractor each quarter under the 

validation process. 

• If a hospital requests 

reconsideration on the basis that it 

disagrees with a determination that one 

or more medical records it submitted 

during the quarterly validation process 

was classified as an invalid record 

selection (that is, the CMS contractor 

determined that one or more medical 

records submitted by the hospital did 

not match what was requested, thus 

resulting in a zero validation score for 

the encounter(s)), our review would 

initially be limited to determining 

whether the medical documentation 

submitted in response to the designated 

CMS contractor’s request was the 

correct documentation. If we determine 

that the hospital did submit the correct 

medical documentation, we would 

abstract the data elements and compute 

a new validation score for the 

encounter. If we conclude that the 

hospital did not submit the correct 

medical record documentation, we 

would not further consider the 

hospital’s request. 

• If a hospital requests 

reconsideration on the basis that it 

disagrees with a determination that it 

did not submit the requested medical 

record documentation to the CMS 

contractor within the proposed 30 

calendar day timeframe, our review 

would initially be limited to 

determining whether the CMS 

contractor received the requested 

medical record documentation within 

30 calendar days, and whether the 

hospital received the initial medical 

record request and reminder notice. If 

we determine that the CMS contractor 

timely received paper copies of the 

requested medical record 

documentation, we would abstract data 

elements from the medical record 

documentation submitted by the 

hospital and compute a validation score 

for the hospital. If we determine that the 

hospital received two letters requesting 

medical documentation but did not 

submit the requested documentation 

within the 30 calendar day period, we 

would not further consider the 

hospital’s request. 

If a hospital is dissatisfied with the 

result of a Hospital OQR reconsideration 

decision, the hospital would be able to 

file an appeal under 42 CFR Part 405, 

Subpart R (PRRB appeal). 

We invite public comment on our 

proposed CY 2013 Hospital OQR 

Program reconsideration and appeals 

procedures. 

I. Electronic Health Records (EHRs) 

Starting with the FY 2006 IPPS final 

rule, we have encouraged hospitals to 

take steps toward the adoption of EHRs 

(also referred to in previous rulemaking 

documents as electronic medical 

records) that will allow for reporting of 

clinical quality data from EHRs to a 

CMS data repository (70 FR 47420 

through 47421). We sought to prepare 

for future EHR submission of quality 

measures by sponsoring the creation of 

electronic specifications for quality 

measures under consideration for the 

Hospital IQR Program. Through the EHR 

Incentive Programs we expect that the 

submission of quality data through 

EHRs will provide a foundation for 

establishing the capacity of hospitals to 

send, and for CMS, in the future, to 

receive, quality measures via hospital 

EHRs for Hospital IQR Program 

measures. We expect the Hospital IQR 

and Hospital OQR Programs to 

transition to the use of certified EHR 

technology, for measures that otherwise 

require information from the clinical 

record. This would allow us to collect 

data for measures without the need for 

manual chart abstraction. In the FY 

2012 IPPS/LTCH PPS proposed rule (75 

FR 25894), we identified FY 2015 as a 

potential transition date to move to 

EHR-based submission and phase out 

manual chart abstraction. We also 

anticipate such a transition for hospital 

outpatient measures, although likely 

somewhat after the transition for 

hospital inpatient measures. This is a 

result of the fact that the clinical quality 

measures in the EHR Incentive Program 

currently are primarily aligned with the 

Hospital IQR Program, rather than the 

Hospital OQR Program. Our goals are to 

align the hospital quality reporting 

programs, to seek to avoid redundant 

and duplicative reporting of quality 

measures for hospitals, and to rely 

largely on EHR submission for measures 

based on clinical record data. 

J. 2012 Medicare EHR Incentive Program 

Electronic Reporting Pilot for Eligible 

Hospitals and CAHs 

1. Background 

Under section 4102(a) of the 

American Recovery and Reinvestment 

Act of 2009 (ARRA) (Pub. L. 111–5), 

eligible hospitals and CAHs may qualify 

for incentive payments if they 

successfully demonstrate meaningful 

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use of certified EHR technology. The 

final rule for the Medicare EHR 

Incentive Program (75 FR 44314) 

established the Stage 1 criteria for 

meaningful use, which include, among 

other requirements, that eligible 

hospitals and CAHs report clinical 

quality measures (CQMs) to CMS, in 

addition to meeting other objectives and 

measures described in the final rule. 

The final rule also requires that for the 

2012 payment year and subsequent 

years, an eligible hospital or CAH using 

certified EHR technology must submit 

information on the specified clinical 

quality measures electronically. 

However, for the 2011 payment year, 

eligible hospitals and CAHs are required 

to submit CQM results as calculated by 

certified EHR technology through 

attestation, rather than submit the 

information electronically. In the final 

rule (75 FR 44380), we also stated that 

we anticipated that we would have 

completed the necessary steps to have 

the capacity to receive information on 

CQMs electronically for the 2012 

payment year. However, we also 

acknowledged that if we do not have the 

capacity to accept electronic reporting 

of CQMs in 2012, consistent with 

sections 1848(o)(2)(B)(ii) and 

1886(n)(3)(B)(ii) of the Act, we would 

continue to rely on attestation for 

reporting CQMs as a requirement for 

demonstrating meaningful use of 

certified EHR technology for the 2012 

payment year. 

We also stated in the final rule that, 

with respect to electronic submission of 

information on clinical quality 

measures, certified EHR technology will 

be required to transmit calculated 

clinical quality measure results under 

the PQRI 2009 Registry XML 

specification. We noted that this was the 

only such standard that the certified 

EHR technology would be able to 

support based on the standards that 

have been adopted for certified EHR 

technology (75 FR 44435; see also 45 

CFR 170.205(f)). 

Since the publication of the final rule, 

we have determined that it is not 

feasible to receive electronically the 

information necessary for clinical 

quality measure reporting based solely 

on the use of PQRI 2009 Registry XML 

Specification content exchange standard 

as is required for certified EHR 

technology. This is because the 

specification is tailored to the elements 

required for 2009 PQRI Registry XML 

submission, rather than constituting a 

more generic standard. As a result, we 

are proposing to modify the requirement 

that clinical quality measure reporting 

must be done electronically. 

Specifically, we are proposing that for 

the 2012 payment year and subsequent 

years, eligible hospitals and CAHs may 

continue to report clinical quality 

measure results as calculated by 

certified EHR technology by attestation, 

as for the 2011 payment year. 

Alternatively, for the 2012 payment 

year, eligible hospitals and CAHs would 

be able to participate in the proposed 

FY 2012 Medicare EHR Incentive 

Program Electronic Reporting Pilot for 

Eligible Hospitals and CAHs (Electronic 

Reporting Pilot) which is further 

described below. We are proposing to 

revise our regulations at § 495.8(b)(2)(ii) 

and proposing to add § 495.8(b)(2)(vi) 

that would reflect these proposals for 

reporting CQMs through attestation and 

the Electronic Reporting Pilot. 

2. Proposed Electronic Reporting Pilot 

Section 1886(n)(3)(B)(ii) of the Act 

provides authority for the Secretary to 

accept information on CQMs 

electronically on a pilot basis. For 

payment year 2012, we are proposing 

that eligible hospitals and CAHs 

participating in the Medicare EHR 

Incentive Program may meet the CQM 

reporting requirement of the EHR 

Incentive Program for payment year 

2012 by participating in the proposed 

Electronic Reporting Pilot. We are 

proposing that participation in this 

Electronic Reporting Pilot would be 

voluntary and that eligible hospitals and 

CAHs may continue to attest to the 

results of CQMs calculated by certified 

EHR technology as they did for the 2011 

payment year. 

We would encourage participation in 

the proposed Electronic Reporting Pilot 

in view of our desire to adequately pilot 

electronic submission of CQMs and to 

move to a system of reporting where 

eligible hospitals and CAHs can qualify 

for CQM reporting for both the Hospital 

IQR and Hospital OQR Programs, and 

the EHR Incentive Program. We strongly 

encourage eligible hospitals and CAHs 

to participate in the proposed Electronic 

Reporting Pilot as it provides 

opportunities to test the interoperability 

and functionality of the certified EHR 

technology that they have implemented. 

We believe that the participation of 

eligible hospitals and CAHs in the 

proposed Electronic Reporting Pilot 

would help advance EHR-based 

reporting in the Hospital IQR and 

Hospital OQR Programs. 

Eligible hospitals and CAHs would 

need to be registered in order to 

participate in the proposed Electronic 

Reporting Pilot. Eligible hospitals and 

CAHs wishing to participate in the 

proposed Electronic Reporting Pilot for 

the CQMs would register by indicating 

their desire and intent to participate in 

the proposed Electronic Reporting Pilot 

as part of the attestation process for the 

Medicare EHR Incentive Program. We 

are proposing that eligible hospitals and 

CAHs that participate in the proposed 

Electronic Reporting Pilot and meet its 

submission requirements would satisfy 

the requirements for reporting clinical 

quality measures under the Medicare 

EHR Incentive Program. Such eligible 

hospitals and CAHs would therefore not 

need to attest to the results of clinical 

quality measures calculated by certified 

EHR technology. As described below, 

for the purpose of the proposed 

Electronic Reporting Pilot, CMS would 

calculate the results of the clinical 

quality measures for eligible hospitals 

and CAHs based on patient level data 

submitted for Medicare patients. The 

proposed Electronic Reporting Pilot 

would require eligible hospitals and 

CAHs to submit information on the 

same 15 CQMs that were listed in Table 

10 of the final rule (75 FR 44418 

through 44420) for the Medicare and 

Medicaid EHR Incentive Programs and 

such information would be obtained 

from the certified EHR technology used 

by the eligible hospital or CAH. 

We are proposing that electronic 

submission of the 15 CQMs through this 

proposed Electronic Reporting Pilot 

would be sufficient to meet the core 

objective for reporting CQMs for the 

Medicare EHR Incentive Program for the 

2012 payment year. Since the reporting 

of CQMs is only one of the 14 core 

meaningful use objectives for eligible 

hospitals and CAHs for the Medicare 

EHR Incentive Program, an eligible 

hospital or CAH that chooses to 

participate in the proposed Electronic 

Reporting Pilot would still be required 

to meet and attest to the other core and 

menu set objectives and their associated 

measures using the attestation module 

for the program on the CMS Web site. 

After the eligible hospital or CAH had 

attested and CMS has received 

electronic submission of the CQMs from 

an eligible hospital or CAH participating 

in the proposed Electronic Reporting 

Pilot, CMS would determine whether 

the eligible hospital or CAH has 

successfully met all the requirements for 

the Medicare EHR Incentive Program. 

We expect this determination would be 

made within 2 months after the end of 

the payment year and not later than 

November 30, 2013. Eligible hospitals 

and CAHs who do not meet the 

reporting requirements through the 

Electronic Reporting Pilot may meet 

such requirement through attestation. 

We are proposing that eligible hospitals 

and CAHs, alternatively, may attest, but 

still participate in the proposed 

Electronic Reporting Pilot. 

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3. CQM Reporting Under the Proposed 

Electronic Reporting Pilot 

Under § 495.6(f)(9), we require 

Medicare eligible hospitals and CAHs 

(which would include those 

participating in the proposed Electronic 

Reporting Pilot) to successfully report 

hospital clinical quality measures to 

CMS in the manner specified by CMS. 

We are proposing that eligible hospitals 

and CAHs participating in the proposed 

Electronic Reporting Pilot must submit 

CQM data on all 15 CQMs listed in 

Table 10 of the final rule (75 FR 44418 

through 44420) to CMS, via a secure 

portal based on data obtained from the 

eligible hospital or CAH’s certified EHR 

technology. 

In the final rule for the Medicare and 

Medicaid EHR Incentive Programs, we 

stated that we will require eligible 

hospitals and CAHs to report aggregatelevel CQM data (75 FR 44432). 

However, we note that for the purpose 

of the proposed Electronic Reporting 

Pilot, we are proposing that eligible 

hospitals and CAHs participating in the 

proposed Electronic Reporting Pilot 

would submit patient-level CQM data 

for Medicare patients only. Aside from 

requiring attestation to other objectives/ 

measures based on data for all patients, 

specifically, we are proposing that 

eligible hospitals and CAHs 

participating in the proposed Electronic 

Reporting Pilot would: (1) Submit CQM 

data on Medicare patients only; (2) 

submit Medicare patient-level data from 

which CMS may calculate CQM results 

using a uniform calculation process, 

rather than aggregate results calculated 

by the eligible hospital or CAH’s 

certified EHR technology; (3) submit one 

full Federal fiscal year of CQM data, 

regardless of the eligible hospital or 

CAH’s year of participation in the 

Medicare and Medicaid EHR Incentive 

Programs; and (4) use electronic 

specifications for transmission as 

specified by CMS which we expect 

would be Level 1 QRDA. 

As noted previously, for the proposed 

Electronic Reporting Pilot, CQM data on 

which the eligible hospital or CAH’s 

submission is based must be obtained 

from certified EHR technology. 

However, the functionality of reporting 

these CQMs to CMS will not rely on the 

certification process. Eligible hospitals 

and CAHs participating in the proposed 

Electronic Reporting Pilot would report 

CQMs based on a pilot measurement 

period of one full Federal fiscal year 

(October 1, 2011 through September 30, 

2012), regardless of whether the eligible 

hospital or CAH is in its first year of 

participation in the Medicare and 

Medicaid EHR Incentive Programs. The 

period for submitting information on 

CQMs under the proposed Electronic 

Reporting Pilot would be October 1, 

2012 through November 30, 2012, 

which is the 60 days following the close 

of the measurement period. The CQM 

reporting format would be as specified 

by CMS, which we expect would be 

Quality Data Reporting Architecture 

(QRDA) Level 1. We would offer a test 

period beginning July 1, 2012, which 

would allow eligible hospitals, CAHs, or 

their designee to submit CQM reports to 

CMS with the requirements that would 

be used in the proposed Electronic 

Reporting Pilot. The test period would 

remain open. Additional details 

including educational materials about 

participation in the proposed Electronic 

Reporting Pilot would be provided on 

the QualityNet Web site at http:// 

www.qualitynet.org. 

We invite public comment on the 

proposed Electronic Reporting Pilot 

discussed above. 

K. Proposed ASC Quality Reporting 

Program 

1. Background 

Section 109(b) of the MIEA TRHCA 

amended section 1833(i) of the Act by 

re-designating clause (iv) as clause (v) 

and adding new clause (iv) to paragraph 

(2)(D) and by adding new paragraph (7). 

Section 1833(i)(2)(D)(iv) of the Act 

authorizes, but does not require, the 

Secretary to implement the revised ASC 

payment system ‘‘in a manner so as to 

provide for a reduction in any annual 

update for failure to report on quality 

measures in accordance with paragraph 

(7).’’ Section 1833(i)(7)(A) of the Act 

states that the Secretary may provide 

that any ASC that does not submit 

quality measures to the Secretary in 

accordance with paragraph (7) will 

incur a 2.0 percentage point reduction 

to any annual increase provided under 

the revised ASC payment system for 

such year. It also specifies that a 

reduction for one year cannot be taken 

into account in computing any annual 

increase factor for a subsequent year. 

Section 1833(i)(7)(B) of the Act 

provides that, ‘‘[e]xcept as the Secretary 

may otherwise provide,’’ the hospital 

outpatient quality data provisions of 

subparagraphs (B) through (E) of section 

1833(t)(17) of the Act shall apply to 

ASCs in a similar manner to the manner 

in which they apply under these 

paragraphs to hospitals under the 

Hospital OQR Program and any 

reference to a hospital, outpatient 

setting, or outpatient hospital services is 

deemed a reference to an ASC, the 

setting of an ASC, or services of an ASC, 

respectively. Section 1833(t)(17)(B) of 

the Act requires that hospitals submit 

quality data in a form and manner, and 

at a time, that the Secretary specifies. 

Section 1833(t)(17)(C)(i) of the Act 

requires the Secretary to develop 

measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by hospitals in outpatient settings, that 

these measures reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that these 

measures include measures set forth by 

one or more national consensus 

building entities. Section 

1833(t)(17)(C)(ii) of the Act allows the 

Secretary to select measures that are the 

same as (or a subset of) the measures for 

which data are required to be submitted 

under the Hospital IQR Program. 

Section 1833(t)(17)(D) of the Act gives 

the Secretary the authority to replace 

measures or indicators as appropriate, 

such as where all hospitals are 

effectively in compliance or the 

measures or indicators have been 

subsequently shown not to represent the 

best clinical practice. Section 

1833(t)(17)(E) of the Act requires the 

Secretary to establish procedures for 

making data submitted under the 

Hospital OQR Program available to the 

public. Such procedures include 

providing hospitals with the 

opportunity to review their data before 

these data are released to the public. For 

a more detailed discussion of the 

provisions in § 1833(t)(17) of the Act, 

please see section XIV.A.3.b. of this 

proposed rule. 

In the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66875), the 

CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68780), the CY 

2010 OPPS/ASC final rule with 

comment period (74 FR 60656), and the 

CY 2011 OPPS/ASC final rule with 

comment period (75 FR 72109), we did 

not implement a quality data reporting 

program for ASCs. We determined that 

it would be more appropriate to allow 

ASCs to acquire some experience with 

the revised ASC payment system, which 

was implemented for CY 2008, before 

implementing new requirements, such 

as public reporting of quality measures. 

However, in these rules, we indicated 

that we intended to implement the 

provisions of section 109(b) of the 

MIEA-TRHCA in the future. 

In preparation for proposing an ASC 

quality reporting program, in the CY 

2011 OPPS/ASC proposed rule, we 

solicited public comment on the 

following measures under consideration 

for ASC quality data reporting: (1) 

Patient Fall in the ASC; (2) Patient Burn; 

(3) Hospital Transfer/Admission; (4) 

Wrong Site, Side, Patient, Procedure, 

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Implant; (5) Prophylactic IV Antibiotic 

Timing; (6) Appropriate Surgical Site 

Hair Removal; (7) Surgical Site Infection 

(SSI); (8) Medication Administration 

Variance (MAV); (9) Medication 

Reconciliation; and (10) VTE Measures: 

Outcome/Assessment/Prophylaxis (75 

FR 46383). 

In addition to preparing to propose 

implementation of an ASC quality 

reporting program, the Department 

developed a plan to implement a valuebased purchasing (VBP) program for 

payments under the Medicare program 

under title XVIII of the Act for ASCs as 

required by section 3006(f) of the 

Affordable Care Act, as added by section 

10301(a) of the Affordable Care Act. We 

also have recently submitted a Report to 

Congress, as required by section 

3006(f)(4) of the Affordable Care Act, 

entitled ‘‘Medicare Ambulatory Surgical 

Center Value-Based Purchasing 

Implementation Plan’’ that contains this 

plan. This report is found on our Web 

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

Payment/downloads/C_ASC_

RTC%202011.pdf. Currently, we do not 

have express statutory authority to 

implement an ASC VBP Program. 

Should there be legislation to authorize 

CMS to implement an ASC VBP 

program, we will develop the program 

and propose it through rulemaking. 

In this proposed rule, we are 

proposing to implement the ASC 

Quality Reporting Program beginning 

with the CY 2014 payment 

determination, with data collection 

beginning in CY 2012 for most of the 

measures to be used for the CY 2014 

payment determination. 

2. ASC Quality Reporting Program 

Measure Selection 

a. Proposed Timetable for Selecting ASC 

Quality Measures 

We are proposing to adopt measures 

for three CY payment determinations for 

the ASC Quality Reporting Program in 

this rulemaking. Therefore, in this 

proposed rule, we are proposing to 

adopt measures for the CYs 2014, 2015, 

and 2016 payment determinations. To 

the extent that we finalize some or all 

of the measures for future payment 

determinations, we would not be 

precluded from proposing to adopt 

additional measures or changing the list 

of measures for future payment 

determinations through annual 

rulemaking cycles so that we may 

address changing program needs arising 

from new legislation or from changes in 

HHS and CMS priorities. Under this 

approach, in the CY 2013 or CY 2014 

rulemaking cycle, we could propose any 

additions or revisions to the measures 

we adopted in the CY 2012 rulemaking 

cycle for the CY 2014 payment 

determination or for future payment 

determinations. This is consistent with 

our approach to proposing measures for 

multiple payment determinations for 

the Hospital IQR and Hospital OQR 

Programs. We believe this proposed 

process will assist ASCs in planning, 

meeting future reporting requirements, 

and implementing quality improvement 

efforts. We also would have more time 

to develop, align, and implement the 

infrastructure necessary to collect data 

on the measures and make payment 

determinations. This flexibility would 

enable us to adapt the program to 

support changes in HHS and CMS 

priorities and any new legislative 

requirements. We invite public 

comments on this proposal. 

b. Considerations in the Selection of 

Measures for the ASC Quality Reporting 

Program 

Section 1833(i)(7)(B) of the Act states 

that § 1833(t)(17)(C) of the Act shall 

apply with respect to ASC services in a 

similar manner in which they apply to 

hospitals for the Hospital OQR Program, 

except as the Secretary may otherwise 

provide. The requirements at 

1833(t)(17)(C)(i) of the Act state that 

measures developed shall ‘‘be 

appropriate for the measurement of the 

quality of care (including medication 

errors) furnished by hospitals in 

outpatient settings and that reflect 

consensus among affected parties and, 

to the extent feasible and practicable, 

shall include measures set forth by one 

or more national consensus building 

entities.’’ 

In selecting proposed measures for the 

ASC Quality Reporting Program and 

other quality reporting programs, we 

have focused on measures that have a 

high impact on and support HHS and 

CMS priorities for improved health care 

outcomes, quality, safety, efficiency and 

satisfaction for patients. Our goal for the 

future is to expand any measure set 

adopted for ASC quality reporting to 

address these priorities more fully and 

to align ASC quality measure 

requirements with those of other 

reporting programs as appropriate, 

including the Hospital OQR Program, 

the Hospital IQR Program, the Physician 

Quality Reporting System, and reporting 

requirements implemented under the 

HITECH Act so that the burden for 

reporting will be reduced. In general, we 

prefer to adopt measures that have been 

endorsed by the NQF because it is a 

national multi-stakeholder organization 

with a well-documented and rigorous 

approach to consensus development. 

However, as we have noted in previous 

rulemaking for the Hospital OQR 

Program (75 FR 72065), the requirement 

that measures reflect consensus among 

affected parties can be achieved in other 

ways, including through the measure 

development process, through broad 

acceptance and use of the measure(s), 

and through public comment. 

In developing this and other quality 

reporting programs, as well as the 

Hospital Inpatient VBP Program, we 

applied the following principles for the 

development and use of measures. We 

invite public comment on these 

principles in the ASC quality reporting 

context. 

• Pay-for-reporting, public reporting, 

and value-based purchasing programs 

should rely on a mix of standards, 

process, outcomes, and patient 

experience of care measures, including 

measures of care transitions and 

changes in patient functional status. 

Across all programs, we seek to move as 

quickly as possible to the use of 

primarily outcome and patient 

experience measures. To the extent 

practicable and appropriate, outcome 

and patient experience measures should 

be adjusted for risk or other appropriate 

patient population or provider/supplier 

characteristics. 

• To the extent possible and 

recognizing differences in payment 

system maturity and statutory 

authorities, measures should be aligned 

across public reporting and payment 

systems under Medicare and Medicaid. 

The measure sets should evolve so that 

they include a focused core set of 

measures appropriate to the specific 

provider/supplier category that reflects 

the level of care and the most important 

areas of service and measures for that 

provider/supplier. 

• The collection of information 

should minimize the burden on 

providers/suppliers to the extent 

possible. To this end, we will 

continuously seek to align our measures 

with the adoption of meaningful use 

standards for HIT, so that data can be 

submitted and calculated via certified 

EHR technology with minimal burden. 

• To the extent practicable and 

feasible, and within the scope of our 

statutory authorities for various quality 

reporting and value-based purchasing 

programs, measures used by CMS 

should be endorsed by a national, multistakeholder organization. Measures 

should be aligned with best practices 

among other payers and the needs of the 

end users of the measures. 

We believe that ASC facilities are 

similar, insofar as the delivery of 

surgical and related nonsurgical 

services, to HOPDs. Similar standards 

and guidelines can be applied between 

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42338 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

41ASC Quality Measures: Implementation Guide 

Version 1.4, ASC Quality Collaboration, December 

2010. 

hospital outpatient departments and 

ASCs with respect to surgical care 

improvement, given that many of the 

same surgical procedures are provided 

in both settings. Measure harmonization 

assures that comparable care in different 

settings can be evaluated in similar 

ways, which further assures that quality 

measurement can focus more on the 

needs of a patient with a particular 

condition rather than on the specific 

program or policy attributes of the 

setting in which the care is provided. In 

general, our goal is to adopt harmonized 

measures that assess the quality of care 

given across settings and providers/ 

suppliers and to use the same measure 

specifications based on clinical 

evidence and guidelines for the care 

being assessed regardless of provider/ 

supplier type or setting. This 

harmonization goal is also supported by 

a commenter to the CY 2011 OPPS/ASC 

proposed rule, who recommended CMS 

align ASC quality measures with State 

and other Federal requirements (75 FR 

72109). 

Our CY 2014 measure proposals for 

ASCs align closely with those discussed 

in the Report to Congress entitled 

‘‘Medicare Ambulatory Surgical Center 

Value-Based Purchasing 

Implementation Plan’’ and with those 

proposed for future consideration in the 

CY 2011 OPPS/ASC proposed rule (75 

FR 46383). Furthermore, the measures 

that we are proposing for ASCs fall into 

the parameter of our stated framework 

for the ASC Quality Reporting Program, 

discussed above. The initial measure set 

that we are proposing for the CY 2014 

payment determination addresses 

outcome measures and infection control 

process measures. Six of the eight initial 

measures that we are proposing for the 

CY 2014 payment determination are 

recommended by the ASC Quality 

Collaborative (ASC QC) and are NQFendorsed. The seventh measure that we 

are proposing is appropriate for 

measuring ambulatory surgical care, is 

NQF-endorsed, is currently in use in the 

Physician Quality Reporting System, 

and is similar to a measure that is being 

utilized in the Hospital OQR program, 

and therefore aligns across settings in 

which outpatient surgery is performed. 

We are proposing collecting these seven 

measures via ‘‘quality data codes’’ to be 

placed on Part B claims submitted by 

ASCs for Medicare fee-for-service 

patients beginning January 1, 2012. The 

eighth measure we are proposing for the 

ASC Quality CY 2014 payment 

determination is an outcome measure of 

Surgical Site Infection (SSI) to be 

submitted in 2013 via the CDC’s 

National Healthcare Safety Network 

(NHSN). Similarly, hospital inpatient 

departments will begin reporting this 

measure to the CDC under the Hospital 

IQR Program in 2012, and we are also 

currently proposing in this rule that 

hospital outpatient departments begin 

reporting this measure to the CDC under 

the Hospital OQR Program in 2013. 

Thus, this measure would be aligned 

across quality reporting programs for 

facilities performing surgery. 

3. Proposed ASC Quality Measures for 

the CY 2014 Payment Determination 

a. Proposed Claims-Based Measures 

Requiring Submission of Quality Data 

Codes (QDCs) Beginning January 1, 2012 

We are proposing to adopt seven 

NQF-endorsed claims-based measures, 

six of which were developed by the ASC 

QC. The ASC QC is a cooperative effort 

of organizations and companies formed 

in 2006 with a common interest in 

ensuring that ASC quality data is 

measured and reported in a meaningful 

way. Stakeholders in the ASC QC 

include ASC corporations, ASC 

associations, professional societies and 

accrediting bodies that focus on ASC 

quality and safety. The ASC QC 

initiated a process of standardizing ASC 

quality measure development through 

evaluation of existing nationally 

endorsed quality measures to determine 

which could be directly applied to the 

outpatient surgery facility setting. The 

ASC QC in its ASC Quality Measure 

Implementation Guide version 1.4 states 

that ‘‘it focused on outcomes and 

processes that ASC facilities could 

influence or impact, outcomes that ASC 

facilities would be aware of given their 

limited contact with the patient, and 

outcomes that would be understandable 

and important to key stakeholders in 

ASC care, including patients, providers 

and payers.’’ 

The ASC QC developed and pilottested five facility-level measures 

(Patient Burn; Patient Fall in the ASC; 

Wrong Site, Wrong Side, Wrong Patient, 

Wrong Procedure, Wrong Implant; 

Hospital Transfer/Admission, and 

Prophylactic IV Antibiotic Timing) for 

feasibility and usability. On November 

15, 2007, these five measures were 

endorsed by the NQF. On September 25, 

2008, a sixth ASC QC-developed 

facility-level measure, ‘‘Appropriate 

Surgical Site Hair Removal’’ was NQFendorsed as ‘‘Ambulatory Surgery 

Patients with Appropriate Method of 

Hair Removal.’’ Of the six ASC QC 

measures, the Prophylactic IV Antibiotic 

Timing and Ambulatory Surgery 

Patients with Appropriate Method of 

Hair Removal measures are infection 

control process measures, and the rest 

are outcome measures. All six of these 

measures were listed as under 

consideration in the CY 2011 OPPS/ 

ASC proposed rule (75 FR 46383). We 

are proposing these six measures for use 

in the CY 2014 payment determination. 

The seventh claims-based measure we 

are proposing for the CY 2014 payment 

determination is Selection of 

Prophylactic Antibiotic: First OR 

Second Generation Cephalosporin. This 

measure was developed by the 

American Medical Association’s 

(AMA’s) Physician Consortium for 

Performance Improvement, a national, 

diverse, physician-led group that 

identifies, develops, and promotes 

implementation of evidence-based 

clinical performance measures that 

reflect best practices. This measure is 

NQF-endorsed. It is an infection control 

process measure and is currently 

adopted in the Hospital IQR Program 

and Physician Quality Reporting System 

(PQRS). 

We are proposing to collect all seven 

measures using the claims-based quality 

data codes (QDCs) data collection 

mechanism. We are proposing to require 

ASCs to report on ASC claims a quality 

data code (QDC) to be used for reporting 

quality data. We are proposing that an 

ASC would need to add a QDC to any 

claim involving a proposed claimsbased quality measure. CMS is in the 

process of developing QDCs for each 

proposed claims-based quality measure. 

The QDC will be a CPT Category II code 

or a HCPCS Level II G-code if an 

appropriate CPT code is not available. 

More information on the QDCs that will 

be associated with the proposed quality 

measures will be provided in the CY 

2012 OPPS/ASC final rule with 

comment period. Additionally, CMS is 

proposing to create a new ASC payment 

indicator ‘‘M5’’ (Quality measurement 

code used for reporting purposes only; 

no payment made) for assignment to the 

QDC to clarify that no payment is 

associated with the QDC for that claim. 

If one or more of these measures are 

finalized as proposed, an ASC would 

need to begin submitting these QDCs on 

any Medicare Part B claims pertaining 

to the measures on January 1, 2012. 

For the first six measures listed, the 

ASC QC measures specifications can be 

found at http://www.ascquality.org/

documents/ASCQualityCollaboration

ImplementationGuide.pdf.41 For the 

seventh measure, the specifications can 

be found on the PQRS Web site at: 

http://www.cms.gov/apps/ama/

license.asp?file=/pqrs/downloads/2011_

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Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 42339 

PhysQualRptg_MeasureSpecifications

Manual_033111.pdf. 

These seven proposed measures are 

discussed in more detail below: 

(1) Patient Burns (NQF #0263) 

The ASC Quality Measures: 

Implementation Guide Version 1.4 

states that every patient receiving care 

in an ASC setting has the potential to 

experience a burn during an episode of 

care, given the multitude of factors that 

could pose risks for patient burns in the 

surgical and procedural settings. The 

Guide cited a recent publication from 

the ECRI Institute that relates an 

increased risk of burns associated with 

newer electrosurgical devices due to 

their application of higher electrical 

current for longer time intervals. Other 

common sources of burns in a surgical 

setting include chemical and thermal 

sources, and radiation, scalds, and fires. 

Clinical practice guidelines for reducing 

the risk of burns have been established 

by the American Society of 

Anesthesiologists (ASA) and 

Association of Operating Room Nurses 

(AORN). 

This NQF-endorsed measure assesses 

the percentage of ASC admissions 

experiencing a burn prior to discharge. 

The NQF-endorsed specifications for 

ASC QC measure can be found at: 

http://www.ascquality.org/documents/ 

ASCQualityCollaboration

ImplementationGuide.pdf. The ASC QC 

in their ASC Quality Measure 

Implementation Guide version 1.4 

defines a ‘‘burn’’ for purposes of this 

measure as ‘‘[u]nintended tissue injury 

caused by any of the six recognized 

mechanisms: scalds, contact, fire, 

chemical, electrical or radiation (e.g., 

warming devices, prep solutions, and 

electrosurgical unit or laser).’’ We 

believe that this measure would allow 

stakeholders to develop a better 

understanding of the incidence of these 

events and further refine means to 

ensure prevention. 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. We 

believe that this measure is appropriate 

to measure quality in ASCs since they 

serve surgical patients who may face the 

risk of burns during ambulatory surgical 

procedures. Furthermore, we believe 

that this measure meets the consensus 

requirement and the requirement that it 

be set forth by a national consensus 

building entity because it was 

developed by the ASC QC and is 

endorsed by the NQF. 

We invite public comment on our 

proposal to adopt this measure for the 

CY 2014 payment determination using 

the claims-based QDC data collection 

mechanism for ASC services furnished 

for Medicare patients from January 1, 

2012 through December 31, 2012. While 

the NQF-endorsed specification for this 

measure includes all ASC admissions, 

our proposal to use information 

submitted on claims to calculate these 

measures requires that we restrict the 

measure population to the population 

for which CMS receives claims. 

Therefore, for this program, we would 

need to calculate the measures based on 

claims submitted for ASC services 

furnished to Medicare fee-for-service 

beneficiaries. NQF has indicated in 

recent exchanges that our proposal to 

use Medicare Part B claims submitted 

by ASCs to calculate the measure 

consistently with the measure 

specification is an appropriate 

application of the NQF-endorsed 

measure to a subset of patients that are 

part of the broader population to which 

the measure applies. If finalized, ASCs 

would need to place QDCs relevant to 

this measure on Medicare Part B claims 

beginning January 1, 2012 in order to 

report this measure for purposes of the 

CY 2014 payment determination. 

(2) Patient Fall (NQF #0266) 

Falls, particularly in the elderly, can 

cause injury and loss of functional 

status, and falls in healthcare settings 

can be prevented through assessment of 

risk, care planning, and patient 

monitoring. Healthcare settings are 

being called upon to report patient falls 

and to take steps to reduce the risk of 

falls. The ASC QC indicates in their 

ASC quality measure implementation 

guide the use of anxiolytics, sedatives, 

and anesthetic agents may put patients 

undergoing outpatient surgery at 

increased risk for falls. Guidelines and 

best practices for the prevention of falls, 

and management of patients after falls 

have been made available by the Agency 

for Healthcare Research and Quality 

(http://www.ahrq.gov/qual/ 

transform.htm), and the National Center 

for Patient Safety (http://www.

patientsafety.gov). 

This NQF-endorsed measure assesses 

the percentage of ASC admissions 

experiencing a fall in the ASC. The 

NQF-endorsed specifications for this 

ASC QC measure can be found at: 

http://www.ascquality.org/documents/ 

ASCQualityCollaboration

ImplementationGuide.pdf. The ASC QC 

in their ASC Quality Measure 

Implementation Guide version 1.4 

defines a ‘‘fall’’ as ‘‘a sudden, 

uncontrolled, unintentional, downward 

displacement of the body to the ground 

or other object, excluding falls resulting 

from violent blows or other purposeful 

actions’’, which is consistent with the 

definition set forth by the National 

Center for Patient Safety. 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. We 

believe that this measure is appropriate 

to measure quality in ASCs because it 

was specifically developed to measure 

quality of surgical care furnished by 

ASCs, as measured by patient falls. 

Furthermore, we believe that this 

measure meets the consensus 

requirement and the requirement that it 

be set forth by a national consensus 

building entity because it was 

developed by the ASC QC and is NQFendorsed. 

We invite public comment on our 

proposal to adopt this measure for the 

CY 2014 payment determination using 

the claims-based QDC data collection 

mechanism for ASC services furnished 

for Medicare fee-for-service 

beneficiaries from January 1, 2012 

through December 31, 2012. While the 

NQF-endorsed specification for this 

measure includes all ASC admissions, 

our proposal requires that we restrict 

the measure population to the 

population for which CMS receives 

claims. Therefore, for this program, we 

would need to calculate the measures 

based on claims submitted for ASC 

services furnished to Medicare fee-forservice beneficiaries. NQF has indicated 

in recent exchanges that our proposal to 

use Medicare Part B claims submitted 

by ASCs to calculate the measure 

consistently with the measure 

specification is an appropriate 

application of the NQF-endorsed 

measure to a subset of patients that are 

part of the broader population to which 

the measure applies. If finalized, ASCs 

would need to place QDCs relevant to 

this measure on Medicare Part B claims 

beginning January 1, 2012 in order to 

report this measure for purposes of the 

CY 2014 payment determination. 

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42http://www.qualityforum.org/Publications/ 

2007/03/Serious_Reportable_Events_

in_Healthcare%E2%80%932006_Update.aspx. 

43 Joint Commission. Universal Protocol for 

Preventing Wrong Site, Wrong Procedure, Wrong 

Person Surgery. Available at http:// 

www.jointcommission.org/standards_information/ 

up.aspx. Last accessed December 14, 2010. 

44Classen, D. et al.: The timing of prophylactic 

administration of antibiotics and the risk of surgical 

wound infection. NEJM. 1992;326(5):281–286. 

45Silver, A. et al.: Timeliness and use of 

antibiotic prophylaxis in selected inpatient surgical 

procedures. The Antibiotic Prophylaxis Study 

Group. Am J Surg. 1996;171(6):548–552. 

(3) Wrong Site, Wrong Side, Wrong 

Patient, Wrong Procedure, Wrong 

Implant (NQF #0267) 

Surgeries and procedures performed 

on the wrong site/side, and wrong 

patient can result in significant impact 

on patients, including complications, 

serious disability or death. While the 

prevalence of such serious errors may be 

rare, such events are considered serious 

reportable events, and are included in 

the NQF’s Serious Reportable Events in 

Healthcare 2006 Update.42 The Joint 

Commission (a not-for-profit 

organization that accredits and certifies 

health care organizations and programs 

in the US) has issued a Universal 

Protocol to prevent such serious surgical 

errors.43 The proposed NQF-endorsed 

measure assesses the percentage of ASC 

admissions experiencing a wrong site, 

wrong side, wrong patient, wrong 

procedure, or wrong implant. The ASC 

QC in their ASC Quality Measures: 

Implementation Guide Version 1.4 

defines ‘‘wrong’’ as ‘‘not in accordance 

with intended site, side, patient, 

procedure or implant.’’ The NQFendorsed specifications for this ASC QC 

measure can be found at: http:// 

www.ascquality.org/documents/ 

ASCQualityCollaboration

ImplementationGuide.pdf. 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. We 

believe that this measure is appropriate 

to measure quality in ASCs because the 

measure assesses the quality of surgical 

care provided in ASCs as measured by 

the percentage of surgical errors. 

Furthermore, we believe that this 

measure meets the consensus 

requirement and the requirement that it 

be set forth by a national consensus 

building entity because it was 

developed by the ASC QC and is 

endorsed by the NQF. 

We invite public comment on our 

proposal to adopt this measure for the 

CY 2014 payment determination using 

the claims-based QDC data collection 

mechanism for ASC services furnished 

for Medicare patients from January 1, 

2012 through December 31, 2012. While 

the NQF-endorsed specification for this 

measure includes all ASC admissions, 

our proposal to use information 

submitted on claims to calculate these 

measures requires that we restrict the 

measure population to the population 

for which CMS receives claims. 

Therefore, for this program, we would 

need to calculate the measures based on 

claims submitted for ASC services 

furnished to Medicare fee-for-service 

beneficiaries. NQF has indicated in 

recent exchanges that our proposal to 

use Medicare Part B claims submitted 

by ASCs to calculate the measure 

consistently with the measure 

specification is an appropriate 

application of the NQF-endorsed 

measure to a subset of patients that are 

part of the broader population to which 

the measure applies. If finalized, ASCs 

would need to place QDCs relevant to 

this measure on Medicare Part B claims 

beginning January 1, 2012 in order to 

report this measure for purposes of the 

CY 2014 payment determination. 

(4) Hospital Transfer/Admission (NQF 

#0265) 

The transfer or admission of a surgical 

patient from an outpatient setting to an 

acute care setting can be an indication 

of a complication, serious medical error, 

or other unplanned negative patient 

outcome. While acute intervention may 

be necessary in these circumstances, a 

high rate of such incidents may indicate 

suboptimal practices or patient selection 

criteria. The proposed NQF-endorsed 

measure assesses the rate of ASC 

admissions requiring a hospital transfer 

or hospital admission upon discharge 

from the ASC. The ASC QC defines 

‘‘hospital transfer/admission’’ as ‘‘any 

transfer/admission from an ASC directly 

to an acute care hospital, including 

hospital emergency room.’’ 

The NQF-endorsed specifications for 

this ASC QC measure can be found at: 

http://www.ascquality.org/documents/ 

ASCQuality

CollaborationImplementationGuide.pdf. 

The ASC QC believes that this ‘‘measure 

would allow ASCs to assess their 

guidelines for procedures performed in 

the facility and patient selection if 

transfers/admissions are determined to 

be at a level higher than expected. If 

commonalities are found in patients 

who are transferred or admitted, 

guidelines may require revision.’’ 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. We 

believe this measure is appropriate to 

measure quality in ASCs because it 

assesses outpatient surgical care quality 

in the form of the rate of surgical 

outpatients needing acute care 

interventions. Furthermore, we believe 

that this measure meets the consensus 

requirement and the requirement that it 

be set forth by a national consensus 

building entity because it was 

developed by the ASC QC and is 

endorsed by the NQF. 

We invite public comment on our 

proposal to adopt this measure for the 

CY 2014 payment determination using 

the claims-based QDC data collection 

mechanism for ASC services furnished 

for Medicare patients from January 1, 

2012 through December 31, 2012. While 

the NQF-endorsed specification for this 

measure includes all ASC admissions, 

our proposal to use information 

submitted on claims to calculate these 

measures requires that we restrict the 

measure population to the population 

for which CMS receives claims. 

Therefore, for this program, we would 

need to calculate the measures based on 

claims submitted for ASC services 

furnished to Medicare fee-for-service 

beneficiaries. NQF has indicated that 

our proposal to use Medicare Part B 

claims submitted by ASCs to calculate 

the measure consistently with the 

measure specification is an appropriate 

application of the NQF-endorsed 

measure to a subset of patients that are 

part of the broader population to which 

the measure applies. If finalized, ASCs 

would need to place QDCs relevant to 

this measure on Medicare Part B claims 

beginning January 1, 2012 in order to 

report this measure for purposes of the 

CY 2014 payment determination. 

(5) Prophylactic Intravenous (IV) 

Antibiotic Timing (NQF #0264) 

Timely preoperative administration of 

intravenous antibiotics to surgical 

patients is an effective practice in 

reducing the risk of developing a 

surgical site infection, which in turn is 

associated with reduced health care 

burden and cost, and better patient 

outcomes.44 45 46 The measurement of 

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46 Dounis, E., Tsourvakas, S., Kalivas, L., and 

Giamacellou, H.: Effect of time interval on tissue 

concentrations of cephalosporins after tourniquet 

inflation. Highest levels achieved by administration 

20 minutes before inflation. Acta Orthop Scand. 

1995;66(2):158–60. 

47ASC QC Quality measures: Implementation 

Guide version 1.4. ASC Quality Collaboration. 

December 2010. 

48Seropian, R., Reynolds, B.M.: Wound infections 

after preoperative depilatory versus razor 

preparation. Am J Surg.1971 Mar;121(3):251–4. 

49http://www.cdc.gov/ncidod/dhqp/pdf/

guidelines/SSI.pdf. 

50Association of Operating Room Nurses. 

Recommended practices for skin preparation of 

patients. AORN J. 2002 Jan;75(1):184–7. 

timely antibiotic administration for 

surgical patients is occurring in the 

Hospital IQR Program, Hospital OQR 

Program and the Physician Quality 

Reporting System. The NQF-endorsed 

ASC QC measure assesses the rate of 

ASC patients who received IV 

antibiotics ordered for surgical site 

infection prophylaxis on time. The 

NQF-endorsed specifications for this 

ASC QC measure can be found at: 

http://www.ascquality.org/documents/ 

ASCQuality

CollaborationImplementationGuide.pdf. 

The ASC QC measure implementation 

guide defines ‘‘antibiotic administered 

on time’’ as ‘‘[a]ntibiotic infusion * * * 

initiated within one hour prior to the 

time of the initial surgical incision or 

the beginning of the procedure (e.g., 

introduction of endoscope, insertion of 

needle, inflation of tourniquet) or two 

hours prior if vancomycin or 

fluoroquinolones are administered.’’ 

The measure also defines ‘‘prophylactic 

antibiotic’’ as ‘‘an antibiotic prescribed 

with the intent of reducing the 

probability of an infection related to an 

invasive procedure. For purposes of this 

measure, the following antibiotics are 

considered prophylaxis for surgical site 

infections: Ampicillin/sulbactam, 

Aztreonam, Cefazolin, Cefmetazole, 

Cefotetan, Cefoxitin, Cefuroxime, 

Ciprofloxacin, Clindamycin, Ertapenem, 

Erythromycin, Gatifloxacin, Gentamicin, 

Levofloxacin, Metronidazole, 

Moxifloxacin, Neomycin and 

Vancomycin.’’ All prophylactic IV 

antibiotics administered for surgical site 

infection would need to have their 

infusion initiated within the one hour 

time frame, except for vancomycin or 

fluoroquinolones, where infusion must 

be initiated within the two hours time 

frame. The ASC QC Guide states that 

‘‘[i]n cases involving more than one 

antibiotic, all antibiotics must be given 

within the appropriate time frame in 

order for the case to meet criteria.’’ The 

timing of the antibiotic starts at the time 

the antibiotic is initiated with a 

preoperative order. 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. We 

believe this measure is appropriate to 

measure quality in ASCs because it 

assesses the quality of care for surgical 

patients in an outpatient setting as 

measured by timely antibiotic 

administration. Furthermore, we believe 

that this measure meets the consensus 

requirement and the requirement that it 

be set forth by a national consensus 

building entity because it was 

developed by the ASC QC and is 

endorsed by the NQF. 

We invite public comment on our 

proposal to adopt this measure for the 

CY 2014 payment determination using 

the claims-based QDCs data collection 

mechanism for ASC services furnished 

for Medicare patients from January 1, 

2012 through December 31, 2012. While 

the NQF-endorsed specification for this 

measure includes all ASC admissions, 

our proposal to use information 

submitted on claims to calculate these 

measures requires that we restrict the 

measure population to the population 

for which CMS receives claims. 

Therefore, for this program, we would 

need to calculate the measures based on 

claims submitted for ASC services 

furnished to Medicare fee-for-service 

beneficiaries. NQF has indicated in 

recent exchanges that our proposal to 

use Medicare Part B claims submitted 

by ASCs to calculate the measure 

consistently with the measure 

specification is an appropriate 

application of the NQF-endorsed 

measure to a subset of patients that are 

part of the broader population to which 

the measure applies. If finalized, ASCs 

would need to place QDCs relevant to 

this measure on Medicare Part B claims 

beginning January 1, 2012 in order to 

report this measure for purposes of the 

CY 2014 payment determination. 

(6) Ambulatory Surgery Patients With 

Appropriate Method of Hair Removal 

(NQF #0515) 

The ASC QC47 cited evidence that 

‘‘[r]azors can cause microscopic cuts 

and nicks to the skin, not visible to the 

eye. Use of razors prior to surgery 

increases the incidence of wound 

infection when compared to clipping, 

depilatory use or no hair removal at 

all.’’ 48 A 1999 guideline issued by the 

CDC suggests that if hair must be 

removed from a surgical site, that it 

preferably be done with clippers rather 

than razors in order to minimize cuts 

and nicks to the skin which may 

increase the risk of a surgical site 

infection.49 In 2002, the Association of 

Operating Room Nurses published 

similar guidelines for appropriate hair 

removal.50 While a similar measure is 

being considered for retirement from the 

Hospital IQR Program because it 

displays a high degree of performance 

with little variability or room for 

improvement, we believe that there is 

significant, variability in practice and 

level of adherence to this guideline in 

outpatient surgical settings such as 

ASCs is not known, and accordingly, 

this measure is still appropriate for use 

in the ASC setting. We are proposing to 

adopt the NQF-endorsed measure to 

capture the percentage of ASC 

admissions with appropriate surgical 

site hair removal. The NQF-endorsed 

specifications for this ASC QC measure 

can be found at: http:// 

www.ascquality.org/documents/

ASCQualityCollaboration

ImplementationGuide.pdf. 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. We 

believe this measure is appropriate to 

measure quality in ASCs because it 

assesses quality of surgical care 

performed in ASCs, as measured by 

appropriate surgical site hair removal. 

Furthermore, we believe that this 

measure meets the consensus 

requirement and the requirement that it 

be set forth by a national consensus 

building entity because it was 

developed by the ASC QC and is 

endorsed by the NQF. 

We invite public comment on our 

proposal to adopt this measure for the 

CY 2014 payment determination using 

the claims-based QDC data collection 

mechanism for ASC services furnished 

for Medicare patients from January 1, 

2012 through December 31, 2012. While 

the NQF-endorsed specification for this 

measure includes all ASC admissions, 

our proposal to use information 

submitted on claims to calculate these 

measures that we restrict the measure 

population to the population for which 

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51McKibben. L., Horan, T.: Guidance on public 

reporting of healthcare-associated infections: 

recommendations of the Healthcare Infection 

Control Practices Advisory Committee. AJIC 

2005;33:217–26. 

CMS receives claims. Therefore, for this 

program, we would need to calculate 

the measures based on claims submitted 

for ASC services furnished to Medicare 

fee-for-service beneficiaries. NQF 

indicated in recent exchanges that our 

proposal to use Medicare Part B claims 

submitted by ASCs to calculate the 

measure consistently with the measure 

specification is an appropriate 

application of the NQF-endorsed 

measure to a subset of patients that are 

part of the broader population to which 

the measure applies. If finalized, ASCs 

would need to place QDCs relevant to 

this measure on Medicare Part B claims 

beginning January 1, 2012 in order to 

report this measure for purposes of CY 

2014 payment determination. 

(7) Selection of Prophylactic Antibiotic: 

First OR Second Generation 

Cephalosporin (NQF #0268) 

Surgical outcomes are affected by the 

selection of appropriate antibiotics. 

Current guidelines indicate that first or 

second generation cephalosporins are 

effective for prevention of surgical site 

infections in most cases. The goal of this 

proposed measure is to ensure safe, 

cost-effective, broad spectrum 

antibiotics are used as a first line 

prophylaxis unless otherwise indicated. 

This measure was developed by the 

AMA’s Physician Consortium for 

Performance Improvement, a national, 

diverse, physician-led group that 

identifies, develops, and promotes 

implementation of evidence-based 

clinical performance measures that 

reflect best practices. This measure 

received NQF-endorsement under a 

2008 project entitled ‘‘Hospital Care: 

Specialty Clinician Performance 

Measures,’’ and it assesses the 

percentage of surgical patients aged 18 

years and older undergoing procedures 

with the indications for a first OR 

second generation cephalosporin 

prophylactic antibiotic, who had an 

order for cefazolin or cefuroxime for 

antimicrobial prophylaxis. While we 

recognize that this measure is not 

specifically endorsed for the ASC 

setting, we believe that this measure is 

highly relevant for use in ASCs because 

it assesses adherence to best practices 

for use of prophylactic antibiotics for 

outpatient surgical patients. 

Accordingly, we propose to adopt an 

application of this NQF-endorsed 

measure for use in the ASC Quality 

Reporting Program. The measure 

specifications for this proposed measure 

can be found at: http://www.cms.gov/ 

pqrs/downloads/2011_PhysQualRptg_

MeasuresGroups_

SpecificationsManual_

033111.pdf?agree=yes&next=Accept. 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. We 

believe this measure is appropriate for 

measurement of quality care in an ASC 

because it specifically assesses quality 

care, as measured by adherence to best 

practices for prophylactic antibiotics 

provided for outpatient surgical 

patients. It is not feasible or practicable 

to adopt an NQF-endorsed measure of 

prophylactic antibiotic selection 

specifically for ASCs because there is no 

such NQF-endorsed measure. We note 

that section 1833(t)(17) of the Act does 

not require that each measure we adopt 

for the ASC Quality Reporting Program 

be endorsed by a national consensus 

building entity, or by the NQF 

specifically. Further, section 

1833(i)(7)(B) of the Act states that 

section 1833(t)(17) of the Act, which 

contains this requirement, applies to the 

ASC Quality Reporting Program, except 

as the Secretary may otherwise provide. 

Under this provision, the Secretary has 

further authority to adopt measures that 

are not NQF-endorsed or measures that 

have not been endorsed for the ASC 

setting. 

The proposed adoption of this 

measure in the ASC Quality Reporting 

Program also is consistent with our goal 

to align measures across settings, as it is 

also used in the Physician Quality 

Reporting System, and a similar 

measure (NQF #0528) has been 

implemented in the Hospital OQR 

Program and the Hospital IQR Program. 

We invite public comment on our 

proposal to adopt this measure for the 

CY 2014 payment determination using 

the claims-based QDC data collection 

mechanism for ASC services furnished 

for Medicare patients from January 1, 

2012 through December 31, 2012. While 

the NQF-endorsed specification for this 

measure includes all surgical patients, 

our proposal to use information 

submitted on claims to calculate these 

measures requires that we restrict the 

measure population to the population 

for which CMS receives claims. 

Therefore, for this program, we would 

need to calculate the measures based on 

claims submitted for ASC services 

furnished to Medicare fee-for-service 

beneficiaries. NQF has indicated in 

recent exchanges that our proposal to 

use Medicare Part B claims submitted 

by ASCs to calculate the measure 

consistently with the measure 

specification is an appropriate 

application of the NQF-endorsed 

measure to a subset of patients that are 

part of the broader population to which 

the measure applies. If finalized, ASCs 

would need to place QDCs relevant to 

this measure on Medicare Part B claims 

beginning January 1, 2012 in order to 

report this measure for purposes of the 

CY 2014 payment determination. 

b. Surgical Site Infection Rate (NQF 

#0299) 

HAIs are among the leading causes of 

death in the United States. CDC 

estimates that as many as 2 million 

infections are acquired each year in 

hospitals and result in approximately 

90,000 deaths.51 It is estimated that 

more Americans die each year from 

HAIs than from auto accidents and 

homicides combined. HAIs not only put 

the patient at risk, but also increase the 

days of hospitalization required for 

patients and add considerable health 

care costs. HAIs are largely preventable 

for surgical patients through application 

of perioperative best practices such as 

those listed in the CDC’s SSI prevention 

guidelines. Therefore, many health care 

consumers and organizations are calling 

for public disclosure of HAIs, arguing 

that public reporting of HAI rates 

provides the information health care 

consumers need to choose the safest 

hospitals, and gives hospitals an 

incentive to improve infection control 

efforts. This proposed measure is 

currently collected by the National 

Healthcare Safety Network (NHSN) as 

part of State-mandated reporting and 

surveillance requirements for hospitals 

in some States. Additionally, data 

submission for this measure through 

EHRs may be possible in the near future. 

This measure is NQF-endorsed and 

we are also proposing to adopt it for the 

CY 2014 Hospital OQR Program. It also 

has been adopted for the FY 2014 

Hospital IQR Program. Because we are 

proposing the same measure for 

Hospital OQR program in this rule, we 

refer readers to the discussion of this 

measure in section XIV.C.2.a. of this 

proposed rule. The measure 

specifications can be found at http:// 

www.cdc.gov/nhsn/psc.html. The NQF 

describes this measure as the 

‘‘percentage of surgical site infection 

events occurring within thirty days after 

the operative procedure if no implant is 

left in place, or [within] one year if an 

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implant is in place in patients who had 

an NHSN operative procedure 

performed during a specified time 

period and the infection appears to be 

related to the operative procedure.’’ 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. 

Increasingly, surgical procedures are 

being performed in hospital outpatient 

department settings and ASCs. We 

believe this measure is appropriate for 

measuring quality of care in ASCs 

because it applies to outcomes for 

surgical patients undergoing procedures 

that are performed in ASCs. 

Furthermore, we believe that this 

measure meets the consensus 

requirement and the requirement that it 

be set forth by a national consensus 

building entity because it is endorsed by 

the NQF. The proposed adoption of this 

measure in the ASC Quality Reporting 

Program also is consistent with our goal 

to align measures across settings 

because we have proposed this measure 

for the Hospital OQR Program for CY 

2014 payment determination and have 

previously adopted it for Hospital IQR 

Program for the FY 2014 payment 

determination. Therefore, we are 

proposing to adopt the Surgical Site 

Infection Rate measure that is collected 

by the CDC via the NHSN for the ASC 

Quality Reporting Program for the CY 

2014 payment determination. 

Data submission for this measure for 

the CY 2014 payment determination 

would begin with infection events 

occurring on or after January 1, 2013 

through June 30, 2013. The proposed 

reporting mechanism for this proposed 

HAI measure via the NHSN is discussed 

in greater detail in section XIV.C.2.a. of 

this proposed rule. We invite public 

comment on this proposed measure and 

the reporting mechanism. 

In summary, we are proposing to 

adopt 7 claims-based measures using 

the QDC data collection mechanism, 

and one NHSN HAI measure of Surgical 

Site Infection Rate for a total of eight 

measures for ASCs for the CY 2014 

payment determination. We believe the 

proposal falls within our stated 

framework for the ASC Quality 

Reporting Program. For the CY 2014 

payment determination, we are 

proposing that data submission for the 

claims-based measures begin on January 

1, 2012 and end December 31, 2012. For 

the CY 2014 payment determination, we 

are proposing that data submission for 

the NHSN-based SSI measure begin 

with infection events occurring between 

January 1, 2013 and June 30, 2013. This 

proposed measure is currently collected 

by the NHSN as part of State-mandated 

reporting and surveillance requirements 

for hospitals in some States. 

The NHSN is a secure, Internet-based 

surveillance system maintained and 

managed by the CDC, and can be 

utilized by all types of healthcare 

facilities in the United States, including 

acute care hospitals, long term acute 

care hospitals, psychiatric hospitals, 

rehabilitation hospitals, outpatient 

dialysis centers, ASCs, and long term 

care facilities. The NHSN reporting 

infrastructure is provided free of charge 

to healthcare providers/suppliers to 

access and use for reporting data 

regarding healthcare safety and 

infections. The NHSN enables 

healthcare facilities to collect and use 

data about HAIs, clinical practices 

known to prevent HAIs, the incidence 

or prevalence of multidrug-resistant 

organisms within their organizations, 

and other adverse events. Some States 

use the NHSN as a means for healthcare 

facilities to submit data on HAIs 

mandated through their specific State 

legislation. We invite public comments 

on our proposals. The proposed 

measures for ASCs for the CY 2014 

payment determination are listed below 

with the ASC prefix: 

ASC PROGRAM MEASUREMENT SET PROPOSED FOR THE CY 2014 PAYMENT DETERMINATION

[Data submission to occur in 2012 and 2013] 

ASC–1: Patient Burn.* 

ASC–2: Patient Fall.* 

ASC–3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant.* 

ASC–4: Hospital Transfer/Admission.* 

ASC–5: Prophylactic Intravenous (IV) Antibiotic Timing.* 

ASC–6: Ambulatory Surgery Patients with Appropriate Method of Hair Removal.* 

ASC–7: Selection of Prophylactic Antibiotic First OR Second Generation Cephalosporin.* 

ASC–8: Surgical Site Infection Rate.** 

* Data submission proposed to begin in CY 2012. 

** Data submission proposed to begin in CY 2013. 

4. Proposed ASC Quality Measures for 

CY 2015 Payment Determination 

a. Retention of Measures Adopted for 

the CY 2014 Payment Determination in 

the CY 2015 Payment Determination 

In general, unless we otherwise 

specify in the retirement section of a 

rule, we propose to retain measures 

from one CY payment determination to 

another. We are proposing to retain the 

eight measures we are proposing to 

adopt for the CY 2014 payment 

determination, if they are finalized in 

the CY 2012 OPPS/ASC final rule with 

comment period, for the CY 2015 

payment determination. We invite 

public comments on this proposal. 

b. Proposed Structural Measures for the 

CY 2015 Payment Determination 

For the CY 2015 payment 

determination, we are proposing to 

adopt two structural measures: Safe 

Surgery Checklist Use, and ASC Facility 

Volume Data on Selected ASC Surgical 

Procedures. We discuss these proposals 

below. 

(1) Safe Surgery Checklist Use 

A sound surgery safety checklist 

could minimize the most common and 

avoidable risks endangering the lives 

and well-being of surgical patients. The 

purpose of this proposed structural 

measure is to assess whether ASCs are 

using a safe surgery checklist that covers 

effective communication and helps 

ensure that safe practices are being 

performed at three critical perioperative 

periods: prior to administration of 

anesthesia, prior to incision, and prior 

to the patient leaving the operating 

room. The use of such checklists has 

been credited with dramatic decreases 

in preventable harm, complications and 

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42344 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

52Haynes, A.B.; Weiser, T.G.; Berry, W.G. et. al 

(2009). ‘‘A Surgical Safety Checklist to Reduce 

Morbidity and Mortality in a Global Population’’. 

New England Journal of Medicine. 360: 491–499. 

53de Vries EN, Prins HA, Crolla RMPH, et al. 

Effect of a comprehensive surgical safety system on 

patient outcomes. N Engl J Med 2010;363: 1928–37. 

54Hospital National Patient Safety Goals. The 

Joint Commission Accreditation Hospital Manual, 

2011. http://www.jointcommission.org/ 

standards_information/npsgs.aspx. 

55http://www.cspsteam.org/safesurgerychecklist/ 

safesurgerychecklist.html. 

56Neily, J; Mills, PD, Young-Xu, Y. (2010). 

‘‘Association between implementation of a Medical 

Team Training Program and Surgical Mortality’’. 

JAMA. 304 (15): 1693–1700. 

57Haynes, AB; Weiser, TG; Berry, WR et al (2009) 

‘‘A Surgical Safety Checklist to Reduce Morbidity 

and Mortality in a Global Population’’. NEJM. 

360:491–499. 

58Birkmeyer, JD (2010) ‘‘Strategies for Improving 

Surgical Quality—Checklists and Beyond.’’ NEJM. 

363: 1963–1965. 

59http://www.jointcommission.org/ 

standards_information/npsgs.aspx. 

post-surgical mortality.52 In November 

2010, the New England Journal of 

Medicine published a study concluding 

that surgical complications were 

reduced by one-third, and mortality by 

nearly half, when a safe surgery 

checklist was used.53

We believe that effective 

communication and the use of safe 

surgical practices during surgical 

procedures will significantly reduce 

preventable surgical deaths and 

complications. Some examples of safe 

surgery practices that can be performed 

during each of these three perioperative 

periods are shown in the table below: 

First critical point (prior to administering 

anesthesia) Second critical point (prior to skin incision) Third critical point (prior to patient leaving the operating room) 

• Verbal confirmation of patient identity. 

• Mark surgical site. 

• Check anesthesia machine/medication. 

• Assessment of allergies, airway and aspiration risk. 

• Confirm surgical team members and roles. 

• Confirm patient identity, procedure, and surgical incision site. 

• Administration of antibiotic prophylaxis within 60 minutes before incision. 

• Confirm the procedure. 

• Complete count of surgical instruments and 

accessories. 

• Identify key patient concerns for recovery 

and management of the patient. 

• Communication among surgical team members of anticipated critical events. 

• Display of essential imaging as appropriate. 

For example, mistakes in surgery can 

be prevented by ensuring that the 

correct surgery is performed on the 

correct patient and at the correct place 

on the patient’s body.54 A safe surgery 

checklist would also reduce the 

potential for human error, which would 

increase the safety of the surgical 

environment. An example of a checklist 

that employs safe surgery practices at 

each of these three perioperative periods 

is the World Health Organization 

Surgical Safety Checklist, which was 

adopted by The World Federation of 

Societies of Anesthesiologists as an 

international standard of practice. This 

checklist can be found at: http:// 

www.who.int/patientsafety/safesurgery/ 

ss_checklist/en/index.html. 

The adoption of a structural measure 

that assesses Safe Surgery Checklist Use 

would align our patient safety initiatives 

with those of several surgical specialty 

societies including: the American 

College of Surgeons’ Nora Institute for 

Patient Safety, the American Society of 

Anesthesiologists, The Joint 

Commission, the National Association 

for Healthcare Quality and the AORN. 

The measure would assess whether the 

ASC uses a safe surgery checklist in 

general, and would not require an ASC 

to report whether it uses a checklist in 

connection with any individual 

procedures. 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. 

This measure is appropriate for the 

measurement of quality of care 

furnished by ASCs because it pertains to 

best practices for surgeries, and ASCs 

perform ambulatory surgeries. It also 

reflects consensus among affected 

parties. As stated in section XIV.C.2.c.1 

of this proposed rule, we believe that 

consensus among affected parties can be 

reflected through means other than NQF 

endorsement, including consensus 

achieved during the measure 

development process; consensus shown 

through broad acceptance and use of 

measures; and consensus through public 

comment. The proposed safe surgery 

checklist measure assesses the adoption 

of a best practice for surgical care that 

is broadly accepted and in widespread 

use among affected parties. In addition 

to being adopted by The World 

Federation of Societies of 

Anesthesiologists, the use of a safe 

surgery checklist is one of the safe 

surgery principles endorsed by the 

Council on Surgical and Perioperative 

Safety,55 which is comprised of the 

American Association of Nurse 

Anesthetists, the American College of 

Surgeons, the American Association of 

Surgical Physician Assistants, the 

American Society of Anesthesiologists, 

the American Society of PeriAnesthesia 

Nurses, AORN, and the Association of 

Surgical Technologists. Two State 

agencies (Oregon, South Carolina), the 

Veterans Health Administration,56

numerous hospital systems, State 

hospital associations (such as California 

and South Carolina), national 

accrediting organizations and large 

private insurers have endorsed the use 

of a safe surgery checklist as a best 

practice for reducing morbidity, 

mortality, and medical errors.57 58

Because the use of a safe surgery 

checklist is a widely accepted best 

practice for surgical care, we believe 

that the proposed structural measure of 

Safe Surgery Checklist Use reflects 

consensus among affected parties. We 

also note that The Joint Commission has 

included safe surgery checklist practices 

among those to be used to achieve 

National Patient Safety Goals adopted 

for 2011 for surgeries performed in 

ambulatory settings and hospitals.59 The 

Safe Surgery Checklist Use structural 

measure is not NQF-endorsed, and there 

is no NQF-endorsed measure of safe 

surgery checklist use despite the broad 

acceptance and widespread 

endorsement of this practice. Therefore, 

it is not feasible or practicable to adopt 

an NQF-endorsed measure of safe 

surgery checklist use because there is no 

such NQF-endorsed measure. We note 

that section 1833(t)(17) of the Act does 

not require that each measure we adopt 

for the ASC Quality Reporting Program 

be endorsed by a national consensus 

building entity, or by the NQF 

specifically. Further, section 

1833(i)(7)(B) of the Act states that 

section 1833(t)(17) of the Act, which 

contains this requirement, applies to the 

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60Livingston, E.H.; Cao, J ‘‘Procedure Volume as 

a Predictor of Surgical Outcomes’’. JAMA. 

2010;304(1):95–97. 

61 David R. Flum, D.R.; Salem, L.; Elrod, J.B.; 

Dellinger, E.P.; Cheadle, A. Chan, L. ‘‘Early 

Mortality Among Medicare Beneficiaries 

Undergoing Bariatric Surgical Procedures’’. JAMA. 

2005;294(15):1903–1908. 

62Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, 

A.M.; Warren, J.L.; Begg, C.B ’’ Influence of Hospital 

Procedure Volume on Outcomes Following Surgery 

for Colon Cancer’’ JAMA. 2000; 284 (23): 3028– 

3035. 

ASC Quality Reporting Program, except 

as the Secretary may otherwise provide. 

Under this provision, the Secretary has 

further authority to adopt non-endorsed 

measures. We note that the proposed 

adoption of this measure in the ASC 

Quality Reporting Program is consistent 

with our goal to align measures across 

settings because we are also proposing 

the same measure for the Hospital OQR 

Program for CY 2014 payment 

determination. 

For the CY 2015 payment 

determination, we are proposing that 

data collection for this structural 

measure for ASCs would begin on July 

1, 2013 and end on August 15, 2013 for 

the entire time period from January 1, 

2012 through December 31, 2012. In 

other words, an ASC would report 

whether their facility employed a safe 

surgery checklist that covered each of 

the three critical perioperative periods 

for the entire calendar year of 2012 

during the 45-day window from July 1 

through August 15, 2013. The 

information for this structural measure 

would be collected via an online Webbased tool that will be made available to 

ASCs via the QualityNet Web site. This 

collection mechanism is also used to 

collect structural measures and other 

information for other programs, 

specifically for the Hospital IQR and 

Hospital OQR programs. 

We invite public comments on our 

proposal to add this new structural 

measure to the ASC quality 

measurement set and the submission 

process for the CY 2015 payment 

determination. 

(2) ASC Facility Volume Data on 

Selected ASC Surgical Procedures 

There is substantial evidence in 

recent peer-reviewed clinical literature 

that volume of surgical procedures, 

particularly of high risk surgical 

procedures, is related to better patient 

outcomes, including decreased surgical 

errors and mortality.60 61 62 This may be 

attributable to greater experience and/or 

surgical skill, greater comfort with and 

hence likelihood of application of 

standardized best practices, and 

increased experience in monitoring and 

management of surgical patients for the 

particular procedure. For this reason, 

the National Quality Forum has 

endorsed measures of total all-patient 

surgical volume for Isolated CABG and 

Valve Surgeries (NQF #0124), 

Percutaneous Coronary Intervention 

(PCI) (NQF #0165), Pediatric Heart 

Surgery (NQF #0340), Abdominal Aortic 

Aneurism Repair (NQF #357), 

Esophageal Resection (#0361), and 

Pancreatic Resection (NQF #0366). 

Additionally, many consumer-oriented 

Web sites reporting health care quality 

information sponsored by States 

(California, New York, Texas, 

Washington, Florida, Illinois, Michigan, 

Oregon) and private organizations 

(Leapfrog Group, U.S. News & World 

Report) are reporting procedure volume, 

in addition to provider performance on 

surgical process (SCIP measures) and 

outcome measures (SSI, Patient Safety 

Indicators, and Mortality), because it 

provides beneficial performance 

information to consumers choosing a 

health care provider. The currently 

NQF-endorsed measures of procedure 

volume (noted above) relate to surgeries 

only performed in inpatient settings, 

and would not be applicable to the 

types of procedures approved to be 

performed in HOPDs and ASCs. 

The recently issued Report to 

Congress entitled ‘‘Medicare 

Ambulatory Surgical Center ValueBased Purchasing Implementation Plan’’ 

included an analysis of CY 2009 ASC 

claims for Medicare beneficiaries. When 

stratified by specialty category, CMS 

identified six procedure categories that 

historically constitute 98.5 percent of 

the total volume of procedures 

performed in ASCs: Gastrointestinal, 

Eye, Nervous System, Musculoskeletal, 

Skin, and Genitourinary. We are 

proposing that ASCs submit all patient 

volume data on these six broad 

categories of surgical procedures as a 

structural measure to be used for the 

ASC Quality Reporting Program CY 

2015 payment determination. In section 

XIV.C.2.c.(2) of this proposed rule, we 

are also proposing that HOPDs submit 

similar all patient volume data for eight 

broad procedure categories. 

Structural measures assess whether a 

provider/facility possesses conditions 

for the care of patients that are 

associated with better quality. Read 

together, section 1833(i)(7)(B) of the Act 

and section 1833(t)(17)(C)(i) of the Act 

require the Secretary, except as the 

Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. 

Because surgical volume is associated 

with better quality, and surgical 

procedures are performed in ASCs, we 

believe that surgical volume is 

appropriate for measuring the quality of 

these six categories of surgical 

procedures performed in ASCs. We have 

previously established for other 

programs that we believe consensus 

among affected parties can be reflected 

through various means including 

widespread use among industry 

stakeholders. We believe that the ASC 

Facility Volume Data on Selected ASC 

Surgical Procedures structural measure 

reflects consensus among affected 

parties as being associated with quality 

of surgical care because of recent 

evidence published in well-respected 

and widely circulated peer-reviewed 

clinical literature, and because of its 

widespread reporting among States and 

private stakeholders on Web sites 

featuring quality information. Because 

the current volume measures are 

endorsed for inpatient procedures, 

many of which are not performed in 

outpatient settings such as ASCs, it is 

not feasible or practicable to utilize NQF 

endorsed measures of volume for ASCs. 

Further, section 1833(i)(7)(B) of the Act 

states that section 1833(t)(17) of the Act, 

which contains this requirement, 

applies to the ASC Quality Reporting 

Program, except as the Secretary may 

otherwise provide. Under this 

provision, the Secretary has further 

authority to adopt non-endorsed 

measures. For the CY 2015 payment 

determination, we are proposing that 

ASCs would report these data with 

respect to these six categories between 

the dates July 1, 2013 and August 15, 

2013 with respect to the time period 

January 1, 2012 through December 31, 

2012. In other words, under this 

proposal, an ASC would report its CY 

2012 all-patient volume data for these 

six categories of procedures during the 

45-day window of July 1 to August 15, 

2013. The table below lists the HCPCS 

codes for which hospitals would be 

required to report all-patient volume 

data. Like the structural measures in the 

Hospital OQR program, data on this 

proposed measure would be collected 

via an online Web-based tool that will 

be made available to ASCs via the 

QualityNet Web site. This collection 

mechanism is also used to collect 

structural measures and other 

information for other programs 

(Hospital IQR and Hospital OQR). We 

invite public comment on this proposal. 

In summary, for the CY 2015 payment 

determination, we are proposing to 

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retain the eight measures proposed for 

the CY 2014 payment determination, if 

they are adopted in the final rule with 

comment period, and to add two 

structural measures. We invite public 

comments on these proposals for the CY 

2015 payment determination. The 

proposed measures for ASCs for CY 

2015 payment determination are listed 

below: 

PROPOSED ASC PROGRAM MEASUREMENT SET FOR THE CY 2015 PAYMENT DETERMINATION

ASC–1: Patient Burn. 

ASC–2: Patient Fall. 

ASC–3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant. 

ASC–4: Hospital Transfer/Admission. 

ASC–5: Prophylactic Intravenous (IV) Antibiotic Timing. 

ASC–6: Ambulatory Surgery Patients with Appropriate Method of Hair Removal. 

ASC–7: Selection of Prophylactic Antibiotic: First OR Second Generation Cephalosporin. 

ASC–8: Surgical Site Infection Rate. 

PROPOSED ASC PROGRAM MEASUREMENT SET FOR THE CY 2015 PAYMENT DETERMINATION

ASC–9: Safe Surgery Checklist Use* 

ASC–10: ASC Facility Volume Data on Selected ASC Surgical Procedures* 

Procedure category Corresponding HCPCS codes 

Gastrointestinal ................... 40000 through 49999, G0104, G0105, G0121, C9716, C9724, C9725, 0170T. 

Eye ..................................... 65000 through 68999, 0186, 0124T, 0099T, 0017T, 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 

0192T, 76510, 0099T. 

Nervous System ................. 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T. 

Musculoskeletal .................. 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T. 

Skin ..................................... 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727. 

Genitourinary ...................... 50000 through 58999, 0193T, 58805. 

*New proposed measures for CY 2015 payment determination. 

5. Proposed ASC Quality Measures for 

the CY 2016 Payment Determination 

a. Retention of Measures Adopted for 

the CY 2015 Payment Determination in 

the CY 2016 Payment Determination 

In general, unless otherwise specified 

in the retirement section of a rule, we 

propose to retain measures from one CY 

payment determination to the next. We 

are proposing to retain the ten measures 

we are proposing to adopt for the CY 

2015 payment determination, if they are 

finalized in an OPPS/ASC final rule 

with comment period, for the CY 2016 

payment determination. We invite 

public comment on this proposal. 

b. Proposed HAI Measure: Influenza 

Vaccination Coverage Among 

Healthcare Personnel (HCP) (NQF 

#0431) 

The Influenza Vaccination among 

Healthcare Personnel measure assesses 

the percentage of healthcare personnel 

who have been immunized for influenza 

during the flu season. The specifications 

for this measure are available at http:// 

www.cdc.gov/nhsn/PDFs/HSPmanual/ 

HPS_Manual.pdf. 

For the ASC CY 2016 payment 

determination, we are proposing to 

adopt this NQF-endorsed HAI measure. 

We also are proposing to adopt this 

measure for the Hospital OQR Program 

for the CY 2015 payment determination. 

We refer readers to the discussion in 

section XIV.C.3.b. of this proposed rule 

for a detailed description of this 

measure. 

Read together, section 1833(i)(7)(B) of 

the Act and section 1833(t)(17)(C)(i) of 

the Act require the Secretary, except as 

the Secretary may otherwise provide, to 

develop measures appropriate for the 

measurement of the quality of care 

(including medication errors) furnished 

by ASCs, that reflect consensus among 

affected parties and, to the extent 

feasible and practicable, that include 

measures set forth by one or more 

national consensus building entities. We 

believe this measure is appropriate for 

measuring quality of care in ASCs due 

to the significant impact of HCP 

influenza vaccination on the spread of 

influenza among patients. Furthermore, 

we believe that this measure meets the 

consensus requirement and the 

requirement that it be set forth by a 

national consensus building entity 

because it is endorsed by the NQF. 

We are proposing that ASCs use the 

NHSN infrastructure and protocol to 

report the measure for ASC Quality 

Reporting Program purposes. Collection 

of data via the NHSN for this measure 

will begin with immunizations from 

October 1, 2013 to March 31, 2014 for 

the CY 2016 payment determination. 

We invite public comment on our 

proposal to adopt this HAI measure into 

the ASC Quality Reporting Program for 

the CY 2016 payment determination. 

In summary, for the CY 2016 payment 

determination, we are proposing to 

retain the ten measures that we adopt 

for the CY 2015 payment determination 

(if these proposals are finalized in a 

final rule) and to add one NHSN HAI 

measure. The proposed measures for 

ASCs for the CY 2016 payment 

determination are listed below: 

PROPOSED ASC PROGRAM MEASUREMENT SET FOR THE CY 2016 PAYMENT DETERMINATION

ASC–1: Patient Burn. 

ASC–2: Patient Fall. 

ASC–3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant. 

ASC–4: Hospital Transfer/Admission. 

ASC–5: Prophylactic Intravenous (IV) Antibiotic Timing. 

ASC–6: Ambulatory Surgery Patients with Appropriate Method of Hair Removal. 

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PROPOSED ASC PROGRAM MEASUREMENT SET FOR THE CY 2016 PAYMENT DETERMINATION—Continued 

ASC–7: Selection of Prophylactic Antibiotic: First OR Second Generation Cephalosporin. 

ASC–8: Surgical Site Infection Rate. 

ASC–9: Safe Surgery Checklist Use. 

ASC–10: ASC Facility Volume Data on Selected ASC Surgical Procedures. 

Procedure category Corresponding HCPCS codes 

Gastrointestinal ................... 40000 through 49999, G0104, G0105, G0121, C9716, C9724, C9725, 0170T. 

Eye ..................................... 65000 through 68999, 0186, 0124T, 0099T, 0017T, 0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 

0192T, 76510, 0099T. 

Nervous System ................. 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 0216T, 0217T, 0218T, 0062T. 

Musculoskeletal .................. 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T. 

Skin ..................................... 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, C9727. 

Genitourinary ...................... 50000 through 58999, 0193T, 58805. 

ASC–11: Influenza Vaccination Coverage among Healthcare Personnel.* 

*New proposed measure for CY 2016 payment determination. 

6. ASC Measure Topics for Future 

Consideration 

Below is a list of future measurement 

areas that we are considering for future 

ASC Quality Reporting Program 

payment determinations for which we 

seek comment. 

In particular, we seek comment on the 

inclusion of Patient Experience of Care 

Measures in the ASC Quality Reporting 

Program measure set for a future 

payment determination, such as existing 

Consumer Assessment of Healthcare 

Providers and Systems (CAHPS) surveys 

for clinicians/groups and the CAHPS 

Surgical Care Survey, sponsored and 

submitted by the American College of 

Surgeons (ACS) and the Surgical 

Quality Alliance (SQA). We also, in 

particular, seek comment on the 

inclusion of procedure-specific 

measures for cataract surgery, 

colonoscopy and endoscopy, and for 

measures of Anesthesia Related 

Complications in the ASC Quality 

Reporting Program measure set. 

MEASURES AND MEASUREMENT TOPICS UNDER CONSIDERATION FOR FUTURE PAYMENT DETERMINATIONS

Patient Experience of Care: 

Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys for clinicians/groups. 

CAHPS Surgical Care Survey. 

Procedure Specific Measures: 

Colonoscopy and other Endoscopy measures. 

Cataract Surgery measures. 

Anesthesia Related Complications: 

Death. 

Cardiac Arrest. 

Perioperative Myocardial Infarction. 

Anaphylaxis. 

Hyperthermia. 

Transfusion Reaction. 

Stroke, Cerebral Vascular Accident, or Coma following anesthesia. 

Visual Loss. 

Medication Error. 

Unplanned ICU admission. 

Patient intraoperative awareness. 

Unrecognized difficult airway. 

Reintubation. 

Dental Trauma. 

Perioperative aspiration. 

Vascular access complication, including vascular injury or pneumothorax. 

Pneumothorax following attempted vascular access or regional anesthesia. 

Infection following epidural or spinal anesthesia. 

Epidural hematoma following spinal or epidural anesthesia. 

High Spinal. 

Postdural puncture headache. 

Major systemic local anesthetic toxicity. 

Peripheral neurologic deficit following regional anesthesia. 

Infection following peripheral nerve block. 

Additional Future Measurement Topics: 

NQF Serious Reportable Events in Healthcare. 

Medication administration variance. 

Medication reconciliation. 

Venous thromboembolism measures: outcome/assessment/prophylaxis. 

Presence of Physician during Entire Recovery Period. 

Post-discharge follow up. 

Post-discharge ED visit within 72 hours. 

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We invite public comment on these 

quality measures and measurement 

topics so that we may consider 

proposing to adopt them for future ASC 

Quality Reporting Program payment 

determinations beginning with the CY 

2015 payment determination. We also 

are seeking suggestions for additional 

measures and rationales for the ASC 

Quality Reporting Program that are not 

listed in the table above. 

7. Technical Specification Updates and 

Data Publication 

a. Maintenance of Technical 

Specifications for Quality Measures 

We are proposing to provide technical 

specifications, and in some cases, links 

to technical specifications hosted on 

external third party Web sites, for the 

ASC Quality Reporting Program 

measure in a Specifications Manual, to 

be posted after publication of the CY 

2012 OPPS/ASC final rule with 

comment period, on the CMS 

QualityNet Web site at http://www.

QualityNet.org. Currently, the 

specifications for the proposed ASC 

measures for the CY 2014, CY 2015 and 

CY 2016 payment determinations, with 

the exception of the two structural 

measures, can be found at: http://www.

ascquality.org/documents/ASCQuality

CollaborationImplementationGuide.pdf; 

http://www.cms.gov/apps/ama/

license.asp?file=/pqrs/downloads/2011_

PhysQualRptg_MeasureSpecifications

Manual_033111.pdf; http://www.cdc.

gov/nhsn/psc.html; and http://www.cdc.

gov/nhsn/PDFs/HSPmanual/HPS_

Manual.pdf. The specifications for the 

two structural measures are included in 

the discussion above and in the table of 

measures proposed for the CY 2015 

payment determination. 

We are proposing to maintain the 

technical specifications for the measures 

adopted for the ASC quality reporting 

program by updating this Specifications 

Manual and including detailed 

instructions and calculation algorithms 

as appropriate. In some cases where the 

specifications are available elsewhere, 

we may include links to Web sites 

hosting technical specifications. We 

currently use this same process for 

Hospital OQR Program measures, as 

discussed above in section XIV.A.3.a. of 

this proposed rule. We are proposing to 

follow the same technical specification 

maintenance process for the ASC 

Quality Reporting Program measures 

and we invite public comments on this 

proposal. 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68766 

through 68767), we established a 

subregulatory process for updates to the 

technical specifications that we use to 

calculate Hospital OQR Program 

measures. This process is used when 

changes to the measure specifications 

are necessary due to changes in 

scientific evidence or other substantive 

changes, thereby giving CMS the option 

to seek re-endorsement of that measure. 

We note that NQF endorsement of an 

OQR measure is not required under 

sections 1833(i)(2)(D)(iv), (i)(7) or (t)(17) 

of the Act. The legal standard for 

adopting Hospital OQR measures is 

consensus among affected parties, and 

to the extent feasible and practicable, 

measures that are set forth by a 

consensus building entity. The legal 

standard for adopting ASC measures is 

this same standard, except as the 

Secretary may otherwise provide. 

Changes of this nature to measures 

adopted for the ASC Quality Reporting 

Program may not coincide with the 

timing of our regulatory actions, but 

nevertheless require inclusion in the 

measure specifications so that measures 

are calculated based on the most up-todate scientific standards and, in some 

instances, consensus standards. 

For the Hospital OQR Program, we 

indicated that notification of changes to 

the measure specifications is available 

on the QualityNet Web site, http:// 

www.QualityNet.org, and in the 

Hospital OQR Program Specifications 

Manual and would occur no less than 3 

months before any changes become 

effective for purposes of reporting under 

the Hospital OQR Program. The 

Hospital OQR Program Specifications 

Manual is released every 6 months and 

addenda are released as necessary 

providing at least 3 months of advance 

notice for substantial changes such as 

changes to ICD–9, CPT, NUBC, and 

HCPCS codes, and at least 6 months 

notice for substantive changes to data 

elements that would require significant 

systems changes. We are proposing to 

follow the same subregulatory process 

for the ASC Quality Reporting Program 

for updates to the technical 

specifications. We invite public 

comments on this proposal. 

b. Publication of ASC Quality Reporting 

Program Data 

Section 1833(t)(17)(E) of the Act 

requires that the Secretary establish 

procedures to make data collected under 

the Hospital OQR Program available to 

the public. It also states that such 

procedures must ensure that a hospital 

has the opportunity to review the data 

that are to be made public with respect 

to the hospital prior to such data being 

made public. These requirements under 

section 1833(t)(17)(E) of the Act also 

apply to the ASC Quality Reporting 

Program except as the Secretary may 

otherwise provide. We are proposing to 

make data that an ASC has submitted 

for the ASC Quality Reporting Program 

available on a CMS Web site after 

providing ASCs an opportunity to 

preview the data to be made public. We 

are proposing that these data would be 

displayed at the CMS Certification 

Number (CCN) level. Publishing this 

information encourages beneficiaries to 

work with their doctors and ASCs to 

discuss the quality of care ASCs provide 

to patients, thereby providing an 

additional incentive to ASCs to improve 

the quality of care that they furnish. We 

intend to propose more detail on the 

publication of data in a later 

rulemaking. We solicit public comment 

on these proposed processes of making 

ASC quality data available to the public. 

8. Proposed Requirements for Reporting 

of ASC Quality Data for the CY 2014 

Payment Determination 

To participate in the ASC Quality 

Reporting Program for the CY 2014 

payment determination, we are 

proposing that ASCs must meet data 

collection and data submission 

requirements. We intend to propose 

administrative requirements, data 

validation and data completeness 

requirements, reconsideration and 

appeals processes, and CY 2015 

payment determination reporting 

requirements in the CY 2013 OPPS/ASC 

proposed rule with comment period. 

a. Proposed Data Collection and 

Submission Requirements for the 

Proposed Claims-Based Measures 

We are proposing that, to be eligible 

for the full CY 2014 ASC annual 

payment update, ASCs would be 

required to submit complete data on 

individual quality measures through a 

claims-based reporting mechanism by 

submitting the appropriate QDCs on the 

ASC’s Medicare claims. For the CY 2014 

payment determination, we are 

proposing to utilize Medicare fee-forservice ASC claims for services 

furnished between January 1, 2012 and 

December 31, 2012. 

We are proposing to consider an ASC 

as participating in the ASC Quality 

Reporting Program for CY 2014 payment 

determination if the ASC includes QDCs 

specified for the program on their CY 

2012 claims relating to the proposed 

measures if finalized. As no 

determinations will be made affecting 

payment until the CY 2014 annual 

payment update, we are proposing this 

approach as to reduce ASC burden. We 

intend to provide additional details 

regarding participation notification and 

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other administrative requirements in CY 

2013 rulemaking. 

We are proposing that data 

completeness for claims-based measures 

would be determined by comparing the 

number of claims meeting measure 

specifications that contain the 

appropriate QDCs with the number of 

claims that would meet measure 

specifications, but did not have the 

appropriate QDCs on the submitted 

claim. We intend to propose how we 

will assess data completeness for 

claims-based measures in the CY 2013 

OPPS/ASC proposed rule. We request 

public comment on these proposals and 

are specifically interested in receiving 

public comment on what constitutes 

complete data in regard to our proposed 

ASC claims-based measures utilizing 

QDCs and methods to assess 

completeness. 

b. Proposed Data Submission Deadlines 

for the Proposed Surgical Site Infection 

Rate Measure 

As discussed above, we are proposing 

to adopt a HAI measure, Surgical Site 

Infection Rate, for the CY 2014 payment 

determination. We are proposing to use 

the data submission and reporting 

standard procedures that have been set 

forth by the CDC for NHSN participation 

in general and for submission of this 

measure to NHSN. We refer readers to 

the CDC’s NHSN Web site (http:// 

www.cdc.gov/nhsn) for detailed data 

submission and reporting procedures. 

Our proposal seeks to reduce ASC 

burden by aligning CMS data 

submission and reporting procedures 

with NHSN procedures currently 

utilized by healthcare providers and 

suppliers. The submission timeframes 

for the CY 2014 payment determination 

that we are proposing to use for the 

proposed Surgical Site Infection Rate 

measure are shown below. ASCs must 

submit their quarterly data to NHSN for 

ASC Quality Data Reporting purposes 

within the date intervals shown in the 

table below (any updates to this 

schedule will be posted on the 

QualityNet Web site). 

PROPOSED SUBMISSION TIMEFRAME FOR THE PROPOSED SURGICAL SITE INFECTION RATE MEASURE FOR THE CY 2014 

PAYMENT DETERMINATION

CY 2013 infection events CDC–NHSN collection and quarterly report Final submission deadline for ASC quality 

reporting CY 2014 payment determination 

Q1 (Jan 1 to Mar 31, 2013) ............................... January 31st to August 1st .............................. August 1, 2013

Q2 (Apr 1 to Jun 30, 2013) ................................ April 30th to November 1st .............................. November 1, 2013 

We request public comments on these 

proposals. 

XV. Proposed Changes to Whole 

Hospital and Rural Provider Exceptions 

to the Physician Self-Referral 

Prohibition: Exception for Expansion of 

Facility Capacity; and Proposed 

Changes to Provider Agreement 

Regulations Relating to Patient 

Notification Requirements 

A. Background 

Section 1877 of the Act, also known 

as the physician self-referral law: (1) 

prohibits a physician from making 

referrals for certain ‘‘designated health 

services’’ (DHS) payable by Medicare to 

an entity with which the physician (or 

an immediate family member) has a 

financial relationship (ownership or 

compensation), unless an exception 

applies; and (2) prohibits the entity from 

filing claims with Medicare (or billing 

another individual, entity, or third party 

payer) for those DHS furnished as a 

result of a prohibited referral. The Act 

establishes a number of specific 

exceptions and grants the Secretary the 

authority to create regulatory exceptions 

that pose no risk of program or patient 

abuse. 

Section 1877(d) of the Act sets forth 

additional exceptions related to 

ownership or investment interests held 

by a physician (or an immediate family 

member of a physician) in an entity that 

furnishes DHS. Section 1877(d)(2) of the 

Act provides an exception for 

ownership or investment interests in 

rural providers. In order for an entity to 

qualify for the exception, the DHS must 

be furnished in a rural area (as defined 

in section 1886(d)(2) of the Act) and 

substantially all of the DHS furnished 

by the entity must be furnished to 

individuals residing in a rural area. 

Section 1877(d)(3) of the Act provides 

an exception, known as the ‘‘whole 

hospital’’ exception, for ownership or 

investment interests in a hospital 

located outside of Puerto Rico, provided 

that the referring physician is 

authorized to perform services at the 

hospital and the ownership or 

investment interest is in the hospital 

itself (and not merely in a subdivision 

of the hospital). 

B. Changes Made by the Affordable Care 

Act 

1. Provisions Relating to Exceptions to 

Ownership and Investment Prohibition 

(Section 6001(a) of the Affordable Care 

Act) 

Section 6001(a) of the Affordable Care 

Act amended the whole hospital and 

rural provider exceptions to impose 

additional restrictions on physician 

ownership or investment in hospitals. 

The statute defines a ‘‘physician owner 

or investor’’ in a hospital as a physician 

or immediate family member of a 

physician who has a direct or indirect 

ownership or investment interest in a 

hospital. We will refer to hospitals with 

such ‘‘physician owners or investors’’ as 

‘‘physician-owned hospitals.’’ 

We addressed section 6001(a) of the 

Affordable Care Act in the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 71800). In § 411.362, we 

implemented most of the requirements 

of section 6001(a) of the ACA, including 

patient safety requirements. In sections 

XV.B.2. and C. of this proposed rule, we 

address the process for a hospital to 

request an exception to the prohibition 

on expansion of facility capacity under 

section 6001(a)(3) of the Affordable Care 

Act. In section D. of this proposed rule, 

we address related patient notification 

requirements in the provider agreement 

regulations. 

2. Provisions of Section 6001(a)(3) of the 

Affordable Care Act 

The amended whole hospital and 

rural provider exceptions provide that a 

hospital may not increase the number of 

operating rooms, procedure rooms, and 

beds beyond that for which the hospital 

was licensed on March 23, 2010 (or, in 

the case of a hospital that did not have 

a provider agreement in effect as of this 

date, but did have a provider agreement 

in effect on December 31, 2010, the date 

of effect of such agreement). Section 

6001(a)(3) of the Affordable Care Act 

added new section 1877(i)(3)(A)(i) of the 

Act to set forth that the Secretary shall 

establish and implement an exception 

process to the prohibition on expansion 

of facility capacity. Referrals are 

prohibited if made by physician owners 

or investors after facility expansion and 

prior to the Secretary granting an 

exception. Exceptions for expanding 

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facility capacity will protect only those 

referrals made after the exception is 

granted. In this proposed rule, we set 

forth proposed regulations for this 

process at § 411.362(c) and related 

definitions at § 411.362(a). 

The proposed regulations at 

§ 411.362(c) set forth the process for a 

hospital to request an exception. 

Proposed new § 411.362(c)(2) outlines 

the requirements for an applicable 

hospital request and § 411.362(c)(3) 

outlines the requirements for a high 

Medicaid facility request. These terms 

are defined at sections 1877(i)(3)(E) and 

1877(i)(3)(F) of the Act. The statute is 

clear that an applicable hospital may 

apply for an exception up to once every 

2 years. Using our rulemaking authority 

under sections 1871 and 1877(i)(3)(A)(i) 

of the Act, we are proposing to interpret 

the statute to impose the same 2-year 

frequency limit to apply also to high 

Medicaid facilities as discussed in 

section XV.C.2. of this proposed rule. 

We are proposing to set forth the 

elements required for a complete 

request for an exception under proposed 

new § 411.362(c)(4). The opportunity for 

community input (required by section 

1877(i)(3)(A)(ii) of the Act) and timing 

of a complete request are described in 

proposed § 411.362(c)(5). Under 

proposed § 411.362(c)(5), we are 

proposing to provide an opportunity for 

individuals and entities in the 

community in which the hospital is 

located to provide input with respect to 

the hospital’s request for an exception. 

For purposes of this proposed rule, 

when the statute refers to an 

‘‘application,’’ we use the term 

‘‘request.’’ 

Because section 1877(i)(3)(D) of the 

Act provides that any increase in the 

number of operating rooms, procedure 

rooms, and beds for which a hospital is 

licensed pursuant to being granted an 

exception may occur only in facilities 

on the hospital’s main campus, we are 

proposing a definition of the ‘‘main 

campus of the hospital’’ at § 411.362(a), 

as discussed below. Additionally, we 

are proposing a definition of the 

‘‘baseline number of operating rooms, 

procedure rooms, and beds’’ for 

purposes of section 1877(i)(3)(C)(ii) of 

the Act. 

Section 1877(i)(3)(H) of the Act 

provides that the Secretary shall publish 

the final decision with respect to an 

application in the Federal Register no 

later than 60 days after receiving a 

complete application. Under section 

XV.C.4. of this proposed rule, below, we 

discuss our proposal for publishing 

decisions in the Federal Register as well 

as on the CMS Web site. 

Under section 1877(i)(3)(A) of the Act, 

the Secretary must promulgate 

regulations concerning the process for a 

hospital to apply for an exception by 

January 1, 2012, and implement this 

process on February 1, 2012. We 

anticipate an effective date of January 1, 

2012, for these proposed regulations. 

Below, we set out our proposals related 

to the exception process in greater 

detail. 

C. Proposed Changes Relating to the 

Process for an Exception to the 

Prohibition on Expansion of Facility 

Capacity 

In order to conform our regulations to 

the amendments made to the rural 

provider and whole hospital exceptions 

by section 6001(a)(3) of the Affordable 

Care Act, we are proposing to add two 

definitions in § 411.362(a) and a new 

§ 411.362(c) to establish the process by 

which an applicable hospital or high 

Medicaid facility may request an 

exception to the prohibition on 

expansion of facility capacity. We are 

proposing to define the terms ‘‘baseline 

number of operating rooms, procedure 

rooms, and beds’’ and ‘‘main campus of 

the hospital’’. The process we are 

proposing sets forth the relevant data 

sources and the elements of a complete 

request for an exception. 

1. Applicable Hospital 

Below we separately discuss each of 

the statutory criteria that a hospital 

must satisfy to qualify as an ‘‘applicable 

hospital’’. We are proposing the 

processes by which a hospital can 

determine whether it satisfies each 

criterion. The proposed data 

requirements for each criterion are 

further discussed in each section below. 

We are proposing that data from the 

CMS Healthcare Cost Report 

Information System (HCRIS) be used to 

determine whether a hospital satisfies 

the inpatient admission, bed capacity, 

and bed occupancy criteria. We 

currently consider HCRIS to contain a 

sufficient amount of data for a particular 

fiscal year if HCRIS contains data from 

at least 6,100 hospitals for that fiscal 

year. Therefore, we are proposing that 

HCRIS must contain data from at least 

6,100 hospitals for a particular year in 

order for that year’s data to be used 

under the exception process. If HCRIS 

does not contain sufficient data for that 

year, data from the most recent year(s) 

that satisfy the threshold should be 

used. 

CMS will post the average percent of 

total inpatient Medicaid admissions per 

county, the average bed capacity per 

State, the national average bed capacity, 

and the average bed occupancy per State 

on the CMS Web site at: http:// 

www.cms.gov/physicianselfreferral/ 

85_physician_owned_hospitals.asp. 

Hospitals can access these data to assess 

whether they satisfy the respective 

criteria to qualify as an applicable 

hospital. CMS will make a reasonable 

effort to ensure that the data contained 

in HCRIS are correct and complete at 

the time of disclosure. We are soliciting 

public comment on proposing and 

justifying alternative data sources other 

than HCRIS that could result in more 

accurate determinations as to whether a 

hospital satisfies the relevant criteria. 

a. Percentage Increase in Population 

Section 1877(i)(3)(E)(i) of the Act 

provides that an applicable hospital 

means a hospital that is located in a 

county in which the percentage increase 

in the population during the most recent 

5-year period (as of the application date) 

is at least 150 percent of the percentage 

increase in the population growth of the 

State in which the hospital is located 

during that period, as estimated by the 

Bureau of the Census. 

To determine the percentage increase 

in population in the county and State in 

which the hospital is located, we are 

proposing at § 411.362(c)(2)(i) that the 

hospital use population estimates 

provided by the Bureau of the Census. 

If the hospital is located in an area 

referred to by the Bureau of the Census 

as a county equivalent area, such as an 

independent city, borough, or census 

area, the hospital should use the Bureau 

of the Census estimates for the county 

equivalent area in which it is located. 

For the remainder of this subsection, 

‘‘county’’ refers to both a county and a 

county equivalent area. 

We recognize that the Bureau of the 

Census may not provide county and 

State population size estimates that are 

current as of the date that a hospital 

submits its request for an exception. We 

are proposing that a hospital should use 

only the most recent estimates available 

to perform the necessary calculations. 

For example, if a hospital submits a 

request for an exception in 2012, but the 

most recent year for which the Bureau 

of the Census has estimates is 2010, the 

hospital should perform the necessary 

calculations using estimates for years 

2010 and 5 years prior. 

We are proposing also that the 

hospital use county and State 

population estimates for the same years. 

For example, if a hospital submits a 

request for an exception in 2012 and the 

most recent year for which the Bureau 

of the Census has State and county 

population estimates is 2011 and 2010, 

respectively, the hospital should 

perform the necessary calculations 

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using estimates for years 2010 and 5 

years prior. We are proposing to review 

a request based on the population 

estimates available as of the date that a 

hospital submits its request even if the 

Bureau of the Census updates its 

estimates after the hospital submits its 

request and prior to our decision. 

b. Inpatient Admissions 

Section 1877(i)(3)(E)(ii) of the Act 

provides that an applicable hospital 

means a hospital that has an annual 

percent of total inpatient admissions 

under Medicaid that is equal to or 

greater than the average percent with 

respect to such admissions for all 

hospitals located in the county in which 

the hospital is located. We are 

proposing at § 411.362(c)(2)(ii) to 

require hospitals to calculate inpatient 

admissions using filed hospital cost 

report discharge data. We are proposing 

that, in calculating the hospital’s annual 

percent of total Medicaid inpatient 

admissions, the hospital should divide 

the number of discharges for the year 

that are paid for under Medicaid by the 

total number of discharges for the year 

paid for by any governmental or private 

payor. We are soliciting public comment 

on other data sources that could be used 

to provide an accurate estimate of the 

annual percent of total Medicaid 

inpatient admissions for the applicable 

hospital and for all hospitals in the 

same county. 

The statute does not specify the 

number of years for which the hospital’s 

annual percent of total inpatient 

admissions under Medicaid must be 

equal to or greater than the average 

percent with respect to such admissions 

for all hospitals located in the county in 

which the hospital is located. We are 

proposing at § 411.362(c)(2)(ii) that a 

hospital must satisfy this criterion for 

each of the 3 most recent fiscal years for 

which data are available as of the date 

the hospital submits a request. We 

invite public comment on whether 3 

years of data are sufficient to indicate a 

legitimate need by the hospital to 

increase its number of operating rooms, 

procedure rooms, and beds and, if not, 

how many years of data we should 

consider in evaluating a request for an 

exception. 

We are proposing at § 411.362(c)(2)(ii) 

that the hospital would estimate its 

annual percentage of total inpatient 

admissions under Medicaid. The 

hospital would reference its own filed 

cost reports for the 3 most recent fiscal 

years for which data are available. We 

are proposing that we would review a 

request based on the data available as of 

the date the hospital submits its request. 

We plan to issue guidance to further 

address the process for a hospital to 

estimate its annual percentage of total 

inpatient admissions under Medicaid. 

The guidance will also explain how 

CMS will determine and provide the 

average percentages of inpatient 

admissions under Medicaid for each 

county. 

c. Nondiscrimination 

Section 1877(i)(3)(E)(iii) of the Act 

provides that an applicable hospital 

does not discriminate against 

beneficiaries of Federal health care 

programs and does not permit 

physicians practicing at the hospital to 

discriminate against such beneficiaries. 

We are proposing to incorporate this 

requirement at § 411.362(c)(2)(iii) of the 

regulations. 

d. Bed Capacity 

Section 1877(i)(3)(E)(iv) of the Act 

provides that an applicable hospital 

means a hospital that is located in a 

State in which the average bed capacity 

in the State is less than the national 

average bed capacity. The statute does 

not specify a time period over which a 

State’s average bed capacity must be less 

than the national average bed capacity. 

We are proposing at § 411.362(c)(2)(iv) 

that the State average bed capacity must 

be less than the national average bed 

capacity for each of the 3 most recent 

fiscal years for which data are available 

as of the date that a hospital submits its 

request. We invite public comment on 

whether 3 years of data are sufficient to 

indicate a legitimate need by the 

hospital to increase its number of 

operating rooms, procedure rooms, and 

beds and, if not, how many years of data 

we should consider in evaluating any 

request for an exception. 

Under our proposed process, CMS 

would use filed hospital cost reporting 

data to determine State and national 

average bed capacities. We plan to issue 

guidance explaining how CMS will 

determine and provide the average bed 

capacities. We are proposing that we 

would review a request based on the 

data available as of the date a hospital 

submits its request. 

e. Bed Occupancy 

Section 1877(i)(3)(E)(v) of the Act 

provides that an applicable hospital 

means a hospital that has an average bed 

occupancy rate that is greater than the 

average bed occupancy rate in the State 

in which the hospital is located. The 

statute does not specify the time period 

over which the hospital’s average bed 

occupancy rate must be greater than the 

State average bed occupancy rate. We 

are proposing at § 411.362(c)(2)(v) that 

the hospital’s bed occupancy rate must 

be greater than the State average bed 

occupancy rate for each of the 3 most 

recent fiscal years for which data are 

available as of the date that a hospital 

submits its request. We invite public 

comment on whether 3 years of data are 

sufficient to indicate a legitimate need 

by the hospital to increase the number 

of its operating rooms, procedure rooms, 

and beds and, if not, how many years 

of data we should consider in evaluating 

any request for an exception. 

We are proposing at § 411.362(c)(2)(v) 

that the hospital use filed hospital cost 

reporting data to calculate its own 

average bed occupancy rate. We plan to 

issue guidance explaining how the 

hospital can calculate its bed occupancy 

rate. The guidance would also explain 

how CMS will determine and provide 

the State bed occupancy rates. We are 

proposing that we would review a 

request based on the data available as of 

the date that the hospital submits its 

request. 

2. High Medicaid Facility 

Below we separately discuss each of 

the statutory criteria that a hospital 

must satisfy to qualify as a ‘‘high 

Medicaid facility.’’ We are proposing 

the processes by which a hospital can 

determine whether it satisfies each 

criterion. The proposed data 

requirements for each criterion are 

further discussed in the sections below. 

As discussed in section XV.C.1. of 

this proposed rule, we currently 

consider HCRIS to contain a sufficient 

amount of data for a particular fiscal 

year once HCRIS contains data from at 

least 6,100 hospitals for that year. 

Therefore, we are proposing that HCRIS 

must contain data from at least 6,100 

hospitals for a particular year in order 

for that year’s data to be used under the 

exception process. If HCRIS does not 

contain sufficient data for that year, data 

from the most recent year(s) that 

satisfies the threshold should be used. 

a. Number of Hospitals in County 

Section 1877(i)(3)(F)(i) of the Act 

provides that a high Medicaid facility 

means a hospital that is not the sole 

hospital in a county. We are proposing 

to incorporate this requirement into the 

regulations at § 411.362(c)(3)(i). 

b. Inpatient Admissions 

Section 1877(i)(3)(F)(ii) of the Act 

provides that a high Medicaid facility 

means a hospital that, with respect to 

each of the 3 most recent years for 

which data are available, has an annual 

percent of total inpatient admissions 

under Medicaid that is estimated to be 

greater than such percent with respect 

to such admissions for any other 

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hospital located in the county in which 

the hospital is located. We are 

proposing to incorporate this 

requirement at § 411.362(c)(3)(ii) of the 

regulations. 

We are proposing at § 411.362(c)(3)(ii) 

that the hospital estimate its annual 

percentages of total inpatient 

admissions under Medicaid for each of 

the 3 most recent fiscal years for which 

data are available. We also are 

proposing that the hospital estimate the 

annual percentage of such admissions 

for all other hospitals located in the 

county in which the hospital is located 

for each of the 3 most recent fiscal years 

for which data are available. We are 

proposing that we would review a 

request based on the data available as of 

the date that the hospital submits its 

request. 

We are proposing to require the 

applicant hospital to use filed hospital 

cost reporting discharge data as a proxy 

for inpatient admissions under 

Medicaid. CMS will post the data 

necessary for a hospital to calculate the 

annual percentage of total inpatient 

admissions under Medicaid for all other 

hospitals located in the county in which 

the hospital is located on the CMS Web 

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

physicianselfreferral/ 

85_physician_owned_hospitals.asp. We 

plan to issue guidance that further 

describes the process for hospitals to 

estimate inpatient admissions under 

Medicaid. 

c. Nondiscrimination 

Section 1877(i)(3)(F)(iii) of the Act 

provides that a high Medicaid facility 

does not discriminate against 

beneficiaries of Federal health care 

programs and does not permit 

physicians practicing at the hospital to 

discriminate against such beneficiaries. 

We are proposing to incorporate this 

requirement at § 411.362(c)(3)(iii) of the 

regulations. 

3. Procedure for Submitting a Request 

We are not creating an application 

form that a hospital must complete to 

apply for an exception to the 

prohibition on expansion of facility 

capacity. Rather, we are proposing that 

a hospital submit to CMS a request that 

includes the information and 

documentation set forth in proposed 

§ 411.362(c)(4)(ii). 

We are proposing that each request 

must include: (i) the name and address, 

National Provider Identification 

number(s) (NPI), Tax Identification 

Number(s) (TIN), and CMS Certification 

Number(s) (CCN) of the hospital; (ii) the 

county in which the hospital is located; 

and (iii) the name, title, address, and 

daytime telephone number of a contact 

person who will be available to discuss 

the request with CMS on behalf of the 

hospital. Each request must include a 

clear statement as to whether the 

hospital is requesting an exception as an 

applicable hospital or a high Medicaid 

facility. We are proposing that each 

request submitted by a hospital must 

include a clear explanation of how it 

satisfies the criteria using the 

information discussed in sections 

XV.C.1. or 2. of this proposed rule. This 

includes performing, recording, and 

submitting all calculations necessary to 

submit a complete request. The 

hospital’s request must state that it does 

not discriminate against beneficiaries of 

Federal health care programs and does 

not permit physicians practicing at the 

hospital to discriminate against such 

beneficiaries. Finally, we encourage 

hospitals to clearly label all 

documentation submitted with a request 

and indicate the criteria for which the 

documentation provides supporting 

information. 

We are proposing at 

§ 411.362(c)(4)(ii)(E) that each request 

must include documentation supporting 

the hospital’s calculation of the 

hospital’s baseline number of operating 

rooms, procedure rooms, and beds as 

defined at section 1877(i)(3)(C)(iii) of 

the Act; the hospital’s number of 

operating rooms, procedure rooms, and 

beds for which the hospital is licensed 

as of the date that the hospital submits 

its request; and the additional number 

of operating rooms, procedure rooms, 

and beds by which the hospital requests 

to expand. 

Finally, we are proposing at 

§ 411.362(c)(4)(iii) that each request 

must include a certification signed by 

an authorized representative of the 

hospital attesting that all of the 

information provided is true and correct 

to the best of his or her knowledge and 

belief. 

We are proposing at § 411.362(c)(4)(i) 

that a hospital must either mail an 

original and one copy of its request to 

CMS or submit its request 

electronically. If a hospital submits its 

request electronically, the hospital must 

also submit an original, hard copy of the 

required certification. 

4. Community Input 

Section 1877(i)(3)(A)(ii) of the Act 

provides that individuals and entities in 

the community in which the applicable 

hospital is located shall have an 

opportunity to provide input on the 

applicable hospital’s request for an 

exception to the prohibition against 

facility expansion. We are proposing to 

incorporate this provision in proposed 

§ 411.362(c)(5) of the regulations. We 

are proposing that the community input 

must take the form of written comments. 

In addition, using our rulemaking 

authority under sections 1871 and 

1877(i)(3)(A)(i) of the Act, we are 

proposing that individuals and entities 

in the community in which a high 

Medicaid facility is located may have 

the same opportunity to submit written 

comments. 

We are proposing at § 411.362(c)(5) 

that a hospital must disclose on any 

public Web site for the hospital that it 

is requesting an exception. The notice 

should be accessible to the public and 

should remain posted from the time a 

request is submitted to CMS until a 

decision is finalized by CMS. Once CMS 

has received the statements, 

certifications, and documentation 

required for a hospital’s request, CMS 

will report that the hospital is 

requesting an exception on the CMS 

Hospital Listserv and will post the 

hospital’s request for an exception on 

the CMS Web site. For specific 

information on how to subscribe to the 

CMS Hospital Listserv, please access the 

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

MLNProducts/downloads/ 

MailingLists_FactSheet.pdf. In addition, 

we are proposing that a notice of the 

hospital’s request will be published in 

the Federal Register. We are proposing 

at § 411.362(c)(5) to allow individuals 

and entities in the community 30 days 

from the date of the notice’s publication 

in the Federal Register to submit 

written comments. 

Examples of community input 

include documentation demonstrating 

that the hospital does not satisfy one or 

more of the data criteria or that the 

hospital discriminates against 

beneficiaries. These are examples only; 

we are not restricting the types of 

community input that may be 

submitted. We are proposing at 

§ 411.362(c)(5) that written comments 

must be submitted by mail or 

electronically to CMS. 

We are proposing at § 411.362(c)(5)(i) 

that we will consider a request complete 

if CMS does not receive any written 

comments during the 30-day period 

after notice of the hospital’s request is 

published in the Federal Register. 

If CMS receives written comments, 

CMS will notify the hospital in writing. 

We are proposing at § 411.362(c)(5)(ii) to 

allow the hospital 30 days after CMS 

notifies the hospital of the written 

comments to submit information and 

documentation that rebut the written 

comments. We will consider the request 

complete at the end of the 30-day period 

provided for the hospital’s rebuttal, 

regardless of whether the hospital 

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submits additional information or 

documentation. We reserve the right to 

perform our own calculations based on 

a review of the material submitted and 

of information generally available to 

CMS. 

5. Permitted Increase 

Section 1877(i)(3)(C)(i) of the Act 

provides that a hospital granted an 

exception from the Secretary may 

increase the number of operating rooms, 

procedure rooms, and beds for which 

the hospital is licensed above its 

baseline number of operating rooms, 

procedure rooms, and beds. If the 

hospital has been granted a previous 

exception from the Secretary, the 

hospital may increase above the number 

of operating rooms, procedure rooms, 

and beds for which the hospital is 

licensed after application of the most 

recent increase under such an 

exception. 

a. Amount of Permitted Increase 

Section 1877(i)(3)(C)(ii) of the Act 

provides that the Secretary shall not 

permit an increase in the number of 

operating rooms, procedure rooms, and 

beds for which an applicable hospital is 

licensed to the extent such increase 

would result in the number of operating 

rooms, procedure rooms, and beds for 

which the applicable hospital is 

licensed exceeding 200 percent of the 

baseline number of operating rooms, 

procedure rooms, and beds of the 

applicable hospital. We are proposing to 

incorporate this provision at 

§ 411.362(c)(6)(i) of the regulations. 

Using our rulemaking authority under 

sections 1871 and 1877(i)(3)(A)(i) of the 

Act, we are proposing to similarly limit 

the increase in the number of operating 

rooms, procedure rooms, and beds for 

which a high Medicaid facility may 

request an exception. We are soliciting 

public comment on whether the 

proposed limit would be sufficient to 

balance the intent of the general 

prohibition on expansion with the 

purpose of the exception process to 

provide the opportunity to expand in 

areas where a sufficient need for access 

to high Medicaid facilities is 

demonstrated. 

A hospital must determine its 

baseline facility capacity to ensure that 

an expansion is within the limits set 

forth at section 1877(i)(3)(C)(ii) of the 

Act and to submit a complete request. 

Section 1877(i)(3)(C)(iii) of the Act 

defines the ‘‘baseline number of 

operating rooms, procedure rooms, and 

beds’’ as the number of operating rooms, 

procedure rooms, and beds for which 

the applicable hospital is licensed as of 

[March 23, 2010] (or, in the case of a 

hospital that did not have a provider 

agreement in effect as of such date but 

does have such an agreement in effect 

on December 31, 2010, the effective date 

of such provider agreement). We are 

proposing to incorporate this definition, 

with the clarification that it also applies 

to high Medicaid facilities, at 

§ 411.362(a) of the regulations. 

b. Location of Permitted Increase 

Section 1877(i)(3)(D) of the Act 

provides that any increase in the 

number of operating rooms, procedure 

rooms, and beds for which an applicable 

hospital is licensed may occur only in 

facilities on the main campus of the 

applicable hospital. We are proposing to 

incorporate this provision at proposed 

§ 411.362(c)(6)(ii) of the regulations. We 

are proposing to define the term ‘‘main 

campus’’ as the term ‘‘campus’’ is 

defined at § 413.65(a)(2). Using our 

rulemaking authority under sections 

1871 and 1877(i)(3)(A)(i) of the Act, we 

are proposing that, with respect to high 

Medicaid facilities, the limitation on 

expansion of hospital capacity, as set 

forth at section 1877(i)(1)(B) of the Act, 

similarly applies to the number of 

operating rooms, procedure rooms, and 

licensed beds on the ‘‘campus’’ of the 

high Medicaid facility. 

6. Decisions 

Section 1877(i)(3)(H) of the Act states 

that the Secretary shall publish in the 

Federal Register the final decision with 

respect to an application for an 

exception to the prohibition against 

facility expansion not later than 60 days 

after receiving a complete application. 

We are proposing to codify this 

provision at § 411.362(c)(7). To facilitate 

access to decisions, we are proposing to 

post our decisions on the CMS Web site 

as well. The posted information will 

include the hospital’s name, address, 

county, and our final decision. If an 

exception is granted under this section, 

we will also post the number of 

operating rooms, procedure rooms, and 

beds by which the hospital may expand 

under the granted exception. We believe 

that posting decisions on the CMS Web 

site will enable us to inform the public 

and the affected community of our 

decisions in a timely manner and in a 

centralized location. 

7. Limitation on Review 

Section 1877(i)(3)(I) of the Act 

provides that there shall be no 

administrative or judicial review of the 

process, either under section 1869, 

section 1878, or otherwise. We 

incorporated this limitation on review at 

proposed § 411.362(c)(8) of the 

regulations. We interpret this limitation 

on review to mean that CMS’ decision 

with respect to whether a hospital 

qualifies for an exception is not 

reviewable. 

8. Frequency of Request 

Section 1877(i)(3)(B) of the Act 

provides that the exception process 

shall permit an applicable hospital to 

apply for an exception up to once every 

2 years. We are incorporating this 

provision at § 411.362(c)(1). Using our 

authority under sections 1871 and 1877 

of the Act, we similarly are proposing to 

permit a high Medicaid facility to 

submit a request for an exception up to 

once every 2 years from the date of a 

CMS decision on the hospital’s most 

recent request. We are proposing to 

consider the date of a CMS decision to 

be the date of the letter sent to the 

requesting party. 

D. Proposed Changes Related to 

Provider Agreement Regulations on 

Patient Notification Requirements 

Section 1866 of the Act states that a 

provider of services shall be qualified to 

participate in the Medicare program and 

shall be eligible for Medicare payments 

if it files a Medicare provider agreement 

and abides by the requirements 

applicable to Medicare provider 

agreements. These requirements are 

incorporated in our existing regulations 

at 42 CFR Part 489, Subparts A and B 

(Provider Agreements and Supplier 

Approval). Section 5006 of the Deficit 

Reduction Act of 2005 mandated the 

Secretary to develop a strategic and 

implementing plan to address certain 

issues with respect to physician 

ownership of specialty hospitals. As 

part of that plan, we used our authority 

under sections 1866, 1820(e)(3), and 

1861(e)(9) of the Act (as well as our 

general rulemaking authority under 

sections 1102 and 1871 of the Act) to 

impose certain additional requirements 

on physician-owned hospitals as part of 

their provider agreements. These new 

requirements were established in the FY 

2008 IPPS final rule with comment 

period (72 FR 47385 through 47391) and 

the FY 2009 IPPS final rule (73 FR 

48686 through 48688). 

Specifically, we added a new 

provision to require that all hospitals 

and CAHs: (1) furnish all patients 

written notice at the beginning of their 

inpatient hospital stay or outpatient 

service if a doctor of medicine or a 

doctor of osteopathy is not present in 

the hospital 24 hours per day, 7 days 

per week; and (2) describe how the 

hospital or CAH will meet the medical 

needs of any patient who develops an 

emergency medical condition at a time 

when no physician is present in the 

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hospital or CAH. These requirements 

are codified at § 489.20(w). The 

requirements of §§ 489.20(u) and (w) 

were made applicable to both inpatient 

hospital stays and outpatient services 

because, as we stated in the FY 2008 

IPPS final rule with comment period, 

these provisions are in the interest of 

the health and safety of all individuals 

who receive services in these 

institutions. The notice requirements 

are intended to permit individuals to 

make more informed decisions 

regarding their treatment. 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72251), we 

stated that we saw no reason to treat the 

safety of hospital inpatients differently 

than hospital outpatients, and, thus, 

applied these patient safety 

requirements to hospital inpatients and 

outpatients. We continue to believe that 

both hospital inpatients and outpatients 

should receive these disclosures prior to 

admission. However, after hospitals in 

general informed us that it would be 

unduly burdensome to provide 

disclosures to all outpatients, and 

hospitals with emergency departments 

reported the individual notice 

requirement makes the registration 

process more cumbersome and timeconsuming than is desirable in the 

emergency department setting, we 

revisited this issue. We have 

reconsidered the patient safety 

requirements related to patient 

notification of physician presence, and 

in this proposed rule, we are proposing 

that hospital outpatients would need to 

receive such disclosures only where the 

risk of an emergency or the length of the 

outpatient visit make their situations 

more like that of hospital inpatients. 

Under this proposal, disclosures would 

be required only for those outpatients 

receiving observation services, surgery, 

or any other procedure requiring 

anesthesia. Signage would be required 

for hospital outpatients in the 

emergency department, as we recognize 

the merit of finding a less cumbersome 

manner to provide the required notice 

in this setting. Other hospital outpatient 

encounters are relatively short and, in 

many cases, scheduled in advance. The 

risk of emergency is relatively low in 

most of these scheduled encounters. As 

a result, we believe the safety of these 

particular hospital outpatients would 

not be compromised in any way if 

hospitals were not required to provide 

disclosures in these circumstances. 

In this proposed rule, we are 

proposing to revise paragraph (w)(1) of 

§ 489.20 to reduce the categories of 

outpatients who must be notified if a 

hospital does not have a physician on 

site 24 hours per day/7 days per week. 

We are proposing that only those 

outpatients who receive observation 

services, surgery, or services involving 

anesthesia, must receive such written 

notice. We believe this change would 

reduce burden, but ensure that notice 

goes to those categories of patients who 

are more likely to find themselves in a 

situation where a physician is not 

present when an emergency develops. 

(We note that we are not making any 

changes to similar patient safety 

requirements for physician-owned 

hospitals at § 411.362(b)(5)(i).) We are 

proposing to add a provision that notice 

would be required at the beginning of a 

planned or unplanned inpatient stay or 

outpatient visit, and we provide 

explanation of when a planned or 

unplanned stay or visit begins. We are 

proposing to add a provision to state 

that an unplanned stay or visit begins at 

the earliest point at which the patient 

presents to the hospital. The current 

regulation describes when a stay or visit 

begins by referring to the time when a 

package of information is provided 

regarding scheduled preadmission 

testing and registration for a planned 

hospital admission or outpatient 

service. However, many admissions to 

the hospital are unplanned admissions 

of patients who present on an 

unscheduled visit to the emergency 

department. Therefore, it was necessary 

to clarify when we considered such 

unplanned stays or visits begin. 

We are proposing to add a new 

paragraph (w)(2) to § 489.20 (existing 

paragraph (w)(2) would be redesignated 

as discussed below) that would require 

a hospital that is a main provider that 

has one or more remote locations of a 

hospital or satellites to make the 

determination of whether notice is 

required separately at each location 

providing inpatient services. We are 

proposing to use the terms ‘‘main 

provider,’’ ‘‘remote location of a 

hospital,’’ and ‘‘satellite’’ as these terms 

are defined at § 413.65(a)(2), § 412.22(h), 

or § 412.25(e), as applicable. We are 

proposing that notice would be required 

for all applicable patients, that is, all 

inpatients and applicable outpatients, at 

each location at which inpatient 

services are furnished and at which a 

doctor of medicine or doctor of 

osteopathy is not present 24 hours per 

day/7 days per week. We are proposing 

to move language that is currently in 

paragraph (w)(1) to a new paragraph 

(w)(3), governing the content of the 

written notice. We are proposing to 

redesignate existing paragraph (w)(2), 

which requires the hospital to receive a 

signed acknowledgment from the 

patient who has received a notice that 

the patient understands that a physician 

may not be present during all hours in 

which services are furnished to the 

patient, as paragraph (w)(4) and to 

revise the redesignated paragraph. We 

are proposing to add a provision to state 

that, before providing an outpatient 

service to an outpatient for whom a 

notice is required, the hospital must 

receive the signed acknowledgment. 

This revision would make this 

requirement consistent with our 

proposed revisions to paragraph (w)(1) 

limiting the notice requirement to 

certain categories of outpatients. 

We are proposing to add a new 

paragraph (w)(5) which would require 

every hospital that has a dedicated 

emergency department in which a 

doctor of medicine or doctor of 

osteopathy is not present 24 hours per 

day/7 days per week to post a notice 

conspicuously in a place or places likely 

to be noticed by all individuals entering 

the dedicated emergency department. 

‘‘Dedicated emergency department’’ 

would have the meaning found in 

existing § 489.24(b) of the regulations. 

We would require the notice to state 

that the hospital does not have a doctor 

of medicine or doctor of osteopathy 

present in the hospital 24 hours per 

day/7 days per week, and to indicate 

how the hospital will meet the needs of 

any patient with an emergency medical 

condition, as that term is defined in 

§ 489.24(b), at a time when no doctor of 

medicine or doctor of osteopathy is 

present within the hospital. In the event 

that there is a decision to admit a 

patient from the emergency department 

as an inpatient, the individualized 

written disclosure and acknowledgment 

would have to be made at the time the 

patient is admitted. 

XVI. Additional Proposals for the 

Hospital Value-Based Purchasing 

(Hospital VBP) Program 

A. Hospital VBP Program 

1. Legislative Background 

Section 3001(a) of the Affordable Care 

Act added section 1886(o) to the Act. 

This section requires the Secretary to 

establish a hospital inpatient valuebased purchasing program under which 

value-based incentive payments are 

made in a fiscal year to hospitals 

meeting performance standards 

established for a performance period for 

such fiscal year. Both the performance 

standards and the performance period 

for a fiscal year are to be established by 

the Secretary. 

Section 1886(o)(1)(B) of the Act 

directs the Secretary to begin making 

value-based incentive payments under 

the Hospital Inpatient Value-Based 

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Purchasing Program (Hospital VBP 

Program) to hospitals for discharges 

occurring on or after October 1, 2012. 

These incentive payments will be 

funded for FY 2013 through a reduction 

of 1.0 percent to the FY 2013 base 

operating DRG payment amount for 

each discharge, as required by section 

1886(o)(7)(B)(i) of the Act. 

Section 1886(o)(1)(C) of the Act 

provides that the Hospital VBP Program 

applies to subsection (d) hospitals (as 

defined in section 1886(d)(1)(B) of the 

Act), but excludes from the definition of 

the term ‘‘hospital,’’ with respect to a 

fiscal year: (1) a hospital that is subject 

to the payment reduction under section 

1886(b)(3)(B)(viii)(I) of the Act (the 

Hospital IQR Program) for such fiscal 

year; (2) a hospital for which, during the 

performance period for the fiscal year, 

the Secretary cited deficiencies that 

pose ‘‘immediate jeopardy’’ to the 

health or safety of patients; and (3) a 

hospital for which there are not a 

minimum number (as determined by the 

Secretary) of measures for the 

performance period for the fiscal year 

involved, or for which there are not a 

minimum number (as determined by the 

Secretary) of cases for the measures that 

apply to the hospital for the 

performance period for such fiscal year. 

2. Overview of the Hospital Inpatient 

VBP Program Final Rule 

We recently issued the Hospital 

Inpatient VBP Program Final Rule, 

which implemented the Hospital VBP 

Program gram under section 1886(o) of 

the Act (76 FR 26490 through 26547). 

The Hospital Inpatient VBP Program 

Final Rule was developed based on 

extensive research we conducted on 

hospital value-based purchasing, 

including research that formed the basis 

of a 2007 report we submitted to 

Congress, entitled ‘‘Report to Congress: 

Plan to Implement a Medicare Hospital 

Value-Based Purchasing Program.’’ This 

report is available on our Web site 

(https://www.cms.gov/AcuteInpatient

PPS/downloads/HospitalVBPPlan

RTCFINALSUBMITTED2007.pdf) and 

takes into account input from 

stakeholders and other interested 

parties. 

As described more fully in the 

Hospital Inpatient VBP Program Final 

Rule, we adopted for the FY 2013 

Hospital VBP Program 13 measures that 

we have already adopted for the 

Hospital IQR Program, categorized into 

two domains (76 FR 26495 through 

26511). We grouped 12 clinical process 

of care measures into a clinical process 

of care domain, and placed the HCAHPS 

survey measure into a patient 

experience of care domain. We adopted 

a 3-quarter performance period from 

July 1, 2011 through March 31, 2012 for 

these measures (76 FR 26494 through 

26495). To determine whether a hospital 

meets the proposed performance 

standards for these measures, we will 

compare each hospital’s performance 

during this performance period to its 

performance during a 3-quarter baseline 

period from July 1, 2009 through March 

31, 2010 (76 FR 26493 through 26495). 

We also finalized a methodology for 

assessing the total performance of each 

hospital based on performance 

standards under which we will score 

each hospital based on achievement and 

improvement ranges for each applicable 

measure. We will calculate a Total 

Performance Score for each hospital by 

combining the greater of the hospital’s 

achievement or improvement points for 

each measure to determine a score for 

each domain, weighting each domain 

score (for the FY 2013 Hospital VBP 

Program, the weights will be clinical 

process of care = 70 percent, patient 

experience of care = 30 percent), and 

adding together the weighted domain 

scores. We will convert each hospital’s 

Total Performance Score into a valuebased incentive payment using a linear 

exchange function. We refer readers to 

the Hospital Inpatient VBP Program 

Final Rule for further explanation of the 

details of the FY 2013 Hospital VBP 

Program (76 FR 26490 through 26547). 

For FY 2014, we adopted 13 outcome 

measures comprised of 3 mortality 

measures, 2 AHRQ composite measures, 

and 8 hospital-acquired condition 

(HAC) measures (76 FR 26511). These 

measures are discussed fully in the 

Hospital Inpatient VBP Program Final 

Rule (76 FR 26510 through 26511). 

These finalized outcome measures for 

FY 2014 are set forth below. 

FINALIZED OUTCOME MEASURES FOR THE FY 2014 HOSPITAL VBP PROGRAM

Mortality Measures (Medicare Patients): 

• Acute Myocardial Infarction (AMI) 30-day mortality rate. 

• Heart Failure (HF) 30-day mortality rate. 

• Pneumonia (PN) 30-day mortality rate. 

AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators (IQIs) Composite Measures: 

• Complication/patient safety for selected indicators (composite). 

• Mortality for selected medical conditions (composite). 

Hospital Acquired Condition Measures: 

• Foreign Object Retained After Surgery. 

• Air Embolism. 

• Blood Incompatibility. 

• Pressure Ulcer Stages III & IV. 

• Falls and Trauma: (Includes: Fracture, Dislocation, Intracranial Injury, Crushing Injury, Burn, Electric Shock). 

• Vascular Catheter-Associated Infection. 

• Catheter-Associated Urinary Tract Infection (UTI). 

• Manifestations of Poor Glycemic Control. 

3. Proposed Additional FY 2014 

Hospital VBP Program Measures 

For the FY 2014 Hospital VBP 

Program, we are proposing to retain all 

13 of the clinical process of care and 

patient experience of care measures that 

we adopted for the FY 2013 Hospital 

VBP Program. We also are proposing to 

add one measure to the clinical process 

of care domain: SCIP–Inf–9: 

Postoperative Urinary Catheter Removal 

on Postoperative Day 1 or 2. This 

measure was specified for the Hospital 

IQR Program beginning with FY 2011 

and subsequent payment determination 

years (74 FR 43869 through 43870), and 

information about the measure first 

appeared on Hospital Compare in 

December 2010. Thus, we believe that 

this measure meets the requirement in 

section 1886(o)(2)(C)(i) of the Act to be 

included in the Hospital VBP Program 

because it has been specified for the 

Hospital IQR Program and will have 

been displayed on Hospital Compare for 

at least one year before the applicable 

performance period begins. In addition, 

SCIP–Inf–9 is NQF-endorsed (#453). 

The measure is relevant for the 

Hospital VBP Program because it 

assesses a practice that reduces Catheter 

Associated Urinary Tract Infection 

(CAUTI), and improves patient safety, 

which is highlighted as one of the 

Institute of Medicine’s six quality aims 

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along with effectiveness, patientcenteredness, timeliness, efficiency, and 

equity. SCIP–Inf–9 is one of the NQFendorsed SCIP infection prevention 

measures; these measures are referenced 

as a whole among the metrics listed in 

the HHS Action Plan to Prevent HAIs. 

This Action Plan can be found at the 

following Web site: http://www.hhs.gov/ 

ash/initiatives/hai/actionplan/. 

Furthermore, this measure meets other 

criteria considered for measure selection 

for the Hospital VBP Program, such as 

not being ‘‘topped-out’’ and displaying 

meaningful variability among hospitals. 

Therefore, we believe it would be a 

meaningful measure to include in the 

Hospital VBP Program. 

The table below lists the clinical 

process of care and patient experience 

of care measures we are proposing to 

adopt for the FY 2014 Hospital VBP 

Program. We note that these measures 

are currently NQF-endorsed and we will 

continue to monitor these measures to 

ensure that they reliably measure 

hospital quality, for example, ensuring 

that, among other things, these measures 

are not ‘‘topped-out,’’ and their 

measurement criteria remain endorsed 

by NQF and/or are otherwise 

appropriate. To the extent we determine 

that these measures are topped-out, we 

may choose not to finalize them. 

PROPOSED CLINICAL PROCESS OF CARE AND PATIENT EXPERIENCE OF CARE MEASURES FOR THE FY 2014 HOSPITAL

VBP PROGRAM

Clinical Process of Care Measures 

Measure ID Measure description 

Acute myocardial infarction: 

AMI–7a ..................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. 

AMI–8a ..................... Primary PCI Received Within 90 Minutes of Hospital Arrival. 

Heart Failure: 

HF–1 ........................ Discharge Instructions. 

Pneumonia: 

PN–3b ...................... Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital. 

PN–6 ........................ Initial Antibiotic Selection for CAP in Immunocompetent Patient. 

Healthcare-associated infections: 

SCIP–Inf–1 ............... Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision. 

SCIP–Inf–2 ............... Prophylactic Antibiotic Selection for Surgical Patients. 

SCIP–Inf–3 ............... Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time. 

SCIP–Inf–4 ............... Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. 

SCIP–Inf–9 ............... Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2. 

Surgeries: 

SCIP–Card–2 ........... Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period. 

SCIP–VTE–1 ............ Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered. 

SCIP–VTE–2 ............ Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After 

Surgery. 

Patient Experience of Care Measures 

HCAHPS ......................... Hospital Consumer Assessment of Healthcare Providers and Systems Survey.* 

* Proposed dimensions of the HCAHPS survey for use in the FY 2014 Hospital VBP Program are: Communication with Nurses, Communication 

with Doctors, Responsiveness of Hospital Staff, Pain Management, Communication about Medicines, Cleanliness and Quietness of Hospital Environment, Discharge Information and Overall Rating of Hospital. 

We invite public comment on these 

proposals. 

4. Proposed Minimum Numbers of 

Cases and Measures for the Outcome 

Domain for the FY 2014 Hospital VBP 

Program 

a. Background 

Section 1886(o)(1)(C)(ii)(III) of the Act 

requires the Secretary to exclude for the 

fiscal year hospitals that do not report 

a minimum number (as determined by 

the Secretary) of measures that apply to 

the hospital for the performance period 

for the fiscal year. Section 

1886(o)(1)(C)(ii)(IV) of the Act requires 

the Secretary to exclude for the fiscal 

year hospitals that do not report a 

minimum number (as determined by the 

Secretary) of cases for the measures that 

apply to the hospital for the 

performance period for the fiscal year. 

In the Hospital Inpatient VBP Program 

Final Rule, we adopted 13 outcome 

measures for the FY 2014 Hospital VBP 

Program (76 FR 26511), but we did not 

adopt a minimum number of cases for 

such measures to apply to hospitals, nor 

did we adopt a minimum number of 

measures necessary for the outcome 

domain to be included in the Total 

Performance Score. 

Under section 1886(o)(1)(C)(iii) of the 

Act, in determining the minimum 

number of reported measures and cases 

under sections 1886(o)(1)(C)(ii)(III) and 

(IV), the Secretary must conduct an 

independent analysis of what minimum 

numbers would be appropriate. As 

described in the Hospital Inpatient VBP 

Final Rule (76 FR 26528 through 26529), 

to fulfill this requirement, we 

commissioned Brandeis University to 

perform an independent analysis that 

examined technical issues concerning 

the minimum number of cases per 

measure and the minimum number of 

measures per hospital for clinical 

process of care measures needed to 

derive reliable domain scores. Based on 

that analysis, we finalized our policy to 

exclude any clinical process of care 

measures for which a hospital reported 

fewer than 10 cases, and to exclude 

from the Hospital VBP Program any 

hospital to which fewer than 4 of the 

clinical process of care measures 

applied. We also finalized our proposal 

to exclude any hospital reporting fewer 

than 100 HCAHPS surveys during the 

performance period (76 FR 26529 

through 26531). 

To determine the minimum numbers 

of measures and cases that should be 

required for the outcome domain, we 

again commissioned Brandeis 

University to perform an independent 

analysis. This analysis examined 

hospital performance on the 13 finalized 

outcome measures using data from the 

proposed baseline periods (discussed 

below) for the FY 2014 Hospital VBP 

Program. As we did to analyze the 

reliability of scores in the clinical 

process of care domain, different 

minimum numbers of cases and 

measures were tested to determine the 

combination of minimum numbers of 

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cases and measures that would lead to 

reliable scores in the outcome domain 

while allowing the maximum number of 

hospitals to be scored for the Hospital 

VBP Program. Concurrent with the 

Brandeis analysis, we contracted with 

researchers at Mathematica Policy 

Research (Mathematica) to explore the 

minimum number of cases a hospital 

would need to report for each 

individual outcome measure. 

b. Proposed Minimum Number of Cases 

for Mortality Measures, AHRQ 

Composite Measures, and HAC 

Measures 

The analyses by Brandeis and 

Mathematica determined that in order to 

receive a score on a mortality measure, 

the hospital would need to report a 

minimum of 10 cases, and in order to 

receive a score on an AHRQ composite 

measure, a hospital would need to 

report a minimum of 3 cases. Consistent 

with these analyses, we are proposing 

that these case minimums would apply 

for the FY 2014 Hospital VBP Program. 

Mathematica also examined the 

minimum number of cases a hospital 

would need to report in order to receive 

a reliable score on each HAC measure. 

Along with reliability concerns, when 

conducting this analysis, Mathematica 

also took into consideration our view, 

more fully explained in section 

XVI.A.6.d. of this proposed rule, that 

the incidence of HACs raises significant 

safety and quality concerns for patients 

and for the Medicare program. 

Therefore, we believe that a hospital 

should be held accountable when HACs 

occur in all instances in order to protect 

and promote patient safety. 

Mathematica concluded that a 

minimum of one Medicare claim would 

be sufficient to compute an accurate 

score on each HAC measure, and in 

accordance with this conclusion, we are 

proposing that hospitals be evaluated 

based on the presence or absence of 

HAC occurrences, regardless of the 

number of Medicare cases a hospital 

treats, as long as the hospital submits at 

least one Medicare claim during the 

performance period. As we discuss 

further below, we anticipate that all 

participating hospitals will submit at 

least one Medicare claim during the 

performance period, which would be 

sufficient for the hospitals to receive a 

score on seven of the eight HAC 

measures. 

c. Proposed Minimum Numbers of 

Measures for Outcome Domain 

Brandeis researchers also analyzed 

the reliability of the outcome domain 

scores for hospitals depending upon the 

total number of outcome measures on 

which they reported. The analysis 

showed that the data provide a 

meaningful and sufficiently reliable 

indication of outcomes for hospitals in 

the outcome domain as long as the 

hospitals submit the minimum number 

of cases (discussed above) on each of 11 

outcome measures for FY 2014. 

Specifically, the analysis found that 

using at least 11 outcome measures per 

hospital provided sufficiently 

comparable reliability of hospitals’ 

scores in the outcome domain 

(particularly in terms of rank ordering 

relative to other hospitals) as compared 

with what hospitals’ scores would have 

been if they had reported on more 

outcome measures. Brandeis concluded 

that this 11 measure minimum could be 

comprised of the 8 HAC measures, 

together with 3 measures comprised of 

any combination of the 3 mortality 

measures and the 2 AHRQ composite 

measures. 

We note that, in conducting its 

analysis, Brandeis evaluated how the 

outcome domain score would be 

affected if a hospital reported all eight 

finalized HAC measures. However, one 

of these HAC measures, Foreign Object 

Retained After Surgery, will not apply 

to a very small subset of hospitals that 

do not perform surgeries. Taking this 

into account, as well as our own further 

analysis which shows that the reliability 

of the outcome domain score would not 

be significantly different as a statistical 

matter, we are proposing that the 

minimum number of measures a 

hospital would need to report in order 

to receive a score on the outcome 

domain is 10, comprised of 7 of the 8 

HAC measures (all but the Foreign 

Object Retained After Surgery measure), 

along with 3 other measures comprised 

of any 3 of the other outcome measures 

(for example, 2 AHRQ composite 

measures and 1 mortality measure, or 3 

mortality measures). We believe that 

this proposal is consistent with the 

conclusions reached by Brandeis. In 

addition, from an inclusiveness 

standpoint, we believe that a 10 

measure minimum will maximize 

hospital participation in the FY 2014 

Hospital VBP Program. 

Furthermore, because we believe that 

every domain is an important 

component of an accurate Total 

Performance Score, we are proposing 

that, in order for a hospital to receive a 

Total Performance Score and be 

included in the FY 2014 Hospital VBP 

Program, the hospital must have enough 

cases and measures to report on all 

finalized domains. This proposed 

requirement should not impose any new 

barrier to hospitals or greatly reduce the 

number of hospitals in the FY 2014 

Hospital VBP Program as compared to 

the FY 2013 Hospital VBP Program, 

when hospitals will only be scored on 

clinical process of care and patient 

experience of care measures. This is 

because, as stated above, an analysis of 

the existing data shows that virtually all 

hospitals participating in the FY 2014 

Hospital VBP Program will report on a 

sufficient number of cases and measures 

to receive outcome domain scores in 

addition to the clinical process and 

patient experience domain scores for FY 

2014. 

We invite public comment on the 

proposed minimum numbers of cases 

and measures required for the FY 2014 

Hospital VBP Program. We also invite 

public comment on the proposed 

requirement that hospitals must report 

on all four domains (if finalized) to 

receive a Total Performance Score for 

the FY 2014 Hospital VBP Program. 

5. Proposed Performance Periods and 

Baseline Periods for FY 2014 Measures 

Section 1886(o)(4) of the Act requires 

the Secretary to establish a performance 

period for the Hospital VBP Program for 

a fiscal year that begins and ends prior 

to the beginning of such fiscal year. 

a. Proposed Clinical Process of Care 

Domain and Patient Experience of Care 

Domain Performance Period and 

Baseline Period 

For the FY 2014 Hospital VBP 

Program, we are proposing a 9-month 

(3-quarter) performance period from 

April 1, 2012 to December 31, 2012 for 

the clinical process of care and patient 

experience of care domain measures. As 

described in the Hospital Inpatient VBP 

Final Rule (76 FR 26494 through 26495), 

due to various statutory deadlines and 

other challenges we faced in 

implementing the FY 2013 Hospital 

VBP Program in a timely fashion, we 

adopted a 3-quarter performance period 

for the clinical process of care and 

patient experience of care domains for 

the FY 2013 payment determination. We 

have stated our intent to move to a 12- 

month performance period when 

feasible. While a 12-month performance 

period is not yet feasible for FY 2014, 

we believe that this proposed 3-quarter 

performance period will allow us to 

notify hospitals of the amount of their 

value-based incentive payment at least 

60 days before the start of FY 2014. It 

would also allow us to consider 

selecting CY 2013, a 12-month 

performance period, as the performance 

period for the FY 2015 Hospital VBP 

Program. In addition, this proposed 

performance period for FY 2014 would 

begin immediately after the end of the 

FY 2013 performance period, provide 

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reliable performance information, and 

ensure that incentive payments can be 

made beginning with October 1, 2013 

discharges. 

As we explained in the Hospital 

Inpatient VBP Program Final Rule (76 

FR 26485), we believe that baseline data 

should be used from a comparable 9- 

month (3-quarter) period. Therefore, we 

are proposing April 1, 2010 to December 

31, 2010 as the baseline period for these 

proposed measures for FY 2014. We 

invite public comment on these 

proposals. 

b. Proposed Outcome Domain 

Performance Periods and Baseline 

Periods 

In the Hospital Inpatient VBP Program 

proposed rule, we proposed an 18- 

month performance period of July 1, 

2011 to December 31, 2012 and an 18- 

month baseline period of July 1, 2008 to 

December 31, 2009 for the three 

mortality outcome measures currently 

specified under the Hospital IQR 

Program (MORT–30–AMI, MORT–30– 

HF, MORT–30–PN). In response to 

public comment and for reasons 

discussed in the Hospital Inpatient VBP 

Program Final Rule (76 FR 26494), we 

adopted a 12-month performance period 

of July 1, 2011 to June 30, 2012 and a 

12-month baseline period of July 1, 2009 

to June 30, 2010 for these measures. 

In the Hospital Inpatient VBP Program 

Final Rule, we stated that we would 

begin the performance period for the 

proposed HAC and AHRQ measures 1 

year after such measures were included 

on Hospital Compare. Because all the 

finalized HAC and AHRQ measures 

were included on Hospital Compare on 

March 3, 2011, we finalized March 3, 

2012 as the start of the performance 

period for these measures in the 

Hospital Inpatient VBP Program Final 

Rule (76 FR 26494 through 26495). We 

stated in the Hospital Inpatient VBP 

Program Final Rule (76 FR 26495) that 

we would propose the end performance 

period date for these measures in this 

proposed rule. 

In order for the HAC and AHRQ 

measures to be scored for the FY 2014 

Hospital VBP Program, the performance 

period for these measures would need to 

end by the fourth quarter of FY 2012 to 

allow us sufficient time to collect and 

process the necessary claims data. We 

note that this time period needs to be 

longer for HAC and AHRQ measures 

than for clinical process and patient 

experience measures, which are based 

on chart-abstracted data and surveys 

rather than claims. Claims data require 

at least three months following a given 

calendar quarter to process and 

necessitate two additional months to 

complete measure calculation, 

including risk adjustment, statistical 

modeling, quality assurance, 

programming, and generating reports on 

patient-level data, which is provided to 

hospitals. 

Therefore, we are proposing to adopt 

a nearly 7-month performance period 

for the HAC and AHRQ measures for FY 

2014 by selecting September 30, 2012 as 

the end of the performance period. 

While we would prefer to use a 12- 

month performance period, analysis of 

existing data indicates that a 7-month 

performance period would provide 

sufficiently robust values on these 

critical measures. 

As stated above, because we believe 

that a comparable period should be 

selected for the baseline data, we are 

proposing to set March 3, 2010 to 

September 30, 2010 as the baseline 

period for the proposed HAC and AHRQ 

measures for the FY 2014 Hospital VBP 

Program. We invite public comment on 

these proposals. 

The following tables include all 

proposed and finalized baseline and 

performance periods for the FY 2013 

and FY 2014 program years. 

FY 2013 HOSPITAL VBP PROGRAM BASELINE AND PERFORMANCE PERIODS

Domain Baseline period Performance period 

Clinical Process ............................... July 1, 2009–March 31, 2010 .................................... July 1, 2011–March 31, 2012. 

Patient Experience .......................... July 1, 2009–March 31, 2010 .................................... July 1, 2011–March 31, 2012. 

FY 2014 HOSPITAL VBP PROGRAM BASELINE AND PERFORMANCE PERIODS

Domain Baseline period Performance period 

Clinical Process * ............................. April 1, 2010–December 31, 2010 ............................ April 1, 2012–December 31, 2012. 

Patient Experience * ........................ April 1, 2010–December 31, 2010 ............................ April 1, 2012–December 31, 2012. 

Efficiency * ....................................... May 15, 2010–90 days prior to February 14, 2011 .. May 15, 2012–February 14, 2013. 

Outcomes 

• Mortality ................................ • July 1, 2009–June 30, 2010 .................................. • July 1, 2011–June 30, 2012. 

• HAC * .................................... • March 3, 2010–September 30, 2010 ..................... • March 3, 2012–September 30, 2012. 

• AHRQ * ................................. • March 3, 2010–September 30, 2010 ..................... • March 3, 2012–September 30, 2012. 

*Proposed 

6. Proposed Performance Standards for 

the FY 2014 Hospital VBP Program 

a. Background 

Section 1886(o)(3)(A) of the Act 

requires the Secretary to establish 

performance standards for the measures 

selected under the Hospital VBP 

Program for a performance period for 

the applicable fiscal year. The 

performance standards must include 

levels of achievement and improvement, 

as required by section 1886(o)(3)(B) of 

the Act, and must be established and 

announced not later than 60 days before 

the beginning of the performance period 

for the fiscal year involved, as required 

by section 1886(o)(3)(C) of the Act. 

Achievement and improvement 

standards are discussed more fully in 

the Hospital Inpatient VBP Program 

Final Rule (76 FR 26511 through 26513). 

In addition, when establishing the 

performance standards, section 

1886(o)(3)(D) of the Act requires the 

Secretary to consider appropriate 

factors, such as: (1) Practical experience 

with the measures, including whether a 

significant proportion of hospitals failed 

to meet the performance standard 

during previous performance periods; 

(2) historical performance standards; (3) 

improvement rates; and (4) the 

opportunity for continued 

improvement. 

(1) Mortality Measures 

In the Hospital Inpatient VBP Program 

Final Rule, we finalized the 

achievement performance standard 

(achievement threshold) for each of the 

proposed FY 2014 Hospital VBP 

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Program mortality measures at the 

median of hospital performance (50th 

percentile) during the applicable 

baseline period. We also finalized the 

improvement performance standard 

(improvement threshold) for each 

mortality measure at each specific 

hospital’s performance on each measure 

during the baseline period of July 1, 

2009 to June 30, 2010 (76 FR 26511 

through 76 FR 26512). In addition, we 

finalized the precise achievement 

thresholds for these mortality measures 

(76 FR 26513), as shown below: 

ACHIEVEMENT THRESHOLDS FOR THE FY 2014 HOSPITAL VBP PROGRAM MORTALITY OUTCOME MEASURES

[Displayed as survival rates] 

Measure ID Measure description 

Performance 

standard (achievement threshold) Benchmark 

Mortality Outcome Measures 

MORT–30–AMI .......... Acute Myocardial Infarction (AMI) 30-Day Mortality Rate .................................. 0.8477 0.8673 

MORT–30–HF ............ Heart Failure (HF) 30-Day Mortality Rate ........................................................... 0.8861 0.9042 

MORT–30 PN ............ Pneumonia (PN) 30-Day Mortality Rate ............................................................. 0.8818 0.9021 

(2) Proposed Medicare Spending per 

Beneficiary Measure 

In section IV.B.3.b.(2)(A) of the FY 

2012 IPPS/LTCH PPS proposed rule (76 

FR 25927), we proposed to calculate a 

ratio of the Medicare spending per 

beneficiary amount for each hospital to 

the median Medicare spending per 

beneficiary amount across all hospitals 

during the performance period. We 

proposed to set the achievement 

threshold at the median Medicare 

spending per beneficiary ratio across all 

hospitals during the performance 

period. The proposed value of the 

achievement performance standard 

(achievement threshold) for the 

Medicare Spending per Beneficiary 

measure would be 1.0. This would be 

the middle ratio, or the Medicare 

spending per beneficiary for the median 

hospital divided by the median 

Medicare spending per beneficiary for 

all hospitals. 

Likewise, in section IV.B.3.b.(2)(B) of 

the FY 2012 IPPS/LTCH PPS proposed 

rule (76 FR 25927 through 25928), we 

proposed to set the improvement 

performance standard (improvement 

threshold) for the proposed Medicare 

spending per beneficiary measure at the 

hospital’s own Medicare spending per 

beneficiary ratio, as calculated during 

the proposed baseline period. We also 

proposed to set the achievement 

performance benchmark at the mean of 

the lowest decile of Medicare spending 

per beneficiary ratios during the 

performance period, and that the 

improvement benchmark would be 

equal to the achievement performance 

benchmark for the performance period, 

which is the mean of the lowest decile 

of Medicare spending per beneficiary 

ratios. We refer readers to the FY 2012 

IPPS/LTCH proposed rule for a 

complete discussion of these proposals. 

b. Proposed Clinical Process of Care and 

Patient Experience of Care FY 2014 

Performance Standards 

As discussed in section XVI.B.5.a. of 

this proposed rule, we are proposing to 

adopt a 9-month (3-quarter) 

performance period of April 1, 2012 to 

December 31, 2012 for the clinical 

process of care and patient experience 

of care measures for the FY 2014 

Hospital VBP Program. To set 

achievement and improvement 

performance standards for these 

proposed measures for the FY 2014 

Hospital VBP Program, we are 

proposing to use the same approach 

adopted in the Hospital Inpatient VBP 

Program Final Rule. That approach, as 

well as our rationale for adopting it, is 

explained in detail at 76 FR 26511 

through 76 FR 26513. We are proposing 

to set the achievement performance 

standard (achievement threshold) for 

each proposed measure at the median of 

hospital performance (50th percentile) 

during the proposed baseline period of 

April 1, 2010 through December 31, 

2010. We also are proposing to set the 

improvement performance standard 

(improvement threshold) for each of the 

proposed measures at each specific 

hospital’s performance on the 

applicable measure during the proposed 

baseline period of April 1, 2010 through 

December 31, 2010. We are proposing to 

set each benchmark for each measure as 

the mean of the top decile performance 

of applicable hospitals during the 

proposed baseline period. We invite 

public comment on these proposals. 

We set out proposed achievement 

performance standards for the proposed 

clinical process of care and patient 

experience of care measures using the 

applicable baseline period data in the 

table below. 

PROPOSED ACHIEVEMENT PERFORMANCE STANDARDS FOR PROPOSED FY 2014 CLINICAL PROCESS OF CARE AND

PATIENT EXPERIENCE OF CARE MEASURES

Measure ID Measure description 

Performance 

standard (achievement threshold) Benchmark 

Process of Care Measures 

AMI–7a ....................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival ................. 0.8066 0.9630 

AMI–8a ....................... Primary PCI Received Within 90 Minutes of Hospital Arrival ............................. 0.9344 1.0000 

HF–1 .......................... Discharge Instructions ......................................................................................... 0.9266 1.0000 

PN–3b ........................ Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital.0.9730 1.0000 

PN–6 .......................... Initial Antibiotic Selection for CAP in Immunocompetent Patient ....................... 0.9446 1.0000 

SCIP–Inf–1 ................. Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision .... 0.9807 1.0000 

SCIP–Inf–2 ................. Prophylactic Antibiotic Selection for Surgical Patients ....................................... 0.9813 1.0000 

SCIP–Inf–3 ................. Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time 0.9663 0.9996 

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PROPOSED ACHIEVEMENT PERFORMANCE STANDARDS FOR PROPOSED FY 2014 CLINICAL PROCESS OF CARE AND

PATIENT EXPERIENCE OF CARE MEASURES—Continued 

Measure ID Measure description 

Performance 

standard (achievement threshold) Benchmark 

SCIP–Inf–4 ................. Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose 0.9634 1.0000 

SCIP–Inf–9 ................. Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2 .......... 0.9286 0.9989 

SCIP–Card–2 ............. Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta 

Blocker During the Perioperative Period.

0.9565 1.0000 

SCIP–VTE–1 .............. Surgery Patients with Recommended Venous Thromboembolism Prophylaxis 

Ordered.

0.9462 1.0000 

SCIP–VTE–2 .............. Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery.0.9492 0.9983 

Patient Experience of Care Measure 

HCAHPS 

Communication with Nurses ............................................................................... 75.79% 84.99% 

Communication with Doctors .............................................................................. 79.57% 88.45% 

Responsiveness of Hospital Staff ....................................................................... 62.21% 78.08% 

Pain Management ............................................................................................... 68.99% 77.92% 

Communication about Medicines ........................................................................ 59.85% 71.54% 

Hospital Cleanliness & Quietness ....................................................................... 63.54% 78.10% 

Discharge Information ......................................................................................... 82.72% 89.24% 

Overall Rating of Hospital ................................................................................... 67.33% 82.55% 

c. AHRQ Measures 

For the reasons we have discussed in 

the Hospital Inpatient VBP Program 

Final rule (76 FR 26514), we are 

proposing to set the achievement 

performance standard (achievement 

threshold) for each AHRQ composite 

measure at the median of hospital 

performance (50th percentile) during 

the proposed baseline period of March 

3, 2010 to September 30, 2010. We are 

proposing to set the benchmark for each 

AHRQ composite measure at the mean 

of the top decile of hospital performance 

during the proposed baseline period of 

March 3, 2010 to September 30, 2010. 

We also are proposing to set the 

improvement performance standard 

(improvement threshold) for each of the 

proposed measures at each specific 

hospital’s performance on the 

applicable measure during the proposed 

baseline period of March 3, 2010 to 

September 30, 2010. 

d. HAC Measures 

We adopted eight HAC measures in 

the Hospital Inpatient VBP Final Rule. 

For each of these eight HAC measures, 

at least one quarter of hospitals 

achieved a 100 percent rating based on 

administrative data for all IPPS 

hospitals participating in the Hospital 

IQR Program for Medicare discharges 

from October 1, 2008 through June 30, 

2010 (that is, they do not have any 

reportable HAC occurrences). In 

addition, based on the administrative 

data from October 1, 2008 through June 

30, 2010, at least one half of all 

hospitals achieved a measure rate of 100 

percent on six of the eight HAC 

measures (Foreign Object Retained After 

Surgery; Air Embolism; Blood 

Incompatibility; Pressure Ulcer Stages 

III and IV; Catheter-Associated UTI; 

Manifestations of Poor Glycemic 

Control). Accordingly, the achievement 

threshold for these measures would be 

zero if we proposed to set performance 

standards for each individual measure 

using the same methodology that we 

finalized with respect to the mortality 

measures. 

We believe that the HAC measures are 

extremely important in promoting 

patient safety, improving quality of care, 

and reducing costs. According to a 2010 

HHS Office of the Inspector General 

report, entitled ‘‘Adverse Events in 

Hospitals: National Incidence Among 

Medicare Beneficiaries’’ (http:// 

oig.hhs.gov/oei/reports/oei-06-09- 

00090.pdf), an estimated 13.5 percent of 

hospitalized Medicare beneficiaries 

experienced adverse events during their 

hospital stays. We believe that all the 

finalized HAC measures assess the 

presence of conditions and outcomes 

that are reasonably preventable if high 

quality care is furnished to the Medicare 

beneficiary. We also believe that the 

incidence of HACs in general raises 

major patient safety issues for Medicare 

beneficiaries. Outcome measures, 

including HAC outcome measures, are 

widely regarded by the provider 

community as strongly indicative of the 

quality of medical care and as integral 

to reporting and improving quality and 

patient safety. Therefore, we believe it is 

important to include HAC outcome 

measures in the Hospital VBP Program. 

For these reasons, we are proposing 

that our topped-out policy would not 

apply to the HAC measures. We also are 

proposing to treat the eight individual 

HAC measures as a single aggregate 

HAC score for purposes of scoring, and 

believe that this approach will enable us 

to calculate meaningful distinction 

among hospitals and variation in 

hospital performance. In addition, this 

aggregation of the scores for the HAC 

measures ensures that the HAC 

measures do not unduly outweigh the 

remainder of the measures in the 

outcome domain. Accordingly, in taking 

into account our HAC policy and 

reliability concerns, we are proposing to 

set achievement performance standards, 

benchmarks, and improvement 

performance standards based on 

hospital combined performance on 

seven or eight HAC measures, as 

applicable, during the proposed 

performance or baseline period. Because 

certain hospitals will report on only 

seven of the eight HAC measures, we are 

proposing separate standards for 

hospital performance depending on 

whether the hospitals report on seven or 

eight HAC measures. As discussed more 

fully below, we are also proposing to 

score hospital performance on the HAC 

measures by combining hospital 

performance scores on each of the HAC 

measures to calculate a single, aggregate 

HAC score for this purpose. 

As finalized in the Hospital Inpatient 

VBP Program Final Rule (76 FR 26514), 

we are proposing to set the achievement 

performance standard (achievement 

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threshold) for the HAC aggregate score 

for those hospitals that report on all 

eight of the HAC measures at the 

median of hospital performance (50th 

percentile) of those hospitals reporting 

on all eight of the HAC measures during 

the proposed baseline period of March 

3, 2010 to September 30, 2010. We are 

proposing to set the achievement 

performance standard (achievement 

threshold) for the HAC aggregate score 

for those hospitals that report on seven 

of the HAC measures at the median of 

hospital performance (50th percentile) 

on only those seven measures for those 

hospitals reporting on either seven or 

eight of the HAC measures during the 

proposed baseline period of March 3, 

2010 to September 30, 2010. 

We are proposing to set the 

benchmark for the HAC aggregate score 

for those hospitals that report on all 

eight of the HAC measures at the mean 

of the top decile of hospital performance 

for those hospitals reporting on all eight 

HAC measures during the proposed 

baseline period of March 3, 2010 to 

September 30, 2010. We are proposing 

to set the benchmark for the HAC 

aggregate score for those hospitals that 

report on seven of the HAC measures at 

the mean of the top decile of hospital 

performance on only those seven 

measures for hospitals reporting on 

either seven or eight of the HAC 

measures during the proposed baseline 

period of March 3, 2010 to September 

30, 2010. 

We also are proposing to set the 

improvement performance standard 

(improvement threshold) for the HAC 

aggregate score at each specific 

hospital’s performance during the 

proposed baseline period of March 3, 

2010 to September 30, 2010, whether 

the hospitals report on seven or eight 

HAC measures. Please see below for 

further discussion of the aggregate HAC 

scoring methodology. 

We note that the performance 

standards for the HAC aggregate score 

are displayed in the table below as a 

score composed of all eight individual 

HAC measures. We recognize that all 

hospitals report on seven of these 

individual measures, and nearly all 

(about 95 percent) of hospitals report all 

eight. However, a small number of 

hospitals do not report on the Foreign 

Object Removal after Surgery HAC 

measure. We believe that any numerical 

differences between the HAC 

performance standards for hospitals 

reporting on seven of eight HAC 

measures compared to the standards for 

hospitals reporting on all eight HAC 

measures will be statistically 

insignificant. However, we intend to 

provide updated performance standards 

in the CY 2012 OPPS/ASC final rule 

with comment period for those hospitals 

only reporting on seven of the eight 

HAC measures. 

We invite public comment on the 

proposed methodology for setting 

performance standards for the aggregate 

HAC score for HAC measures finalized 

for the FY 2014 Hospital VBP Program. 

We specify the proposed performance 

standards for the aggregate HAC score 

(all eight measures) and AHRQ 

measures using the proposed baseline 

period data in the table below. We note 

that, for both AHRQ and HAC measures, 

a lower value represents better 

performance on the measures. Thus, a 

‘‘perfect’’ score on each measure would 

be a 0.00. 

PROPOSED ACHIEVEMENT PERFORMANCE STANDARDS FOR FY 2014 HAC * AND AHRQ MEASURES

Measure ID Measure description 

Performance 

standard (achievement threshold) Benchmark 

Outcome Measures 

HACs ** ......................................... Hospital Acquired Conditions per 1,000 (aggregated) ...................... 0 .00109 0.0000 

AHRQ Composite ......................... Complication/patient safety for selected indicators (composite) ....... 0 .4006 0.2754 

AHRQ Composite ......................... Mortality for selected medical conditions (composite) ....................... 0 .7542 0.6130 

* Finalized HACs for use in the FY 2014 Hospital VBP Program include: Foreign Object Retained After Surgery, Air Embolism, Blood Incompatibility, Pressure Ulcer Stages III & IV, Falls and Trauma, Vascular Catheter Associated Infections, Catheter Associated Urinary Tract Infection, 

and Manifestations of Poor Glycemic Control. 

** HAC performance standards were calculated using data from hospitals reporting on 8 HAC measures. The final rule will include the performance standards for hospitals reporting on seven HAC measures. 

7. Proposed FY 2014 Hospital VBP 

Program Scoring Methodology 

a. Proposed FY 2014 Domain Scoring 

Methodology 

In the Hospital Inpatient VBP Program 

Final Rule, we adopted a methodology 

for scoring all clinical process of care, 

patient experience of care, and outcome 

measures. As noted in the Hospital 

Inpatient VBP Program Final Rule, this 

methodology outlines an approach that 

we believe is well-understood by patient 

advocates, hospitals and other 

stakeholders because it was developed 

during a year-long process that involved 

extensive stakeholder input, and was 

presented by us in a report to Congress. 

Further, we have conducted extensive 

research on a number of other scoring 

models for the Hospital VBP Program to 

ensure a high level of confidence in the 

scoring methodology (76 FR 26514). In 

addition, we believe that, for simplicity 

and consistency of the Hospital VBP 

Program, it is important to score 

hospitals under the same methodology 

for subsequent fiscal years, with 

appropriate modifications to 

accommodate new domains and 

measures. Therefore, we are proposing 

to use the same scoring methodology for 

these measures in the FY 2014 Hospital 

VBP Program, with the changes 

discussed below for HAC measures. We 

also refer readers to discussion of the 

proposed Medicare Spending per 

Beneficiary measure in the FY 2012 

IPPS/LTCH PPS proposed rule (76 FR 

25927 through 25928). We invite public 

comment on this proposal. 

b. Proposed HAC Measures Scoring 

Methodology 

We are proposing to score the HAC 

measures using an aggregated HAC rate 

based on the unweighted average of the 

rates of the individual HAC measures. 

However, as explained above, we are 

aware that hospitals may only report on 

seven of the eight finalized HAC 

measures. This is because some 

hospitals do not perform surgeries, and 

therefore would not submit eligible 

claims that would be the basis for the 

Foreign Object Retained After Surgery 

HAC measure. The remaining seven 

HAC measures would apply to all 

hospitals, however, because all 

hospitals that participate in the Hospital 

VBP Program will submit eligible claims 

for these measures. We also anticipate 

that most hospitals will report on all 

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eight of the individual HAC measures 

because most hospitals that participate 

in the Hospital VBP Program perform 

surgeries and would submit eligible 

surgical claims that would be the basis 

for the Foreign Object Retained After 

Surgery HAC measure. Accordingly, we 

are proposing that the aggregate HAC 

score for each hospital be calculated as 

the equally weighted average of the rates 

on all HAC measures for which the 

hospital reports Medicare claims, which 

will most often be an equally weighted 

average of the rates on all eight 

measures, but may be scores on seven of 

the HAC measures. As stated above, the 

HAC aggregate score will be calculated 

if a hospital submits at least one 

Medicare claim during the performance 

period. For example, if a hospital 

submits one or more Medicare claims 

during the performance period, and 

those claims do not indicate any HAC 

occurrences, the hospital will receive a 

perfect score on all applicable HAC 

measures. The aggregate HAC rate 

would then be used to assign points in 

accordance with the proposed 

performance standards discussed above 

to calculate an individual hospital’s 

aggregate HAC achievement and 

improvement scores. The single 

aggregate HAC score would be the 

greater of the hospital’s achievement or 

improvement score. The hospital’s 

aggregate HAC score would be 

combined with the hospital’s score on 

other outcome measures to derive an 

outcome domain score, with the 

aggregate HAC score weighted equally 

with the other outcome measures in the 

domain. We note that in assigning 

points for this aggregate HAC score, 

lower aggregate HAC scores represent 

better performance. We believe our 

proposed aggregate scoring methodology 

for HAC measures allows us to 

meaningfully score hospitals on these 

critical patient safety measures. 

We welcome public comment on this 

proposal. 

8. Ensuring HAC Reporting Accuracy 

For the FY 2013 Hospital VBP 

Program, the validation process we 

adopted for the Hospital IQR Program 

will ensure that the Hospital VBP data 

are accurate (76 FR 26537 through 

26538). In addition, Medicare 

Administrative Contractors (MACs) 

review claims to ensure that accurate 

Medicare payments are made. This 

claims review ensures that HAC data 

included on the claims are accurately 

reported both for the Hospital IQR 

Program and the Hospital VBP Program. 

In addition, we are considering 

proposing to adopt additional targeting 

to assess the accuracy of HAC data 

reported on claims. Specifically, we are 

considering targeting a subset of 

hospitals that report zero or an 

aberrantly low percentage of HACs on 

Medicare fee-for-service IPPS claims 

relative to the overall national average 

of HACs. 

This consideration is supported by 

our analysis of HAC rates calculated 

using data from Medicare fee-for-service 

claims from October 1, 2008 through 

June 30, 2010. We publicly released 

these rates in March 2011, and they can 

be found on our Web site at: http://

www.cms.gov/HospitalQualityInits/06_

HACPost.asp#TopOfPage. This analysis 

revealed a range in hospital-reporting of 

the eight HACs from a low of 0.0001 

percent (that is, 1 discharge out of every 

100,000 applicable discharges) of 

hospital inpatient discharges (23 

discharges) reporting a blood 

incompatibility, to a high of 0.0564 

percent (that is, 56.4 discharges out of 

every 100,000 applicable discharges) 

reporting Falls and Trauma. According 

to this analysis, however, these HAC 

rates appear to be underreported 

occurrences when compared to similar 

HAI measures. For example, the 

Catheter Associated Urinary Tract 

Infection (CAUTI) measure rate was 5.4 

percent, or 54 out of every 1,000 eligible 

discharges, as reported in the AHRQ 

2008 National Healthcare Quality 

Report. This rate is more than 125 times 

greater than the national HAC reported 

CAUTI rate of 0.317 out of every 1,000 

eligible discharges. While we recognize 

that definitional differences in the 

measures might contribute to this rate 

difference, we also believe that 

underreporting of HAC claims data 

contributed to this difference. It is 

important to note that the 5.4 percent 

CAUTI rate was calculated using 

medical record documentation as a data 

source and a random sample of 

Medicare beneficiaries for acute care 

hospital stays, as discussed in a separate 

Federal report about healthcare quality 

(AHRQ 2008 National Healthcare 

Quality Report). We note that this 

analysis is exploratory in nature, and we 

cannot definitively conclude any 

systematic underreporting by any 

particular hospitals. Nonetheless, we 

believe that this analysis provides 

sufficient information for CMS to 

consider development of a HAC 

validation process to assess potential 

underreporting by hospitals and ensure 

accurate reporting among all hospitals 

reporting HACs on Medicare claims. 

Our goal is to improve quality and 

patient safety through accurate reporting 

of hospital quality data and accurately 

linking quality to payment in the 

Hospital VBP Program. We strive to 

ensure accurate reporting, and we 

believe that validating a random subset 

of hospitals that report an aberrantly 

low number of HACs would strengthen 

our overall effort to link value to 

quality. We welcome public comments 

regarding our consideration of a HAC 

validation process. We also note that we 

intend to take appropriate action if we 

discover systematic underreporting of 

HAC and other adverse event 

information, including, where 

appropriate, reporting such instances to 

the HHS Office of the Inspector General 

for its review. 

9. Proposed Domain Weighting for FY 

2014 Hospital VBP Program 

For the FY 2013 Hospital VBP 

Program, we adopted a weighting 

scheme that weights the clinical process 

of care domain at 70 percent of the Total 

Performance Score, and weights the 

patient experience of care domain at 30 

percent. However, the addition of the 

outcome domain and the proposed 

addition of an efficiency domain 

necessitate the adoption of a different 

domain weighting scheme than we 

adopted for the FY 2013 Hospital VBP 

Program. We discuss below the factors 

we considered in determining the 

appropriate weight to propose for each 

domain in the FY 2014 Hospital VBP 

Program. 

As we have previously stated, we 

believe that the patient’s experience 

associated with receiving inpatient 

services in a hospital is important in 

determining the hospital’s overall 

quality of care for purposes of the 

Hospital VBP Program. However, we 

also believe that a majority of the Total 

Performance Score should be based on 

the objective data submitted by 

hospitals on the measures selected for 

the Hospital VBP Program. Thus, as we 

finalized for the FY 2013 Hospital VBP 

Program, we are proposing to weight the 

patient experience of care domain at 30 

percent for the FY 2014 Hospital VBP 

Program. We believe that this weighting 

proposal appropriately incentivizes 

hospitals to provide patient-centered 

care across the full spectrum of their 

services. As we stated in the Hospital 

Inpatient VBP Program Final Rule (76 

FR 26491), we believe that domains 

need not be given equal weight, and that 

over time, scoring methodologies should 

be weighted more towards outcomes, 

patient experience of care and 

functional status measures (measures 

assessing physical and mental capacity, 

capability, well-being and 

improvement). Consistent with this 

policy and our analysis showing that 

many of the clinical process of care 

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measures are nearly topped-out, we are 

proposing to reduce the weighting for 

the clinical process of care domain to 20 

percent. We also are proposing to 

weight the outcome domain at 30 

percent of the Total Performance Score 

for the FY 2014 Hospital VBP Program. 

Because we believe that scoring 

hospitals on outcome measures will 

improve treatment outcomes and patient 

safety, we intend to propose increasing 

the weighting for the outcome domain 

in subsequent fiscal years as more 

outcome measures become available. 

As we indicated in the FY 2012 IPPS/ 

LTCH PPS proposed rule (76 FR 25927 

through 25928), we believe that 

efficiency is an important component of 

improving outcomes, the patient 

experience of care and the overall 

quality of care provided to Medicare 

beneficiaries in the inpatient hospital 

setting. However, we also recognize the 

importance of clinical quality based 

upon industry standards of care and the 

patients’ experience of care. 

Accordingly, we are proposing to weight 

the efficiency domain at 20 percent of 

the Total Performance Score for the FY 

2014 Hospital VBP Program. 

Therefore, we are proposing the 

following domain weights for the FY 

2014 Total Performance Score: outcome 

domain = 30 percent; clinical process of 

care domain = 20 percent; patient 

experience of care domain = 30 percent; 

and efficiency domain = 20 percent. 

Under this proposed weighting scheme, 

the clinical care-related domains 

(process of care and outcome domains) 

would, together, constitute 50 percent of 

the total performance score (20 percent 

for clinical process of care and 30 

percent for outcome), the patient 

experience of care domain would 

constitute 30 percent, and the efficiency 

domain would constitute 20 percent. 

We believe that this proposed weighting 

scheme will hold hospitals accountable 

for all aspects of patient care, including 

clinical outcomes and efficiency. 

We invite public comment on the 

proposed weighting of the four 

proposed domains to be used in the 

calculation of the Total Performance 

Score for the FY 2014 Hospital VBP 

Program. 

B. Proposed Review and Correction 

Process Under the Hospital VBP 

Program 

1. Background 

Section 1886(o)(10)(A)(i) of the Act 

requires the Secretary to make 

information available to the public 

regarding individual hospital 

performance in the Hospital VBP 

Program, including: (1) Performance of 

the hospital on each measure that 

applies to the hospital; (2) the 

performance of the hospital with respect 

to each condition or procedure; and (3) 

the hospital’s Total Performance Score. 

To meet this requirement, we stated our 

intention in the Hospital Inpatient VBP 

Program Final Rule to publish hospital 

scores with respect to each measure, 

each hospital’s condition-specific score 

(that is, the performance score with 

respect to each condition or procedure, 

for example, AMI, HF, PN, and SCIP), 

each hospital’s domain-specific score, 

and each hospital’s Total Performance 

Score on Hospital Compare (76 FR 

26534 through 26536). We intend to 

make proposals related to making this 

information publicly available in future 

rulemaking. 

Section 1886(o)(10)(A)(ii) of the Act 

requires the Secretary to ensure that 

each hospital has the opportunity to 

review, and submit corrections for, the 

information to be made public with 

respect to each hospital under section 

1886(o)(10)(A)(i) of the Act prior to such 

information being made public. 

For the FY 2013 Hospital VBP 

Program, the finalized measures consist 

of chart-abstracted clinical process of 

care measures and a patient experience 

of care measure. We are proposing that 

hospitals will have an opportunity to 

review and correct chart-abstracted data 

and patient experience data through the 

processes discussed below. We intend 

to make additional proposals regarding 

the review and correction of outcome 

measures, efficiency measures, and 

domain, condition, and Total 

Performance Scores in future 

rulemaking. 

2. Proposed Review and Corrections of 

Data Submitted to the QIO Clinical 

Warehouse on Chart-Abstracted Process 

of Care Measures and Measure Rates 

We are proposing that the process 

utilized to give hospitals an opportunity 

to review and correct data submitted on 

the Hospital IQR Program chartabstracted measures also be used to 

allow hospitals to correct data and 

measure rates on chart-abstracted 

measures for the Hospital VBP Program. 

Under this proposed process, hospitals 

would continue to have the opportunity 

to review and correct data they submit 

on all Hospital IQR Program chartabstracted measures, whether or not the 

measure is adopted as a measure for the 

Hospital VBP Program. We are 

proposing to use the Hospital IQR 

Program’s data submission, review, and 

correction processes, which will allow 

for review and correction of data on a 

continuous basis as it is being submitted 

for the Hospital IQR Program, which in 

turn would allow hospitals to correct 

data and measure rates used to calculate 

the Hospital VBP Program Total 

Performance Score for those hospitals 

that participate in both programs. We 

believe this process would satisfy the 

requirement in section 1886(o)(10)(A)(ii) 

of the Act to allow hospitals to review 

and submit corrections for one of the 

pieces of information that will be made 

public with respect to each hospital— 

the measure rates for chart-abstracted 

measures. For hospitals that do not 

participate in the Hospital IQR Program 

but do participate in the Hospital VBP 

Program, such as Maryland hospitals, 

we intend to make proposals regarding 

how those hospitals will be able to 

review and correct their Hospital VBP 

data in future rulemaking. 

Under the Hospital IQR Program, 

hospitals currently have an opportunity 

to submit, review, and correct any of the 

chart-abstracted information submitted 

to the QIO Clinical Warehouse for the 

full 41⁄2 months following the last 

discharge date in a calendar quarter. 

(We note that in the FY 2012 IPPS/ 

LTCH PPS proposed rule (76 FR 25915), 

we proposed to reduce the submission 

period from 41⁄2 months to 104 days.) 

Hospitals can begin submitting data on 

the first discharge day of any reporting 

quarter. Hospitals are encouraged to 

submit data early in the submission 

schedule so that they can identify errors 

and resubmit data before the quarterly 

submission deadline. Users are able to 

view and make corrections to the data 

that they submit within 24 hours of 

submission. The data are populated into 

reports that are updated nightly with all 

data that have been submitted and 

successfully processed for the previous 

day. Hospitals are able to view a report 

each quarter which shows the 

numerator, denominator and percentage 

of total for each Clinical Measure Set 

and Strata. That report contains the 

hospital’s performance on each measure 

set/strata submitted to the QIO Clinical 

Warehouse. The numerator is the 

number of cases that satisfies the 

conditions of the performance measure, 

and a denominator is the number of 

successfully accepted cases in the 

measure population evaluated by the 

performance measure. The percentage of 

total is calculated by using the 

numerator divided by the denominator 

multiplied by 100. This measure rate is 

the same as the Hospital VBP measure 

rate. 

We believe that 41⁄2 months is 

sufficient time for hospitals to be able to 

submit, review data, make corrections to 

the data, and view their percentage of 

total, or measure rate, on each Clinical 

Measure Set/Strata for use in both the 

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42364 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

Hospital IQR and Hospital VBP 

Programs. Additionally, because this 

process is familiar to most hospitals, use 

of this existing framework reduces the 

burden that could have been placed on 

hospitals that participate in the Hospital 

IQR Program if they had to learn a new 

process for submitting data for the 

Hospital VBP Program. Following the 

period in which hospitals can review 

and correct data and measure rates for 

chart-abstracted measures as specified 

above, we propose that hospitals will 

have no further opportunity to correct 

such data or measure rates. 

We are proposing that once the 

hospital has an opportunity to review 

and correct data related to chartabstracted measures submitted in the 

Hospital IQR Program, we will consider 

that the hospital has been given the 

opportunity to review and correct this 

data and measure rates for purposes of 

the Hospital VBP Program, and these 

measure rates will be used to calculate 

domain, condition, and Total 

Performance Scores for the Hospital 

VBP Program without further review 

and correction. We invite public 

comment on this proposal. 

3. Proposed Review and Correction 

Process for Hospital Consumer 

Assessment of Healthcare Providers and 

Systems (HCAHPS) Data 

We are proposing a ‘‘two-phase’’ 

process for the review and correction of 

HCAHPS data. Under this proposed 

process, hospitals would have the 

opportunity to review and correct data 

they submitted on all HCAHPS Hospital 

IQR Program items in the first phase, 

whether or not such items or 

combination of items are adopted as 

HCAHPS dimensions for the Hospital 

VBP Program. In the second phase, 

hospitals would have the opportunity to 

review the patient-mix and mode 

adjusted HCAHPS scores (details on the 

HCAHPS adjustment process may be 

found at: http://www.hcahpsonline.org/ 

files/Final%20Draft%20Description%20

of%20HCAHPS%20Mode%20and

%20PMA%20with%20bottom%20box

%20modedoc%20April%2030,

%202008.pdf) on dimensions that we 

will use to score hospitals under the 

Hospital VBP Program to determine 

whether they believe CMS calculated 

their scores on these dimensions 

correctly. We believe that this proposal 

for a two-phase review process will 

expedite hospital review and correction 

of data. We also believe that this 

proposal will improve quality of care 

because hospitals will be able to timely 

review their HCAHPS scores and 

respond efficiently in improving patient 

care to address areas of weakness 

reflected in their scores. We are not 

proposing to release any patient level 

data to the public. This proposed review 

process would only grant each hospital 

the authority to review and correct the 

hospital’s patient-level data. 

a. Phase One: Review and Correction of 

HCAHPS Data Submitted to the QIO 

Clinical Warehouse 

For the first phase of the HCAHPS 

review and correction process, we 

proposed to reduce the HCAHPS 

submission deadline under the Hospital 

IQR Program by one week in order to 

create a 1-week period for hospitals to 

review and correct their HCAHPS data. 

We included this proposal to reduce the 

submission deadline in the FY 2012 

IPPS/LTCH PPS proposed rule (76 FR 

25916). Currently, hospitals have 

approximately 14 weeks after the end of 

a calendar quarter to submit HCAHPS 

data for that quarter to the QIO Clinical 

Warehouse. Under this proposal, 

hospitals would have approximately 13 

weeks after the end of a calendar quarter 

to submit HCAHPS data for that quarter 

to the QIO Clinical Warehouse and a 1- 

week period to review and correct that 

data. During the 13-week submission 

period, hospitals would be able to 

resubmit their data to make corrections 

to the patient-level records. The 1-week 

review and correction period would 

occur immediately after the 13-week 

data submission deadline. 

The proposed 1-week review and 

correction period would allow hospitals 

to provide missing data or replace 

incorrect data in the data files they have 

submitted to the QIO Clinical 

Warehouse. The 1-week review and 

correction period will allow hospitals to 

identify any issues with the data they 

had submitted in the 13-week 

submission period. Hospitals will have 

the opportunity to review frequency 

distributions of all of their submitted 

data items, which include hospital 

summary information, patient 

administrative data, and patient survey 

responses, and resubmit their HCAHPS 

data files to correct identified issues 

during the 1-week review and correction 

period. We define the term ‘‘review and 

correct’’ to mean that hospitals can 

correct their existing data records, but 

not add new data records. Accordingly, 

hospitals would not be allowed to add 

new patient-level records or remove 

existing patient-level records during the 

review and correction period. Following 

the conclusion of the 1-week review and 

correction period, hospitals would not 

be allowed to review, correct, or submit 

additional HCAHPS data for the 

applicable calendar quarter. 

b. Phase Two: Review and Correction of 

HCAHPS Scores for the Hospital VBP 

Program 

In the second phase of the proposed 

HCAHPS review and correction process, 

hospitals would be given the 

opportunity to review their scores on 

the HCAHPS items that will be used in 

the Hospital VBP Program. These 

HCAHPS scores are constructed after 

the data that hospitals had submitted 

have been analyzed to identify and 

remove incomplete surveys and after 

adjustments for the effects of patientmix and survey mode have been 

applied. (Details on the HCAHPS 

adjustment process may be found at: 

http://www.hcahpsonline.org/files/Final

%20Draft%20Description%20of

%20HCAHPS%20Mode%20

and%20PMA%20with%20bottom

%20box%20modedoc%20April%2030,

%202008.pdf.) Hospitals would have 

approximately 1 week to examine their 

HCAHPS dimension scores for the 

applicable Hospital VBP Program 

performance period. A participating 

hospital would have the opportunity to 

question CMS if the hospital believes its 

scores were miscalculated. We would 

respond to a hospital’s inquiries by 

checking the calculation and, if 

necessary, recalculating the hospital’s 

HCAHPS scores. In this proposed 

second phase of the HCAHPS review 

and correction process, hospitals would 

not be allowed to change or submit new 

HCAHPS data or delete existing data. 

Their right to correct information during 

this period would be limited to 

reviewing their HCAHPS dimension 

scores and notifying CMS of any errors 

in its calculation of those scores. We 

intend to propose the procedural 

aspects of the second phase of the 

proposed HCAHPS review and 

correction process in the FY 2013 IPPS/ 

LTCH PPS proposed rule. In summary, 

for the chart-abstracted and patient 

experience of care measures, we are 

proposing that existing procedures for 

submission, review, and correction 

related to chart-abstracted measures 

under the Hospital IQR Program, 

coupled with the proposed two phase 

review of HCAHPS scores discussed 

above, would constitute an opportunity 

for review and correction of measure 

data and measure rates under the 

Hospital VBP Program. Because these 

procedures give hospitals the 

opportunity to review and correct the 

data and/or measure rates, such data 

and measure rates may be used to 

calculate domain, condition, and Total 

Performance Scores for the Hospital 

VBP Program. We intend to make 

proposals related to making this 

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information publicly available, and to 

make additional proposals regarding the 

review and correction of outcome 

measures, efficiency measures, and 

domain, condition, and Total 

Performance Scores in future 

rulemaking. We invite public comment 

on these proposals. 

XVII. Files Available to the Public via 

the Internet 

In the past, a majority of the Addenda 

to which we referred throughout the 

preamble of the OPPS/ASC proposed 

and final rules appeared in the printed 

version of the Federal Register as part 

of the annual rulemakings. However, 

beginning with this CY 2012 proposed 

rule, the Addenda of the proposed and 

final rules will be published and 

available only via the Internet on the 

CMS Web site. We note that our existing 

regulations at §§ 416.166(b), 416.171(b), 

and 416.173 provide for the annual 

publication of the covered surgical 

procedures and the payment rates under 

the ASC payment system in the Federal 

Register. In this proposed rule, we are 

proposing to revise these three 

regulations to reflect the option of 

annually publishing the Addenda 

containing the covered surgical 

procedures and payment rates under the 

ASC payment system via the Internet on 

the CMS Web site. 

To view the Addenda of the CY 2012 

OPPS/ASC proposed rule pertaining to 

the CY 2012 proposed payments under 

the OPPS, go to the CMS Web site at: 

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

HospitalOutpatientPPS/HORD and 

select ‘‘1525–P’’ from the list of 

regulations. All Addenda for this 

proposed rule are contained in the 

zipped folder entitled ‘‘2012 OPPS 

NPRM Addenda’’ at the bottom of the 

page. 

To view the Addenda of the CY 2012 

OPPS/ASC proposed rule pertaining to 

the CY 2012 proposed payments under 

the ASC payment system, go to the CMS 

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

ASCPayment/ASCRN/ and select 

‘‘1525–P’’ from the list of regulations. 

All Addenda for this proposed rule are 

contained in the zipped folder entitled 

‘‘Addendum AA, BB, DD1, and DD2’’ at 

the bottom of the page. 

A. Information in Addenda Related to 

the Proposed CY 2012 Hospital OPPS 

Addenda A and B provide various 

data pertaining to the proposed CY 2012 

payment for items and services under 

the OPPS. Specifically, Addendum A 

includes a list of all proposed APCs to 

be payable under the OPPS, including 

the proposed scaled relative weights, 

the proposed national unadjusted 

payment rates, the proposed national 

unadjusted copayments, and the 

proposed minimum unadjusted 

copayments for each APC that we are 

proposing for CY 2012. Addendum B 

includes a list of all active HCPCS 

codes, including the proposed APC 

assignments, the proposed scaled 

relative weights, the proposed national 

unadjusted payment rates, the proposed 

national unadjusted copayments, the 

proposed minimum unadjusted 

copayments, and the proposed payment 

status indicators and proposed comment 

indicators for CY 2012 OPPS. 

For the convenience of the public, we 

also are including on the CMS Web site 

a table that displays the HCPCS code 

data in Addendum B sorted by APC 

assignment, identified as Addendum C. 

Addendum D1 defines the proposed 

payment status indicators that we are 

proposing to use in Addenda A and B. 

Addendum D2 defines the proposed 

comment indicators that are used in 

Addendum B. Addendum E lists the 

HCPCS codes that are proposed to be 

only payable to hospitals as inpatient 

procedures and that are not payable 

under the OPPS for CY 2012. 

Addendum L contains the proposed outmigration wage adjustment for CY 2012. 

Addendum M lists the HCPCS codes 

that are proposed to be members of a 

composite APC and identifies the 

proposed composite APC to which each 

is assigned. This addendum also 

identifies the proposed status indicator 

for each HCPCS code and a proposed 

comment indicator if there is a proposed 

change in the code’s status with regard 

to its membership in the composite 

APC. Each of the HCPCS codes included 

in Addendum M has a single procedure 

payment APC, listed in Addendum B, to 

which it is assigned when the criteria 

for assignment to the composite APC are 

not met. When the criteria for payment 

of the code through the composite APC 

are met, one unit of the composite APC 

payment is paid, thereby providing 

packaged payment for all services that 

are assigned to the composite APC 

according to the specific I/OCE logic 

that applies to the APC. We refer readers 

to the discussion of composite APCs in 

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

a complete description of the proposed 

composite APCs. 

Addendum N, ‘‘Proposed Bypass 

Codes for Creating ‘Pseudo’ Single 

Procedure Claims for CY 2012 OPPS,’’ 

contains a list of the HCPCS codes that 

we are proposing to use to create 

‘‘pseudo’’ single claims from multiple 

procedure claims so that the most 

claims data can be used to set median 

costs for the CY 2012 OPPS. We refer 

readers to section II.A.1.b. of this 

proposed rule for a full discussion of the 

use of this file in the proposed 2012 

OPPS ratesetting process. Addendum N 

contains the following elements for the 

proposed CY 2012 bypass codes: (1) 

HCPCS code; (2) short descriptor; (3) 

overall bypass indicator; and (4) an 

indicator if the code was not used as a 

bypass code in ratesetting activities 

prior to this CY 2012 proposed rule. The 

addendum was previously issued as a 

table (usually Table 1) in the preamble 

of the applicable proposed or final rule. 

We are issuing it as an addendum in 

this proposed rule because it is lengthy 

and users can better analyze the file if 

it is furnished in Excel format on the 

CMS Web site. 

B. Information in Addenda Related to 

the Proposed CY 2012 ASC Payment 

System 

Addenda AA and BB provide various 

data pertaining to the proposed CY 2012 

payment for the covered surgical 

procedures and covered ancillary 

services for which ASCs may receive 

separate payment. Addendum AA lists, 

for CY 2012, the proposed ASC covered 

surgical procedures, whether the 

procedure is proposed to be subject to 

multiple procedure discounting, the 

proposed comment and payment 

indicators for each procedure, and the 

proposed payment weights and rates for 

each procedure. Addendum BB 

displays, for CY 2012, the proposed 

ASC covered ancillary services, the 

proposed comment and payment 

indicators for each service, and the 

proposed payment weights and rates for 

each service. 

Addendum DD1 defines the proposed 

payment indicators that are used in 

Addenda AA and BB. Addendum DD2 

defines the proposed comment 

indicators that are used in Addenda AA 

and BB. 

To view the Addenda that pertain to 

the list of proposed surgical procedures 

to be excluded from Medicare payment 

if furnished in ASCs, go to the CMS 

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

ASCPayment/ASCRN/ and select 

‘‘1525–P’’ from the list of regulations. 

The proposed excluded ASC procedures 

are contained in the zipped folder titled 

‘‘Addendum EE’’ at the bottom of the 

page. The proposed excluded 

procedures listed in Addendum EE are 

surgical procedures that are assigned to 

the OPPS inpatient list, are not covered 

by Medicare, are reported using a CPT 

unlisted code, or have been determined 

to pose a significant safety risk to a 

Medicare beneficiary when performed 

in an ASC or for which standard 

medical practice dictates that the 

beneficiary typically requires active 

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42366 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

medical monitoring and care at 

midnight following the procedure. 

The Medicare Physician Fee Schedule 

(MPFS) data files are located at the CMS 

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

PhysicianFeeSched/. 

The links to all of the FY 2012 IPPS 

proposed wage index-related tables (that 

are used for the CY 2012 OPPS) are 

accessible on the CMS Web site at: 

http://www.cms.gov/ 

AcuteInpatientPPS/WIFN. 

XVIII. Collection of Information 

Requirements 

A. Legislative Requirements for 

Solicitation of Comments 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

to solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

In this proposed rule, we are 

soliciting public comments on each of 

the issues outlined above as discussed 

below that contained information 

collection requirements. 

B. Requirements in Regulation Text 

This proposed rule contains the 

following proposed information 

collection requirements specified in the 

regulatory text: 

1. ICRs Regarding Basic Commitments 

of Providers (§ 489.20) 

Section 489.20(w) contains a 

physician presence disclosure 

requirement that requires disclosure 

when a doctor of medicine or a doctor 

of osteopathy is not onsite 24 hours per 

day, 7 days per week. The burden 

associated with the physician presence 

disclosure requirement is the time and 

effort necessary for each hospital and 

CAH to develop a standard notice to 

furnish to its patient, obtain the 

required patients signatures, and 

maintain a copy in the patient’s medical 

record. Although this requirement is 

subject to the PRA, the associated 

burden is approved under OMB control 

number 0938–1034. 

Our proposed amendment to 

§ 489.20(w) would require that, for 

hospitals and CAHs that are not 

physician owned, the existing physician 

presence disclosure requirement 

regarding outpatient services would 

apply only to outpatients receiving 

observation services, surgery, and 

procedures requiring anesthesia. The 

burden associated with this requirement 

would be greatly reduced and includes 

revisions to the time and effort 

necessary for each hospital and CAH to 

revise and disseminate the existing 

standard notice to its patients. The 

requirements in § 489.20(w) apply to all 

hospitals as defined in § 489.24(b). We 

estimate that there are approximately 

2,597 hospitals and CAHs that may not 

have a doctor or medicine or a doctor 

of osteopathy onsite at all times. We 

estimate that it will take each hospital 

or CAH 4 hours to develop or amend 

and review a disclosure form on a onetime basis, 30 seconds to make each 

disclosure, another 30 seconds to obtain 

the patient’s signature, and an 

additional 30 seconds to include a copy 

of the notice in the patient’s medical 

record. We estimate that on average 

each hospital or CAH that is subject to 

the disclosure requirement will make 

1966 disclosures per year. The 

estimated annual burden associated 

with developing an amended form, 

obtaining patient signatures, and 

copying and recording the form is 

137,872 hours at a cost of approximately 

$2,551,148. 

2. ICRs Regarding Exceptions Process 

Related to the Prohibition of Expansion 

of Facility Capacity (§ 411.362) 

As discussed in section XV. of this 

proposed rule, our proposed new 

§ 411.362(c) would establish and 

implement a process under which an 

applicable hospital or high Medicaid 

facility may apply for an exception to 

the prohibition on expansion of facility 

capacity. A physician-owned hospital 

would be allowed to request an 

exception under proposed § 411.362(c) 

by providing information to CMS 

regarding the hospital’s baseline number 

of operating rooms, procedure rooms, 

and beds for which the hospital is 

licensed as of March 23, 2010, and 

specifying the increase in the number of 

operating rooms, procedure rooms and 

beds it is requesting under the 

exceptions process. In addition, the 

hospital would have to provide 

supporting documentation to CMS 

regarding the criteria it must satisfy. We 

estimate that 265 physician-owned 

hospitals would request an exception. 

We estimate that it would take each 

hospital 8 hours and 17.5 minutes to 

complete the request process at the cost 

of $417.74 for each hospital. Overall, the 

annual burden for this process is 

estimated at approximately 2,153 hours 

at the cost of approximately $110,707. 

These estimates do not include time or 

cost burden estimates for hospitals to 

read and provide rebuttal statements in 

response to community input 

comments, which is included in the 

proposed regulation, and the associated 

time and costs for the hospital to send 

them to CMS. Due to the voluntary 

nature of this criterion, time and cost 

burden estimates would be difficult to 

anticipate as this is an unknown 

variable. 

PROPOSED REVISED ANNUAL RECORDKEEPING AND REPORTING REQUIREMENTS

Regulation 

section(s) OMB Control No. Number of respondents 

Number of 

responses 

Burden per 

response 

(hours) 

Total annual 

burden 

(hours) 

Hourly labor 

cost of 

reporting 

($) 

Total labor 

cost of 

reporting 

($) 

Total 

capital/ 

maintenance 

costs 

($) 

Total cost 

($) 

§ 489.20 ................... 0938–1034 .............. 2,597 1,966 0 .019 * 137,872 18 .50 2,551,148 0 2,551,148 

§ 411.362 ................. 0938–New ............... 265 265 8 .29 2,153 51 .42 110,707 0 110,707 

Total .................. ................................. 2,862 2,231 ...................... 140,025 ...................... .................... .................... 2,661,855 

* Represents the revised burden estimate associated with the requirement. It does not reflect the burden currently approved under OCN 0938–1034. 

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C. Proposed Associated Information 

Collections Not Specified in Regulatory 

Text 

In this proposed rule, we make 

reference to proposed associated 

information collection requirements that 

are not discussed in the regulation text 

contained in this document. The 

following is a discussion of those 

requirements. 

1. Hospital Outpatient Quality 

Reporting (Hospital OQR) Program 

As previously stated in section XIV. of 

this proposed rule, the Hospital OQR 

Program has been generally modeled 

after the quality data reporting program 

for the Hospital IQR Program. We refer 

readers to the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72064 

through 72110 and 72111 through 

72114) for a detailed discussion of 

Hospital OQR Program information 

collection requirements we have 

previously finalized. 

2. Hospital OQR Program Measures for 

the CY 2012, CY 2013, CY 2014, and CY 

2015 Payment Determinations 

a. Previously Adopted Hospital OQR 

Program Measures for the CY 2012, CY 

2013, and CY 2014 Payment 

Determinations 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68766), we 

retained the 7 chart-abstracted measures 

we used in CY 2009 and adopted 4 new 

claims-based imaging measures for the 

CY 2010 payment determination, 

bringing the total number of quality 

measures for which hospitals must 

submit data to 11 measures. In the CY 

2010 OPPS/ASC final rule with 

comment period (74 FR 60637), we 

required hospitals to continue to submit 

data on the same 11 measures for the CY 

2011 payment determination. The 

burden associated with the 

aforementioned data submission 

requirements is currently approved 

under OCN: 0938–1109 and expires 

October 31, 2013. 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72071 

through 72094), we adopted measures 

for the CY 2012, CY 2013, and CY 2014 

payment determinations. 

For the CY 2012 payment 

determination, we retained the 7 chartabstracted measures and the 4 claimsbased imaging measures we used for the 

CY 2011 payment determination. We 

also adopted 1 structural HIT measure 

that tracks HOPDs’ ability to receive lab 

results electronically, and 3 claimsbased imaging efficiency measures. 

These actions bring the total number of 

measures for the CY 2012 payment 

determination for which hospitals must 

submit data to 15 measures. In the CY 

2011 OPPS/ASC final rule with 

comment period (75 FR 72112 through 

72113), we discussed the burden 

associated with these information 

collection requirements. 

For the CY 2013 payment 

determination, we required that 

hospitals continue to submit data for all 

of the quality measures that we adopted 

for the CY 2012 payment determination. 

We also adopted 1 structural HIT 

measure assessing the ability to track 

clinical results between visits, 6 new 

chart-abstracted measures on the topics 

of HOPD care transitions and ED 

efficiency, as well as 1 chart-abstracted 

ED–AMI measure that we proposed for 

the CY 2012 payment determination but 

which we decided to finalize for the CY 

2013 payment determination. These 

actions bring the total number of quality 

measures for the CY 2013 payment 

determination for which hospitals must 

submit data to 23 measures. 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72071 

through 72094), for the CY 2014 

payment determination, we retained the 

CY 2013 payment determination 

measures, but did not adopt any 

additional measures. In the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 72112 through 72113), we 

discussed the burden associated with 

these information collection 

requirements. 

The 23 measures that we adopted in 

the CY 2011 OPPS/ASC final rule with 

comment period to be used for the CY 

2012 through CY 2014 payment 

determinations are listed in the table 

below. 

HOSPITAL OQR PROGRAM MEASUREMENT SET ADOPTED IN THE CY 2011 OPPS/ASC FINAL RULE WITH COMMENT

PERIOD TO BE USED FOR THE CY 2012, CY 2013, AND CY 2014 PAYMENT DETERMINATIONS

OP–1: Median Time to Fibrinolysis. 

OP–2: Fibrinolytic Therapy Received Within 30 Minutes. 

OP–3: Median Time to Transfer to Another Facility for Acute Coronary Intervention. 

OP–4: Aspirin at Arrival. 

OP–5: Median Time to ECG. 

OP–6: Timing of Antibiotic Prophylaxis. 

OP–7: Prophylactic Antibiotic Selection for Surgical Patients. 

OP–8: MRI Lumbar Spine for Low Back Pain. 

OP–9: Mammography Follow-up Rates. 

OP–10: Abdomen CT—Use of Contrast Material. 

OP–11: Thorax CT—Use of Contrast Material. 

OP–12: The Ability for Providers with HIT to Receive. Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data. 

OP–13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery. 

OP–14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT). 

OP–15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache. 

OP–16: Troponin Results for Emergency Department acute myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac 

Chest Pain) Received Within 60 minutes of Arrival. 

OP–17: Tracking Clinical Results between Visits. 

OP–18: Median Time from ED Arrival to ED Departure for Discharged ED Patients. 

OP–19: Transition Record with Specified Elements Received by Discharged Patients. 

OP–20: Door to Diagnostic Evaluation by a Qualified Medical Professional. 

OP–21: ED–Median Time to Pain Management for Long Bone Fracture. 

OP–22: ED–Patient Without Being Seen. 

OP–23: ED–Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interpretation Within 45 

minutes of Arrival. 

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b. Additional Proposed Hospital OQR 

Program Measures for CY 2014 

In the CY 2011 OPPS/ASC final rule 

with comment period, we did not adopt 

any new measures for the CY 2014 

payment determination. In this CY 2012 

OPPS/ASC proposed rule, we are 

proposing to add, for the CY 2014 

payment determination, 6 chartabstracted measures, 2 structural 

measures (including hospital outpatient 

volume data for selected outpatient 

surgical procedures), and 1 HAI surgical 

site infection measure. Thus, for the CY 

2014 payment determination, we are 

proposing that there would be a total of 

32 measures. The complete proposed 

measure set we are proposing for the CY 

2014 payment determination, including 

measures we have previously adopted, 

is shown below. 

PROPOSED CY 2014 HOSPITAL OQR PROGRAM MEASURE SET REFLECTING MEASURES PREVIOUSLY ADOPTED AND THE

PROPOSED ADDITIONS

OP–1: Median Time to Fibrinolysis. 

OP–2: Fibrinolytic Therapy Received Within 30 Minutes. 

OP–3: Median Time to Transfer to Another Facility for Acute Coronary Intervention. 

OP–4: Aspirin at Arrival. 

OP–5: Median Time to ECG. 

OP–6: Timing of Antibiotic Prophylaxis. 

OP–7: Prophylactic Antibiotic Selection for Surgical Patients. 

OP–8: MRI Lumbar Spine for Low Back Pain. 

OP–9: Mammography Follow-up Rates. 

OP–10: Abdomen CT—Use of Contrast Material. 

OP–11: Thorax CT—Use of Contrast Material. 

OP–12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable Data.* 

OP–13: Cardiac Imaging for Preoperative Risk Assessment for Non-Cardiac Low Risk Surgery.* 

OP–14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT).* 

OP–15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic Headache.* 

OP–16: Troponin Results for Emergency Department acute myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac 

Chest Pain) Received Within 60 minutes of Arrival.** 

OP–17: Tracking Clinical Results between Visits.** 

OP–18: Median Time from ED Arrival to ED Departure for Discharged ED Patients.** 

OP–19: Transition Record with Specified Elements Received by Discharged Patients.** 

OP–20: Door to Diagnostic Evaluation by a Qualified Medical Professional.** 

OP–21: ED–Median Time to Pain Management for Long Bone Fracture.** 

OP–22: ED–Patient Left Before Being Seen.** 

OP–23: ED–Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT Scan Interpretation Within 45 

minutes of Arrival.** 

OP–24: Surgical Site Infection.*** 

OP–25: Hemoglobin A1c Poor Control in Diabetic Patients.*** 

OP–26: Low Density Lipoprotein (LDL–C) Control in Diabetic Patients.*** 

OP–27: High Blood Pressure Control in Diabetic Patients.*** 

OP–28: Dilated Eye Exam in Diabetic Patients.*** 

OP–29: Urine Screening for Microalbumin or Medical Attention for Nephropathy in Diabetic Patients.*** 

OP–30: Cardiac Surgery Referral.*** 

OP–31: Safety Surgery Checklist.*** 

OP–32: Hospital Outpatient Department Volume for Selected Outpatient Surgical Procedures.*** 

* New measure for the CY 2012 payment determination. 

** New measure for the CY 2013 payment determination. 

*** Proposed new measure for the CY 2014 payment determination. 

We will calculate the claims-based 

measures using Medicare FFS claims 

data and do not require additional 

hospital data submissions, and we are 

using the same data submission 

requirements related to the chartabstracted quality measures that are 

submitted directly to CMS that we used 

for the CY 2011 and CY 2012 payment 

determinations. For the structural 

measures, including the collection of 

all-patient volume for selected 

outpatient procedures; hospitals will 

enter data into a Web-based collection 

tool during a specified collection period 

once annually. For the collection of HAI 

data, we are proposing that hospitals 

would use the NHSN infrastructure and 

protocol to report the measure for 

Hospital OQR Program purposes. The 

NHSN is a Web-based reporting tool 

hosted by CDC and is provided free of 

charge to hospitals. Under the Hospital 

OQR Program requirements, hospitals 

must complete and submit a notice of 

participation form for the Hospital OQR 

Program if they have not already done 

so or have withdrawn from 

participation. By submitting this 

document, hospitals agree that they will 

allow CMS to publicly report the 

measures for which they have submitted 

data under the Hospital OQR Program. 

For the CY 2014 payment 

determination, the burden associated 

with these requirements (including 

those previously adopted and those 

currently proposed) is the time and 

effort associated with completing the 

notice of participation form, collecting 

and submitting the data on the 32 

measures. For the chart-abstracted 

measures where data is submitted 

directly to CMS, we estimate that there 

will be approximately 3,200 

respondents per year. For hospitals to 

collect and submit the information on 

the chart-abstracted measures (including 

the OP–22 measure for which we are 

proposing that data be submitted via a 

Web-based tool rather than via an 

electronic file) we estimate it will take 

35 minutes per sampled case. Based 

upon the data submitted for the CY 2011 

payment determination and our 

estimates for the additional proposed 

measures, we estimate there will be a 

total of 1,307,510 cases per year, 

approximately 409 cases per year per 

respondent. The estimated annual 

burden associated with the submission 

requirements for these chart-abstracted 

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measures is 762,278 hours (1,307,510 

cases per year × 0.583 hours per case). 

For the structural measures, excluding 

the proposed all-patient volume for 

selected surgical procedures measure, 

we estimate that each participating 

hospital will spend 10 minutes per year 

to collect and submit the required data, 

making the estimated annual burden 

associated with this measure 1,603 

hours (3,200 hospitals × 0.167 hours per 

hospital × 3 structural measures per 

hospital). 

For the collection of data for the 

proposed HAI Surgical Site Infection 

measure, we estimate that 

approximately 1,200 hospitals are 

participating in the Hospital OQR 

Program, but are not currently 

submitting HAI data to the NHSN. 

Based upon burden estimates associated 

with the collection of NHSN data 

currently approved under OCN: 0920– 

0666, we estimate that additional 

annual burden associated with this 

proposed measure will be 17,269 hours 

(0.533 hr per response × estimated 27 

responses per hospital × 1,200 

hospitals). 

For the proposed collection of allpatient volume for selected outpatient 

surgical procedures, because hospitals 

must determine their populations for 

data reporting purposes and most 

hospitals are voluntarily reporting 

population and sampling data for 

Hospital OQR Program purposes, we 

believe the only additional burden 

associated with this proposed 

requirement would be the reporting of 

the data using the Web-based tool. We 

estimate that each participating hospital 

will spend 10 minutes per year to 

collect and submit the data, making the 

estimated annual burden associated 

with this measure 534 hours (3,200 

hospitals × 0.167 hours per hospital). 

c. Proposed Hospital OQR Program 

Measures for CY 2015 

For the CY 2015 payment 

determination, we are proposing to 

retain the requirement that hospitals 

must complete and submit a notice of 

participation form for the Hospital OQR 

Program. For the CY 2015 payment 

determination, we also are proposing to 

retain the measures used for CY 2014 

payment determination (including, if 

adopted, the measures proposed in this 

proposed rule) and to add one 

additional HAI measure, Healthcare 

Personnel (HCP) Influenza Vaccination. 

Achieving and sustaining high influenza 

vaccination coverage among HCP is 

intended to help protect HCP and their 

patients and reduce disease burden and 

healthcare costs. 

For the CY 2015 payment 

determination, the burden associated 

with these proposed requirements is the 

time and effort associated with 

completing the notice of participation 

form, collecting and submitting the data 

on the proposed measures, and 

collecting and submitting proposed allpatient volume data for selected 

outpatient surgical procedures. For the 

proposed chart-abstracted measures, we 

estimate that there will be 

approximately 3,200 respondents per 

year. For hospitals to collect and submit 

the information on the proposed chartabstracted measures where data is 

submitted directly to CMS, we estimate 

it will take 35 minutes per sampled 

case. Based upon the data submitted for 

the CY 2011 payment determination and 

our estimates for the additional 

proposed measures, we estimate there 

will be a total of 1,307,510 cases per 

year, approximately 409 cases per year 

per respondent. The estimated annual 

burden associated with the 

aforementioned proposed submission 

requirements for the proposed chartabstracted data is 762,278 hours 

(1,307,510 cases per year × 0.583 hours 

per case). For the proposed structural 

measures, we estimate that each 

participating hospital will spend 10 

minutes per year to collect and submit 

the data, making the estimated annual 

burden associated with this proposed 

measure 1,603 hours (3,200 hospitals × 

0.167 hours per hospital × 3 structural 

measures per hospital). 

For the proposed collection of HAI 

data, we estimate that approximately 

1,200 hospitals are participating in the 

Hospital OQR Program, but are not 

currently submitting HAI data to the 

NHSN. We base our burden estimates 

upon burden estimates associated with 

the collection of NHSN data currently 

approved under OCN: 0920–0666. For 

the proposed Surgical Site Infection HAI 

measure, we estimate that hospitals will 

incur an additional burden of 17,269 

hours (0.533 hours per response × an 

estimated 27 responses per hospital × 

1,200 hospitals). 

For the proposed collection of HCP 

Influenza Vaccination HAI measure 

data, we estimate that hospitals will 

incur an additional burden of 14,400 

hours (2.0 hours per response × an 

estimated 6 responses per hospital × 

1,200 hospitals). 

For the proposed collection of allpatient volume data for selected 

outpatient surgical procedures, because 

hospitals must determine their 

populations for data reporting purposes 

and most hospitals are voluntarily 

reporting population and sampling data 

for Hospital OQR purposes, we believe 

the only additional burden associated 

with this proposed requirement will be 

the reporting of the data using the Webbased tool. We estimate that each 

participating hospital will spend 10 

minutes per year to collect and submit 

the data, making the estimated annual 

burden associated with this proposed 

measure 534 hours (3,200 hospitals × 

0.167 hours per hospital). 

We invite public comment on the 

burden associated with these proposed 

information collection requirements. 

3. Proposed Hospital OQR Program 

Validation Requirements for CY 2013 

In this proposed rule, we are 

proposing to retain most of the 

requirements related to data validation 

for CY 2013 that we adopted in the CY 

2011 OPPS/ASC final rule with 

comment period (75 FR 72103 through 

72106) for CY 2012, with some 

revisions. While these requirements are 

subject to the PRA, they are currently 

approved under OCN: 0938–1109 and 

expire October 31, 2013. 

Similar to our approach for the CY 

2012 Hospital IQR Program payment 

determination (75 FR 72103 through 

72106), we are proposing to validate 

data from randomly selected hospitals 

for the CY 2013 payment determination, 

but we are proposing to reduce the 

number of hospitals from 800 to 450. 

We note that, because hospitals would 

be selected randomly, every hospital 

participating in the Hospital OQR 

Program would be eligible each year for 

validation selection. 

In the CY 2011 OPPS/ASC proposed 

rule and final rule with comment period 

(75 FR 46381 and 72106, respectively), 

we discussed additional data validation 

conditions under consideration for CY 

2013 and subsequent years. In this 

proposed rule, we are proposing to 

select for validation, up to 50 additional 

hospitals based upon targeting criteria. 

For each selected hospital, we would 

randomly select up to 48 patient 

episodes of care per year (12 per 

quarter) for validation purposes from 

the total number of cases that the 

hospital successfully submitted to the 

OPPS Clinical Warehouse during the 

applicable time period. However, if a 

selected hospital submitted less than 12 

cases in one or more quarters, only 

those cases available would be 

validated. 

The burden associated with the 

proposed CY 2013 requirement is the 

time and effort necessary to submit 

validation data to a CMS contractor. We 

estimate that it would take each of the 

sampled hospitals approximately 12 

hours to comply with these proposed 

data submission requirements. To 

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comply with the proposed 

requirements, we estimate each hospital 

must submit up to 48 cases for the 

affected year for review. We are 

proposing that selected hospitals 

comply with these requirements per 

year, which would result in a total of up 

to 24,000 charts being submitted by the 

sampled hospitals. The estimated 

annual burden associated with the 

proposed data validation process for CY 

2013 is approximately 6,000 hours. 

We also are proposing to reduce the 

deadline from 45 days to 30 days for 

hospitals to submit requested medical 

record documentation to a CMS 

contractor to support our validation 

process. This proposal may create an 

additional administrative burden for 

hospitals selected for validation. 

However, this proposed deadline is in 

line with our QIO regulations at 

§ 476.78 and the total burden would be 

the time required to comply with the 

requirements for copying and mailing in 

a 30-day period 12 charts for each of 

four quarters for CY 2013. 

We invite public comment on the 

burden associated with these proposed 

information collection requirements. 

4. Proposed Hospital OQR Program 

Reconsideration and Appeals 

Procedures 

In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68779), we 

adopted a mandatory reconsideration 

process that applied to the CY 2010 

payment decisions. In the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60654 through 60655), we 

continued this process for the CY 2011 

payment update. In the CY 2011 OPPS/ 

ASC final rule with comment period (75 

FR 72106 through 72108), we continued 

this process for the CY 2012 payment 

update with some modifications. We 

eliminated the requirement that the 

reconsideration request form be signed 

by the hospital CEO to facilitate 

electronic submission of the form and 

reduce hospital burden. We are 

proposing to continue this process for 

the CY 2013 payment determination. 

While there is burden associated with 

filing a reconsideration request, 5 CFR 

1320.4 of the Paperwork Reduction Act 

of 1995 regulations excludes collection 

activities during the conduct of 

administrative actions such as 

redeterminations, reconsiderations, and/ 

or appeals. 

5. ASC Quality Reporting Program 

In this proposed rule, we are 

proposing to adopt seven claims-based 

measures for collection beginning in CY 

2012 and one NHSN HAI measure of 

Surgical Site Infection for collection 

beginning in CY 2013. These measures 

would be used for the CY 2014 payment 

determination. We are proposing to 

collect quality measure data for the 

seven claims-based measures by using 

Quality Data Codes (QDCs) placed on 

submitted claims beginning with 

services furnished from January 1, 2012 

through December 31, 2012. Data 

collection for the HAI measure would 

begin with infection events occurring on 

or after January 1, 2013 through June 30, 

2013. The eight proposed measures are: 

• Patient Burns (NQF #0263) 

• Patient Falls (NQF #0266) 

• Wrong Site, Wrong Side, Wrong 

Patient, Wrong Procedure, Wrong 

Implant (NQF #0267) 

• Hospital Transfer/Admission (NQF 

#0265) 

• Prophylactic Intravenous (IV) 

Antibiotic Timing (NQF #0264) 

• Ambulatory Surgery Patients with 

Appropriate Method of Hair Removal 

(NQF #0515) 

• Selection of Prophylactic 

Antibiotic: First OR Second Generation 

Cephalosporin (NQF #0268) 

• Surgical Site Infection Rate (NQF 

#0299) 

Approximately 71 percent of ASCs 

participate in Medical Event Reporting, 

which includes reporting on the first 

four proposed claims-based measures 

listed above. Between January 1995 and 

December 2007, ASCs reported 126 

events, an average of 8.4 events per year 

(Florida Medical Quality Assurance, 

Inc. and Health Services Advisory 

Group. Ambulatory Surgery Center 

Environmental Scan (July 2008) 

(Contract No. GS–10F–0096T).). Thus, 

we estimate the burden to report QDCs 

on this number of claims per year for 

the first four claims-based measures to 

be nominal due to the small number of 

cases (less than 1 case per month per 

ASC). 

The remaining proposed claims-based 

measures concern surgical procedures. 

We estimate the burden associated with 

submitting QDCs for these measures to 

be 465,703 hours (5,577,280 claims per 

year × 50 percent of claims requiring 

quality data code information × 0.167 

hours per claim). We refer readers to the 

HHS Report to Congress: Medicare 

Ambulatory Surgical Center ValueBased Purchasing Implementation Plan, 

available at the Web site: https:// 

www.cms.gov/ASCPayment/downloads/ 

C_ASC_RTC%202011.pdf as the source 

for the number of ASCs and number of 

claims per year to calculate ASC burden 

estimates. 

For the collection of the Surgical Site 

Infection HAI data, we are proposing 

that ASCs would use the NHSN 

infrastructure and protocol to report the 

measure for ASC Quality Reporting 

Program purposes discussed above. 

For the Surgical Site Infection HAI 

measure, we estimate that it will require 

ASCs an additional 8,275 hours (0.533 

hours per response x an estimated 3 

responses per ASC × 5,175 ASCs). We 

base the time per response for our 

burden estimate on burden estimates 

associated with the collection of NHSN 

data currently approved under OCN: 

0920–0666, and the number of ASCs 

from the HHS Report to Congress: 

Medicare Ambulatory Surgical Center 

Value-Based Purchasing 

Implementation Plan, available at the 

Web site: https://www.cms.gov/ 

ASCPayment/downloads/ 

C_ASC_RTC%202011.pdf. 

For CY 2015 payment determination, 

we are proposing to retain the eight 

measures we are proposing to adopt for 

CY 2014 payment determination (if they 

are adopted) and we are proposing to 

add two structural measures. 

For the structural measures, we are 

proposing that ASCs would enter 

required information using a Web-based 

collection tool between July 1, 2013 and 

August 15, 2013. For the Safe Surgery 

Checklist Use structural measure, we 

estimate that each participating ASC 

will spend 10 minutes per year to 

collect and submit the required data, 

making the estimated annual burden 

associated with this measure 864 hours 

(5,175 ASCs × 0.167 hours per ASC). 

For the ASC Facility Volume Data on 

Selected ASC Surgical Procedures 

structural measure, we estimate that 

each participating ASC will spend 10 

minutes per year to collect and submit 

the required data, making the estimated 

annual burden associated with this 

measure, 864 hours (5,175 ASCs × 0.167 

hours per ASC). 

For the CY 2016 payment 

determination, we are proposing to 

retain the ten measures we are 

proposing to adopt for the CY 2015 

payment determination (if they are 

adopted), and are proposing to add one 

structural measure, Influenza 

Vaccination Coverage Among 

Healthcare Personnel (NQF #0431). 

We estimate that each participating 

ASC will spend 10 minutes per year to 

collect and submit the data via a Webbased tool, making the estimated annual 

burden associated with this proposed 

measure 864 hours (5,175 ASCs × 0.167 

hours per ASC). 

6. Proposed 2012 Medicare EHR 

Incentive Program Electronic Reporting 

Pilot for Hospitals and CAHs 

Under 42 CFR 495.6(f)(9), we require 

eligible hospitals and CAHs 

participating in the Medicare EHR 

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Incentive Program (which would 

include those participating in the 

proposed 2012 Medicare EHR Incentive 

Program Electronic Reporting Pilot) to 

successfully report hospital clinical 

quality measures (CQMs) to CMS in the 

manner specified by CMS. Although we 

are proposing that eligible hospitals and 

CAHs may continue to attest CQMs in 

2012, they may also choose to 

participate in the proposed 2012 

Medicare EHR Incentive Program 

Electronic Reporting Pilot for Hospitals 

and CAHs. We are proposing that 

eligible hospitals and CAHs 

participating in the 2012 Medicare EHR 

Incentive Program Electronic Reporting 

Pilot must submit CQM data on all 15 

CQMs (listed in Table 10 of the final 

rule (75 FR 44418 through 44420) for 

the Medicare and Medicaid EHR 

Incentive Program) to CMS, via a secure 

portal based on data obtained from the 

eligible hospital’s or CAH’s certified 

EHR technology. 

Eligible hospitals and CAHs are 

required to report on core and menu set 

criteria for Stage 1 meaningful use. The 

reporting of clinical quality measures is 

part of the core set. We estimate that it 

would take an eligible hospital or CAH 

0.5 hour to submit the required CQM 

information via the proposed 2012 

Medicare EHR Incentive Program 

Electronic Reporting Pilot. Therefore, 

the estimated total burden for all 4,922 

Medicare eligible hospitals and CAHs 

participating in the reporting Pilot 

(3,620 acute care hospitals and 1,302 

CAHs) is 2,461 hours. 

We believe that an eligible hospital or 

CAH might assign a Computer and 

Information Systems Managers to 

submit the CQM information on their 

behalf. We estimate the cost burden for 

an eligible hospital or CAH to submit 

the CQMs and hospital quality 

requirements is $29.64 (0.5 hour × 

$59.27 (mean hourly rate for computer 

and information systems managers 

based on the 2010 Bureau of Labor 

Statistics)) and the total estimated 

annual cost burden for all eligible 

hospitals and CAHs to submit the 

required CQMs is $145,889 ($29.64 × 

4,922 hospitals and CAHs). We are 

soliciting public comments on the 

estimated numbers of eligible hospitals 

and CAHs that may registered for the 

Medicare EHR Incentive Program 

Electronic Reporting Pilot that would 

submit the CQM information via the 

proposed Electronic Reporting Pilot in 

FY 2012. We also invite public 

comments on the type of personnel or 

staff that would mostly likely submit on 

behalf of eligible hospitals and CAHs. 

7. Additional Topics 

In addition to seeking OMB approval 

for the proposed information collection 

requirements associated with the 

Hospital OQR Program, we are seeking 

public comment on several issues that 

may ultimately affect the burden 

associated with the Hospital OQR 

Program. Specifically, in this proposed 

rule, we are proposing to retain 

measures for the CY 2015 payment 

determinations, adopt new measures for 

the CY 2014 and CY 2015 payment 

determinations, and we are seeking 

comments on other possible measures 

under consideration for adoption into 

the Hospital OQR Program. We also are 

soliciting public comments on 

collecting chart-abstracted data for one 

measure for the CY 2013 payment 

determination via a Web-based tool, and 

on the continued use of an 

extraordinary circumstance extension or 

waiver for reporting quality data, and 

additional data validation conditions 

that we are considering adopting 

beginning with the CY 2014 payment 

determination. 

We also are seeking public comment 

on our proposals for an ASC Quality 

Reporting Program for the ASC payment 

determinations for CYs 2014, 2015 and 

2016. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access CMS’ Web site 

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

Paperwork@cms.hhs.gov, or call the 

Reports Clearance Office at 410–786– 

1326. 

We invite public comments on these 

potential information collection 

requirements. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 

Attention: CMS Desk Officer, (CMS– 

1525–P) 

Fax: (202) 395–6974; or 

E-mail: 

OIRA_submission@omb.eop.gov. 

XIX. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this proposed rule, and, when we 

proceed with a subsequent document(s), 

we will respond to those comments in 

the preamble to that document. 

XX. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We have examined the impacts of this 

proposed rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993, 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, section 202 of 

the Unfunded Mandates Reform Act of 

1995 (UMRA) (March 22, 1995, Pub. L. 

104–4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated as an 

‘‘economically’’ significant rule under 

section 3(f)(1) of Executive Order 12866. 

Accordingly, the rule has been reviewed 

by the Office of Management and 

Budget. We have prepared a Regulatory 

Impact Analysis that, to the best of our 

ability, presents the costs and benefits of 

the proposed rule. We are soliciting 

public comments on the Regulatory 

Impact Analysis provided. 

2. Statement of Need 

This proposed rule requests public 

comment on the CMS proposal to 

update the Medicare hospital outpatient 

prospective payment rates and the 

ambulatory surgical center prospective 

payment rates for CY 2012. The 

proposed rule is necessary to enable 

CMS to acquire and consider the public 

comments on the proposed changes to 

payment policies and payment rates for 

services furnished by hospitals and 

CMHCs to outpatients for CY 2012. We 

are required under section 

1833(t)(3)(C)(ii) of the Act to update 

annually the OPPS conversion factor 

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used to determine the APC payment 

rates. We also are required under 

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

review, not less often than annually, 

and revise the groups, the relative 

payment weights, and the wage and 

other adjustments described in section 

1833(t)(2) of the Act. In addition, we 

must review the clinical integrity of 

payment groups and weights at least 

annually. 

This proposed rule also requests 

public comment on the CMS proposal to 

update the ASC payment rates for CY 

2012. The proposed rule is necessary to 

enable CMS to acquire and consider 

public comments on the proposed 

changes to payment policies and 

payment rates for covered surgical 

procedures and covered ancillary 

services that are performed in an ASC 

for CY 2012. Because the ASC payment 

rates are based on the OPPS relative 

weights for the majority of the 

procedures performed in ASCs, the ASC 

payment rates are updated annually to 

reflect annual changes to the OPPS 

weights. In addition, because the 

services provided in ASCs are identified 

by HCPCS codes which are reviewed 

and revised either quarterly or annually, 

depending on the HCPCS codes, it is 

necessary to update the ASC payment 

rates annually to reflect these changes to 

HCPCS codes. In addition, we are 

required under section 1833(i)(1) of the 

Act to review and update the list of 

surgical procedures that can be 

performed in an ASC not less often than 

every 2 years. 

Section 1833(t)(17) of the Act requires 

that subsection (d) hospitals that fail to 

meet quality reporting requirements 

under the Hospital OQR Program to 

incur a reduction of 2.0 percentage 

points to their OPD fee schedule 

increase factor. In section XIV. of this 

proposed rule, we are proposing 

additional policies affecting the 

Hospital OQR Program for CY 2013, CY 

2014, and CY 2015 that hospitals would 

have to meet in order to receive the full 

OPD fee schedule increase factor. We 

are soliciting public comments on these 

proposed additional policies. 

In this proposed rule, to further 

implement section 6001(a)(3) of the 

Affordable Care Act, we set forth the 

proposed process for a hospital to 

request an exception to the prohibition 

on expansion of facility capacity under 

the whole hospital and rural provider 

exceptions to the physician self-referral 

prohibition. We also set forth a related 

proposal for amendments to the patient 

safety requirements in the provider 

agreement regulations. We are soliciting 

public comments on these proposed 

changes. 

Section 1886(o)(1)(B) of the Act 

directs the Secretary to begin making 

value-based incentive payments under 

the Hospital VBP Program to hospitals 

for discharges occurring on or after 

October 1, 2012. In this proposed rule, 

we are proposing to add one chartabstracted measure for the FY 2014 

payment determination under the 

Hospital Inpatient VBP Program. We are 

soliciting public comments on this 

proposed additional measure. 

Section 109(b) of the MIEA TRHCA 

states that the Secretary may implement 

a quality reporting system for ASCs in 

a manner so as to provide for a 

reduction of 2.0 percentage point s in 

any annual update with respect to the 

year involved, for failure to report on 

quality measures. In this proposed rule, 

we are proposing to establish an ASC 

Quality Reporting Program with the 

collection of seven quality measures 

beginning in CY 2012. 

3. Overall Impacts for Proposed OPPS 

and ASC Provisions 

We estimate that the effects of the 

proposed OPPS provisions that would 

be implemented by this proposed rule 

would result in expenditures exceeding 

$100 million in any 1 year. We estimate 

the total increase (from proposed 

changes in this proposed rule as well as 

enrollment, utilization, and case-mix 

changes) in expenditures under the 

OPPS for CY 2012 compared to CY 2011 

to be approximately $3.285 billion. 

Because this proposed rule for the OPPS 

is ‘‘economically significant’’ as 

measured by the $100 million threshold 

and also a major rule under the 

Congressional Review Act, we have 

prepared a regulatory impact analysis 

that, to the best of our ability, presents 

the costs and benefits of this 

rulemaking. Table 51 of this proposed 

rule displays the redistributional impact 

of the proposed CY 2012 changes on 

OPPS payment to various groups of 

hospitals and for CMHCs. 

We estimate that the effects of the 

proposed ASC provisions that would be 

implemented by this proposed rule for 

the ASC payment system would result 

in expenditures exceeding $100 million 

in any one year. We estimate the total 

increase (from proposed changes in this 

proposed rule as well as enrollment, 

utilization, and case-mix changes) in 

expenditures under the ASC payment 

system for CY 2012 compared to CY 

2011 to be approximately $224 million. 

Because this proposed rule for the ASC 

payment system is ‘‘economically 

significant’’ as measured by the $100 

million threshold and also a major rule 

under the Congressional Review Act, we 

have prepared a regulatory impact 

analysis of changes to the ASC payment 

system that, to the best of our ability, 

presents the costs and benefits of this 

rulemaking. Table 52 and Table 53 of 

this proposed rule display the 

redistributional impact of the CY 2012 

proposed changes on ASC payment, 

grouped by specialty area and then 

grouped by procedures with the greatest 

ASC expenditures, respectively. 

4. Detailed Economic Analyses 

a. Effects of Proposed OPPS Changes in 

This Proposed Rule 

We are proposing to update the OPPS 

payment rates and to revise several 

OPPS payment policies for CY 2012. We 

are required under section 

1833(t)(3)(C)(ii) of the Act to update 

annually the conversion factor used to 

determine the APC payment rates. We 

also are required under section 

1833(t)(9)(A) of the Act to review, not 

less often than annually, and revise the 

groups, the relative payment weights, 

and the wage and other adjustments 

described in section 1833(t)(2) of the 

Act. In addition, we must review the 

clinical integrity of payment groups and 

weights at least annually. Consistent 

with our historical proactice in this 

proposed rule, we are proposing to 

update the conversion factor and the 

wage index adjustment for hospital 

outpatient services furnished beginning 

January 1, 2012, as we discuss in 

sections II.B. and II.C., respectively, of 

this proposed rule. We discuss our 

implementation of section 10324 of the 

Affordable Care Act, as amended by 

HCERA, authorizing a wage index of 

1.00 for certain frontier States. We also 

are proposing to revise the relative APC 

payment weights using claims data for 

services furnished on and after January 

1, 2010, through and including 

December 31, 2010, and updated cost 

report information. We are proposing to 

continue the current payment 

adjustment for rural SCHs, including 

EACHs. Finally, we list the 19 drugs and 

biologicals in Table 26 of this proposed 

rule that we are proposing to remove 

from pass-through payment status for 

CY 2012. 

Under this proposed rule, we estimate 

that the update change to the conversion 

factor and other adjustments (but not 

including the effects of outlier 

payments, pass-through estimates, and 

the application of the frontier State 

wage adjustment for CY 2012), would 

increase total OPPS payments by 1.5 

percent in CY 2012. The proposed 

changes to the APC weights, the changes 

to the wage indices, the continuation of 

a payment adjustment for rural SCHs, 

including EACHs, and the proposed 

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payment adjustment for cancer hospitals 

would not increase OPPS payments 

because these changes to the OPPS are 

budget neutral. However, these 

proposed updates would change the 

distribution of payments within the 

budget neutral system as shown in 

Table 51 below and described in more 

detail in this section. We also estimate 

that the total proposed change in 

payments between CY 2011 and CY 

2012, considering all payments, 

including proposed changes in 

estimated total outlier payments, passthrough payments, and the application 

of the frontier State wage adjustment 

outside of budget neutrality, in addition 

to the application of the proposed OPD 

fee schedule increase factor after all 

adjustments required by sections 

1833(t)(3)(F) and 1833(t)(3)(G) of the 

Act, would increase total estimated 

OPPS payments by 1.5 percent. 

(1) Limitations of Our Analysis 

The distributional impacts presented 

here are the projected effects of the 

proposed CY 2012 policy changes on 

various hospital groups. We post on the 

CMS Web site our hospital-specific 

estimated payments for CY 2012 with 

the other supporting documentation for 

this proposed rule. To view the 

hospital-specific estimates, we refer 

readers to the CMS Web site at: http:// 

www.cms.hhs.gov/ 

HospitalOutpatientPPS/. At the Web 

site, select ‘‘regulations and notices’’ 

from the left side of the page and then 

select ‘‘CMS–1525–P’’ from the list of 

regulations and notices. The hospitalspecific file layout and the hospitalspecific file are listed with the other 

supporting documentation for this 

proposed rule. We show hospitalspecific data only for hospitals whose 

claims were used for modeling the 

impacts shown in Table 51 below. We 

do not show hospital-specific impacts 

for hospitals whose claims we were 

unable to use. We refer readers to 

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

a discussion of the hospitals whose 

claims we do not use for ratesetting and 

impact purposes. 

We estimate the effects of the 

proposed individual policy changes by 

estimating payments per service, while 

holding all other payment policies 

constant. We use the best data available, 

but do not attempt to predict behavioral 

responses to our policy changes. In 

addition, we do not make adjustments 

for future changes in variables such as 

service volume, service mix, or number 

of encounters. As we have done in 

previous rules, we are soliciting public 

comment and information about the 

anticipated effects of our proposed 

changes on providers and our 

methodology for estimating them. 

(2) Estimated Effects of This Proposed 

Rule on Hospitals 

Table 51 below shows the estimated 

impact of this proposed rule on 

hospitals. Historically, the first line of 

the impact table, which estimates the 

proposed change in payments to all 

facilities, has always included cancer 

and children’s hospitals, which are held 

harmless to their pre-BBA amount. We 

also include CMHCs in the first line that 

includes all providers because we 

include CMHCs in our weight scalar 

estimate. As discussed in section II.F. of 

this proposed rule, we are proposing to 

extend an adjustment to certain cancer 

hospitals under section 3138 of the 

Affordable Care Act. Because these 

hospitals would continue to be eligible 

to receive hold harmless payments 

(under our standard policy), we now 

include a second line for all hospitals, 

excluding permanently held harmless 

hospitals and CMHCs, and we also 

include a column that shows the impact 

on other hospitals of the proposed 

budget neutral cancer adjustment. 

We present separate impacts for 

CMHCs in Table 51 because CMHCs are 

paid only for partial hospitalization 

services and CMHCs are a different 

provider type from hospitals. In CY 

2011, we are paying CMHCs under APC 

0172 (Level I Partial Hospitalization (3 

services) for CMHCs) and APC 0173 

(Level II Partial Hospitalization (4 or 

more services) for CMHCs), and we are 

paying hospitals for partial 

hospitalization services under APC 0175 

(Level I Partial Hospitalization (3 

services) for hospital-based PHPs) and 

APC 0176 (Level II Partial 

Hospitalization (4 or more services) for 

hospital-based PHPs). For CY 2012, we 

are proposing to continue this APC 

payment structure and to base payment 

fully on the median costs calculated 

using claims and cost report data for the 

type of provider for which rates are 

being set, that is, hospital or CMHC. We 

display the impact on CMHCs of this 

proposed policy below, and we discuss 

the impact on hospitals as part of our 

discussion of the impact of proposed 

changes on hospitals for CY 2012. 

The estimated increase in the total 

payments made under the OPPS is 

determined largely by the increase to 

the conversion factor set under the 

methodology in the statute. The 

distributional impacts presented do not 

include assumptions about changes in 

volume and service mix. Section 

1833(t)(3)(C)(iv) of the Act provides 

that, for purposes of this subparagraph 

subject to paragraph (17) and 

subparagraph (F) of this paragraph, the 

OPD fee schedule increase factor is 

equal to the market basket percentage 

increase applicable under section 

1886(b)(3)(B)(iii) of the Act. The 

proposed market basket percentage 

increase applicable under section 

1886(b)(3)(B)(iii) of the Act, which we 

refer to as the IPPS market basket in this 

discussion, is 2.8 percent. However, 

section 1833(t)(3)(F)(i) of the Act 

reduces that 2.8 percent by the proposed 

productivity adjustment described in 

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

which we propose to be 1.2 percentage 

points (which is the MFP adjustment for 

FY 2012 as proposed in the FY 2012 

IPPS/LTCH proposed rule), and section 

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

the Act further reduce the amount by 

0.1 percentage point, resulting in the 

OPD fee schedule increase factor of 1.5 

percent, which we are proposing to use 

in the calculation of the CY 2012 OPPS 

proposed conversion factor. We refer 

readers to section II.B. of this proposed 

rule for a detailed discussion of the 

calculation of the conversion factor and 

the source of its components. Section 

10324 of the Affordable Care Act, as 

amended by HCERA, further authorized 

additional expenditures outside budget 

neutrality for hospitals in certain 

frontier States that have a wage index of 

1.00. The amounts attributable to this 

frontier State wage index adjustment are 

incorporated into the CY 2012 estimates 

in Table 51. 

Table 51 shows the estimated 

redistribution of hospital and CMHC 

payments among providers as a result of 

APC reconfiguration and recalibration; 

wage indices and the rural adjustment; 

the combined impact of the APC 

recalibration, wage and rural adjustment 

effects, and the OPD fee schedule 

increase factor update to the conversion 

factor; the effect of the proposed budget 

neutral adjustment to payments made to 

the 11 cancer hospitals that meet the 

classification criteria in section 

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

State wage index adjustment; and, 

finally, estimated redistribution 

considering all proposed payments for 

CY 2012 relative to all payments for CY 

2011, including the impact of changes 

in estimated outlier payments, and 

changes to the pass-through payment 

estimate. We did not model an explicit 

budget neutrality adjustment for the 

rural adjustment for SCHs because we 

are not proposing to make any changes 

to the policy for CY 2012. Because the 

proposed updates to the conversion 

factor (including the update of the OPD 

fee schedule increase factor, that is, the 

proposed IPPS market basket amount 

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less the productivity adjustment 

required by section 1833(t)(3)(F)(i) of 

the Act and less the adjustment required 

by sections 1833(t)(3)(F)(ii) and 

1833(t)(3)(G)(ii) of the Act; the 

subtraction of the estimated cost of the 

cancer adjustment; the subtraction of 

the estimated cost of the rural 

adjustment; and the subtraction of the 

estimated cost of projected pass-through 

payment for CY 2012), are applied 

uniformly across services, observed 

redistributions of payments in the 

impact table for hospitals largely 

depend on the mix of services furnished 

by a hospital (for example, how the 

APCs for the hospital’s most frequently 

furnished services would change), and 

the impact of the wage index changes on 

the hospital. However, total payments 

made under this system and the extent 

to which this proposed rule would 

redistribute money during 

implementation also would depend on 

changes in volume, practice patterns, 

and the mix of services billed between 

CY 2011 and CY 2012 by various groups 

of hospitals, which CMS cannot 

forecast. 

Overall, we estimate that the 

proposed OPPS rates for CY 2012 would 

have a positive effect for providers paid 

under the OPPS, resulting in a 1.5 

percent estimated increase in Medicare 

payments. Removing payments to 

cancer and children’s hospitals because 

their payments are held harmless to the 

pre-OPPS ratio between payment and 

cost and removing payments to CMHCs 

suggest that these proposed changes 

would result in a 1.1 percent estimated 

increase in Medicare payments to all 

other hospitals. 

To illustrate the impact of the 

proposed CY 2012 changes, our analysis 

begins with a baseline simulation model 

that uses the final CY 2011 weights, the 

FY 2011 final IPPS wage indices that 

include reclassifications, and the final 

CY 2011 conversion factor. Column 2 in 

Table 51 shows the independent effect 

of the proposed changes resulting from 

the reclassification of services among 

APC groups and the recalibration of 

APC weights, based on 12 months of CY 

2010 OPPS hospital claims data and the 

most recent cost report data. We 

modeled the effect of the proposed APC 

recalibration changes for CY 2012 by 

varying only the weights (the final CY 

2011 weights versus the proposed CY 

2012 weights calculated using the 

service mix and volume in the CY 2010 

claims used for this proposed rule) and 

calculating the percent difference in 

weight. Column 2 also reflects the effect 

of the proposed changes resulting from 

the APC reclassification and 

recalibration changes and any changes 

in multiple procedure discount patterns 

or conditional packaging that occur as a 

result of the proposed changes in the 

relative magnitude of payment weights. 

Column 3 reflects the independent 

effects of the proposed updated wage 

indices, including the proposed 

application of budget neutrality for the 

rural floor policy on a nationwide basis. 

This column excludes the effects of the 

frontier State wage index adjustment, 

which is not budget neutral and is 

included in Column 6. We did not 

model a budget neutrality adjustment 

for the rural adjustment for SCHs 

because we are not proposing to make 

any changes to the policy for CY 2012. 

We modeled the independent effect of 

updating the wage indices by varying 

only the wage indices, holding APC 

relative weights, service mix, and the 

rural adjustment constant and using the 

proposed CY 2012 scaled weights and a 

CY 2011 conversion factor that included 

a budget neutrality adjustment for the 

effect of changing the wage indices 

between CY 2011 and CY 2012. 

Column 4 demonstrates the 

independent effect of the proposed 

cancer hospital payment adjustment. 

For CY 2012 we are proposing to make 

additional payment to raise each cancer 

hospital’s payment to cost ratio (PCR) to 

the weighted average PCR for all other 

hospitals paid under the OPPS. We are 

proposing to accomplish this by 

adjusting each cancer hospital’s OPPS 

payment by the percentage difference 

between their individual PCR (without 

TOPs) and the weighted average PCR of 

the other hospitals paid under the 

OPPS. This results in an increase in 

estimated payments to cancer hospitals 

of 38.8 percent compared to the 

estimated payment that would have 

been made under the OPPS to these 

hospitals as a class in CY 2011, but does 

not represent the estimated net increase 

in payment to cancer hospitals for CY 

2012. After accounting for TOPs that we 

estimate cancer hospitals would no 

longer receive as a result of increased 

payment under the OPPS, the net 

increase in estimated payment to cancer 

hospitals for CY 2012 would be 

approximately 9 percent. 

Column 5 demonstrates the combined 

‘‘budget neutral’’ impact of proposed 

APC recalibration (that is, Column 2), 

the wage index update (that is, Column 

3), as well as the impact of updating the 

conversion factor with the OPD fee 

schedule increase factor, the proposed 

2.8 percent hospital market basket 

update less the multifactor productivity 

adjustment required by section 

1833(t)(3)(F)(i) of the Act which we are 

proposing to be 1.2 percentage points, 

and less the 0.1 percentage point 

reduction required by sections 

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

the Act, which resulted in an OPD fee 

schedule increase factor of 1.5 percent). 

We modeled the independent effect of 

the budget neutrality adjustments and 

the OPD fee schedule increase factor by 

using the weights and wage indices for 

each year, and using a CY 2011 

conversion factor that included the OPD 

fee schedule increase and a budget 

neutrality adjustment for differences in 

wage indices. 

Column 6 demonstrates the 

cumulative impact of the proposed 

budget neutral adjustments from 

Columns 2 through 4, and the OPD fee 

schedule increase factor of 1.5 percent 

reflected in Column 5, combined with 

the non-budget neutral frontier State 

wage index adjustment, discussed in 

section II.C.1. of this proposed rule. 

This differs from Column 5 solely based 

on application of the proposed 

nonbudget neutral frontier Stage wage 

index adjustment. 

Column 7 depicts the full impact of 

the proposed CY 2012 policies on each 

hospital group by including the effect of 

all the proposed changes for CY 2012 

(including the APC reconfiguration and 

recalibration shown in Column 2) and 

comparing them to all estimated 

payments in CY 2011. Column 7 shows 

the combined budget neutral effects of 

Columns 2 through 4, plus the impact 

of the frontier State wage index 

adjustment; the proposed change to the 

fixed-dollar outlier threshold from 

$2,025 to $2,100 as discussed in section 

II.G. of this proposed rule; the change in 

the hospital OQR payment reduction for 

the small number of hospitals in our 

impact model that failed to meet the 

reporting requirements (discussed in 

section XIV.E. of this proposed rule); 

and the impact of increasing the 

estimate of the percentage of total OPPS 

payments dedicated to transitional passthrough payments. Of the 107 hospitals 

that failed to meet the OQR reporting 

requirements for the full CY 2011 

update (and assumed, for modeling 

purposes, to be the same number for CY 

2012), we included 30 hospitals in our 

model because they had both CY 2010 

claims data and recent cost report data. 

We estimate that the cumulative effect 

of all proposed changes for CY 2012 

would increase payments to all 

providers by 1.5 percent for CY 2012. 

We modeled the independent effect of 

all changes in Column 7 using the final 

weights for CY 2011 and the proposed 

weights for CY 2012. We used the final 

conversion factor for CY 2011 of 

$68.876 and the proposed CY 2012 

conversion factor of $69.420 discussed 

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in section II.B. of this proposed rule in 

this model. 

Column 7 also contains simulated 

outlier payments for each year. We used 

the charge inflation factor used in the 

FY 2012 IPPS/LTCH PPS proposed rule 

of 9.08 percent (1.0908) to increase 

individual costs on the CY 2010 claims, 

and we used the most recent overall 

CCR in the April 2011 Outpatient 

Provider-Specific File (OPSF) (76 FR 

26025). Using the CY 2010 claims and 

a 4.44 percent charge inflation factor, 

we currently estimate that outlier 

payments for CY 2011, using a multiple 

threshold of 1.75 and a fixed-dollar 

threshold of $2,025 should be 

approximately 1.1 percent of total 

payments. Outlier payments of 1.1 

percent are incorporated in the CY 2011 

comparison in Column 6. We used the 

same set of claims and a charge inflation 

factor of 9.08 percent (1.0908) and the 

CCRs in the April 2011 OPSF, with an 

adjustment of 0.9850, to reflect relative 

changes in cost and charge inflation 

between CY 2010 and CY 2012, to 

model the CY 2012 outliers at 1.0 

percent of estimated total payments 

using a multiple threshold of 1.75 and 

a fixed-dollar threshold of $2,100. 

Column 1: Total Number of Hospitals 

The first line in Column 1 in Table 51 

shows the total number of facilities 

(4,141), including designated cancer and 

children’s hospitals and CMHCs for 

which we were able to use CY 2010 

hospital outpatient and CMHC claims to 

model CY 2011 and CY 2012 payments, 

by classes of hospitals. We excluded all 

hospitals for which we could not 

accurately estimate CY 2011 or CY 2012 

payment and entities that are not paid 

under the OPPS. The latter entities 

include CAHs, all-inclusive hospitals, 

and hospitals located in Guam, the U.S. 

Virgin Islands, Northern Mariana 

Islands, American Samoa, and the State 

of Maryland. This process is discussed 

in greater detail in section II.A. of this 

proposed rule. At this time, we are 

unable to calculate a disproportionate 

share (DSH) variable for hospitals not 

participating in the IPPS. Hospitals for 

which we do not have a DSH variable 

are grouped separately and generally 

include freestanding psychiatric 

hospitals, rehabilitation hospitals, and 

long-term care hospitals. We show the 

total number (3,879) of OPPS hospitals, 

excluding the hold-harmless cancer and 

children’s hospitals and CMHCs, on the 

second line of the table. We excluded 

cancer and children’s hospitals because 

section 1833(t)(7)(D) of the Act 

permanently holds harmless cancer 

hospitals and children’s hospitals to 

their ‘‘pre-BBA amount’’ as specified 

under the terms of the statute and, 

therefore, we removed them from our 

impact analyses. We show the isolated 

impact on 200 CMHCs at the bottom of 

the impact table and discuss that impact 

separately below. 

Column 2: Proposed APC Changes Due 

to Reassignment and Recalibration 

This column shows the combined 

effects of the proposed reconfiguration, 

recalibration, and other policies (such as 

setting payment for separately payable 

drugs and biologicals at ASP+4 percent 

with an accompanying reduction in the 

amount of cost associated with 

packaged drugs and biologicals and 

changes in payment for PHP services). 

Overall, we estimate that proposed 

changes in APC reassignment and 

recalibration across all services paid 

under the OPPS would increase 

payments to urban hospitals by 0.2 

percent. We estimate that both large and 

other urban hospitals would experience 

an increase of 0.2 percent, all 

attributable to recalibration. We 

estimate that urban hospitals billing 

fewer than 21,000 lines for OPPS 

services would experience decreases 

ranging from 0.2 percent to 5.5 percent. 

The decrease of 5.5 percent for urban 

hospitals billing fewer than 5,000 lines 

per year is attributable to the decline in 

the proposed payment for APC 0034 

(Mental Health Services Composite), for 

which the payment rate is proposed to 

be set at the payment rate for APC 0176 

(Level II Partial Hospitalization (4 or 

more services) for hospital-based PHPs). 

Urban hospitals billing 21,000 or more 

lines for OPPS services would 

experience increases of 0.1 to 0.5 

percent. 

Overall, we estimate that rural 

hospitals would experience an increase 

of 0.2 percent as a result of changes to 

the APC structure. We estimate that 

rural hospitals of all bed sizes would 

experience increases of 0.1 to 0.5 

percent as a result of the proposed APC 

recalibration. We estimate that rural 

hospitals that report fewer than 5,000 

lines for OPPS services would 

experience a decrease of 1.2 percent, 

while rural hospitals that report 5,000 or 

more lines for OPPS services would 

experience an increase of 0.1 to 0.9 

percent in payment as a result of 

proposed APC recalibration. 

Among teaching hospitals, we 

estimate that the impact resulting from 

APC recalibration would include a 

decrease of 0.1 percent for major 

teaching hospitals and an increase of 0.3 

for minor teaching hospitals and 

nonteaching hospitals. 

Classifying hospitals by type of 

ownership suggests that voluntary, 

proprietary, and governmental hospitals 

would experience no change or 

estimated increases of 0.1 to 0.3 percent 

as a result of the proposed APC 

recalibration. Finally, we estimate that 

hospitals for which DSH payments are 

not available would experience a 

decrease of 7.5 to 7.7 percent. Hospitals 

for which DSH is not available furnish 

a large number of psychiatric services 

and we believe that the proposed 

decline in payment for APC 0176 is the 

cause for this estimated decline in 

payment. 

Column 3: Proposed New Wage Indices 

and the Effect of the Rural Adjustment 

This column estimates the impact of 

applying the proposed FY 2012 IPPS 

wage indices for the CY 2012 OPPS 

without the influence of the frontier 

State wage index adjustment which is 

not budget neutral. The frontier State 

wage index adjustment is reflected in 

the combined impact shown in Columns 

6 and 7. We are proposing to continue 

the rural payment adjustment of 7.1 

percent to rural SCHs for CY 2012, as 

described in section II.E.2. of this 

proposed rule. We estimate that the 

combination of updated wage data and 

nationwide application of rural floor 

budget neutrality would redistribute 

payment among regions. We also 

updated the list of counties qualifying 

for the section 505 out-migration 

adjustment. Overall, we estimate that 

urban hospitals would experience no 

change from CY 2011 to CY 2012, and 

that rural hospitals would experience 

decreases of 0.2 to 0.4 percent as a result 

of the updated wage indices. We 

estimate that hospitals located in urban 

New England, Middle Atlantic, West 

North Central, West South Central, and 

Puerto Rico regions would experience 

increases of 0.1 to 0.5 percent while 

other urban regions would experience 

no change or decreases of 0.2 to 0.7 

percent. Hospitals in urban New 

England are expected to see an increase 

of 3.8 percent as a result of the 

implementation of the rural floor. See 

section II.C. for more information. We 

estimate that hospitals in rural West 

North Central, West South Central, and 

Pacific States would experience 

increases of 0.1 to 0.5 percent, 

respectively, while other rural regions 

would experience decreases from 0.2 to 

0.7 percent. 

Column 4: Proposed Cancer Hospital 

Payment Adjustment 

This column estimates the budget 

neutral impact of applying the proposed 

hospital-specific CY 2012 cancer 

adjustment authorized by section 3138 

of the Affordable Care Act, which would 

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result in an estimated aggregate increase 

in OPPS payments to dedicated cancer 

hospitals of 38.8 percent for the CY 

2012 OPPS. After accounting for TOPs 

that we estimate would no longer be 

made, the net impact would result in an 

increase in payment to these hospitals 

of approximately 9 percent. We estimate 

that all other hospitals would 

experience a decrease of 0.6 to 0.7 

percent in CY 2012 as result of the 

adjustment to payments to the cancer 

hospitals under this proposed payment 

adjustment. 

Column 5: All Proposed Budget 

Neutrality Changes Combined With the 

Proposed OPD Fee Schedule Increase 

We estimate that, for most classes of 

hospitals, the addition of the proposed 

OPD fee schedule increase factor of 1.5 

percent would mitigate the negative 

impacts created by the budget neutrality 

adjustments made in Columns 2 and 3. 

While all other classes of hospitals 

would receive an increase after the 

update is applied to the budget 

neutrality adjustments, urban hospitals 

that bill fewer than 11,000 lines and 

rural hospitals that report fewer than 

5,000 lines would experience decreases. 

In particular, urban hospitals that report 

fewer than 5,000 lines would experience 

a cumulative decrease, after application 

of the proposed OPD fee schedule 

increase factor and the budget neutrality 

adjustments, of 4.3 percent, largely as a 

result of the proposed decrease in 

payment for APC 0034 (Mental Health 

Services Composite). OPPS payment for 

APC 0034 is proposed to continue being 

set to the payment rate of APC 0176 

(Level II Partial Hospitalization (4 or 

more services) for hospital-based PHPs), 

which experienced a decline based on 

updated cost report and hospital claims 

data. 

Overall, we estimate that these 

proposed changes would increase 

payments to urban hospitals by 1.1 

percent. We estimate that large urban 

hospitals and ‘‘other’’ urban hospitals 

would also experience an increase of 1.1 

percent. We estimate that rural hospitals 

would experience a 0.8 percent increase 

as a result of the proposed OPD fee 

schedule increase factor and other 

budget neutrality adjustments. 

Among teaching hospitals, we 

estimate that the observed impacts 

resulting from the proposed OPD fee 

schedule increase factor and other 

budget neutrality adjustments would 

include an increase of 1.2 percent for 

major teaching hospitals and an increase 

of 1.0 percent for minor teaching 

hospitals. 

Classifying hospitals by type of 

ownership suggests that proprietary 

hospitals would experience an 

estimated increase of 0.7 percent, while 

voluntary hospitals would experience 

an estimated increase of 1.2 percent and 

government hospitals would experience 

an estimated increase of 0.6 percent. 

Column 6: Proposed Frontier State Wage 

Index Adjustment 

This column shows the impact of all 

budget neutrality adjustments, 

application of the proposed 1.5 percent 

OPD fee schedule increase factor, and 

the non-budget neutral impact of 

applying the proposed frontier State 

wage adjustment (that is, the proposed 

frontier State wage index change in 

addition to all changes reflected in 

Column 4). In general, we estimate that 

all facilities would experience a 

combined increase of 1.6 percent and 

that all hospitals would experience a 

combined increase of 1.1 percent. 

Hospitals in the rural Mountain region 

would experience an increase of 2.3 

percent, most of which is attributable to 

the proposed frontier State wage 

adjustment. Similarly, hospitals in both 

the urban and rural West North Central 

region would experience an increase of 

1.8 percent, most of which is 

attributable to the proposed frontier 

State wage adjustment. 

Column 7: All Proposed Changes for CY 

2012 

Column 7 compares all proposed 

changes for CY 2012 to estimated final 

payment for CY 2011, including the 

proposed changes in the outlier 

threshold, payment reductions for 

hospitals that failed to meet the OQR 

reporting requirements, and the 

difference in pass-through estimates that 

are not included in the combined 

percentages shown in Column 5. This 

column includes estimated payment for 

a few hospitals receiving reduced 

payment because they did not meet 

their hospital outpatient quality 

measure reporting requirements; 

however, we estimate that the 

anticipated change in payment between 

CY 2011 and CY 2012 for these 

hospitals would be negligible. (We 

further discuss the estimated impacts of 

hospitals’ failure to meet these 

requirements below in section XX.A.4.d. 

of this proposed rule.) Overall, we 

estimate that facilities would experience 

an increase of 1.5 percent under this 

proposed rule in CY 2012 relative to 

total spending in CY 2011. The 

projected 1.5 percent increase for all 

facilities in Column 7 of Table 51 

reflects the proposed 1.5 percent OPD 

fee schedule increase factor, less 0.00 

percent for the change in the passthrough estimate between CY 2011 and 

CY 2012, less 0.06 percent for the 

difference in estimated outlier payments 

between CY 2011 (1.06 percent) and CY 

2012 (1.0 percent), less 0.09 percent due 

to the section 508 wage adjustment, plus 

0.10 percent due to the frontier State 

wage index adjustment. When we 

exclude cancer and children’s hospitals 

(which are held harmless to their preBBA amount) and CMHCs, the 

estimated increase is 1.5 percent after 

rounding. 

We estimate that the combined effect 

of all proposed changes for CY 2012 

would increase payments to urban 

hospitals by 1.2 percent. We estimate 

that large urban hospitals would 

experience a 1.1 percent increase, while 

‘‘other’’ urban hospitals would 

experience an increase of 1.2 percent. 

We estimate that urban hospitals that 

bill less than 5,000 lines of OPPS 

services would experience a decrease of 

4.2 percent, largely attributable to the 

proposed decline in payment for APC 

0034 (Mental Health Services 

Composite). We estimate that urban 

hospitals that bill 11,000 or more lines 

of OPPS services would experience 

increases between 0.6 percent and 1.5 

percent, while urban hospitals that 

report between 5,000 and 10,999 lines 

would experience a decrease of 0.8 

percent. 

Overall, we estimate that rural 

hospitals would experience a 0.9 

percent increase as a result of the 

combined effects of all proposed 

changes for CY 2012. We estimate that 

rural hospitals that bill less than 5,000 

lines of OPPS services would 

experience a decrease of 0.7 percent and 

that rural hospitals that bill 5,000 or 

more lines of OPPS services would 

experience increases ranging from 0.8 to 

1.7 percent. 

Among teaching hospitals, we 

estimate that the impacts resulting from 

the combined effects of all proposed 

changes would include an increase of 

1.2 percent for major teaching hospitals 

and 1.1 percent for minor teaching 

hospitals and non-teaching hospitals. 

In our analysis, we have also stratified 

hospitals by type of ownership. Based 

on this analysis, we estimate that 

voluntary hospitals would receive an 

increase of 1.3 percent, proprietary 

hospitals would receive an increase of 

0.8 percent, and governmental hospitals 

would experience an increase of 0.7 

percent. 

(3) Estimated Effects of This Proposed 

Rule on CMHCs 

The last line of Table 51 demonstrates 

the isolated impact on CMHCs. In CY 

2011, CMHCs are paid under four APCs 

for services under the OPPS: APC 0172 

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(Level I Partial Hospitalization (3 

services) for CMHCs); APC 0173 (Level 

II Partial Hospitalization (4 or more 

services) for CMHCs); APC 0175 (Level 

I Partial Hospitalization (3 services) for 

hospital-based PHPs); and APC 0176 

(Level II Partial Hospitalization (4 or 

more services) for hospital-based PHPs). 

We implemented these four APCs for 

CY 2011. We adopted payment rates for 

each APC based on the cost data derived 

from claims and cost reports for the 

provider type to which the APC is 

specific and provided a transition to 

CMHC rates based solely on CMHC data 

for the two CMHC PHP per diem rates. 

For CY 2012, we are proposing to 

continue the four APC provider-specific 

structure we adopted for CY 2011 and 

to base payment fully on the cost data 

for the type of provider furnishing the 

service. We modeled the impact of this 

APC policy assuming that CMHCs 

would continue to provide the same 

number of days of PHP care, with each 

day having either 3 services or 4 or more 

services, as seen in the CY 2010 claims 

data used for this CY 2012 OPPS/ASC 

proposed rule. We excluded days with 

one or two services because our policy 

only pays a per diem rate for partial 

hospitalization when 3 or more 

qualifying services are provided to the 

beneficiary. Because the relative 

payment weights for APC 0172 and APC 

0173 for CMHCs both decline in CY 

2012 due to CMHC cost data for partial 

hospitalization services provided by 

CMHCs, we estimate that there would 

be a 34.2 percent decrease in payments 

to CMHCs due to these APC policy 

changes (shown in Column 2). 

Column 3 shows that the estimated 

impact of adopting the proposed CY 

2012 wage index values have no 

influence on payments to CMHCs. 

Column 4 shows that CMHCs would 

receive a 0.7 percent reduction as a 

result of the proposed cancer hospital 

adjustment. We note that all providers 

paid under the OPPS, including 

CMHCs, would receive a proposed 1.5 

percent OPD fee schedule increase 

factor. Column 5 shows that combining 

this proposed OPD fee schedule 

increase factor, along with proposed 

changes in APC policy for CY 2012 and 

the proposed CY 2012 wage index 

updates, results in an estimated 

decrease of 33.2 percent. Column 6 

shows that adding the frontier State 

wage adjustment results in no change to 

the cumulative 33.2 percent decrease. 

Column 7 shows that adding the 

proposed changes in outlier and passthough payments would result in a 33.1 

percent decrease in payment for CMHCs 

that reflects all proposed changes for CY 

2012. 

The impact of the changes to hospital 

payment rates for partial hospitalization 

services is reflected in the impact of all 

proposed changes on hospitals. The 

impact of the decline in payment for 

APC 0034 appears most notably in small 

urban hospitals that furnish primarily 

outpatient psychiatric services. 

All providers paid under the OPPS 

would receive a proposed 1.5 percent 

OPD fee schedule increase factor under 

this policy. Combining this proposed 

OPD fee schedule increase factor with 

proposed changes in APC policy for CY 

2012, the proposed CY 2012 wage index 

updates, and with proposed changes in 

outlier and pass-through payments, we 

estimate that the combined impact on 

hospitals within the OPPS system 

would be a 1.5 percent increase in total 

payment for CY 2012. Table 51 presents 

the estimated impact of the proposed 

changes to the OPPS for CY 2012. 

TABLE 51—ESTIMATED IMPACT OF THE CY 2012 PROPOSED CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE

PAYMENTS SYSTEM

(1) (2) (3) (4) (5) (6) (7) 

Number of 

hospitals 

APC 

Recalibration 

New wage 

index and 

rural 

adjustment 

New cancer 

hospital 

payment 

adjustment 

Comb (cols 

2, 3,4) with 

market basket update 

Comb (col 

5) with frontier wage 

index 

adjustment 

All changes 

ALL FACILITIES * .................................... 4,141 0.0 0.0 0.0 1.5 1.6 1.5 

ALL HOSPITALS ..................................... 3,879 0.2 0.0 ¥0.6 1.0 1.1 1.1 

(Excludes hospitals permanently held harmless and CMHCs) 

URBAN HOSPITALS ............................... 2,928 0.2 0.0 ¥0.6 1.1 1.2 1.2 

LARGE URBAN (GT 1 MILL.) .......... 1,592 0.2 0.0 ¥0.7 1.1 1.1 1.1 

OTHER URBAN (LE 1 MILL.) .......... 1,336 0.2 0.0 ¥0.6 1.1 1.3 1.2 

RURAL HOSPITALS ................................ 951 0.2 ¥0.3 ¥0.7 0.8 1.0 0.9 

SOLE COMMUNITY ......................... 385 0.1 ¥0.2 ¥0.6 0.8 1.3 0.9 

OTHER RURAL ................................ 566 0.3 ¥0.4 ¥0.7 0.8 0.8 0.9 

BEDS (URBAN): 

0–99 BEDS ....................................... 1,007 ¥0.1 0.1 ¥0.7 0.8 0.9 0.8 

100–199 BEDS ................................. 856 0.4 0.1 ¥0.7 1.3 1.4 1.3 

200–299 BEDS ................................. 445 0.4 0.1 ¥0.7 1.3 1.5 1.4 

300–499 BEDS ................................. 417 0.2 ¥0.1 ¥0.6 1.0 1.0 1.0 

500 + BEDS ...................................... 203 0.0 0.1 ¥0.6 1.0 1.0 1.1 

BEDS (RURAL): 

0–49 BEDS ....................................... 340 0.2 ¥0.1 ¥0.7 0.9 1.1 1.0 

50–100 BEDS ................................... 364 0.1 ¥0.3 ¥0.6 0.6 0.9 0.7 

101–149 BEDS ................................. 140 0.5 ¥0.2 ¥0.7 1.1 1.3 1.2 

150–199 BEDS ................................. 60 0.2 ¥0.4 ¥0.7 0.6 1.2 0.7 

200 + BEDS ...................................... 47 0.1 ¥0.3 ¥0.6 0.8 0.8 0.8 

VOLUME (URBAN): 

LT 5,000 Lines .................................. 611 ¥5.5 0.4 ¥0.7 ¥4.3 ¥4.2 ¥4.2 

5,000–10,999 Lines .......................... 146 ¥1.5 ¥0.1 ¥0.7 ¥0.8 ¥0.6 ¥0.8 

11,000–20,999 Lines ........................ 255 ¥0.2 ¥0.1 ¥0.7 0.6 0.6 0.6 

21,000–42,999 Lines ........................ 490 0.5 ¥0.1 ¥0.7 1.2 1.2 1.2 

42,999–89,999 Lines ........................ 738 0.5 0.1 ¥0.7 1.5 1.5 1.5 

GT 89,999 Lines ............................... 688 0.1 0.0 ¥0.6 1.0 1.1 1.1 

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TABLE 51—ESTIMATED IMPACT OF THE CY 2012 PROPOSED CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE

PAYMENTS SYSTEM—Continued 

(1) (2) (3) (4) (5) (6) (7) 

Number of 

hospitals 

APC 

Recalibration 

New wage 

index and 

rural 

adjustment 

New cancer 

hospital 

payment 

adjustment 

Comb (cols 

2, 3,4) with 

market basket update 

Comb (col 

5) with frontier wage 

index 

adjustment 

All changes 

VOLUME (RURAL): 

LT 5,000 Lines .................................. 71 ¥1.2 ¥0.2 ¥0.7 ¥0.7 1.4 ¥0.7 

5,000–10,999 Lines .......................... 81 0.9 0.1 ¥0.7 1.8 1.9 1.7 

11,000–20,999 Lines ........................ 184 0.3 ¥0.3 ¥0.7 0.8 1.0 0.8 

21,000–42,999 Lines ........................ 286 0.4 ¥0.3 ¥0.7 0.9 1.2 1.0 

GT 42,999 Lines ............................... 329 0.1 ¥0.3 ¥0.6 0.7 0.9 0.8 

REGION (URBAN): 

NEW ENGLAND ............................... 150 0.0 3.8 ¥0.6 4.6 4.6 4.4 

MIDDLE ATLANTIC .......................... 351 0.1 0.1 ¥0.6 1.1 1.1 1.0 

SOUTH ATLANTIC ........................... 452 0.3 ¥0.6 ¥0.7 0.6 0.6 0.7 

EAST NORTH CENT ........................ 469 0.3 ¥0.6 ¥0.6 0.6 0.6 0.6 

EAST SOUTH CENT ........................ 184 0.4 ¥0.7 ¥0.6 0.5 0.5 0.7 

WEST NORTH CENT ....................... 193 0.1 0.1 ¥0.6 1.1 1.8 1.3 

WEST SOUTH CENT ....................... 489 0.3 0.3 ¥0.7 1.4 1.4 1.5 

MOUNTAIN ....................................... 202 0.2 0.0 ¥0.6 1.0 1.4 1.2 

PACIFIC ............................................ 390 0.0 ¥0.2 ¥0.7 0.7 0.7 0.8 

PUERTO RICO ................................. 48 0.3 0.5 ¥0.7 1.6 1.6 1.7 

REGION (RURAL): 

NEW ENGLAND ............................... 26 ¥0.5 ¥0.5 ¥0.6 ¥0.1 ¥0.1 0.1 

MIDDLE ATLANTIC .......................... 68 0.2 ¥0.2 ¥0.6 0.9 0.9 1.0 

SOUTH ATLANTIC ........................... 162 0.4 ¥0.2 ¥0.7 1.0 1.0 1.1 

EAST NORTH CENT ........................ 126 0.2 ¥0.7 ¥0.7 0.4 0.4 0.3 

EAST SOUTH CENT ........................ 172 0.6 ¥0.6 ¥0.7 0.8 0.8 0.9 

WEST NORTH CENT ....................... 101 ¥0.4 0.2 ¥0.6 0.7 1.8 1.0 

WEST SOUTH CENT ....................... 201 0.4 0.1 ¥0.7 1.3 1.3 1.3 

MOUNTAIN ....................................... 66 0.2 ¥0.6 ¥0.6 0.5 2.3 0.5 

PACIFIC ............................................ 29 0.1 0.5 ¥0.6 1.5 1.5 1.7 

TEACHING STATUS: 

NON-TEACHING .............................. 2,891 0.3 ¥0.1 ¥0.7 1.0 1.1 1.1 

MINOR .............................................. 699 0.3 ¥0.1 ¥0.6 1.0 1.2 1.1 

MAJOR ............................................. 289 ¥0.1 0.4 ¥0.6 1.2 1.2 1.2 

DSH PATIENT PERCENT: 

0 ........................................................ 7 ¥0.7 0.0 ¥0.7 0.1 0.1 0.3 

GT 0–0.10 ......................................... 343 0.2 0.2 ¥0.7 1.2 1.3 1.3 

0.10–0.16 .......................................... 359 0.4 ¥0.4 ¥0.7 0.8 0.9 0.8 

0.16–0.23 .......................................... 733 0.3 0.0 ¥0.7 1.1 1.3 1.1 

0.23–0.35 .......................................... 1,037 0.3 0.0 ¥0.6 1.2 1.3 1.2 

GE 0.35 ............................................. 789 0.1 0.1 ¥0.6 1.0 1.0 1.2 

DSH NOT AVAILABLE ** .................. 611 ¥7.5 0.5 ¥0.7 ¥6.2 ¥6.2 ¥6.1 

URBAN TEACHING/DSH: 

TEACHING & DSH 901 0.2 0.1 ¥0.6 1.1 1.2 1.2 

NO TEACHING/DSH ........................ 1,446 0.4 ¥0.1 ¥0.7 1.2 1.2 1.3 

NO TEACHING/NO DSH .................. 6 ¥0.7 0.0 ¥0.7 0.1 0.1 0.3 

DSH NOT AVAILABLE ** .................. 575 ¥7.7 0.6 ¥0.7 ¥6.3 ¥6.3 ¥6.2 

TYPE OF OWNERSHIP:.

VOLUNTARY .................................... 2,060 0.3 0.1 ¥0.6 1.2 1.3 1.3 

PROPRIETARY ................................ 1,259 0.0 ¥0.1 ¥0.7 0.7 0.8 0.8 

GOVERNMENT ................................ 560 0.1 ¥0.4 ¥0.6 0.6 0.6 0.7 

CMHCs ..................................................... 200 ¥34.2 0.0 ¥0.7 ¥33.2 ¥33.2 ¥33.1 

Cancer Hospitals ...................................... 11 0.2 0.6 38.8 41.5 41.5 37.8 

Column (1) shows total hospitals and/or CMHCs. 

Column (2) shows the impact of proposed changes resulting from the reclassification of HCPCS codes among APC groups and the proposed 

recalibration of APC weights based on CY 2010 hospital claims data. 

Column (3) shows the proposed budget neutral impact of updating the wage index by applying the FY 2012 hospital inpatient wage index. See 

section II.C. for discussion of the estimated increase in payments to urban New England hospitals. 

Column (4) shows the proposed budget neutral estimated impact within the OPPS of applying a proposed cancer hospital adjustment to all 

OPPS services. However, we note that after accounting for the TOPs that we estimate cancer hospitals would no longer receive, the proposed 

net increase in payment to cancer hospitals would be approximately 9 percent. 

Column (5) shows the impact of all proposed budget neutrality adjustments and the proposed addition of the 1.5 percent OPD fee schedule increase factor (2.8 percent reduced by 1.2 percentage points for the proposed productivity adjustment and further reduced by 0.1 percentage 

point in order to satisfy statutory requirements set forth in the Affordable Care Act). 

Column (6) shows the proposed non-budget neutral impact of applying the frontier State wage adjustment, after application of the CY 2012 

proposed OPD fee schedule increase factor. 

Column (7) shows the proposed additional adjustments to the conversion factor resulting from a proposed change in the pass-through estimate 

and adds proposed outlier payments. This column also shows the expiration of section 508 wages on September 30, 2011 and the application of 

the proposed frontier State wage adjustment for CY 2012. 

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* These 4,141 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. 

** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care 

hospitals. 

(4) Estimated Effect of This Proposed 

Rule on Beneficiaries 

For services for which the beneficiary 

pays a copayment of 20 percent of the 

payment rate, the beneficiary share of 

payment would increase for services for 

which the OPPS payments would rise 

and would decrease for services for 

which the OPPS payments would fall. 

For example, for a service assigned to 

Level IV Needle Biopsy/Aspiration 

Except Bone Marrow (APC 0037) in the 

CY 2011 OPPS, the national unadjusted 

copayment is $228.76, and the 

minimum unadjusted copayment is 

$215.24, 20 percent of the national 

unadjusted payment rate of $1,076.14. 

For CY 2012, the proposed national 

unadjusted copayment for APC 0037 is 

$225.55, a decline from the copayment 

in effect for CY 2011. The proposed 

minimum unadjusted copayment for 

APC 0037 is $213.25 or 20 percent of 

the proposed CY 2012 national 

unadjusted payment rate for APC 0037 

of $1,066.25. The proposed minimum 

unadjusted copayment would decline 

because the CY 2011 payment rate for 

APC 0037 would decline for CY 2012. 

For further discussion on the 

calculation of the proposed national 

unadjusted copayments and minimum 

unadjusted copayments, we refer 

readers to section II.I. of this proposed 

rule. We note that the proposed rural 

hospital and cancer hospital payment 

adjustments would result in 

corresponding increases in the 

beneficiary copayment, where those 

payment adjustments are applied. In all 

cases, the statute limits beneficiary 

liability for copayment for a procedure 

to the hospital inpatient deductible for 

the applicable year. The CY 2011 

hospital inpatient deductible is $1,132 

(75 FR 68799 through 68800). The CY 

2012 hospital inpatient deductible was 

not known at the time this proposed 

rule was developed. 

In order to better understand the 

impact of changes in copayment on 

beneficiaries, we modeled the percent 

change in total copayment liability 

using CY 2010 claims. We estimate, 

using the claims of the 4,141 hospitals 

and CMHCs on which our modeling is 

based, that total beneficiary liability for 

copayments would increase as an 

overall percentage of total payments, 

from 22.0 percent in CY 2011 to 22.1 

percent in CY 2012 due largely to 

changes in service mix. 

(5) Effects on Other Providers 

The relative weights and payment 

amounts established under the OPPS 

affect the payments made to ASCs as 

discussed in section XIII. of this 

proposed rule. No types of providers 

other than hospitals and ASCs are 

affected by the changes we are 

proposing in this proposed rule. 

(6) Effects on the Medicare and 

Medicaid Programs 

The effect on the Medicare program is 

expected to be $3.285 billion in 

additional program payments for OPPS 

services furnished in CY 2012. The 

effect on the Medicaid program is 

expected to be limited to increased 

copayments that Medicaid may make on 

behalf of Medicaid recipients who are 

also Medicare beneficiaries. We refer 

readers to our discussion of the impact 

on beneficiaries under section 

XX.A.4.a.(4). of this proposed rule. 

(7) Alternatives Considered 

Alternatives to the changes we are 

proposing to make and the reasons for 

our selected alternatives are discussed 

throughout this proposed rule. Some of 

the major issues discussed in this 

proposed rule and the alternatives 

considered are discussed below. 

• Alternatives Considered for Payment 

of the Acquisition and Pharmacy 

Overhead Costs of Drugs and Biologicals 

That Do Not Have Pass-Through Status 

We are proposing that, for CY 2012, 

the OPPS would make payment for 

separately payable drugs and biologicals 

at ASP+4 percent, and this payment 

would continue to represent combined 

payment for both the acquisition and 

pharmacy overhead costs of separately 

payable drugs and biologicals. In 

addition, because we are proposing to 

continue to make a pharmacy overhead 

adjustment for CY 2012, we believe it is 

appropriate to account for inflation that 

has occurred since the overhead 

redistribution amount of $200 million 

was applied in CY 2011. Therefore, as 

discussed in further detail in section 

V.B.3. of this proposed rule, we believe 

that approximately $161 million of the 

estimated $705 million in pharmacy 

overhead cost currently attributed to 

coded packaged drugs and biologicals 

with an ASP and $54 million of the 

estimated $502 million in pharmacy 

overhead cost currently attributed to 

coded and uncoded packaged drugs and 

biologicals without an ASP should, 

instead, be attributed to separately 

payable drugs and biologicals to provide 

an adjustment for the pharmacy 

overhead costs of these separately 

payable products. As a result, we also 

are proposing to reduce the cost of 

packaged drugs and biologicals that is 

included in the payment for procedural 

APCs to offset the proposed $215 

million adjustment to payment for 

separately payable drugs and 

biologicals. We are proposing that any 

redistribution of pharmacy overhead 

cost that may arise from CY 2012 final 

rule claims data would occur only from 

some drugs and biologicals to other 

drugs and biologicals, thereby 

maintaining the estimated total cost of 

drugs and biologicals under the OPPS. 

We considered two alternatives for 

payment of the acquisition and 

pharmacy overhead costs of drugs and 

biologicals that do not have passthrough status for CY 2012. The first 

alternative we considered, but are not 

proposing, is to compare the estimated 

aggregate cost of separately payable 

drugs and biologicals in our claims data 

to the estimated aggregate ASP dollars 

for separately payable drugs and 

biologicals, using the ASP as a proxy for 

average acquisition cost, to calculate the 

estimated percent of ASP that would 

serve as the best proxy for the combined 

acquisition and pharmacy overhead 

costs of separately payable drugs and 

biologicals (70 FR 68642), but without 

redistribution of estimated pharmacy 

overhead costs. Under this methodology 

without redistribution, using April 2011 

ASP information and costs derived from 

CY 2010 OPPS claims data, we 

estimated the combined acquisition and 

overhead costs of separately payable 

drugs and biologicals to be ASP–2 

percent. As discussed in section V.B.3. 

of this proposed rule, we also 

determined that the combined 

acquisition and overhead costs of 

packaged drugs are 188 percent of ASP. 

We did not choose this alternative 

because we believe that this analysis 

indicates that our standard drug 

payment methodology has the potential 

to ‘‘compress’’ the calculated costs of 

separately payable drugs and biologicals 

to some degree when there is no 

redistribution of estimated pharmacy 

overhead costs. Further, we recognize 

that the attribution of pharmacy 

overhead costs to packaged or separately 

payable drugs and biologicals through 

our standard drug payment 

methodology of a combined payment for 

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42380 Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 / Proposed Rules 

acquisition and pharmacy overhead 

costs depends, in part, on the treatment 

of all drugs and biologicals each year 

under our annual drug packaging 

threshold. Changes to the packaging 

threshold may result in changes to 

payment for the overhead cost of drugs 

and biologicals that do not reflect actual 

changes in hospital pharmacy overhead 

cost for those products. 

The second alternative we considered 

and the one we are proposing for CY 

2012 is to continue our pharmacy 

overhead redistribution methodology 

and proposing to apply an inflation 

allowance and redistribute $215 million 

in overhead costs from packaged coded 

and uncoded drugs and biologicals to 

separately payable drugs and biologicals 

which would result in a payment for 

non-pass-through separately payable 

drugs and biologicals at ASP+4 percent, 

which would continue to represent a 

combined payment for both the 

acquisition costs of separately payable 

drugs and biologicals and the pharmacy 

overhead costs applicable to these 

products. We also are proposing to 

reduce the cost of packaged drugs and 

biologicals that is included in the 

payment for procedural APCs to offset 

the $215 million adjustment to payment 

for separately payable drugs and 

biologicals, resulting in payment for 

packaged drugs and biologicals of 

ASP+123 percent under our proposal. 

We chose this alternative because we 

believe that it provides the most 

appropriate redistribution of pharmacy 

overhead costs associated with drugs 

and biologicals, based on the analyses 

discussed in section V.B.3. of this 

proposed rule. 

• Proposed OPPS Payment Adjustment 

for Certain Cancer Hospitals 

Section 3138 of the Affordable Care 

Act instructs the Secretary to conduct a 

study to determine if outpatient costs, 

including the cost of drugs and 

biologicals, incurred by cancer hospitals 

described in section 1886(d)(1)(B)(v) of 

the Act with respect to ambulatory 

classification groups exceed the costs 

incurred by other hospitals furnishing 

services under this subsection (section 

1833(t) of the Act). Further, section 3138 

of the Affordable Care Act provides that 

if the cancer hospitals’ costs with 

respect to APC groups are determined to 

be greater than the costs of other 

hospitals paid under the OPPS, the 

Secretary shall provide an appropriate 

budget neutral payment adjustment to 

reflect these higher costs. 

As discussed in detail in section II. F. 

of this proposed rule, using the claims 

and cost report data that we used under 

the modeled proposed CY 2011 OPPS, 

we constructed our traditional providerlevel database of costs, modeled 

payments, units, service mix, wage 

index and other provider information 

that we typically use to establish class 

adjustments under the OPPS. We 

observed that cancer hospitals were 

more costly with respect to APC groups 

than other hospitals paid under the 

OPPS, having a standardized cost per 

discounted unit of $150.12 compared to 

a standardized cost per discounted unit 

of $94.14 for all other hospitals. 

Having reviewed the cost data from 

the standard analytic database and 

determined that cancer hospitals are 

more costly with respect to APC groups 

than other hospitals within the OPPS 

system, we are proposing a payment 

adjustment for cancer hospitals for CY 

2012 based on a comparison of 

costliness relative to payments using 

cost report data. Specifically, our 

proposed adjustment is as follows: If a 

hospital described in section 

1886(d)(1)(B)(v) of the Act has a PCR (as 

determined by the Secretary) that is less 

than the weighted average PCR of other 

hospitals furnishing services under 

section 1833(t) of the Act (as determined 

by the Secretary) (Target PCR) for 

covered hospital outpatient department 

services (except pass-through devices 

defined in section 419.66), the payment 

adjustment is the percentage difference 

between the PCR of the hospital and the 

Target PCR. The CY 2012 proposed rule 

cost report data indicated a cancer 

hospital weighted average PCR of 0.647 

(range = 0.56 to 0.82) and a weighted 

average PCR for all other hospitals equal 

to 0.901. Our proposed adjustment 

would result in an estimated 39.3 

percent aggregate increase in budget 

neutral payments to cancer hospitals. 

For a cancer hospital with an individual 

PCR that is above the weighted average 

PCR of other hospitals furnishing 

services under the OPPS, we are 

proposing a zero percent adjustment for 

services furnished on and after January 

1, 2012. 

We considered three alternatives for 

the proposed OPPS payment adjustment 

for certain cancer hospitals. The first 

alternative we considered, but are not 

proposing, is to use our standard 

payment regression model instead of 

cost report data to identify an 

appropriate payment adjustment for 

cancer hospitals. We used this approach 

in our CY 2006 OPPS final rule with 

comment period to establish the 7.1 

percent payment adjustment for rural 

SCHs (70 FR 68556 through 68561). 

However, in constructing our analysis of 

cancer hospitals’ costs relative to other 

hospitals, we considered whether our 

standard analytical approach would 

lead to valid results. The analyses 

presented in the CY 2006 OPPS 

proposed and final rules were designed 

to establish an adjustment for a large 

class of rural hospitals. In contrast, 

section 3138 of the Affordable Care Act 

is specifically limited to identifying an 

adjustment for 11 cancer hospitals to the 

extent that their costs with respect to 

APC groups exceeded the costs incurred 

by other hospitals furnishing services 

under section 1833(t) of the Act. With 

such a small sample size (11 out of 

approximately 4,000 hospitals paid 

under the OPPS), we were concerned 

that the standard explanatory and 

payment regression models used to 

establish the rural hospital adjustment 

would lead to imprecise estimates of 

payment adjustments for this small 

group of hospitals. Further, section 3138 

of the Affordable Care Act specifies 

explicitly that cost comparisons 

between classes of hospitals must 

include the cost of drugs and 

biologicals. In our CY 2006 analysis of 

rural hospitals, we excluded the cost of 

drugs and biologicals in our model 

because the extreme units associated 

with proper billing for some drugs and 

biologicals can bias the calculation of a 

service mix index, or volume weighted 

average APC relative weight, for each 

hospital (70 FR 42698). Therefore, we 

chose not to pursue our standard 

combination of explanatory and 

payment regression modeling to 

determine a cancer hospital adjustment. 

The second alternative we considered, 

but are not proposing, is to provide the 

same adjustment to all cancer hospitals 

based on the difference between the 

weighted average PCR for all cancer 

hospitals (0.647) and the weighted 

average PCR for all other hospitals 

(0.901). This class adjustment, instead 

of a hospital specific adjustment, would 

provide a 39.3 percent payment increase 

for each cancer hospital. Because this 

alternative did not seem equitable to 

other hospitals furnishing services 

under OPPS as it would result in a PCR 

for most cancer hospitals that is higher 

the weighted average PCR of other 

hospitals furnishing services under 

OPPS and a much larger budget 

neutrality adjustment, we did not 

propose this alternative. 

The third alternative we considered, 

and the one we are proposing for CY 

2012, is to provide a hospital specific 

payment adjustment to cancer hospitals 

that have a PCR that is less than the 

weighted average PCR of other hospitals 

furnishing services under the OPPS, for 

covered hospital outpatient department 

services (except pass-through devices) 

furnished on and after January 1, 2012, 

based on the percent difference between 

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each cancer hospital’s PCR and the 

weighted average PCR of other OPPS 

hospitals using the most recent cost 

report data. For cancer hospitals with an 

individual PCR that is above the 

weighted average PCR of other hospitals 

furnishing services under the OPPS, we 

are proposing a zero percent adjustment 

for services furnished on and after 

January 1, 2012. For purposes of 

calculating a proposed adjustment, we 

chose to rely on this straightforward 

assessment of payments and costs from 

the cost report data because of the 

concerns outlined above with respect to 

the small number of hospitals, and 

because of the challenges associated 

with accurately including drug and 

biological costs in our standard 

regression models. We believe that an 

appropriate adjustment would 

redistribute enough payments from 

other hospitals paid under the OPPS to 

the cancer hospitals to give cancer 

hospitals a PCR that is comparable to 

the average PCR for other hospitals paid 

under the OPPS. 

• Alternatives Considered for the 

Supervision of Hospital Outpatient 

Therapeutic Services 

In the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72012), we 

stated our intent to develop through our 

CY 2012 rulemaking an independent 

review process that enables the agency 

to request, with stakeholder input, 

advisory recommendations regarding 

the appropriate supervision level for 

individual outpatient therapeutic 

services. We considered three 

alternatives with regard to the nature of 

the advisory recommendations 

regarding the appropriate supervision 

level for individual outpatient 

therapeutic services. 

The first alternative we considered 

but are not proposing is to use an 

existing body other than the APC Panel 

such as the Relative Value Scale Update 

Committee to make recommendations to 

CMS with regard to the level of 

supervision that would be required for 

outpatient therapeutic services. We did 

not choose a different existing body 

because we did not believe there was an 

alternative that had an appropriate 

balance of subject matter expertise or 

that would be able to furnish the 

appropriate advice. 

The second alternative we considered 

but are not proposing is to establish a 

new non-advisory body such as a 

Technical Expert Panel. We did not 

propose to establish a new entity 

because currently we have no funding to 

do so. Moreover, it is not clear that the 

resources of a new body are necessary 

for the supervision deliberations, 

especially once initial determinations 

are made regarding key services. Also, 

we believe it is important to obtain 

advice that carries the weight of a 

Federal advisory recommendation. 

The third alternative we considered, 

and the one we selected, is to propose 

to establish the Federal Advisory APC 

Panel as an independent review body 

that would evaluate individual 

outpatient therapeutic services for 

potential assignment by CMS of general 

(lower) or personal (higher) supervision. 

We are proposing to amend the APC 

Panel charter to render the Panel more 

appropriate for this task by expanding 

its scope to include the topic of 

supervision. We also are proposing to 

add two to four members to the Panel 

who would be representative of CAHs, 

so that all types of hospitals who are 

subject to the supervision rules for 

payment would be represented in 

developing the Panel’s 

recommendations. We are proposing to 

use the standard APC Panel protocols 

with respect to frequency of meetings 

and receiving requests for evaluation of 

services. We believe it is important to 

obtain advice that carries the weight of 

a Federal advisory recommendation, 

because it may have greater legitimacy 

both with stakeholders and with CMS 

compared to the opinions of other types 

of groups. The APC Panel has a long and 

excellent history of providing valuable 

advice to CMS with regard to the 

clinical issues associated with the APC 

groupings of hospital outpatient 

therapeutic services under the OPPS, 

and we believe that extension of the 

function of the Panel to providing 

advice on supervision of individual 

hospital outpatient therapeutic services 

will result in both full consideration of 

the views of all types of hospitals and 

the best possible clinical decisions with 

respect to the level of supervision that 

should be required as a condition of 

Medicare payment. 

b. Effects of Proposed ASC Payment 

System Changes in This Proposed Rule 

On August 2, 2007, we published in 

the Federal Register the final rule for 

the revised ASC payment system, 

effective January 1, 2008 (72 FR 42470). 

In that final rule, we adopted the 

methodologies to set payment rates for 

covered ASC services to implement the 

revised payment system so that it would 

be designed to result in budget 

neutrality as required by section 626 of 

Pub. L. 108–173; established that the 

OPPS relative payment weights would 

be the basis for payment and that we 

would update the system annually as 

part of the OPPS rulemaking cycle; and 

provided that the revised ASC payment 

rates would be phased in over 4 years. 

During the 4-year transition to full 

implementation of the ASC payment 

rates, payments for surgical procedures 

performed in ASCs that were on the CY 

2007 ASC list of covered surgical 

procedures were made using a blend of 

the CY 2007 ASC payment rate and the 

ASC payment rate calculated according 

to the ASC standard ratesetting 

methodology for the applicable 

transitional year. In CY 2009, we paid 

ASCs using a 50/50 blend, in which 

payment was calculated by adding 50 

percent of the CY 2007 ASC rate for a 

surgical procedure on the CY 2007 ASC 

list of covered surgical procedures and 

50 percent of the CY 2009 ASC rate 

calculated according to the ASC 

standard ratesetting methodology for the 

same procedure. For CY 2010, we 

transitioned the blend to a 25/75 blend 

of the CY 2007 ASC rate and the CY 

2010 ASC payment rate calculated 

according to the ASC standard 

ratesetting methodology. In CY 2011, we 

are paying ASCs for all covered surgical 

procedures, including those on the CY 

2007 ASC list, at the ASC payment rates 

calculated according to the ASC 

standard ratesetting methodology. 

ASC payment rates are calculated by 

multiplying the ASC conversion factor 

by the ASC relative payment weight. As 

discussed fully in section XIII. of this 

proposed rule, we set the proposed CY 

2012 ASC relative payment weights by 

scaling CY 2012 ASC relative payment 

weights by the ASC scalar of 0.9373. 

The estimated effects of the updated 

relative payment weights on payment 

rates during this second year of full 

implementation of the ASC payment 

rates calculated according to the ASC 

standard ratesetting methodology are 

varied and are reflected in the estimated 

payments displayed in Tables 52 and 53 

below. 

Beginning in CY 2011, section 3401 of 

the Affordable Care Act requires that the 

annual update to the ASC payment 

system, which is the consumer price 

index for all urban consumers (CPI–U), 

be reduced by the productivity 

adjustment. The Affordable Care Act 

defines the productivity adjustment to 

be equal to the 10-year moving average 

of changes in annual economy-wide 

private nonfarm business multi-factor 

productivity (MFP) (as projected by the 

Secretary for the 10-year period ending 

with the applicable fiscal year, year, 

cost reporting period, or other annual 

period). We calculated the proposed CY 

2012 ASC conversion factor by adjusting 

the CY 2011 ASC conversion factor by 

1.0003 to account for changes in the prefloor and pre-reclassified hospital wage 

indices between CY 2011 and CY 2012 

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and by applying the proposed CY 2012 

MFP-adjusted CPI–U of 0.9 percent (2.3 

percent CPI–U minus a productivity 

adjustment of 1.4 percent percentage 

points). The proposed CY 2012 ASC 

conversion factor is $42.329. 

(1) Limitations of Our Analysis 

Presented here are the projected 

effects of the proposed changes for CY 

2012 on Medicare payment to ASCs. A 

key limitation of our analysis is our 

inability to predict changes in ASC 

service mix between CY 2010 and CY 

2012 with precision. We believe that the 

net effect on Medicare expenditures 

resulting from the proposed CY 2012 

changes would be small in the aggregate 

for all ASCs. However, such changes 

may have differential effects across 

surgical specialty groups as ASCs 

continue to adjust to the payment rates 

based on the policies of the revised ASC 

payment system. We are unable to 

accurately project such changes at a 

disaggregated level. Clearly, individual 

ASCs would experience changes in 

payment that differ from the aggregated 

estimated impacts presented below. 

(2) Estimated Effects of This Proposed 

Rule on Payments to ASCs 

Some ASCs are multispecialty 

facilities that perform the gamut of 

surgical procedures, from excision of 

lesions to hernia repair to cataract 

extraction; others focus on a single 

specialty and perform only a limited 

range of surgical procedures, such as 

eye, digestive system, or orthopedic 

procedures. The combined effect on an 

individual ASC of the proposed update 

to the CY 2012 payments would depend 

on a number of factors, including, but 

not limited to, the mix of services the 

ASC provides, the volume of specific 

services provided by the ASC, the 

percentage of its patients who are 

Medicare beneficiaries, and the extent to 

which an ASC provides different 

services in the coming year. The 

following discussion presents tables that 

display estimates of the impact of the 

proposed CY 2012 update to the revised 

ASC payment system on Medicare 

payments to ASCs, assuming the same 

mix of services as reflected in our CY 

2010 claims data. Table 52 depicts the 

estimated aggregate percent change in 

payment by surgical specialty or 

ancillary items and services group by 

comparing estimated CY 2011 payments 

to estimated CY 2012 payments, and 

Table 53 shows a comparison of 

estimated CY 2011 payments to 

estimated CY 2012 payments for 

procedures that we estimate would 

receive the most Medicare payment in 

CY 2012. 

Table 52 shows the estimated effects 

on aggregate proposed Medicare 

payments under the revised ASC 

payment system by surgical specialty or 

ancillary items and services group. We 

have aggregated the surgical HCPCS 

codes by specialty group, grouped all 

HCPCS codes for covered ancillary 

items and services into a single group, 

and then estimated the effect on 

aggregated payment for surgical 

specialty and ancillary items and 

services groups. The groups are sorted 

for display in descending order by 

estimated Medicare program payment to 

ASCs. The following is an explanation 

of the information presented in Table 

52. 

• Column 1—Surgical Specialty or 

Ancillary Items and Services Group 

indicates the surgical specialty into 

which ASC procedures are grouped or 

the ancillary items and services group 

which includes all HCPCS codes for 

covered ancillary items and services. To 

group surgical procedures by surgical 

specialty, we used the CPT code range 

definitions and Level II HCPCS codes 

and Category III CPT codes as 

appropriate, to account for all surgical 

procedures to which the Medicare 

program payments are attributed. 

• Column 2—Estimated CY 2011 ASC 

Payments were calculated using CY 

2010 ASC utilization (the most recent 

full year of ASC utilization) and CY 

2011 ASC payment rates. The surgical 

specialty and ancillary items and 

services groups are displayed in 

descending order based on estimated CY 

2011 ASC payments. 

• Column 3—Estimated CY 2012 

Percent Change is the aggregate 

percentage increase or decrease in 

Medicare program payment to ASCs for 

each surgical specialty or ancillary 

items and services group that would be 

attributable to updates to proposed ASC 

payment rates for CY 2012 compared to 

CY 2011. 

As seen in Table 52, we estimate that 

the proposed update to ASC rates for CY 

2012 would result in a 0 percent 

decrease in aggregate payment amounts 

for eye and ocular adnexa procedures, a 

1 percent increase in aggregate payment 

amounts for digestive system 

procedures, and a 2 percent increase in 

aggregate payment amounts for nervous 

system procedures. 

Generally, for the surgical specialty 

groups that account for less ASC 

utilization and spending, we estimate 

that the payment effects of the CY 2012 

update are variable. For instance, we 

estimate that, in the aggregate, payment 

for genitourinary system procedures and 

hemic & lymphatic systems procedures 

would increase by 5 percent and 4 

percent, respectively, whereas auditory 

system procedures and cardiovascular 

system procedures would decrease by 5 

percent and 4 percent, respectively, 

under the proposed CY 2012 rates. 

An estimated increase in aggregate 

payment for the specialty group does 

not mean that all procedures in the 

group would experience increased 

payment rates. For example, the 

estimated modest increase for CY 2012 

for genitourinary system procedures is 

likely due to an increase in the ASC 

payment weight for some of the high 

volume procedures, such as CPT code 

50590 (Fragmenting of kidney stone) 

where estimated payment would 

increase by 25 percent for CY 2012. 

Also displayed in Table 52 is a 

separate estimate of Medicare ASC 

payments for the group of separately 

payable covered ancillary items and 

services. The payment estimates for the 

covered surgical procedures include the 

costs of packaged ancillary items and 

services. Payment for New Technology 

Intraocular Lenses (NTIOLs) is captured 

under this category. Because the NTIOL 

class for reduced spherical aberration 

expired on February 26, 2011, and a 

new NTIOL class was not approved 

during CY 2011 rulemaking, we 

redistributed the estimated payment 

dedicated to separately paid NTIOLs in 

CY 2011 while the NTIOL class was 

active to other services for CY 2012. 

Therefore, we estimate that aggregate 

payments for these items and services 

would decrease by 30 percent for CY 

2012. 

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TABLE 52—ESTIMATED IMPACT OF THE PROPOSED CY 2012 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE

CY 2012 MEDICARE PROGRAM PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND SERVICES GROUP

Surgical Specialty Group 

Estimated 

CY 2011 

ASC payments 

(in millions) 

Estimated 

CY 2012 

percent change 

(3) 

(1) (2) (3) 

Total ............................................................................................................................................................. $3,400 1 

Eye and ocular adnexa ................................................................................................................................ 1,435 0 

Digestive system .......................................................................................................................................... 689 1 

Nervous system ........................................................................................................................................... 454 2 

Musculoskeletal system ............................................................................................................................... 420 2 

Genitourinary system ................................................................................................................................... 150 5 

Integumentary system ................................................................................................................................. 132 1 

Respiratory system ...................................................................................................................................... 43 0 

Cardiovascular system ................................................................................................................................ 32 ¥4 

Ancillary items and services ........................................................................................................................ 29 ¥30 

Auditory system ........................................................................................................................................... 11 ¥5 

Hematologic & lymphatic systems ............................................................................................................... 5 4 

Table 53 below shows the estimated 

impact of the proposed updates to the 

revised ASC payment system on 

aggregate ASC payments for selected 

surgical procedures during CY 2012. 

The table displays 30 of the procedures 

receiving the greatest estimated CY 2011 

aggregate Medicare payments to ASCs. 

The HCPCS codes are sorted in 

descending order by estimated CY 2011 

program payment. 

• Column 1–HCPCS code. 

• Column 2—Short Descriptor of the 

HCPCS code. 

• Column 3—Estimated CY 2011 ASC 

Payments were calculated using CY 

2010 ASC utilization (the most recent 

full year of ASC utilization) and the CY 

2011 ASC payment rates. The estimated 

CY 2011 payments are expressed in 

millions of dollars. 

• Column 4—Estimated CY 2012 

Percent Change reflects the percent 

differences between the estimated ASC 

payment for CY 2011 and the estimated 

payment for CY 2012 based on the 

proposed update. 

As displayed in Table 53, 21 of the 30 

procedures with the greatest estimated 

aggregate CY 2011 Medicare payment 

are included in the 3 surgical specialty 

groups that are estimated to account for 

the most Medicare payment to ASCs in 

CY 2011, specifically eye and ocular 

adnexa, digestive system, and nervous 

system surgical groups. Consistent with 

the estimated payment effects on the 

surgical specialty groups displayed in 

Table 52 the estimated effects of the 

proposed CY 2012 update on ASC 

payment for individual procedures 

shown in Table 53 are varied. 

The ASC procedure for which the 

most Medicare payment is estimated to 

be made in CY 2011 is the cataract 

removal procedure reported with CPT 

code 66984 (Cataract surg w/iol 1 stage). 

We estimate that the proposed update to 

the ASC rates would result in a 0 

percent change for this procedure in CY 

2012. The estimated payment effects on 

two of the other three eye and ocular 

adnexa procedures included in Table 53 

are slightly more significant. We 

estimate that the payment rate for CPT 

code 66821 (After cataract laser surgery) 

would increase by 2 percent and 

payment for CPT code 67042 (Vit for 

macular hole) would increase by 3 

percent. 

We estimate that the proposed 

payment rates for all of the digestive 

system procedures included in Table 53 

would change by -3 to +3 percent in CY 

2012. During the previous 4-year 

transition to the revised ASC payment 

system, payment for most of the high 

volume digestive system procedures 

decreased each year because, under the 

previous ASC payment system, the 

payment rates for many high volume 

endoscopy procedures were almost the 

same as the payments for the procedures 

under the OPPS. 

The estimated effects of the proposed 

CY 2012 update on the nine nervous 

system procedures for which the most 

Medicare ASC payment is estimated to 

be made in CY 2011 would be variable. 

Our estimates indicate that the proposed 

CY 2012 update would result in 

payment increases of 2 to 3 percent for 

6 of the 9 procedures and result in a 1 

to 5 percent decrease for the other 3 

nervous system procedures. The 

nervous system procedure for which we 

estimate a negative effect on CY 2012 

payments is CPT code 63650 (Implant 

neuroelectrodes) which is expected to 

have payment decrease of 5 percent. 

The estimated payment effects for 

most of the remaining procedures listed 

in Table 53 would be positive. For 

example, the payment rate for 

musculoskeletal CPT codes 26055 

(Incise finger tendon sheath) is 

estimated to increase 4 percent over the 

CY 2011 payment rates. Musculoskeletal 

procedures are expected to account for 

a greater percentage of CY 2012 

Medicare ASC spending as we estimate 

that payment for procedures in that 

surgical specialty group would increase 

under the revised payment system in CY 

2012. 

TABLE 53—ESTIMATED IMPACT OF THE PROPOSED CY 2012 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE

PAYMENTS FOR SELECTED PROCEDURES

CPT/HCPCS 

Code * Short descriptor 

Estimated CY 

2011 ASC payments (in millions) 

Estimated CY 

2012 percent 

change 

(1) (2) (3) (4) 

66984 ................ Cataract surg w/iol, 1 stage ......................................................................................... $1,083 0 

43239 ................ Upper GI endoscopy, biopsy ........................................................................................ 158 ¥3 

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TABLE 53—ESTIMATED IMPACT OF THE PROPOSED CY 2012 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE

PAYMENTS FOR SELECTED PROCEDURES—Continued 

CPT/HCPCS 

Code * Short descriptor 

Estimated CY 

2011 ASC payments (in millions) 

Estimated CY 

2012 percent 

change 

(1) (2) (3) (4) 

45380 ................ Colonoscopy and biopsy .............................................................................................. 133 2 

45378 ................ Diagnostic colonoscopy ................................................................................................ 100 2 

45385 ................ Lesion removal colonoscopy ........................................................................................ 87 2 

66982 ................ Cataract surgery, complex ........................................................................................... 79 0 

62311 ................ Inject spine l/s (cd) ....................................................................................................... 66 2 

64483 ................ Inj foramen epidural l/s ................................................................................................. 66 2 

66821 ................ After cataract laser surgery .......................................................................................... 56 2 

15823 ................ Revision of upper eyelid ............................................................................................... 41 0 

64493 ................ Inj paravert f jnt l/s 1 lev ............................................................................................... 40 2 

63650 ................ Implant neuroelectrodes ............................................................................................... 38 ¥5 

G0105 ............... Colorectal scrn; hi risk ind ............................................................................................ 32 3 

29881 ................ Knee arthroscopy/surgery ............................................................................................ 31 0 

29826 ................ Shoulder arthroscopy/surgery ...................................................................................... 31 2 

64721 ................ Carpal tunnel surgery ................................................................................................... 30 2 

29827 ................ Arthroscop rotator cuf repr ........................................................................................... 27 2 

29880 ................ Knee arthroscopy/surgery ............................................................................................ 26 0 

63685 ................ Insrt/redo spine n generator ......................................................................................... 26 ¥1 

G0121 ............... Colon ca scrn not hi rsk ind ......................................................................................... 25 3 

45384 ................ Lesion remove colonoscopy ......................................................................................... 24 2 

43235 ................ Uppr gi endoscopy, diagnosis ...................................................................................... 23 ¥3 

52000 ................ Cystoscopy ................................................................................................................... 20 1 

28285 ................ Repair of hammertoe .................................................................................................... 19 0 

64622 ................ Destr paravertebrl nerve l/s .......................................................................................... 19 3 

64590 ................ Insrt/redo pn/gastr stimul .............................................................................................. 16 ¥1 

62310 ................ Inject spine c/t .............................................................................................................. 16 2 

26055 ................ Incise finger tendon sheath .......................................................................................... 16 4 

50590 ................ Fragmenting of kidney stone ........................................................................................ 15 25 

67042 ................ Vit for macular hole ...................................................................................................... 14 3 

* Note that HCPCS codes proposed for deletion for CY 2012 are not displayed in this table. 

The previous ASC payment system 

served as an incentive to ASCs to focus 

on providing procedures for which they 

determined Medicare payments would 

support their continued operation. We 

note that, historically, the ASC payment 

rates for many of the most frequently 

performed procedures in ASCs were 

similar to the OPPS payment rates for 

the same procedures. Conversely, 

procedures with ASC payment rates that 

were substantially lower than the OPPS 

rates were performed least often in 

ASCs. We believed that the revised ASC 

payment system would encourage 

greater efficiency in ASCs and would 

promote significant increases in the 

breadth of surgical procedures 

performed in ASCs because it 

distributes payments across the entire 

spectrum of covered surgical procedures 

based on a coherent system of relative 

weights that are related to the clinical 

and facility resource requirements of 

those procedures. 

The CY 2010 claims data that we used 

to develop the proposed CY 2012 ASC 

payment system relative payment 

weights and rates reflect the third year 

of utilization under the revised payment 

system. Although the changes in the 

claims data are not large, the data reflect 

increased Medicare ASC spending for 

procedures that were newly added to 

the ASC list in CY 2008. Our estimates 

based on CY 2010 data indicate that for 

CY 2012 there would be especially 

noticeable increases in spending for the 

hematologic and lymphatic systems 

compared to the previous ASC payment 

system. 

(3) Estimated Effects of This Proposed 

Rule on Beneficiaries 

We estimate that the proposed CY 

2012 update to the ASC payment system 

would be generally positive for 

beneficiaries with respect to the new 

procedures that we are adding to the 

ASC list of covered surgical procedures 

and for those that we are designating as 

office-based for CY 2012. First, other 

than certain preventive services where 

coinsurance and the Part B deductible is 

waived to comply with sections 

1833(a)(1) and (b) of the Act, the ASC 

coinsurance rate for all procedures is 20 

percent. This contrasts with procedures 

performed in HOPDs, where the 

beneficiary is responsible for 

copayments that range from 20 percent 

to 40 percent of the procedure payment. 

Second, ASC payment rates under the 

revised payment system are lower than 

payment rates for the same procedures 

under the OPPS; therefore, the 

beneficiary coinsurance amount under 

the ASC payment system almost always 

would be less than the OPPS copayment 

amount for the same services. (The only 

exceptions would be if the ASC 

coinsurance amount exceeds the 

inpatient deductible. The statute 

requires that copayment amounts under 

the OPPS not exceed the inpatient 

deductible.) Furthermore, the additions 

to the ASC list of covered surgical 

procedures would provide beneficiaries 

access to more surgical procedures in 

ASCs. Beneficiary coinsurance for 

services migrating from physicians’ 

offices to ASCs may decrease or increase 

under the revised ASC payment system, 

depending on the particular service and 

the relative payment amounts for that 

service in the physician’s office 

compared to the ASC. However, for 

those additional procedures that we are 

proposing to designate as office-based in 

CY 2012, the beneficiary coinsurance 

amount would be no greater than the 

beneficiary coinsurance in the 

physician’s office. 

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(4) Alternatives Considered 

Alternatives to the changes we are 

proposing to make and the reasons that 

we have chosen specific options are 

discussed throughout this proposed 

rule. Some of the major ASC issues 

discussed in this proposed rule and the 

options considered are discussed below. 

• Alternatives Considered for OfficeBased Procedures 

According to our final policy for the 

revised ASC payment system, we 

designate as office-based those 

procedures that are added to the ASC 

list of covered surgical procedures in CY 

2008 or later years and that we 

determine are predominantly performed 

in physicians’ offices based on 

consideration of the most recent 

available volume and utilization data for 

each individual procedure HCPCS code 

and, if appropriate, the clinical 

characteristics, utilization, and volume 

of related HCPCS codes. We establish 

payment for procedures designated as 

office-based at the lesser of the MPFS 

nonfacility practice expense payment 

amount or the ASC rate developed 

according to the standard methodology 

of the revised ASC payment system. 

In developing this proposed rule, we 

reviewed CY 2010 utilization data for all 

surgical procedures added to the ASC 

list of covered surgical procedures in CY 

2008 or later years and for those 

procedures for which the office-based 

designation is temporary in the CY 2011 

OPPS/ASC final rule with comment 

period (75 FR 72036 through 72038). 

Based on that review, and as discussed 

in section XIII.C.1.b. of this proposed 

rule, we are proposing to newly 

designate 10 surgical procedures as 

permanently office-based and proposing 

to make temporary office-based 

designations for 8 procedures in CY 

2012 that were designated as 

temporarily office-based for CY 2011. 

We considered two alternatives in 

developing this policy. 

The first alternative we considered 

was to make no change to the procedure 

payment designations. This would mean 

that we would pay for the ten 

procedures we are proposing to 

designate as permanently office-based 

and the eight procedures we are 

proposing to designate as temporarily 

office-based at an ASC payment rate 

calculated according to the standard 

ratesetting methodology of the revised 

ASC payment system. We did not select 

this alternative because our analysis of 

the data and our clinical review 

indicated that all 10 procedures we are 

proposing to designate as permanently 

office-based, as well as the 8 procedures 

that we are proposing to designate 

temporarily as office-based, are 

considered to be predominantly 

performed in physicians’ offices. 

Consistent with our final policy adopted 

in the August 2, 2007 final rule (72 FR 

42509 through 42513), we were 

concerned that making payments at the 

standard ASC payment rate for the 10 

procedures we are proposing to 

designate as permanently office-based 

and the 8 procedures we are proposing 

to designate as temporarily office-based 

could create financial incentives for the 

procedures to shift from physicians’ 

offices to ASCs for reasons unrelated to 

clinical decisions regarding the most 

appropriate setting for surgical care. 

Further, consistent with our policy, we 

believe that when adequate data become 

available to make permanent 

determinations about procedures with 

temporary office-based designations, 

maintaining the temporary designation 

is no longer appropriate. 

The second alternative we considered 

and the one we are proposing for CY 

2012 is to designate 10 additional 

procedures as permanently office-based 

for CY 2012 and to designate 8 

procedures as temporarily office-based 

in CY 2012 that were designated as 

temporarily office-based for CY 2011. 

We chose this alternative because our 

claims data and clinical review indicate 

that these procedures could be 

considered to be predominantly 

performed in physicians’ offices. We 

believe that designating these 

procedures as office-based, which 

results in the CY 2012 ASC payment 

rate for these procedures potentially 

being capped at the CY 2012 physicians’ 

office rate (that is, the MPFS nonfacility 

practice expense payment amount), if 

applicable, is an appropriate step to 

ensure that Medicare payment policy 

does not create financial incentives for 

such procedures to shift unnecessarily 

from physicians’ offices to ASCs, 

consistent with our final policy adopted 

in the August 2, 2007 final rule. 

c. Accounting Statements and Tables 

As required by OMB Circular A–4 

(available at http://www.whitehouse.

gov/omb/circulars/a004/a-4.pdf), we 

have prepared two accounting 

statements to illustrate the impacts of 

this proposed rule. The first accounting 

statement, Table 54 below, illustrates 

the classification of expenditures for the 

CY 2012 estimated hospital OPPS 

incurred benefit impacts associated with 

the proposed CY 2012 OPD fee schedule 

increase shown in this proposed rule, 

based on the FY 2012 President’s 

Budget. The second accounting 

statement, Table 55 below, illustrates 

the classification of expenditures 

associated with the 0.9 percent 

proposed CY 2011 update to the revised 

ASC payment system, based on the 

provisions of this proposed rule and the 

baseline spending estimates for ASCs in 

the FY 2012 President’s Budget. Lastly, 

both tables classify all estimated 

impacts as transfers. 

TABLE 54—ACCOUNTING STATEMENT: CY 2012 ESTIMATED HOSPITAL OPPS TRANSFERS FROM CY 2011 TO CY 2012 

ASSOCIATED WITH THE PROPOSED CY 2012 HOSPITAL OUTPATIENT OPD FEE SCHEDULE INCREASE

Category Transfers 

Annualized Monetized Transfers ....................................... $0.5 billion. 

From Whom to Whom ........................................................ Federal Government to outpatient hospitals and other providers who received payment under the hospital OPPS. 

Total ............................................................................ $0.5 billion. 

TABLE 55—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2011 TO CY 2012 AS A

RESULT OF THE PROPOSED CY 2012 UPDATE TO THE REVISED ASC PAYMENT SYSTEM

Category Transfers 

Annualized Monetized Transfers ....................................... $26 million. 

From Whom to Whom ........................................................ Federal Government to Medicare Providers and Suppliers. 

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TABLE 55—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2011 TO CY 2012 AS A

RESULT OF THE PROPOSED CY 2012 UPDATE TO THE REVISED ASC PAYMENT SYSTEM—Continued 

Category Transfers 

Total ............................................................................ $26 million. 

d. Effect of Proposed Requirements for 

the Hospital Outpatient Quality 

Reporting (OQR) Program 

In section XVI. of the CY 2009 OPPS/ 

ASC final rule with comment period (73 

FR 68758 through 68781), section XVI. 

of the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60629 

through 60655), and section XVI. of the 

CY 2011 OPPS/ASC final rule with 

comment period (75 FR72064 through 

72110), we discussed our requirements 

for subsection (d) hospitals to report 

quality data under the Hospital OQR 

Program in order to receive the full OPD 

fee schedule increase factor for CY 2010, 

CY 2011, and CY 2012–2014, 

respectively. In section XIV. of this 

proposed rule, we are proposing 

additional policies affecting the 

Hospital OQR Program for CY 2013, CY 

2014, and CY 2015. 

We determined that 107 hospitals did 

not meet the requirements to receive the 

full OPD fee schedule increase factor for 

CY 2011. Most of these hospitals (over 

90 of the 107) received little or no OPPS 

payment on an annual basis and did not 

participate in the Hospital OQR 

Program. We estimate that 120 hospitals 

may not receive the full OPD fee 

schedule increase factor in CY 2012. We 

are unable at this time to estimate the 

number of hospitals that may not 

receive the full OPD fee schedule 

increase factor in CY 2013, CY 2014 and 

CY 2015. 

In section XVI.E.3.a. of the CY 2010 

OPPS/ASC final rule with comment 

period (74 FR 60647 through 60650), for 

the CY 2011 payment update, as part of 

the validation process, we required 

hospitals to submit paper copies of 

requested medical records to a 

designated contractor within the 

required timeframe. Failure to submit 

requested documentation could result in 

a 2 percentage point reduction to a 

hospital’s CY 2011 OPD fee schedule 

increase factor, but the failure to attain 

a validation score threshold would not. 

In section XVI.D.3.b of the CY 2011 

OPPS/ASC final rule with comment 

period, we finalized our proposal to 

validate data submitted by 800 hospitals 

of the approximately 3,200 participating 

hospitals for purposes of the CY 2012 

Hospital OQR Program payment 

determination. We stated our belief that 

this approach was suitable for the CY 

Hospital OQR Program because it 

would: Produce a more reliable estimate 

of whether a hospital’s submitted data 

have been abstracted accurately; provide 

more statistically reliable estimates of 

the quality of care delivered in each 

selected hospital as well as at the 

national level; and reduce overall 

hospital burden because most hospitals 

would not be selected to undergo 

validation each year. We adopted a 

threshold of 75 percent as the threshold 

for the validation score because we 

believed this level was reasonable for 

hospitals to achieve while still ensuring 

accuracy of the data. Additionally, this 

level is consistent with what we 

adopted in the Hospital Inpatient 

Quality Reporting (IQR) Program 

(formerly referred to as the Reporting 

Hospital Quality Data for Annual 

Payment Update (RHQDAPU) program)) 

(75 FR 50225 through 50229). As a 

result, we believed that the effect of our 

validation process for CY 2012 would be 

minimal in terms of the number of 

hospitals that would not meet all 

program requirements. 

In this proposed rule, we are 

proposing 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 the CY 2011 and CY 2012 

payment determinations, and under our 

proposal for CY 2013, we stated that we 

would conduct a measure level 

validation by assessing whether the 

measure data submitted by the hospital 

matches the independently reabstracted 

measure data. 

As stated above, we are unable to 

estimate the number of hospitals that 

may not receive the full OPD fee 

schedule increase factor in CY 2013. 

Therefore, we are unable to estimate the 

number of hospitals that would fail the 

validation documentation submission 

requirement for the proposed CY 2013 

payment update. 

The validation requirements for CY 

2011, CY 2012, and the validation 

requirement proposed for CY 2013 

would result in result in medical record 

documentation for approximately 7,300 

cases for CY 2011, 9,600 cases per 

quarter for CY 2012, and approximately 

6,000 cases per quarter for CY 2013, 

respectively, being submitted to a 

designated CMS contractor. We would 

pay for the cost of sending this medical 

record documentation to the designated 

CMS contractor at the rate of 12 cents 

per page for copying and approximately 

$1.00 per case for postage. We have 

found that an outpatient medical chart 

is generally up to 10 pages. Thus, as a 

result of validation requirements 

effective for the CY 2011 and CY 2012 

payment determinations, and proposed 

for the CY 2013 payment determination, 

respectively, we would have 

expenditures of approximately $16,060 

for CY 2011, $21,120 per quarter for CY 

2012, and approximately $13,200 per 

quarter for CY 2013. Again, as we would 

pay for the data collection effort, we 

believe that a requirement for medical 

record documentation for 7,300 total 

cases for CY 2011, a maximum of 12 

cases per quarter for 800 hospitals for 

CY 2012, and a maximum of 12 cases 

per quarter for up to 500 hospitals for 

CY 2013 represents a minimal burden to 

Hospital OQR Program participating 

hospitals. 

In previous years, medical record 

documentation was requested by a CMS 

contractor and hospitals were given 45 

days from the date of the request to 

submit the requested documentation. In 

section XIV.G.3.d. of this proposed rule, 

for the CY 2013 payment determination, 

we are proposing to reduce the time 

from 45 days to 30 days for hospitals to 

submit requested medical record 

documentation to meet our validation 

requirement; this may create an 

additional administrative burden. The 

total burden would be a maximum of 12 

charts for each of the four quarters that 

must be copied and mailed within a 30- 

day period after the end of each quarter. 

We are proposing this deadline of 30 

days to align the process with 

requirements in 42 CFR 476.78(b)(2), 

which allows 30 days for chart 

submission in the context of QIO review 

and to reduce the time for data 

validation completion to increase 

timeliness of providing hospitals 

feedback on their abstraction accuracy. 

e. Effects of Proposed Changes to 

Physician Self-Referral Regulations 

Section 6001(a) of the Affordable Care 

Act amended the whole hospital and 

rural provider exceptions (sections 

1877(d)(2) and (d)(3) of the Act, 

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respectively) to impose additional 

restrictions on physician ownership or 

investment in hospitals. The amended 

whole hospital and rural provider 

exceptions provide that a hospital may 

not increase the number of operating 

rooms, procedure rooms, and beds 

beyond that for which the hospital was 

licensed on March 23, 2010 (or, in the 

case of a hospital that did not have a 

provider agreement in effect as of this 

date, but did have a provider agreement 

in effect on December 31, 2010, the date 

of effect of such agreement). Section 

6001(a)(3) of the Affordable Care Act 

added new section 1877(i)(3)(A)(i) of the 

Act to set forth that the Secretary shall 

establish and implement an exception 

process to the prohibition on expansion 

of facility capacity. 

Most physician-owned hospitals are 

unable to qualify for the ownership and 

investment exception at section 

1877(d)(1) of the Act. Section 1877(d)(1) 

of the Act provides an exception for 

ownership or investment in publicly 

traded securities in a corporation where 

there is stockholder equity exceeding 

$75 million at the end of the 

corporation’s most recent fiscal year or 

on average during the previous 3 fiscal 

years; or the ownership involves mutual 

funds in a company that has assets 

greater than $75 million. Studies by the 

OIG and GAO have concluded that 

physician-owned hospitals tend to be 

smaller and are unable to meet the $75 

million threshold. 

The proposed regulations at 

§ 411.362(c) set forth the proposed 

process for a hospital to request an 

exception to the prohibition on 

expansion of facility capacity. Proposed 

new § 411.362(c)(2) outlines the 

requirements for an applicable hospital 

request and § 411.362(c)(3) outlines the 

requirements for a high Medicaid 

facility request. Our proposed 

regulations would require each hospital 

desiring an exception to access certain 

data and make estimates based on that 

data to determine if the hospital meets 

the relevant criteria. For example, a 

hospital would be required to access 

data furnished by the CMS Healthcare 

Cost Report Information System (HCRIS) 

and by the Bureau of the Census, in 

addition to referencing data from the 

hospital’s individual cost reports and 

making certain estimates on the basis of 

its cost report data. We believe the 

impact of these requirements on affected 

hospitals would be minimal. 

Our proposed regulations would 

require each hospital requesting an 

exception to provide documentation 

supporting its calculations to 

demonstrate that it satisfies the relevant 

criteria. Our proposed regulations 

would further require each hospital to 

provide documentation to support 

information related to its number of 

operating rooms, procedure rooms, and 

beds. This information would include, 

for example, the number of operating 

rooms, procedure rooms, and beds for 

which the hospital is licensed as of the 

date that the hospital submits a request 

for an exception. Each hospital would 

also be required to provide a detailed 

explanation regarding whether and how 

it satisfies each of the relevant criteria. 

We believe physician-owned hospitals 

would be minimally affected by these 

requirements. 

Our proposed regulations would 

require each hospital requesting an 

exception to disclose on a public Web 

site for the hospital that it is requesting 

an exception. Our proposed regulations 

would require each hospital to certify 

that it does not discriminate and does 

not permit physicians to discriminate 

against beneficiaries of Federal health 

care programs. In addition, under our 

proposed regulations, if CMS were to 

receive input from the community 

related to a particular hospital’s request 

for an exception, the hospital may 

submit a rebuttal statement in response 

to input from the community. We 

believe the impact of these requirements 

on physician-owned hospitals would be 

minimal. 

We believe our proposals would affect 

a relatively small number of physicianowned hospitals. We estimate that 265 

physician-owned hospitals are eligible 

to apply for an exception. We believe 

accurately estimating the number of 

hospitals choosing to request an 

exception would be impracticable. 

Further, we are not aware of any 

existing data or projections that may 

produce an estimate with reasonable 

certainty. As a result, we are choosing 

to estimate that each of the 265 eligible 

hospitals will request an exception in 

order to avoid underestimating the 

potential impact. We are not aware of 

any data that may indicate the potential 

increase in operation rooms, procedure 

rooms, or beds pursuant to exceptions 

potentially approved. We also have no 

data or projections that may help 

estimate the number of physicians that 

would be affected by this proposed rule 

as a result of their ownership interests 

in hospitals. 

The proposed requirements 

concerning the criteria and process for 

hospitals seeking an exception to the 

prohibition on expansion of facility 

capacity are consistent with the 

physician self-referral statute and 

regulations and the current practices of 

most hospitals. Thus, our proposed 

requirements would present a negligible 

impact on physician-owned hospitals. 

Physician-owned hospitals would bear 

costs associated with requesting an 

exception to the prohibition on facility 

expansion. In part because hospitals are 

currently undertaking the costs of 

producing a cost report, we believe that 

the cost of referencing the required data 

and making the required estimates 

would be negligible. In addition, we 

believe the costs of providing 

supporting documentation, certifying 

nondiscrimination against beneficiaries 

of Federal health care programs, and 

submitting other required information 

necessary to request an exception to 

CMS would be minimal. 

We believe that beneficiaries may be 

positively impacted by these proposed 

provisions. Specifically, an increase in 

operating rooms, procedure rooms, and 

beds may augment the volume or nature 

of services offered by physician-owned 

hospitals. An expansion in the number 

of hospital beds may also permit 

additional inpatient admissions and 

overnight stays. Increased operating 

rooms, procedure rooms, and beds may 

result in improved access to health care 

facilities and services. We believe that 

our proposals are necessary to conform 

our regulations to the amendments to 

section 1877 of the Act. We also believe 

the proposed regulations would help 

minimize anticompetitive behavior that 

can affect the decision as to where a 

beneficiary receives health care services 

and would possibly enhance the 

services furnished. 

In this proposed rule, we are 

soliciting public comments on each of 

the issues outlined above that contain 

estimates of the costs and benefits of the 

proposed rule. 

f. Effects of Proposed Changes to 

Provider Agreement Regulations on 

Patient Notification Requirements 

In section XV.D. of this proposed rule, 

we discuss our proposal concerning the 

requirement that all hospitals and 

critical access hospitals must furnish 

written notice to their patients at the 

beginning of their hospital stay or 

outpatient visit if a doctor of medicine 

or a doctor of osteopathy is not present 

in the hospital 24 hours per day, 7 days 

per week, and that the notice must 

indicate how the hospital will meet the 

medical needs of any patient who 

develops an emergency medical 

condition at a time when there is no 

physician present in the hospital. In this 

proposed rule, we are proposing to 

modify the provider agreement 

regulations to reduce the categories of 

outpatients who must be notified if 

hospital does not have a doctor of 

medicine or doctor of osteopathy on site 

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24 hours per days/7 days per week. We 

are proposing that only those 

outpatients who receive observation 

services, surgery, or services involving 

anesthesia must receive written notice. 

We are not making any changes to our 

patient safety requirements for 

physician-owned hospitals at 

§ 411.362(b)(5)(i). We continue to 

believe that patients should be made 

aware of whether or not a doctor of 

medicine or a doctor of osteopathy is 

present in the hospital at all times, and 

the hospital’s plans to address patient’s 

emergency medical conditions when a 

doctor of medicine or a doctor of 

osteopathy is not present. 

We believe our proposed changes to 

the provider agreement regulations 

would result in only a minor change in 

the number of hospitals that are subject 

to the disclosure requirements, 

specifically those multicampus 

hospitals that currently have 24 hour 

per day, seven day per week presence of 

a doctor of medicine or a doctor of 

osteopathy on one, but not all of their 

campuses with inpatient services. We 

anticipate that very few multicampus 

hospitals would fall into this category. 

Rather, the primary impact of the 

proposed regulation would be to change 

the number of annual written 

disclosures given by hospitals to 

patients. We believe the cost of 

implementing these provisions borne by 

hospitals would be limited to a one-time 

cost associated with completing minor 

revisions to portions of the hospitals, 

policies and procedures related to 

patient admission and registration, as 

well as providing written notification to 

patients and affected staff. Therefore, we 

do not believe that these proposed 

changes will have any significant 

economic impact on hospitals. 

We do not anticipate that our 

proposals will have a significant 

economic impact on a substantial 

number of physicians, other health care 

providers and suppliers, or the 

Medicare or Medicaid programs and 

their beneficiaries. Specifically, we 

believe that this proposed rule will 

affect mostly hospitals, physicians, and 

beneficiaries. The proposed changes 

concerning the disclosure of the 

presence of a doctor of medicine or a 

doctor of osteopathy in hospitals is 

consistent with the physician selfreferral statute and regulations as well 

as the current practices of most 

hospitals. Thus, our physician presence 

disclosure proposal would present a 

negligible economic impact on the 

hospital. 

Overall, we believe that beneficiaries 

will be positively impacted by these 

provisions. Specifically, disclosure of 

physician presence equips patients to 

make informed decisions about where 

they elect to receive care. Our proposal 

makes no significant change that has the 

potential to impede patient access to 

health care facilities and services. In 

fact, we believe that our proposal will 

help minimize anti-competitive 

behavior that can affect the decision as 

to where a beneficiary receives health 

care services and possibly the quality of 

the services furnished. 

g. Effects of Additional Proposed 

Hospital VBP Program Requirements 

Section 1886(o)(1)(B) of the Act 

directs the Secretary to begin making 

value-based incentive payments under 

the Hospital VBP Program to hospitals 

for discharges occurring on or after 

October 1, 2012. These incentive 

payments will be funded for FY 2013 

through a reduction to the FY 2013 base 

operating MS–DRG payment amount for 

each discharge of 1 percent, as required 

by section 1886(o)(7)(B)(i) of the Act. 

The applicable percentage for FY 2014 

is 1.25 percent, for FY 2015 is 1.5 

percent, for FY 2016 is 1.75 percent, and 

for FY 2017 and subsequent years is 2 

percent. In section XVI.A.3. of this 

proposed rule, we are proposing 

additional requirements for the FY 2014 

Hospital VBP Program. Specifically, we 

are proposing to add one chartabstracted measure to the Hospital VBP 

measure set for the FY 2014 payment 

determination. Because this additional 

measure is chart-abstracted and is 

required for the Hospital IQR Program, 

its inclusion in the Hospital VBP 

Program does not result in any 

additional burden because the Hospital 

VBP Program uses data that are required 

for the Hospital IQR Program. 

h. Effects of the Proposed EHR 

Reporting Pilot 

Under section XIV.J. of this proposed 

rule, we are proposing to allow eligible 

hospitals and CAHs that are 

participating in the EHR Incentive 

Program to meet the CQM reporting 

requirement of the program for payment 

year 2012 by participating in the 

Medicare EHR Incentive Program 

Electronic Reporting Pilot. This 

proposal would facilitate the use of an 

electronic infrastructure that supports 

the use of EHRs by hospitals and CAHs 

to meet the requirements in various 

CMS programs and reduce reporting 

burden simultaneously. Through this 

pilot, we have encouraged hospitals to 

take steps toward the adoption of EHRs 

that will allow for reporting of clinical 

quality data from EHRs to a CMS data 

repository. We expect that the 

submission of quality data through 

EHRs will provide a foundation for 

establishing the capacity of hospitals to 

send, and for CMS, in the future, to 

receive, quality measures via hospital 

EHRs for the Hospital IQR Program’s 

measures. Hospitals that choose to 

participate in the EHR Incentive 

Program by means of this pilot for the 

purpose of meeting the CQM reporting 

requirement of Meaningful Use will be 

taking those first steps toward reporting 

clinical quality data in such a way. 

B. Regulatory Flexibility Act (RFA) 

Analysis 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, we 

estimate that most hospitals, ASCs and 

CMHCs are small entities as that term is 

used in the RFA. For purposes of the 

RFA, most hospitals are considered 

small businesses according to the Small 

Business Administration’s size 

standards with total revenues of $34.5 

million or less in any single year. Most 

ASCs and most CMHCs are considered 

small businesses with total revenues of 

$10 million or less in any single year. 

For details, see the Small Business 

Administration’s Web site at http:// 

sba.gov; choose ‘‘Contracting’’ and 

select ‘‘Table of Small Business Size 

Standards’’ in PDF or Excel. 

In addition, section 1102(b) of the 

Social Security Act requires us to 

prepare a regulatory impact analysis if 

a rule may have a significant impact on 

the operations of a substantial number 

of small rural hospitals. This analysis 

must conform to the provisions of 

section 603 of the RFA. For purposes of 

section 1102(b) of the Act, we define a 

small rural hospital as a hospital that is 

located outside of a metropolitan 

statistical area and has fewer than 100 

beds. We estimate that this proposed 

rule may have a significant impact on 

approximately 704 small rural hospitals. 

The analysis above, together with the 

remainder of this preamble, provides a 

Regulatory Flexibility Analysis and a 

Regulatory Impact Analysis. 

C. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. That threshold 

level is currently approximately $135 

million. This proposed rule would not 

mandate any requirements for State, 

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local, or tribal governments, nor would 

it affect private sector costs. 

D. Conclusion 

The changes we are proposing would 

affect all classes of hospitals paid under 

the OPPS and would affect both CMHCs 

and ASCs. We estimate that most classes 

of hospitals paid under the OPPS would 

experience a modest increase or a 

minimal decrease in payment for 

services furnished under the OPPS in 

CY 2012. Table 51 demonstrates the 

estimated distributional impact of the 

OPPS budget neutrality requirements 

that would result in a 1.5 percent 

increase in payments for all services 

paid under the OPPS in CY 2012, after 

considering all proposed changes to 

APC reconfiguration and recalibration, 

as well as the proposed OPD fee 

schedule increase factor, wage index 

changes, including the proposed frontier 

State wage index adjustment, estimated 

payment for outliers, and changes to the 

pass-through payment estimate. 

However, some classes of providers that 

are paid under the OPPS would 

experience significant gains and others 

would experience modest losses in 

OPPS payments in CY 2012. 

Specifically, we estimate that the 11 

dedicated cancer hospitals that met the 

classification criteria in section 

1883(d)(1)(B)(v) of the Act, as a class, 

would receive an increase in payments 

under the OPPS of 38.8 percent for CY 

2012, although after accounting for the 

TOPs that we estimate they would no 

longer receive due to increased 

payments under the OPPS, the net 

increase in payment to these hospitals 

would be approximately 9 percent. In 

contrast, we estimate that CMHCs 

would see an overall decrease in 

payment of 33.1 percent as a result of 

the proposed full transition in CY 2012 

to payment rates for partial 

hospitalization services at CMHCs based 

on cost report and claims data 

submitted by CMHCs. 

The proposed updates to the ASC 

payment system for CY 2012 would 

affect each of the approximately 5,000 

ASCs currently approved for 

participation in the Medicare program. 

The effect on an individual ASC would 

depend on its mix of patients, the 

proportion of the ASC’s patients that are 

Medicare beneficiaries, the degree to 

which the payments for the procedures 

offered by the ASC are changed under 

the revised payment system, and the 

extent to which the ASC provides a 

different set of procedures in the coming 

year. Table 52 demonstrates the 

estimated distributional impact among 

ASC surgical specialties of the MFPadjusted CPI–U update of 0.9 percent 

proposed for CY 2012. 

XXI. Federalism Analysis 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

costs on State and local governments, 

preempts State law, or otherwise has 

Federalism implications. 

We have examined the OPPS and ASC 

provisions included in this proposed 

rule in accordance with Executive Order 

13132, Federalism, and have 

determined that they would 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 51 of 

this proposed rule, we estimate that 

OPPS payments to governmental 

hospitals (including State and local 

governmental hospitals) would increase 

by 1.5 percent under this proposed rule. 

While we do not know the number of 

ASCs with government ownership, we 

anticipate that it is small. We believe 

that the proposed provisions related to 

payments to ASCs in CY 2012 would 

not affect payments to any ASCs owned 

by government entities. 

The analyses we have provided in 

section XX.A. of this proposed rule, in 

conjunction with the remainder of this 

document, demonstrates that this 

proposed rule is consistent with the 

regulatory philosophy and principles 

identified in Executive Order 12866, the 

RFA, and section 1102(b) of the Act. 

This proposed rule would affect 

payments to a substantial number of 

small rural hospitals and a small 

number of rural ASCs, as well as other 

classes of hospitals and ASCs, and some 

effects may be significant. 

List of Subjects 

42 CFR Part 410 

Health facilities, Health professions, 

Laboratories, Medicare, Rural areas, 

X-rays. 

42 CFR Part 411 

Kidney diseases, Medicare, Physician 

referral, Reporting and recordkeeping 

requirements. 

42 CFR Part 416 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 419 

Hospitals, Medicare, Reporting and 

recordkeeping requirements. 

42 CFR Part 489 

Health facilities, Medicare, Reporting 

and recordkeeping requirements. 

42 CFR Part 495 

Computer technology, Electronic 

health records, Electronic transactions, 

Health, Health care. Health information 

technology, Health insurance, Health 

records, Hospitals, Incorporation by 

reference, Laboratories, Medicaid, 

Medicare, Privacy, Reporting and 

recordkeeping requirements, Public 

health, Security. 

For reasons stated in the preamble of 

this document, the Centers for Medicare 

& Medicaid Services is proposing to 

amend 42 CFR Chapter IV as set forth 

below: 

PART 410—SUPPLEMENTARY 

MEDICAL INSURANCE (SMI) 

BENEFITS 

1. The authority citation for Part 410 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

2. Section 410.27 is amended by— 

a. Revising the section heading. 

b. Revising paragraph (a). 

c. In paragraph (b), removing the 

cross-reference ‘‘§ 410.168’’ and adding 

in its place the cross-reference 

‘‘§ 410.29’’. 

d. In paragraph (c), removing the 

cross-reference ‘‘§ 410.168’’ and adding 

in its place the cross-reference ‘‘subpart 

G of Part 424 of this chapter’’. 

e. Redesignating paragraphs (d) 

through (f) as paragraphs (e) through (g), 

respectively. 

f. Adding a new paragraph (d). 

The revisions and addition read as 

follows: 

§ 410.27 Therapeutic outpatient hospital or 

CAH services and supplies incident to a 

physician’s or nonphysician practitioner’s 

service: Conditions. 

(a) Medicare Part B pays for 

therapeutic hospital or CAH services 

and supplies furnished incident to a 

physician’s or nonphysician 

practitioner’s service, which are defined 

as all services and supplies furnished to 

hospital or CAH outpatients that are not 

diagnostic services and that aid the 

physician or nonphysician practitioner 

in the treatment of the patient, 

including drugs and biologicals that 

cannot be self-administered, if— 

(1) They are furnished— 

(i) By or under arrangements made by 

the participating hospital or CAH, 

except in the case of a SNF resident as 

provided in § 411.15(p) of this 

subchapter; 

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(ii) As an integral although incidental 

part of a physician’s or nonphysician 

practitioner’s services; 

(iii) In the hospital or CAH or in a 

department of the hospital or CAH, as 

defined in § 413.65 of this subchapter; 

and 

(iv) Under the direct supervision (or 

other level of supervision as specified 

by CMS for the particular service) of a 

physician or a nonphysician 

practitioner as specified in paragraph (g) 

of this section, subject to the following 

requirements: 

(A) For services furnished in the 

hospital or CAH, or in an outpatient 

department of the hospital or CAH, both 

on and off-campus, as defined in 

§ 413.65 of this subchapter, ‘‘direct 

supervision’’ means that the physician 

or nonphysician practitioner must be 

immediately available to furnish 

assistance and direction throughout the 

performance of the procedure. It does 

not mean that the physician or 

nonphysician practitioner must be 

present in the room when the procedure 

is performed; 

(B) Certain therapeutic services and 

supplies may be assigned either general 

supervision or personal supervision. 

When such assignment is made, general 

supervision means the definition 

specified at § 410.32(b)(3)(i), and 

personal supervision means the 

definition specified at § 410.32(b)(3)(iii); 

(C) Nonphysician practitioners may 

directly supervise services that they 

may personally furnish in accordance 

with State law and all additional 

requirements, including those specified 

in §§ 410.71, 410.73, 410.74, 410.75, 

410.76, and 410.77; 

(D) For pulmonary rehabilitation, 

cardiac rehabilitation, and intensive 

cardiac rehabilitation services, direct 

supervision must be furnished by a 

doctor of medicine or a doctor of 

osteopathy, as specified in §§ 410.47 

and 410.49, respectively; and 

(E) For nonsurgical extended duration 

therapeutic services (extended duration 

services), which are hospital or CAH 

outpatient therapeutic services that can 

last a significant period of time, have a 

substantial monitoring component that 

is typically performed by auxiliary 

personnel, have a low risk of requiring 

the physician’s or appropriate 

nonphysician practitioner’s immediate 

availability after the initiation of the 

service, and are not primarily surgical in 

nature, Medicare requires a minimum of 

direct supervision during the initiation 

of the service which may be followed by 

general supervision at the discretion of 

the supervising physician or the 

appropriate nonphysician practitioner. 

‘‘Initiation’’ means the beginning 

portion of the nonsurgical extended 

duration therapeutic service which ends 

when the patient is stable and the 

supervising physician or the appropriate 

nonphysician practitioner determines 

that the remainder of the service can be 

delivered safely under general 

supervision. 

(2) In the case of partial 

hospitalization services, also meet the 

conditions of paragraph (e) of this 

section. 

* * * * * 

(d) Rules on emergency services 

furnished to outpatients in a foreign 

country are specified in subpart H of 

Part 424 of this chapter. 

* * * * * 

PART 411—EXCLUSIONS FROM 

MEDICARE AND LIMITATIONS ON 

MEDICARE PAYMENT 

3. The authority citation for Part 411 

continues to read as follows: 

Authority: Secs. 1102, 1860D–1 

through 1860D–42, 1871, and 1877 of 

the Social Security Act (42 U.S.C. 1302, 

1395w-101 through 1395w-152, 1395hh 

and 1395nn). 

4. Section 411.362 is amended by— 

a. Adding in paragraph (a) definitions 

of ‘‘baseline number of operating rooms, 

procedure rooms, and beds’’ and ‘‘main 

campus of the hospital’’ in alphabetical 

order. 

b. Revising paragraph (b)(2). 

c. Adding paragraph (c). 

The revision and additions read as 

follows: 

§ 411.362 Additional requirements 

concerning physician ownership and 

investment in hospitals. 

(a) * * * 

Baseline number of operating rooms, 

procedure rooms, and beds means the 

number of operating rooms, procedure 

rooms, and beds for which the 

applicable hospital or high Medicaid 

facility is licensed as of March 23, 2010 

(or, in the case of a hospital that did not 

have a provider agreement in effect as 

of such date, but does have a provider 

agreement in effect on December 31, 

2010, the date of effect of such 

agreement). 

Main campus of the hospital means 

‘‘campus’’ as defined at § 413.65(a)(2). 

* * * * * 

(b) * * * 

(2) Prohibition on facility expansion. 

The hospital may not increase the 

number of operating rooms, procedure 

rooms, and beds beyond that for which 

the hospital is licensed on March 23, 

2010 (or, in the case of a hospital that 

did not have a provider agreement in 

effect as of this date, but does have a 

provider agreement in effect on 

December 31, 2010, the effective date of 

such agreement), unless an exception is 

granted pursuant to paragraph (c) of this 

section. 

* * * * * 

(c) Criteria for an individual hospital 

seeking an exception to the prohibition 

on facility expansion. 

(1) General. An applicable hospital or 

high Medicaid facility may request an 

exception from the prohibition on 

facility expansion up to once every 2 

years from the date of a CMS decision 

on the hospital’s most recent request. 

(2) Criteria for applicable hospital. An 

applicable hospital is a hospital that 

satisfies all of the following criteria: 

(i) Population increase. Is located in 

a county that has a percentage increase 

in population that is at least 150 percent 

of the percentage increase in population 

of the State in which the hospital is 

located during the most recent 5-year 

period for which data are available as of 

the date that the hospital submits its 

request. To calculate State and county 

population growth, a hospital must use 

Bureau of the Census estimates. 

(ii) Medicaid inpatient admissions. 

Has an annual percent of total inpatient 

admissions under Medicaid that is equal 

to or greater than the average percent 

with respect to such admissions for all 

hospitals located in the county in which 

the hospital is located for each of the 3 

most recent fiscal years for which data 

are available as of the date that the 

hospital submits its request. A hospital 

must use filed hospital cost report 

discharge data to estimate its annual 

percent of total inpatient admissions 

under Medicaid. 

(iii) Nondiscrimination. Does not 

discriminate against beneficiaries of 

Federal health care programs and does 

not permit physicians practicing at the 

hospital to discriminate against such 

beneficiaries. 

(iv) Average bed capacity. Is located 

in a State in which the average bed 

capacity in the State is less than the 

national average bed capacity for each of 

the 3 most recent fiscal years for which 

data are available as of the date that the 

hospital submits its request. 

(v) Average bed occupancy. Has an 

average bed occupancy rate that is 

greater than the average bed occupancy 

rate in the State in which the hospital 

is located for each of the 3 most recent 

fiscal years for which data are available 

as of the date that the hospital submits 

its request. A hospital must use filed 

hospital cost report data to determine its 

average bed occupancy rate. 

(3) Criteria for high Medicaid facility. 

A high Medicaid facility is a hospital 

that satisfies all of the following criteria: 

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(i) Sole hospital. Is not the sole 

hospital in the county in which the 

hospital is located. 

(ii) Medicaid inpatient admissions. 

With respect to each of the 3 most 

recent fiscal years for which data are 

available as of the date the hospital 

submits its request, has an annual 

percent of total inpatient admissions 

under Medicaid that is estimated to be 

greater than such percent with respect 

to such admissions for any other 

hospital located in the county in which 

the hospital is located. A hospital must 

use filed hospital cost report discharge 

data to estimate its annual percentage of 

total inpatient admissions under 

Medicaid and the annual percentages of 

total inpatient admissions under 

Medicaid for every other hospital 

located in the county in which the 

hospital is located. 

(iii) Nondiscrimination. Does not 

discriminate against beneficiaries of 

Federal health care programs and does 

not permit physicians practicing at the 

hospital to discriminate against such 

beneficiaries. 

(4) Procedure for submitting a request. 

(i) A hospital must either mail an 

original and one copy of the written 

request to CMS or submit the request 

electronically to CMS. If a hospital 

submits the request electronically, the 

hospital must mail an original hard 

copy of the signed certification set forth 

in paragraph (c)(4)(iii) of this section to 

CMS. 

(ii) A request must include the 

following information: 

(A) The name, address, National 

Provider Identification number(s) (NPI), 

Tax Identification Number(s) (TIN), and 

CMS Certification Number(s) (CCN) of 

the hospital requesting an exception. 

(B) The county in which the hospital 

requesting an exception is located. 

(C) The name, title, address, and 

daytime telephone number of a contact 

person who will be available to discuss 

the request with CMS on behalf of the 

hospital. 

(D) A statement identifying the 

hospital as an applicable hospital or 

high Medicaid facility and a detailed 

explanation with supporting 

documentation regarding whether and 

how the hospital satisfies each of the 

criteria for an applicable hospital or 

high Medicaid facility. The request must 

state that the hospital does not 

discriminate against beneficiaries of 

Federal health care programs and does 

not permit physicians practicing at the 

hospital to discriminate against such 

beneficiaries. 

(E) Documentation supporting the 

hospital’s calculations of its baseline 

number of operating rooms, procedure 

rooms, and beds; the hospital’s number 

of operating rooms, procedure rooms, 

and beds for which the hospital is 

licensed as of the date that the hospital 

submits a request for an exception; and 

the additional number of operating 

rooms, procedure rooms, and beds by 

which the hospital requests to expand. 

(iii) A request must include the 

following certification signed by an 

authorized representative of the 

hospital: ‘‘With knowledge of the 

penalties for false statements provided 

by 18 U.S.C. 1001, I certify that all of the 

information provided in the request and 

all of the documentation provided with 

the request is true and correct to the best 

of my knowledge and belief.’’ An 

authorized representative is the chief 

executive officer, chief financial officer, 

or other comparable officer of the 

hospital. 

(5) Community input and timing of 

complete request. Upon submitting a 

request for an exception and until the 

hospital receives a CMS decision, the 

hospital must disclose on any public 

Web site for the hospital that it is 

requesting an exception. Individuals 

and entities in the hospital’s community 

may provide input with respect to the 

hospital’s request no later than 30 days 

after CMS publishes notice of the 

hospital’s request in the Federal 

Register. Such input must take the form 

of written comments. The written 

comments must be either mailed or 

submitted electronically to CMS. 

(i) If CMS does not receive written 

comments from the community, a 

request will be deemed complete at the 

end of the 30-day period. 

(ii) If CMS receives written comments 

from the community, the hospital has 30 

days after CMS notifies the hospital of 

the written comments to submit a 

rebuttal statement. A request will be 

deemed complete at the end of this 30- 

day period regardless of whether the 

hospital submits a rebuttal statement. 

(6) A permitted increase under this 

section— 

(i) May not exceed 200 percent of the 

hospital’s baseline number of operating 

rooms, procedure rooms, and beds; and 

(ii) May occur only in facilities on the 

hospital’s main campus. 

(7) Publication of final decisions. Not 

later than 60 days after receiving a 

complete request, CMS will publish the 

final decision in the Federal Register. 

(8) Limitation on review. There shall 

be no administrative or judicial review 

under section 1869, section 1878, or 

otherwise of the process under this 

section (including the establishment of 

such process). 

PART 416—AMBULATORY SURGICAL 

SERVICES 

5. The citation for Part 416 continues 

to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

6. Section 416.166 is amended by 

revising paragraph (b) to read as follows: 

§ 416.166 Covered surgical procedures. 

* * * * * 

(b) General standards. Subject to the 

exclusions in paragraph (c) of this 

section, covered surgical procedures are 

surgical procedures specified by the 

Secretary and published in the Federal 

Register and/or via the Internet on the 

CMS Web site that are separately paid 

under the OPPS, that would not be 

expected to pose a significant safety risk 

to a Medicare beneficiary when 

performed in an ASC, and for which 

standard medical practice dictates that 

the beneficiary would not typically be 

expected to require active medical 

monitoring and care at midnight 

following the procedure. 

* * * * * 

7. Section 416.171 is amended by 

revising paragraphs (b) and (d) to read 

as follows: 

§ 416.171 Determination of payment rates 

for ASC services. 

* * * * * 

(b) Exception. The national ASC 

payment rates for the following items 

and services are not determined in 

accordance with paragraph (a) of this 

section but are paid an amount derived 

from the payment rate for the equivalent 

item or service set under the payment 

system established in part 419 of this 

subchapter as updated annually in the 

Federal Register and/or via the Internet 

on the CMS Web site. 

* * * * * 

(d) Limitation on payment rates for 

office-based surgical procedures and 

covered ancillary radiology services. 

Notwithstanding the provisions of 

paragraph (a) of this section, for any 

covered surgical procedure under 

§ 416.166 that CMS determines is 

commonly performed in physicians’ 

offices or for any covered ancillary 

radiology service, excluding those listed 

in paragraphs (d)(1) and (2) of this 

section, the national unadjusted ASC 

payment rates for these procedures and 

services will be the lesser of the amount 

determined under paragraph (a) of this 

section or the amount calculated at the 

nonfacility practice expense relative 

value units under § 414.22(b)(5)(i)(B) of 

this subchapter multiplied by the 

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conversion factor described in 

§ 414.20(a)(3) of this subchapter. 

(1) The national unadjusted ASC 

payment rate for covered ancillary 

radiology services that involve certain 

nuclear medicine procedures will be the 

amount determined under paragraph (a) 

of this section. 

(2) The national unadjusted ASC 

payment rate for covered ancillary 

radiology services that use contrast 

agents will be the amount determined 

under paragraph (a) of this section. 

* * * * * 

8. Section 416.173 is revised to read 

as follows: 

§ 416.173 Publication of revised payment 

methodologies and payment rates. 

CMS publishes annually, through 

notice and comment rulemaking in the 

Federal Register and/or via the Internet 

on the CMS Web site, the payment 

methodologies and payment rates for 

ASC services and designates the covered 

surgical procedures and covered 

ancillary services for which CMS will 

make an ASC payment and other 

revisions as appropriate. 

PART 419—PROSPECTIVE PAYMENT 

SYSTEM FOR HOSPITAL OUTPATIENT 

DEPARTMENT SERVICES 

9. The authority citation for Part 419 

continues to read as follows: 

Authority: Secs. 1102, 1833(t), and 1871 of 

the Social Security Act (42 U.S.C. 1302, 

1395(t), and1395hh). 

10. Section 419.32 is amended by: 

a. Revising paragraph (b)(1)(iv)(A). 

b. Removing the word ‘‘and’’ that 

appears at the end of paragraph 

(b)(1)(iv)(B)(1). 

c. Removing the period and adding 

‘‘; and’’ in its place at the end of 

paragraph (b)(1)(iv)(B)(2). 

d. Adding a new paragraph 

(b)(1)(iv)(B)(3). 

The revision and addition read as 

follows: 

§ 419.32 Calculation of prospective 

payment rates for hospital outpatient 

services. 

* * * * * 

(b) * * * 

(1) * * * 

(iv)(A) For calendar year 2003 and 

subsequent years, by the hospital 

inpatient market basket percentage 

increase applicable under section 

1886(b)(3)(B)(iii) of the Act, reduced by 

the factor(s) specified in paragraph 

(b)(1)(iv)(B) of this section. 

(B) * * * 

(3) For calendar year 2012, a 

multifactor productivity adjustment (as 

determined by CMS) and 0.1 percentage 

point. 

* * * * * 

11. Section 419.43 is amended by 

adding paragraph (i) to read as follows: 

§ 419.43 Adjustments to national program 

payment and beneficiary copayment 

amounts. 

* * * * * 

(i) Payment adjustment for certain 

cancer hospitals.—(1) General rule. 

CMS provides for a payment adjustment 

for covered hospital outpatient 

department services furnished on or 

after January 1, 2012, by a hospital 

described in section 1886(d)(1)(B)(v) of 

the Act. 

(2) Amount of payment adjustment. 

The amount of the payment adjustment 

under paragraph (i)(1) of this section is 

determined by the Secretary as follows: 

(i) If a hospital described in section 

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

payment-to-cost ratio (as determined by 

the Secretary) that is less than the 

weighted average payment-to-cost ratio 

of other hospitals furnishing services 

under section 1833(t) of the Act (as 

determined by the Secretary) (referred to 

as the target payment-to-cost ratio), for 

covered hospital outpatient department 

services except pass-through devices as 

defined in § 419.66, the payment 

adjustment is the percentage difference 

between the payment-to-cost ratio of the 

hospital and the target payment-to-cost 

ratio. 

(ii) If a hospital described in section 

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

payment-to-cost ratio (as determined by 

the Secretary) that is less than the 

weighted average payment-to-cost ratio 

of other hospitals furnishing services 

under section 1866(t) of the Act (as 

determined by the Secretary) (referred to 

as the target payment-to-cost ratio), for 

pass-through devices as defined in 

§ 419.66, the payment adjustment is 

zero percent. 

(iii) If a hospital described in section 

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

payment-to-cost ratio (as determined by 

the Secretary) that is greater than the 

target payment-to-cost ratio (as 

determined by the Secretary), for 

covered hospital outpatient department 

services, the payment adjustment is zero 

percent. 

(3) Budget neutrality. CMS establishes 

the payment adjustment under 

paragraph (i)(1) of this section in a 

budget neutral manner. 

12. Section 419.70 is amended by 

revising paragraphs (d)(2) introductory 

text and (d)(6) to read as follows: 

§ 419.70 Transitional adjustments to limit 

decline in payments. 

* * * * * 

(d) * * * 

(2) Temporary treatment for small 

rural hospitals on or after January 1, 

2006. For covered hospital outpatient 

services furnished in a calendar year 

from January 1, 2006, through December 

31, 2011, for which the prospective 

payment system amount is less than the 

pre-BBA amount, the amount of 

payment under this part is increased by 

95 percent of that difference for services 

furnished during CY 2006, 90 percent of 

that difference for services furnished 

during CY 2007, and 85 percent of that 

difference for services furnished during 

CYs 2008, 2009, 2010, and 2011 if the 

hospital— 

* * * * * 

(6) Temporary treatment for sole 

community hospitals on or after January 

1, 2010, and through December 31, 

2011. For covered hospital outpatient 

services furnished on or after January 1, 

2010, through December 31, 2011, for 

which the prospective payment system 

amount is less than the pre-BBA 

amount, the amount of payment under 

this part is increased by 85 percent of 

that difference if the hospital is a sole 

community hospital as defined in 

§ 412.92 of this chapter or is an essential 

access community hospital as described 

under § 412.109 of this chapter. 

* * * * * 

PART 489—PROVIDER AGREEMENTS 

AND SUPPLIER APPROVAL 

13. The authority citation for Part 489 

continues to read as follows: 

Authority: Secs. 1102, 1819, 1820(e), 1861, 

1864(m), 1866, 1869, and 1871 of the Social 

Security Act (42 U.S.C. 1302, 1395i–3, 1395x, 

1395aa(m), 1395cc, 1395ff, and 1395hh). 

14. Section 489.20 is amended by 

revising paragraph (w) to read as 

follows: 

§ 489.20 Basic commitments. 

* * * * * 

(w)(1) In the case of a hospital as 

defined in § 489.24(b), to furnish written 

notice to all patients at the beginning of 

their planned or unplanned inpatient 

hospital stay or at the beginning of any 

planned or unplanned outpatient visit 

for observation, surgery or any other 

procedure requiring anesthesia, if a 

doctor of medicine or a doctor of 

osteopathy is not present in the hospital 

24 hours per day, 7 days per week, in 

order to assist the patients in making 

informed decisions regarding their care, 

in accordance with § 482.13(b)(2) of this 

subchapter. For purposes of this 

paragraph, a planned hospital stay or 

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outpatient visit begins with the 

provision of a package of information 

regarding scheduled preadmission 

testing and registration for a planned 

hospital admission for inpatient care or 

outpatient service. An unplanned 

hospital stay or outpatient visit begins at 

the earliest point at which the patient 

presents to the hospital. 

(2) In the case of a hospital that is a 

main provider and has one or more 

remote locations of a hospital or one or 

more satellites, as these terms are 

defined in § 413.65(a)(2), § 412.22(h), or 

§ 412.25(e) of this chapter, as applicable, 

the determination is made separately for 

the main provider and each remote 

location or satellite whether notice to 

patients is required. Notice is required 

at each location at which inpatient 

services are furnished at which a doctor 

of medicine or doctor of osteopathy is 

not present 24 hours per day, 7 days per 

week. 

(3) The written notice must state that 

the hospital does not have a doctor of 

medicine or a doctor of osteopathy 

present in the hospital 24 hours per day, 

7 days per week, and must indicate how 

the hospital will meet the medical needs 

of any patient who develops an 

emergency medical condition, as 

defined in § 489.24(b), at a time when 

there is no doctor of medicine or doctor 

of osteopathy present in the hospital. 

(4) Before admitting a patient or 

providing an outpatient service to 

outpatients for whom a notice is 

required, the hospital must receive a 

signed acknowledgment from the 

patient stating that the patient 

understands that a doctor of medicine or 

doctor of osteopathy may not be present 

during all hours services are furnished 

to the patient. 

(5) Each dedicated emergency 

department, as that term is defined in 

§ 489.24(b), in a hospital in which a 

doctor of medicine or doctor of 

osteopathy is not present 24 hours per 

day, 7 days per week must post a notice 

conspicuously in a place or places likely 

to be noticed by all individuals entering 

the dedicated emergency department. 

The posted notice must state that the 

hospital does not have a doctor of 

medicine or a doctor of osteopathy 

present in the hospital 24 hours per day, 

7 days per week, and must indicate how 

the hospital will meet the medical needs 

of any patient with an emergency 

medical condition, as defined in 

§ 489.24(b), at a time when there is no 

doctor of medicine or doctor of 

osteopathy present in the hospital. 

PART 495—STANDARDS FOR THE 

ELECTRONIC HEALTH RECORD 

TECHNOLOGY INCENTIVE PROGRAM 

15. The authority citation for Part 495 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

16. Section 495.8 is amended by 

revising paragraph (b)(2)(ii) and adding 

paragraph (b)(2)(vi) to read as follows: 

§ 495.8 Demonstration of meaningful use 

criteria. 

* * * * * 

(b) * * * 

(2) * * * 

(ii) Reporting clinical quality 

information. For § 495.6(f)(9) ‘‘Reporting 

hospital clinical quality measures to 

CMS or, in the case of Medicaid eligible 

hospitals, the States,’’ report the 

hospital quality measures selected by 

CMS to CMS (or in the case of Medicaid 

eligible hospitals, the States) in the form 

and manner specified by CMS (or in the 

case of Medicaid eligible hospitals, the 

States). 

* * * * * 

(vi) Exception for Medicare eligible 

hospitals and CAHs for FY 2012— 

Participation in the Medicare EHR 

Incentive Program Electronic Reporting 

Pilot. In order to satisfy the clinical 

quality measure reporting objective in 

§ 495.6(f)(9), aside from attestation, a 

Medicare eligible hospital or CAH may 

participate in the Medicare EHR 

Incentive Program Electronic Reporting 

Pilot. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; Program No. 93.774, Medicare— 

Supplementary Medical Insurance Program; 

and Program No. 93.778 (Medical Assistance) 

Dated: June 24, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: June 28, 2011. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2011–16949 Filed 7–1–11; 4:15 pm] 

BILLING CODE 4120–01–P 

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