DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services 42 CFR Parts 411, 412, 416, 419, 422, 423, and 424 [CMS-1613-P]

RIN 0938-AS15 Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Syst ems and Quality Reporting Programs; Physician-Owned Hospitals: Data Sources for Expansion Exception; Physician Certification of Inpatient Hospital Serv ices; Medicare Advantage Organizations and Part D Sponsors: Appeals Process for Overpayments Associated with Submitted

Data

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

ACTION: Proposed rule.

SUMMARY: This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and th e Medicare ambulatory surgical center (ASC) payment system for CY 2015 to implement applicable statutory requirements and changes arising from our continuing experien ce with these systems. In this proposed rule, we describe the proposed changes to the amounts and factors us ed to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this pro posed rule would update and refine the requirements for the Hospital Outpatient Qu ality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program.CMS-1613-P 2 In this document, we also are proposi ng changes to the data sources used for expansion requests for physician owned hos pitals under the physician self-referral regulations; changes to the underlying aut hority for the requirement of an admission order for all hospital inpatient admissions a nd changes to require physician certification for hospital inpatient admissions only for long- stay cases and outlier cases; and changes to establish a three-level appeals process for Medicare Advantage (MA) organizations and Part D sponsors that would be applicable to CMS-identified overpayments associated with data submitted by these organizations and sponsors.

DATES : Comment Period: To be assured c onsideration, 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 [Insert 60 days from date of display at the Office of the Federal Register].

ADDRESSES: In commenting, please refer to file code CMS-1613-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 wr itten comments to the following address

ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services,CMS-1613-P 3 Attention: CMS-1613-P, P.O. Box 8013, Baltimore, MD 21244-1850.

Please allow sufficient time for mailed co mments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments via express or overnight mail to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1613-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, S.W., Washington, DC 20201.CMS-1613-P 4 (Because access to the interior of the H ubert H. Humphrey Building is not readily available to persons without Federal G overnment identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available fo r persons wishing to re tain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD—

Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, please call the telephone number (410) 786-7195 in advance to schedule your arrival with one of our

staff members.

Comments mailed to the addresses indicat ed as appropriate for hand or courier delivery may be delayed and rece ived after the comment period. For information on viewing public comments, we refer readers to the beginning of

the “ SUPPLEMENTARY INFORMATION ” section. FOR FURTHER INFORMATION, CONTACT: Marjorie Baldo, (410) 786-4617, for issu es related to new CPT and Level II HCPCS codes, revised process for soliciting comments related to new Category I and III CPT codes, and exceptions to the 2 times rule.CMS-1613-P 5 Anita Bhatia, (410) 786-7236, for issues related to the Ambulatory Surgical Center Quality Reporting (ASCQR) Pr ogram – Program Administration and Reconsideration Issues, and for issues re lated to the Hospital Outpatient Quality Reporting - Program Admini stration, Validation, and Reconsideration Issues. Chuck Braver, (410) 786-9379, for issues related to the CMS web posting of the OPPS & ASC payment files. Erick Chuang, (410) 786-1816, for issues related to OPPS APC weights, OPPS data claims, geometric mean calculation, copa yments, rural hospital payments, and wage

index. Dexter Dickey, (410) 78 6-6856, or Dorothy Myrick, (410) 786-9671, for issues related to partial hospitalization and commun ity mental health center (CMHC) issues. Eva Fung, (410) 786-7539, or Fiona Larb i, (410) 786-7224, or Felicia Diggs, (410) 786-1591, for issues rela ted to HOQR and ASCQR measur es issues and publication of HOQR program data issues. Julie Gover, (410) 786-0525, for issues related to Medicare Advantage (MA) organizations and Medicare Pa rt D sponsor overpayments. Twi Jackson, (410) 786-1159, for issues related to device-dependent APCs, extended assessment and management composite APCs, hospital outpatient visits, inpatient procedures list, and no cost/full credit and partial credit devices. Marina Kushnirova, (410) 786-2682, for i ssues related to OPPS status indicators

and comment indicators.CMS-1613-P 6 Barry Levi, (410) 786-4529, for issues related to OPPS pass-through devices, brachytherapy sources, brachytherapy composite APC, and multiple imaging composite

APCs. John McInnes, (410) 786-0791, for issues related to comprehensive APCs, provider-based issues, pack aged items/services, OPPS drugs/radiopharmaceuticals/biologicals paym ents, new technology intraocular lenses (NTIOLs), and ambulatory surgi cal center (ASC) payments. David Rice, (410) 786-6004, for issues related to blood and blood products, cancer hospital payments, conversion factor, cost-to-charge ratios (CCRs), and outlier payments. Daniel Schroder, (410) 786-7452, for issues related to physiciancertification of hospital inpatient services. Carol Schwartz, (410) 786-0576, for issu es related to the Advisory Panel on Hospital Outpatient Payment (HOP Panel). Teresa Walden, (410) 786-3755, or Patr icia Taft, (410) 786-4561, for issues related to the physician self -referral law/physician-owned hospital expansion exception

process. Marjorie Baldo, (410) 786-4617, for all othe r issues related to hospital outpatient and ambulatory surgical center paym ents not previously identified.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comm ents received before the close of the comment period are available for viewi ng by the public, including any personallyCMS-1613-P 7

identifiable or confidential business informa tion 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 th ey have been received: http://www.regulations.gov. Follow

the search instructions on that We b site to view public comments. Comments received timely will also be available for public inspection, generally beginning approximately 3 weeks after publicati on of the rule, at the headquarters of the

Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To schedule an appoint ment to view public comments, phone

1-800-743-3951.

Electronic Access

This Federal Register document is also available from the Federal Register online database through Federal Digital Sy stem (FDsys), a service of the U.S. Government Printing Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/

. Addenda Available Only Through th e Internet on the CMS Web Site In the past, a majority of the Addenda referred to in our OPPS/ASC proposed and final rules were published in the Federal Register as part of the annual rulemakings. However, beginning with the CY 2012 OPPS/AS C proposed rule, all of the Addenda no longer appear in the Federal Register as part of the annua l OPPS/ASC proposed and

final rules to decrease admi nistrative burden and reduce cost s associated with publishing lengthy tables. Instead, these Addenda are published and available only on the CMSCMS-1613-P 8 Web site. The Addenda relating to the OPPS are available at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The Addenda relating to the ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/index.html

. Alphabetical List of Acronyms Appearin g in This Federal Register Document AHA American Hospital Association

AMA American Medical Association APC Ambulatory Payment Classification ASC Ambulatory surgical center ASCQR Ambulatory Surgical Center Quality Reporting ASP Average sales price AWP Average wholesale price BBA Balanced Budget Act of 1997, Pub. L. 105-33 BBRA Medicare, Medicaid, and SCHIP [S tate Children's Health Insurance Program] Balanced Budget Refi nement Act of 1999, Pub. L. 106-113 BIPA Medicare, Medicai d, and SCHIP Benefits Improvement and Protection Act of 2000, Pub. L. 106-554

BLS Bureau of Labor Statistics CAH Critical access hospital CAP Competitive Acquisition Program C-APC Comprehensive Ambulatory Payment ClassificationCMS-1613-P 9 CASPER Certification and Survey Provider Enhanced Reporting

CAUTI Catheter-associated urinary tract infection

CBSA Core-Based Statistical Area CCI Correct Coding Initiative

CCN CMS Certification Number CCR Cost-to-charge ratio

CDC Centers for Disease Control and Prevention

CEO Chief executive officer CERT Comprehensive Error Rate Testing CFR Code of Federal Regulations CLFS Clinical Laboratory Fee Schedule CMHC Community mental health center

CMS Centers for Medicare & Medicaid Services

CPI-U Consumer Price Inde x for All Urban Consumers CPT Current Procedural Terminology (c opyrighted by the American Medical Association) CQM Clinical quality measure CR Change request CSAC Consensus Standards Approval Committee CY Calendar year DFO Designated Federal Official DRA Deficit Reduction Act of 2005, Pub. L. 109-171CMS-1613-P 10 DRG Diagnosis-Related Group DSH Disproportionate share hospital EACH Essential access community hospital eCQM Electronically specified clinical quality measure ECT Electroconvulsive therapy ED Emergency department E/M Evaluation and management

EHR Electronic health record ESRD End-stage renal disease FACA Federal Advisory Committee Act, Pub. L. 92-463 FDA Food and Drug Administration FFS [Medicare] Fee-for-service FY Fiscal year FFY Federal fiscal year GAO Government Accountability Office

HAI Healthcare-associated infection

HCERA Health Care and Education R econciliation Act of 2010, Pub. L. 111-152

HCPCS Healthcare Common Procedure Coding System HCRIS Healthcare Cost Report Information System HEU Highly enriched uranium

HIPAA Health Insurance Portabi lity and Accountability Act of 1996,

Pub. L. 104-191CMS-1613-P 11 HITECH Health Information Technology for Economic and Clinical Health [Act] (found in the American Recovery an d Reinvestment Act of 2009, Pub. L. 111-5) HOP Hospital Outpatient Payment [Panel] HOPD Hospital outpatient department

ICD-9-CM International Classification of Diseases, Ninth Revision, Clinical

Modification ICD Implantable cardioverter defibrillator

ICU Intensive care unit

IHS Indian Health Service IMRT Intensity Modulated Radiation Therapy I/OCE Integrated Outpatient Code Editor

IOL Intraocular lens

IOM Institute of Medicine IORT Intraoperative radiation treatment IPPS [Hospital] Inpatient Prospective Payment System IQR [Hospital] Inpatient Quality Reporting

LDR Low dose rate LOS Length of stay LTCH Long-term care hospital

MAC Medicare Administrative Contractor MAP Measure Application PartnershipCMS-1613-P 12 MedPAC Medicare Payment Advisory Commission

MEI Medicare Economic Index MFP Multifactor productivity MGCRB Medicare Geographic Cl assification Review Board MIEA-TRHCA Medicare Improvements and Extension Act under Division B, Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432 MIPPA Medicare Improvements for Patients and Providers Act of 2008,

Pub. L. 110-275 MMA Medicare Prescription Drug, Impr ovement, and Modernization Act of 2003, Pub. L. 108-173

MMEA Medicare and Medicaid Ex tenders Act of 2010, Pub. L. 111-309 MMSEA Medicare, Medicaid, and SCHI P Extension Act of 2007, Pub. L. 110-173 MPFS Medicare Phys ician Fee Schedule MRA Magnetic resonance angiography MRI Magnetic resonance imaging MSA Metropolitan Statistical Area NCCI National Correct Coding Initiative NHSN National Healthcare Safety Network NQF National Quality Forum NTIOL New technology intraocular lens NUBC National Uniform Billing Committee OACT [CMS] Office of the ActuaryCMS-1613-P 13 OBRA Omnibus Budget Reconcili ation Act of 1996, Pub. L. 99-509 OIG [HHS] Office of the Inspector General OMB Office of Management and Budget OPD [Hospital] Outpatient Department OPO Organ Procurement Organization OPPS [Hospital] Outpatient Prospective Payment System OPSF Outpatient Provider-Specific File OQR [Hospital] Outpatient Quality Reporting OT Occupational therapy PBD Provider-Based Department PCR Payment-to-cost ratio PE Practice expense PEPPER Program for Evaluating Paym ent Patterns Electronic Report PHP Partial hospitalization program PHS Public Health Service [Act], Pub. L. 96-88

PPI Producer Price Index PPS Prospective payment system PQRS Physician Quality Reporting System PT Physical therapy QDC Quality data code QIO Quality Improvement Organization RFA Regulatory Flexibility ActCMS-1613-P 14 RTI Research Triangle In stitute, International

RVU Relative value unit SCH Sole community hospital SCOD Specified covered outpatient drugs

SI Status indicator

SIR Standardized infection ratio SLP Speech-language pathology SNF Skilled nursing facility SRS Stereotactic radiosurgery TEP Technical Expert Panel TMS Transcranial Magnetic Stimulation Therapy TOPs Transitional Outpatient Payments

UR Utilization review

USPSTF United States Preventive Services Task Force UTI Urinary tract infection VBP Value-based purchasing WAC Wholesale acquisition cost

Table of Contents I. Summary and Background A. Executive Summary of This Document 1. Purpose 2. Summary of the Major ProvisionsCMS-1613-P 15 3. Summary of Costs and Benefits B. Legislative and Regulator y Authority for the Hospital OPPS C. Excluded OPPS Services and Hospitals D. Prior Rulemaking E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel), Formerly Named the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) 1. Authority of the Panel

2. Establishment of the Panel 3. Panel Meetings and Organizational Structure

F. Public Comments Received in Response to the CY 2014 OPPS/ASC Final

Rule with Comment Period II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction a. Database Source and Methodology b. Proposed Use of Single and Multiple Procedure Claims c. Proposed Calculation and Us e of Cost-to-Charge Ratios (CCRs) 2. Proposed Data Development Proce ss and Calculation of Costs Used for Ratesetting a. Claims Preparation b. Splitting Claims and Creation of “Pseudo” Single Procedure ClaimsCMS-1613-P 16 (1) Splitting Claims (2) Creation of “Pseudo” Single Procedure Claims c. Completion of Claim Records an d Geometric Mean Cost Calculations (1) General Process (2) Recommendations of the Pa nel Regarding Data Development d. Proposed Calculation of Single Procedure APC Criteria-Based Costs (1) Device-Dependent APCs (2) Blood and Blood Products (3) Brachytherapy Source Payment e. Establishment of Comprehensive APCs (1) Background (2) Public Comments (3) Proposed CY 2015 Policy for Comprehensive APCs (4) Summary of Proposed CY 2015 Policies for Comprehensive APCs f. Proposed Calculation of Co mposite APC Criteria-Based Costs (1) Extended Assessment and Manage ment Composite APCs (APCs 8002 and 8003) (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001) (3) Mental Health Services Composite APC (APC 0034) (4) Multiple Imaging Compos ite APCs (APCs 8004, 8005, 8006, 8007, and 8008) 3. Proposed Changes to Packaged Items and ServicesCMS-1613-P 17 a. Background and Rationale for Packaging in the OPPS b. Proposed Revision of a Packaging Po licy Established in CY 2014—Procedures Described by Add-On Codes c. Proposed Packaging Policies for CY 2015 (1) Ancillary Services (2) Prosthetic Supplies 4. Proposed Calculation of OPPS Scaled Payment Weights B. Proposed Conversion Factor Update C. Proposed Wage Index Changes D. Proposed Statewide Average Default CCRs E. Proposed Adjustment for Rural SCHs and EACHs under Section 1833(t)(13)(B) of the Act F. Proposed OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B)(v) of the Act 1. Background 2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2015 G. Proposed Hospital Outpatient Outlier Payments 1. Background 2. Proposed Outlier Calculation H. Proposed Calculation of an Adju sted Medicare Payment from the National Unadjusted Medicare Payment I. Proposed Beneficiary CopaymentsCMS-1613-P 18 1. Background 2. Proposed OPPS Copayment Policy 3. Proposed Calculation of an Adju sted Copayment Amount for an APC Group III. Proposed OPPS Ambulatory Paymen t Classification (APC) Group Policies A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes 1. Proposed Treatment of New CY 2014 Level II HCPCS and CPT Codes Effective April 1, 2014 and July 1, 2014 for Which We Are Soliciting Public Comments in this CY 2015 OPPS/ASC Proposed Rule 2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2014 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2015 for Which We Will Solicit P ublic Comments in the CY 2015 OPPS/ASC

Final Rule with Comment Period 3. Proposed Process for Soliciting Public Comments for New and Revised CPT Codes That Would Be Released by AMA Before the January 1 Effective Date a. Current Process for Accepting Comments on New and Revised CPT Codes That Are Effective January 1 b. Proposal to Modify the Current Process for Accepting Comments on New and Revised CPT Codes That Are Effective January 1 B. Proposed OPPS Changes--Variations within APCs 1. Background 2. Application of the 2 Times Rule 3. Proposed Exceptions to the 2 Times Rule C. Proposed OPPS APC-Specific PoliciesCMS-1613-P 19 1. Ophthalmic Procedures and Services 2. Female Reproductive Procedures (A PCs 0188, 0189, 0192, 0193, and 0202) 3. Image-Guided Breast Biopsy Procedures (APC 0005) 4. Image-Guided Abscess Drainage Procedures (APCs 0005 and 0007)

5. Cystourethroscopy and Other Genitourinary Procedures (APCs 0160, 0161, 0162, and 0163) 6. Wound Treatments and Se rvices (APCs 0015 and 0327) a. Epidermal Autograft (APC 0327) b. Negative Pressure Wound Therapy (NPWT) (APC 0015) 7. Endoscopic Retrograde Cholangiopa ncreatography (ERCP) with Stent (APC 0384) 8. Radiation Therapy (APCs 0066, 0067, 0412, 0446, 0648, and 0667) 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 2015 Policy 2. Provisions for Reducing Transitional Pass-Through Payments to Offset Costs Packaged into APC Groups a. Background b. Proposed CY 2015 Policy B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit and Partial

Credit DevicesCMS-1613-P 20 1. Background 2. Proposed Policy for CY 2015 V. Proposed OPPS Payment Changes for Dr ugs, Biologicals, and Radiopharmaceuticals A. Proposed OPPS Transitional Pass-T hrough Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals 1. Background 2. Proposed Drugs and Biologicals w ith Expiring Pass-Through Status in

CY 2014 3. Proposed Drugs, Biologicals, a nd Radiopharmaceuticals with New or Continuing Pass-Through Status in CY 2015 4. Proposed Provisions for Reducing Transitional Pass-Through Payments for Diagnostic Radiopharmaceuticals; Contra st Agents; Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplie s When Used in a Diagnostic Test or Procedure; and Drugs and Biologicals That Function as Supplies When Used in a Surgical Procedure to Offset Costs Packaged into APC Groups a. Background b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals c. Proposed Payment Offset Policy for Contrast Agents d. Proposed Payment Offset Policy for Products Packaged According to the Policy to Package Drugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test orProcedure and Drugs and Biologicals That Function as Supplies When Used in a Surgical ProcedureCMS-1613-P 21 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 Packag ing of Payment for HCPCS Codes That Describe Certain Drugs, Ce rtain Biologicals, and Ther apeutic Radiopharmaceuticals (“Threshold-Packaged Drugs”) c. Proposed High/Low Cost Threshold for Packaged Skin Substitutes d. Proposed Pass-Through Evaluation Process for Skin Substitutes e. Proposed Packaging Determination fo r HCPCS Codes That Describe the Same Drug or Biological But Different Dosages 3. Proposed Payment for Drugs and Bi ologicals without Pass-Through Status That Are Not Packaged a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and Other Separately Payable and P ackaged Drugs and Biologicals b. Proposed CY 2015 Payment Policy 4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals 5. Proposed Payment for Blood Clotting Factors 6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital Claims DataCMS-1613-P 22 VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceu ticals, and Devices A. Background B. Proposed Estimate of Pass-Through Spending VII. Proposed OPPS Payment fo r Hospital Outpatient Visits A. Background B. Proposed Payment for Hospital Outpa tient Clinic and Emergency Department

Visits C. Proposed Payment for Critical Care Services VIII. Proposed Payment for Partial Hospitalization Services A. Background B. Proposed PHP APC Update for CY 2015 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 Nonrecurring Policy Changes: Collecting Data on Services Furnished in Off-Campus Provider-Based Departments XI. Proposed CY 2015 OPPS Payment Status and Comment Indicators A. Proposed CY 2015 OPPS Paymen t Status Indicator Definitions B. Proposed CY 2015 Comm ent Indicator Definitions XII. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment SystemCMS-1613-P 23 A. Background 1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment System 2. Policies Governing Changes to the Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services B. 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 Leve l II HCPCS Codes and Category III CPT Codes Implemented in April 2014 and July 2014 for Which We Are Soliciting Public Comments in This Proposed Rule 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 2015 OPPS/ASC Final Rule with Comment Period C. Proposed Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Proposed Additions to the List of ASC Covered Surgical Procedures b. Proposed Covered Surgical Proc edures Designated as Office-Based (1) Background (2) Proposed Changes for CY 2015 to C overed Surgical Procedures Designated

as Office-BasedCMS-1613-P 24 c. Proposed ASC Covered Surgical Pr ocedures Designated as Device-Intensive (1) Background (2) Proposed Changes to List of Covere d ASC Surgical Procedures Designated as

Device-Intensive for CY 2015 d. Proposed Adjustment to ASC Paymen ts for No Cost/Full Credit and Partial

Credit Devices e. ASC Treatment of Surgical Proce dures Proposed for Removal from the OPPS Inpatient List for CY 2015 2. Covered Ancillary Services D. Proposed ASC Payment for Covered Surgical Procedures and Covered Ancillary Services 1. Proposed ASC Payment for Covered Surgical Procedures a. Background b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for

CY 2015

c. Waiver of Coinsurance and Deductible for Certain Preventive Services d. Proposed Payment for Cardiac Resynchronization Therapy Services e. Proposed Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite 2. Proposed Payment for Covered Ancillary Services a. Background b. Proposed Payment for Covered Ancillary Services for CY 2015CMS-1613-P 25 E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Application Cycle 2. Requests to Establish New NTIOL Classes for CY 2015 3. Payment Adjustment F. Proposed ASC Payment and Comment Indicators 1. Background 2. Proposed ASC Payment and Comment Indicators G. Calculation of the Proposed ASC Conversion Factor and the Proposed ASC Payment Rates 1. Background 2. Proposed Calculation of the ASC Payment Rates a. Updating the ASC Relative Paymen t Weights for CY 2015 and Future Years b. Updating the ASC Conversion Factor 3. Display of Proposed CY 2015 ASC Payment Rates XIII. Hospital Outpatient Quality Reporting Program Updates A. Background

1. Overview 2. Statutory History of the Hospital OQR Program 3. Measure Updates and Data Publication a. Maintenance of Technical Specifications for Quality Measures b. Public Display of Quality MeasuresCMS-1613-P 26 B. Process for Retention of Hosp ital OQR Program Measures Adopted in Previous Payment Determinations C. Removal of Quality Measures fr om the Hospital OQR Program Measure Set 1. Considerations in Removing Quality Measures from the Hospital OQR Program 2. Proposed Criteria for Rem oval of “Topped-Out” Measures 3. Proposed Removal of Measures from the Hospital OQR Program for the CY 2017 Payment Determination and Subsequent Years D. Quality Measures Previously Adopted for the CY 2016 Payment Determination and Subsequent Years 1. Data Submission Requirements for OP -27: Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) Reported via NHSN for the CY 2017 Payment Determination and Subsequent Years

a. Clarification of Submission Deadline and Data Submitted b. Clarification on Reporting by CMS Certification Number (CCN) 2. Delayed Data Collection for OP-29 and OP-30 3. OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery a. Correction of Respon se to Public Comments b. Delayed Data Collection for OP-31 and Proposed Exclusion from the CY 2016 Payment Determination Measure SetCMS-1613-P 27 c. Proposed Voluntary Collection of Data for OP-31 for the CY 2017 Payment Determination and Subsequent Years E. Proposed New Quality Measure for the CY 2017 Payment Determination and Subsequent Years F. Possible Hospital OQR Program Measures and Topics for Future

Consideration 1. Electronic Clinical Quality Measures 2. Partial Hospitaliza tion Program Measures

3. Behavioral Health Measures 4. National Quality Strategy and CMS Quality Strategy Measure Domains G. Proposed Payment Reduction for Hosp itals That Fail to Meet the Hospital Outpatient Quality Reporting (OQR) Progr am Requirements for the CY 2015 Payment Update 1. Background 2. Proposed Reporting Ratio Application and Associated Adjustment Policy for

CY 2015 H. Proposed Requirements for Reporti ng Hospital OQR Program Data for the CY 2017 Payment Determination and Subsequent Years 1. Administrative Requirements for the CY 2017 Payment Determination and Subsequent Years 2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program

a. General Pro cedural RequirementsCMS-1613-P 28 b. Requirements for Chart-Abstracted Measures Where Data is Submitted Directly to CMS for the CY 2017 Paymen t Determination and Subsequent Years c. Claims-Based Measure Data Requirements for the CY 2017 Payment Determination and Subsequent Years d. Data Submission Requirements for Measure Data Submitted via the CMS Web-Based Tool for the CY 2017 Payment Determination and Subsequent Years e. Population and Sampling Data Requirements for the CY 2017 Payment Determination and Subsequent Years f. Proposed Review and Corrections Period for Chart-Abstracted Measures 3. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent Years a. Background b. Proposed Selection of Hospitals fo r Data Validation of Chart-Abstracted Measures for the CY 2017 Payment Determination and Subsequent Years c. Targeting Criteria for Data Valid ation Selection for the CY 2017 Payment Determination and Subsequent Years d. Methodology for Encounter Selecti on for the CY 2017 Payment Determination and Subsequent Years e. Proposed Medical Record Docume ntation Requests for Validation and

Validation Score Calculation for the CY 2017 Payment Determination and Subsequent

YearsCMS-1613-P 29 I. Hospital OQR Program Reconsider ation and Appeals Procedures for the CY 2017 Payment Determination and Subsequent Years J. Extension or Exception Process for the CY 2017 Payment Determination and Subsequent Years XIV. Requirements for the Ambulatory Su rgical Center Quality Reporting (ASCQR) Program A. Background

1. Overview 2. Statutory History of the Ambulat ory Surgical Center Quality Reporting (ASCQR) Program 3. Regulatory History of the ASCQR Program B. ASCQR Program Quality Measures

1. Considerations in the Selecti on of ASCQR Program Quality Measures 2. Proposed Policy for Removal of Qua lity Measures from the ASCQR Program 3. Proposed Criteria for Rem oval of “Topped-Out” Measures 4. ASCQR Program Qual ity Measures Adopted in Previous Rulemaking 5. Proposed New ASCQR Program Quality Measure for the CY 2017 Payment Determination and Subsequent Years 6. ASCQR Program Measures for Future Consideration a. ASCQR Program Measure Domains b. Accelerating Health Information Exchange 7. Maintenance of Technical Specifications for Quality MeasuresCMS-1613-P 30 8. Public Reporting of ASCQR Program Data C. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements 1. Statutory Background 2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR Program Requirements for a Payment Determination Year D. Administrative Requirements 1. Requirements Regarding QualityNet Account and Security Administrator 2. Requirements Regarding Participation Status E. Form, Manner, and Timing of Data Submitted for the ASCQR Program 1. Requirements Regarding Data Proce ssing and Collection Periods for ClaimsBased Measures Using Quality Data Codes (QDCs) 2. Minimum Threshold, Minimum Case Volume, and Data Completeness for

Claims

‐ Based Measures Using QDCs

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

a. Data Collection for ASC-6 and ASC-7 b. Delayed Data Collection for ASC-9 and ASC-10 c. Delayed Data Collection and Prop osed Exclusion for ASC-11 for the CY 2016 Payment Determination and Proposed Vol untary Data Collection for ASC-11 for CY 2017 and Subsequent Payment Determination Years 4. Claims-Based Measure Data Requirements for the Proposed New Measure for the CY 2017 Payment Determination and Subsequent YearsCMS-1613-P 31 5. Data Submission Requirements for ASC-8 (Influenza Vaccination Coverage Among Healthcare Personnel) Reported via the National Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination and Subsequent Years a. Previously Adopted Requirements for the CY 2016 Payment Determination b. Proposed Data Collection Timeframes for the CY 2017 Payment Determination and Subsequent Years a nd Proposed Submission Deadlines for the CY 2016 Payment Determination and Subsequent Years 6. ASCQR Program Validation of Clai ms-Based and CMS Web-Based Measures 7. Extraordinary Circumstances Exte nsions or Exemptions for the CY 2017 Payment Determination and Subsequent Years 8. ASCQR Program Reconsideration Procedures for the CY 2017 Payment Determination and Subsequent Years XV. Proposed Changes to the Rural Pr ovider and Hospital Ownership Exceptions to the Physician Self-Referral La w: Expansion Exception Process A. Background 1. Statutory Basis

2. Affordable Care Act Amendments to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law B. Limitations Identified by Stakeholde rs Regarding the Required Use of HCRIS

Data 1. Medicaid Managed Care Data 2. Hospitals That Lack Filed Cost Reports for the Relevant Fiscal YearsCMS-1613-P 32 C. Proposed Changes to Permit Supplemental Data Sources in the Expansion Exception Process

D. Additional Considerations XVI. Proposed Revision of the Require ments for Physician Certification of Hospital Inpatient Services Other Than Psychiatric Inpatient Services XVII. CMS-Identified Overpayments Associated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors (Proposed §§ 422.330 and 423.352) A. Background 1. Medicare Part C Background 2. Medicare Part D Background B. Provisions of our Proposals 1. Proposed Definitions of “PaymentData” and “Applicable Reconciliation

Date” 2. Request for Corrections of Payment Data 3. Proposed Payment Offset

a. Offset Amount b. Payment Offset Notification 4. Proposed Appeals Process for MA Organizations and Part D Sponsors

a. Reconsideration b. Informal Hearing c. Review by AdministratorCMS-1613-P 33 5. Matters Subject to Appeal and Burden of Proof 6. Effective Date of Propos ed Appeals Process Provisions

XVIII. Files Available to the Public Via the Internet XIX. Collection of Information Requirements A. Legislative Requirement s for Solicitation of Comments B. Requirements in Regulation Text: Proposed Changes to the Rural Provider and Hospital Ownership Exceptions to the P hysician Self-Referra l Law: Expansion Exception Process (§ 411.362)

C. Associated Information Collectio ns Not Specified in Regulatory Text 1. Hospital OQR Program

a. Revisions to the CY 2016 Payment Determination Estimates b. Hospital OQR Program Requirements for the CY 2017 Payment Determination and Subsequent Years

c. Review and Corrections Peri od Requirements for the CY 2017 Payment Determination and Subsequent Years d. Hospital OQR Program Validation Requirements for the CY 2017 Payment Determination and Subsequent Years e. Extraordinary Circumstances Extensions or Exemptions Process f. Reconsideration and Appeals 2. ASCQR Program RequirementsCMS-1613-P 34 a. Background

b. Revisions to the CY 2016 Pa yment Determination Estimates c. Claims-Based Measures for the CY 2014 Payment Determination and Subsequent Years d. Web-Based Measures for the CY 2017 Payment Determination and Subsequent Years e. Extraordinary Circumstances Extension or Exemptions Process f. Reconsiderations and Appeals XX. Response to Comments XXI. Economic Analyses A. Regulatory Impact Analysis

1. Introduction

2. Statement of Need 3. Overall Impacts for the Propos ed OPPS and ASC Payment Provisions 4. Detailed Economic Analyses a. Estimated Effects of Proposed OPPS Changes in this Proposed Rule (1) Limitations of Our Analysis (2) Estimated Effects of Proposed OPPS Changes on Hospitals (3) Estimated Effects of Proposed OPPS Changes on CMHCs (4) Estimated Effect of Propos ed OPPS Changes on Beneficiaries (5) Estimated Effects of Proposed OPPS Changes on Other ProvidersCMS-1613-P 35 (6) Estimated Effects of Proposed O PPS Changes on the Medicare and Medicaid Programs (7) Alternative O PPS Policies Considered

b. Estimated Effects of CY 2015 AS C Payment System Proposed Policies (1) Limitations of Our Analysis (2) Estimated Effects of CY 2015ASC Payment System Proposed Policies on

ASCs (3) Estimated Effects of ASC Payment System Proposed Policies on

Beneficiaries (4) Alternative ASC Payment Policies Considered c. Accounting Statements and Tables d. Effects of Proposed Requireme nts for the Hospital OQR Program e. Effects of CY 2014 Proposed Policies for the ASCQR Program f. Effects of Proposed Changes to th e Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law g. Effects of Proposed Policies Rela ted to CMS-Identified Overpayments Associated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors B. Regulatory Flexibility Act (RFA) Analysis C. Unfunded Mandates Reform Act Analysis

D. Conclusion XXII. Federalism AnalysisCMS-1613-P 36 Regulation Text I. Summary and Background A. Executive Summary of This Document 1. Purpose In this proposed rule, we are propos ing to update the payment policies and payment rates for services furnished to Me dicare beneficiaries in hospital outpatient departments and Ambulatory Surgical Ce nters (ASCs) beginning January 1, 2015. Section 1833(t) of the Social Security Act (the Act) requires us to annually review and update the relative payment weights and the conversion factor for services payable under the Outpatient Prospective Payment System (OPPS). Under secti on 1833(i) of the Act, we annually review and update the ASC paymen t rates. We describe these and various other statutory authorities in th e relevant sections of this pr oposed rule. In addition, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. In this document, we also are proposi ng changes to the data sources used for expansion requests for physician owned hos pitals under the physician self-referral regulations; changes to the underlying aut hority for the requirement of an admission order for all hospital inpatient admissions a nd changes to require physician certification for hospital inpatient admissions only for long- stay cases and outlier cases; and changes to establish a three-level appeals process for Medicare Advantage (MA) organizations and Part D sponsors that would be applicable to CMS-identified overpayments associated with data submitted by these organizations and sponsors.CMS-1613-P 37 2. Summary of the Major Provisions

● OPPS Update: For CY 2015, we are proposing to increase the payment rates under the OPPS by an Outpatient Department (OPD) fee schedule increase factor of 2.1 percent. This proposed increase is based on the proposed hospital inpatient market basket percentage increase of 2.7 percent for inpatien t services paid under the hospital inpatient prospective payment system (IPPS), minus the proposed multifactor productivity (MFP) adjustment of 0.4 percentage points, and minus a 0.2 percentage point adjustment required by the Affordable Care Act. U nder this proposed rule, we estimate that proposed total payments for CY 2015, incl uding beneficiary cost-sharing, to the approximate 4,000 facilities paid under the O PPS (including general acu te care hospitals, children’s hospitals, cancer hos pitals, and community mental health centers (CMHCs)), will be approximately $56.5 billion, an incr ease of approximately $5.2 billion compared to CY 2014 payments, or $800 million excluding our estimated changes in enrollment, utilization, and case-mix. We are proposing to continue to impl ement the statutory 2.0 percentage point reduction in payments for hospitals failing to meet the hospital outpatient quality reporting requirements, by applying a reporti ng factor of 0.980 to the OPPS payments and copayments for all applicable services.

● Rural Adjustment: We are proposing to continue the adjustment of 7.1 percent to the OPPS payments to certain rural so le community hospitals (SCHs), including essential access community hospitals (EACHs). This adjustment will apply to all servicesCMS-1613-P 38 paid under the OPPS, excluding separately pa yable drugs and biologicals, devices paid under the pass-through payment policy, and item s paid at charges reduced to cost.

● Cancer Hospital Payment Adjustment: For CY 2015, we are proposing to continue to provide additional payments to cancer hospitals so that the cancer hospital’s payment to-cost ratio (PCR) after the additi onal payments is equal to the weighted average PCR for the other OPPS hospitals usi ng the most recently submitted or settled cost report data. Based on those data, a ta rget PCR of 0.89 will be used to determine the proposed CY 2015 cancer hospital payment adju stment to be paid at cost report settlement. That is, the proposed payment adjustments will be the additional payments needed to result in a PCR equal to 0.89 for each cancer hospital.

● Payment of Drugs, Biologicals , and Radiopharmaceuticals: For CY 2015, proposed payment for the acquisition and pharm acy overhead costs of separately payable drugs and biologicals that do not have pass-th rough status would be set at the statutory default of average sales price (ASP) plus 6 percent.

● Packaging Policies: We are proposing to conditionally package certain ancillary services when they are integral, ancillary, supportive, depe ndent, or adjunctive to a primary service. The in itial set of services proposed to be packaged under this ancillary service policy are the services assigned to APCs having a proposed APC geometric mean cost (prior to application of status indicator Q1) of less than or equal to $100. This proposed $100 geometric mean co st limit for the APC is part of the methodology of establishing an initial set of conditionally packaged ancillary service APCs, and is not meant to represent a thre shold above which a given ancillary serviceCMS-1613-P 39 would not be packaged, but as a basis for se lecting an initial set of APCs that would likely be updated and expanded in future years.

● Implementation of Comprehensive APCs: For CY 2015, we are proposing to implement, with several modifications, th e policy for comprehensive APCs that was

finalized in the CY 2014 O PPS/ASC final rule with comment period effective January 1, 2015. We are proposing to conti nue to define the services assigned to comprehensive APCs as primary services, and to define a comprehensive APC as a classification for the provision of a primar y service and all adjunctive services and supplies provided to support the delivery of th e primary service. We would continue to consider the entire hospital stay, defined as all services reported on the hospital claim reporting the primary service, to be one co mprehensive service for the provision of a primary service into which all other services appearing on the claim would be packaged. This would result in a single Medicare pa yment and a single beneficiary copayment under the OPPS for the comprehensive service based on all included charges on the

claim. We are proposing a total of 28 comprehe nsive APCs for CY 2015, including all of the device-dependent APCs remaining after some restructuring and consolidation of these APCs and two comprehensive APCs for other pr ocedures that are either largely device dependent or represent single session servic es with multiple components (single-session cranial stereotactic radiosurgery and intr aocular telescope implantation). We are proposing to modify the complexity adjustme nt criteria finalized last year, proposing

lower volume and cost threshold criteria for complexity adjustments. Finally, we areCMS-1613-P 40 proposing to package all add-on codes furnishe d as part of a comprehensive service, which is consistent with our general add-on code packaging policy. However, the add-on codes assigned to the CY 2014 device-depende nt APCs would be being evaluated with a primary service for a potential complexity adjustment.

● Ambulatory Surgical Center Payment Update: For CY 2015, we are proposing to increase payment rates under the ASC payment system by 1.2 percent. This proposed increase is based on a projected CPI–U update of 1.7 percent minus a multifactor productivity adjustment required by the Affordab le Care Act that is projected to be 0.5 percent. Based on this proposed update, we estimate that total payments to ASCs (including beneficiary cost-sharing and estimated changes in enrollment, utilization, and case-mix), for CY 2015 would be approxi mately $4.086 billion, an increase of approximately $243 million compared to estimated CY 2014 payments.

● Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital OQR Program, we are proposing to add one claims-based quality measure for the CY 2017 payment determination and subsequent years. We are proposing to refine the criteria for determining when to remove a measure because it is “topped-out” and we are proposing to remove three measures due to “topped-out” status. In addition, we are updating several previously adopted measur es. We are proposing to exclude one previously adopted measure from th e measure set for the CY 2016 payment determination and to change this measur e from required to voluntary for the CY 2017 payment determination and subsequent years. Hospitals would not be subject to payment reductions with respect to this measure. In addition, we are proposing to formalize aCMS-1613-P 41 review and corrections period for chart-abstracted measures. We also are proposing updates to validation procedures and changes to regulation text to correct typographical errors. Finally, we are clarifying how we refer to the extraordinary circumstances extensions or exemptions process.

● Ambulatory Surgical Center Qual ity Reporting (ASCQR) Program: For the ASCQR Program, we are proposing to adopt one new quality measure for the CY 2017 payment determination and subsequent years. The measure would be computed using Medicare claims data and would not impose any additional burden on ASC facilities. We also are proposing that one measure previ ously adopted for the CY 2016 and subsequent years’ payment determinations be excluded from the CY 2016 measure set and that this measure be voluntarily reported for the CY 2017 payment determination and subsequent years, rather than mandatorily reported. We would not subject ASCs to payment reductions with respect to this measure fo r the CY 2016 payment determination or during the period of voluntary reporti ng. In addition, we are propos ing to define the data

collection timeframes and submission deadlin es for one previously adopted measure, noting the delayed data collection of two measures for the CY 2016 payment determination, and clarifying how we refer to the extraordinary circumstances extensions or exemptions process. 3. Summary of Costs and Benefits In sections XXI. and XXII. of this proposed rule, we set forth a detailed analysis of the regulatory and federalism impacts that the proposed changes would have on

affected entities and beneficiaries. Ke y estimated impacts are described below. a. Impacts of the OPPS UpdateCMS-1613-P 42 (1) Impacts of All Proposed OPPS Changes Table 52 in section XXI. of this proposed rule displays the distributional impact all the proposed OPPS changes on various groups of hospitals and CMHCs for CY 2015 compared to all estimated OPPS payments in CY 2014. We estimate that the proposed policies in this proposed rule would result in a 2.2 percent overall increase in OPPS payments to providers. W e estimate that proposed total OPPS payments for CY 2015, including benefici ary cost-sharing, to the approximate 4,000 facilities paid under the OPPS (including general acute care hospitals, children’s hospitals, cancer hospita ls, and community mental health centers (CMHCs)), will be approximately $56.5 billi on, an increase of approximately $5.2 billion compared to CY 2014 payments, or $800 million, excluding our estimated changes in enrollment, utilization, and case-mix. We estimated the isolated impact of our proposed OPPS policies on CMHCs because CMHCs are only paid for partial hospitaliza tion services under the OPPS. Continuing the provider-specific structure that we adopted be ginning in CY 2011 and basing payment fully on the type of provider furnishing the service, we estimate a -1.6 percen t decrease in CY 2015 payments to CMHCs relative to their CY 2014 payments. (2) Impacts of the Proposed Updated Wage Indexes We estimate that our proposal to update th e wage indexes and apply the frontier State wage index, including changes resulting from the proposed adoption of the new OMB labor market area delineations and the proposed trans itional 1-year, 50/50 blended wage index, would have a positive impact on payments to hospitals. (3) Impacts of the Proposed Rural Adjustment and the Cancer Hospital Payment Adjustment There are no significant impacts of our proposed CY 2015 payment policies for hospitals that are eligible for the rural adjustment or fo r the cancer hospital payment adjustment. We areCMS-1613-P 43 not proposing to make any change in policies for determining the rural and cancer hospital payment adjustments, and the proposed adjust ment amounts do not significantly impact the budget neutrality adjustments for these proposed policies. (4) Impacts of the Proposed OPD Fee Schedule Increase Factor We estimate that, for most hospitals, the a pplication of the proposed OPD fee schedule increase factor of 2.1 percent to the conversion factor for CY 2015 would mitigate the small negative impacts of the budget neutrality adjustments. As a result of the OPD fee schedule increase factor and other budget neutrality adjustment s, we estimate that rural and urban hospitals would experience increases of approximately 2.1 percent for urban hospitals and 2.4 percent for rural hospitals. Classifying hospitals by teaching st atus or type of ownership suggests that these hospitals will receive similar increases. b. Impacts of the Proposed ASC Payment Update For impact purposes, the surgical proce dures on the ASC list of covered procedures are aggregated into surgical specialty groups us ing CPT and HCPCS code range definitions. The proposed percentage change in estimated total pa yments by specialty groups under the proposed CY 2015 payment rates compared to estimated CY 2014 payment rates ranges between -3.0 percent for cardiovascular system procedures and 12 percent for hematologic and lymphatic system procedures. c. Impacts of the Hospital OQR Program We do not expect our proposed CY 2015 policies to significantly affect the number of hospitals that do not receive a full annual payment update. d. Impacts of the ASCQR Program We do not expect our proposed CY 2015 proposed policies to significantly affect the number of ASCs that do not receive a full annual payment update.CMS-1613-P 44 B. Legislative and Regulatory Authority for the Hospital OPPS When Title XVIII of the Social Security Act was enacted, Medicare payment for hospital outpatient services was based on hospital-specif ic costs. In an effort to ensure that Medicare and its beneficiaries pay appropr iately for services and to encourage more efficient delivery of care, the Congress mandated replacement of the reasonable cost-based payment methodology with a pros pective payment system (PPS). The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act authorizing implementation of a PPS for hospita l outpatient services. The OPPS was first implemented for services furnished on or after August 1, 2000. Implementing regulations

for the OPPS are located at 42 CFR Parts 410 and 419. The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following Acts made additional changes to the O PPS: the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement , and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted on February 8, 2006; the Medicare Improvement s and Extension Act under Division B of

Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 109-432), enacted on December 20, 2006; the Me dicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173), enac ted on December 29, 2007; the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July 15, 2008; the Patient Pr otection and Affordable Care ActCMS-1613-P 45 (Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and

Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (These two public laws are co llectively known as the Affordable Care Act); the Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll Tax Cut Continuation Act of 2011 (T PTCCA, Pub. L. 112-78), enacted on December 23, 2011; the Middle Class Ta x Relief and Job Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on Febr uary 22, 2012; and the American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 2, 2013. Under the OPPS, we pay for hospital Part B services on a rate-per-service basis that varies according to the APC group to which the service is assigned. We use the Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current Procedural Terminology (CPT) codes) to iden tify and group the services within each APC. The OPPS includes payment for most hospital outpatient se rvices, except those

identified in section I.C. of this final rule with comment period. Section 1833(t)(1)(B) of the Act provides for payment under the OPPS fo r hospital outpatient services designated by the Secretary (which includes partial hos pitalization services furnished by CMHCs), and certain inpatient hos pital services that ar e paid under Part B. The OPPS rate is an unadjusted national payment amount that includes the Medicare payment and the beneficiary copayment. This rate is divided into a

labor-related amount and a nonlabor-relat ed amount. The labor-related amount is adjusted for area wage differences using the hospital inpatient wage index value for the locality in which the hospital or CMHC is located.CMS-1613-P 46

All services and items within an APC group are comparable clinically and with respect to resource use (section 1833(t)(2 )(B) of the Act). In accordance with section 1833(t)(2) of the Act, subject to certain exceptions, it ems and services within an APC group cannot be considered comparable with respect to the use of resources if the highest median cost (or mean cost, if elected by the Secretary) for an item or service in the APC group is more than 2 times greater than the lowest median cost (or mean cost, if elected by the Secretary) for an item or servi ce within the same APC group (referred to as the “2 times rule”). In implementing this prov ision, we generally use the cost of the item or service assigned to an APC group. For new technology items and services, sp ecial payments under the OPPS may be made in one of two ways. Section 1833( t)(6) of the Act provides for temporary additional payments, which we refer to as “transitional pass-thr ough payments,” for at least 2 but not more than 3 years for certa in drugs, biological agents, brachytherapy

devices used for the treatment of cancer, and categories of other medical devices. For new technology services that ar e not eligible for transiti onal pass-through payments, and

for which we lack sufficient clinical inform ation and cost data to appropriately assign them to a clinical APC group, we have esta blished special APC groups based on costs, which we refer to as New Technology APCs. These New Technology APCs are designated by cost bands which allow us to provide appropriate and consistent payment for designated new procedures that are not yet reflected in our claims data. Similar to pass-through payments, an assignment to a New Technology APC is te mporary; that is,CMS-1613-P 47 we retain a service within a New Technology APC until we acquire sufficient data to assign it to a clinical ly appropriate APC group. C. Excluded OPPS Services and Hospitals Section 1833(t)(1)(B)(i) of the Act aut horizes the Secretary to designate the hospital outpatient services th at are paid under the OPPS. While most hospital outpatient services are payable under the OPPS, sect ion 1833(t)(1)(B)(iv) of the Act excludes payment for ambulance, physical and occupational therapy, and speech-language pathology services, for which payment is made under a fee schedule. It also excludes screening mammography, dia gnostic mammography, and effective January 1, 2011, an annual wellness visit providing personalized pr evention plan services. The Secretary exercises the authority grante d under the statute to also exclude from the OPPS certain services that are paid under fee schedules or other payment systems. Such excluded services include, for exampl e, the professional services of physicians and nonphysician practitioners paid under the Me dicare Physician Fee Schedul e (MPFS); certain laboratory services paid under the Clinical Labora tory Fee Schedule (CLFS); services for beneficiaries with end-stage renal diseas e (ESRD) that are paid under the ESRD prospective payment system; and services and procedures that requir e an inpatient stay that are paid under the hospital IPPS. We se t forth the services that are excluded from payment under the OPPS in regulations at 42 CFR 419.22. Under § 419.20(b) of the regulations, we sp ecify the types of hospitals that are excluded from payment under the OPPS. Thes e excluded hospitals include: Maryland hospitals, but only for services that are pa id under a cost containment waiver inCMS-1613-P 48 accordance with section 1814(b)(3) of the Act; cr itical access hospitals (CAHs); hospitals located outside of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service (IHS) hospitals. D. Prior Rulemaking On April 7, 2000, we published in the Federal Register a final rule with comment period (65 FR 18434) to implement a prospective payment system for hospital outpatient services. The hospital OPPS was fi rst implemented for services furnished on or after August 1, 2000. Secti on 1833(t)(9) of the Act requires the Secretary to review certain components of the OPPS, not less ofte n than annually, and to revise the groups, relative payment weights, and other adjust ments that take into account changes in medical practices, changes in technologies, and the addition of new services, new cost data, and other relevant information and factors. Since initially implementing the OPPS, we have published final rules in the Federal Register annually to implement statutory re quirements and changes arising from our continuing experience with this system. These rules can be viewed on the CMS Web

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

. E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel) Authority of the Panel Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 106-113, requires that we consult with an external advisory panel of experts to annually review the clinicalCMS-1613-P 49 integrity of the payment groups and their weights under the OPPS. In CY 2000, based on section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, the Secretary established the Advisory Panel on Ambulatory Payment Classification Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the PHS Act which gives discreti onary authority to the Secr etary to convene advisory councils and committees, the Secretary expanded the panel’s scope to include the supervision of hospital outpatient therapeuti c services in addition to the APC groups and weights. To reflect th is new role of the panel, the Secr etary changed the panel’s name to the Advisory Panel on Hospital Outpatient Paym ent (the HOP Panel, or the Panel). The

Panel is not restricted to using data compiled by CMS, a nd in conducting its review it may use data collected or developed by organizations outside the Department.

2. Establishment of the Panel On November 21, 2000, the Secretary signed the initial charter establishing the HOP Panel, at that time named the APC Pa nel. This expert panel, which may be composed of up to 19 appropriate representa tives of providers (c urrently employed fulltime, not as consultants, in their respective ar eas of expertise), revi ews clinical data and

advises CMS about the clinical integrity of the APC groups and their payment weights. Since CY 2012, the Panel also is charged with advising the Secretar y on the appropriate level of supervision for indivi dual hospital outpatient therapeutic services. The Panel is technical in nature, and it is governed by the provisions of the Federal Advisory Committee Act (FACA). The current charter specifies, among other requirements, that:

the Panel continues to be tec hnical in nature; is governed by the provisions of the FACA;CMS-1613-P 50 may convene up to three meetings per year; ha s a Designated Federal Official (DFO); and is chaired by a Federal Official designated by the Secretary. The current charter was amended on November 15, 2011 and the Panel was renamed to reflect expanding the Panel’s authority to include supervision of hospital outpatie nt therapeutic services and therefore to add CAHs to its membership. The current Panel membership and othe r information pertaining to the Panel, including its charter, Federal Register notices, membership, meeting dates, agenda topics, and meeting reports, can be viewed on the CMS Web site at: http://www.cms.gov/FACA/05_AdvisoryPanel onAmbulatoryPaymentClassificationGrou ps.asp#TopOfPage

. 3. Panel Meetings and Organizational Structure The Panel has held multiple meetings, with the last meeting taking place on March 10, 2014. Prior to each meeting, we publish a notice in the Federal Register to announce the meeting and, when necessary, to solicit nominations for Panel membership

and to announce new members. The Panel has established an operational st ructure that, in part, currently includes

the use of three subcommittees to facilitate it s required review process. The three current subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, and the Subcommittee for APC Groups a nd Status Indicator (SI) Assignments. The Data Subcommittee is responsible for studying the data issues confronting the Panel and for recommending options for reso lving them. The Visits and Observation

Subcommittee reviews and makes recommendations to the Panel on all technical issuesCMS-1613-P 51 pertaining to observation servic es and hospital outpatient vis its paid under the OPPS (for example, APC configurations and APC rela tive payment weights). The Subcommittee for APC Groups and SI Assignments advise s the Panel on the following issues: the appropriate SIs to be assigne d to HCPCS codes, including but not limited to whether a HCPCS code or a category of codes should be packaged or separately paid; and the appropriate APC placement of HCPCS codes regarding services for which separate payment is made. Each of these subcommittees was established by a majority vote from the full Panel during a scheduled Panel meeting, and the Panel recommended at the March 2014 meeting that the subcommittees conti nue. We accepted this recommendation.

Discussions of the other recommendati ons made by the Panel at the March 2014 Panel meeting are included in the sections of this proposed rule that are specific to each

recommendation. For discussions of earlie r Panel meetings and recommendations, we refer readers to previously published OPPS/ ASC proposed and final rules, the CMS Web

site mentioned earlier in this sect ion, and the FACA database at: http://fido.gov/facadatabase/public.asp

. F. Public Comments Received on the CY 2014 OPPS/ASC Final Ru le with Comment

Period We received 490 timely pieces of correspondence on the CY 2014 OPPS/ASC final rule with comment period that appeared in the Federal Register on December 10, 2013 (78 FR 74826), some of wh ich contained comments on the interim APC assignments and/or status indicato rs of new or replacement HCPCS codesCMS-1613-P 52 (identified with comment indicator “NI” in A ddenda B, AA, and BB to that final rule). Summaries of the public comments on new or replacement codes will be set forth in the CY 2015 final rule with comment period under the appropriate subject -matter headings. However, we are summarizing the public comments on the CY 2014 OPPS/ASC final rule with comment period regarding comprehe nsive APCs in this proposed rule rather

than the CY 2015 final rule with commentperiod, as we are proposing several methodological changes in respons e to these public comments. II. Proposed Updates Affecting OPPS Payments A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction a. Database Source and Methodology Section 1833(t)(9)(A) of the Act requires that the Secretary re view not less often than annually and revise the relative paym ent weights for APCs. In the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we explained in detail how we

calculated the relativ e payment weights that were implemented on August 1, 2000 for each APC group. For the CY 2015 OPPS, we are proposing to recalibrate the APC relative payment weights for services furnished on or afte r January 1, 2015, and before January 1, 2016 (CY 2015), using the same basic methodol ogy that we described in the CY 2014

OPPS/ASC final rule with comm ent 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) se rvices, using the most recent available data to constructCMS-1613-P 53 a database for calculating APC group weights. Therefore, for the purpose of recalibrating the proposed APC relative payment wei ghts for CY 2015, we used approximately 149 million final action claims (claims for whic h all disputes and adjustments have been resolved and payment has been made) for hospital outpatient department services furnished on or after January 1, 2013, and be fore January 1, 2014. For exact counts of claims used, we refer readers to the claims accounting narrative under supporting documentation for this CY 2015 OPPS/ASC pr oposed rule on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. Of the approximately 149 million final ac tion claims for services provided in hospital outpatient settings us ed to calculate the CY 2015 OPPS payment rates for this proposed rule, approximately 119 million clai ms were the type of bill potentially appropriate for use in setting rates for OPPS services (but did not necessarily contain services payable under the OPPS). Of the approximately 119 million claims, approximately 5 million claims were not fo r services paid under the OPPS or were excluded as not appropriate for use (for exampl e, erroneous cost-to-ch arge ratios (CCRs) or no HCPCS codes reported on the claim) . From the remaining approximately 114 million claims, we created approximately 94 million single records, of which approximately 46 million were “pseudo” single or “single session” claims (created from approximately 21 million multiple procedure claims using the process we discuss later in this section). Approximately 1 million claims were trimmed out on cost or units in

excess of +/- 3 standard de viations from the geometric mean, yielding approximatelyCMS-1613-P 54 94 million single bills for ratesetting. As de scribed in section II.A.2. of this proposed rule, our data development process is designe d with the goal of using appropriate cost information in setting the APC relative payment weights. The bypass process is described in section II.A.1.b. of this proposed rule. This sectio n 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 conti nues to be unusable. Consistent with the goal of using appropriate information in our data development process, we only use claims (or portions of each claim) that are appropriate for ratesetting purposes. The proposed APC relative weights a nd payments for CY 2015 in Addenda A and B to this proposed rule (which are avai lable via the Internet on the CMS Web site) were calculated using claims from CY 2013 that were processed through December 31, 2013. While prior to CY 2013 we historically based the payments on median hospital costs for services in the APC groups, begi nning with the CY 2013 OPPS, we established the cost-based relative payment weights for the OPPS using geometric mean costs, as

discussed in the CY 2013 O PPS/ASC final rule with comment period (77 FR 68259 through 68271). For the CY 2015 OPPS, we are proposing to use this same methodology, basing payments on geometric mean costs. Under this methodology, we select claims for services paid under the O PPS and match these claims to the most recent cost report filed by the indivi dual hospitals represented in ou r claims data. We continue to believe that it is appropriate to use the mo st current full calendar year claims data andCMS-1613-P 55 the most recently submitted cost reports to calculate the relative costs underpinning the APC relative payment weights a nd the CY 2015 payment rates. b. Proposed Use of Single and Multiple Procedure Claims For CY 2015, in general, we are propos ing to continue to use single procedure

claims to set the costs on which the AP C relative payment weights are based. We generally use single procedure claims to se t the estimated costs for APCs because we believe that the OPPS relative weights on which payment rates are based should be derived from the costs of furnishing one un it of one procedure and because, in many circumstances, we are unable to ensure that packaged costs can be appropriately allocated across multiple procedures performe d on the same date of service. It is generally desirable to use the da ta from as many claims as possible to recalibrate the APC relative payment wei ghts, including those claims for multiple procedures. As we have for several years, we are 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, th is enables us to create multiple “pseudo” single procedure claims from claims that were submitted as multiple procedure claims spanning multiple dates of service, or claims that contained numerous separately paid procedures reported on the same date on one claim. We refer to these newly created single procedure claims as “pse udo” single procedure claims. The history of our use of a bypass list to generate “pseudo” single pr ocedure claims is well documented, mostCMS-1613-P 56 recently in the CY 2014 O PPS/ASC final rule with comment period (78 FR 74849 through 74851). In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and created the first composite APCs, and continued t hose policies through CY 2014. Increased packaging and creation of composite APCs also increased the

number of bills that we were able to use fo r ratesetting by enabling us to use claims that contained multiple major procedures that previously would not have been usable. Further, for CY 2009, we expanded the compos ite APC model to one additional clinical area, multiple imaging services (73 FR 68559 through 68569), which also increased the

number of bills we were able to use in developing the OPPS relative weights on which payments are based. We have continued the composite APCs for multiple imaging services through CY 2014, and we are proposi ng to continue this policy for CY 2015.

We refer readers to section II.A.2.f. of th e CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74925) for a discussion of the use of claims in modeling the costs for composite APCs and to section II. A.3. of the CY 2014 O PPS/ASC final rule with comment period (78 FR 74925 through 749 48) for a discussion of our packaging policies for CY 2014. In addition, we are prop osing to establish additional packaging policies for the CY 2015 OPPS, as discussed in section II.A.3. of this proposed rule. We are proposing to continue to apply thes e processes to enable us to use as much claims data as possible for ratesetting fo r the CY 2015 OPPS. This methodology enabled us to create, for this proposed rule, appr oximately 46 million “pseudo” single procedure claims, including multiple imaging composite “s ingle session” bills (we refer readers toCMS-1613-P 57 section II.A.2.f.(5) of this proposed rule for further discussion), to add to the approximately 48 million “natural” single procedure claims. For CY 2015, we are proposing to bypass 227 HCPCS codes that are identified in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site). Since the inception of the bypass list, which is the li st of codes to be bypassed to convert multiple procedure claims to “p seudo” single procedure claims, we have calculated the percent of “natural” single bi lls 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 prev ious year’s bypass list and use the updated year’s data (for CY 2015, data available fo r the March 10, 2014 meeting of the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2013 claims processed through September 30, 2013, and CY 2012 claims data processed through June 30, 2013, used to model the payment rates for CY 2014) to determine whether it would be appropriate to add additional codes to the previous year’s bypass list. For CY 2015, we are proposing to continue to bypass all of the HCPCS codes on the CY 2014 OPPS bypass list, with the excepti on of HCPCS codes that we are proposing to delete for CY 2015, 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 b ecause the purpose of the bypass list is to obtain more data for thos e codes relevant to ratesetting. Some of the codes we are proposing to remove from the CY 2015 bypass list are affected by the CY 2015 proposed packaging policy, discussed in section II.A.3. of this proposed rule. In addition, we are proposing to add to the bypass list for CY 2015 HCPCS codes not onCMS-1613-P 58 the CY 2014 bypass list that, using either th e CY 2014 final rule data (CY 2012 claims) or the March 10, 2014 Panel data (first 9 mont hs of CY 2013 claims), met the empirical criteria for the bypass list that are summarized below. Finally, to remain consistent with the CY 2015 proposal to continue to devel op OPPS relative payment weights based on geometric mean costs, we also are proposing th at the packaged cost criterion continue to be based on the geometric mean cost. The entire list proposed for CY 2015 (including the codes that remain on the bypass list from prior years) is open to public comment in this CY 2015 OPPS/ASC proposed rule. Becau se 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 th e 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 propos ed criteria for th e bypass list are:

● There are 100 or more “n atural” single procedure clai ms for the code. This number of single procedure claims ensure s that observed outcomes are sufficiently representative of packaging that might occur in the multiple claims.

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

● The geometric mean cost of packag ing observed in the “natural” single procedure claims is equal to or less than $55. This criterion also limits the amount ofCMS-1613-P 59 error in redistributed costs. During the asse ssment of claims against the bypass criteria, we do not know the dollar value of the pack aged cost that shoul d be appropriately attributed to the other proce dures on the claim. Therefore, ensuring that redistributed costs associated with a bypass code are small in amount a nd volume protects the validity

of cost estimates for low cost servic es billed with th e bypassed service. We note that, as we did for CY 2014, we are proposing to continue to establish the CY 2015 OPPS relative payment weights based on geometric mean costs. To remain consistent in the metric used for identifyi ng cost patterns, we are proposing to use the geometric mean cost of packaging to identi fy potential codes to add to the bypass list. In response to public comments on the CY 2010 OPPS/ASC proposed rule requesting that the packaged cost threshold be updated, we consid ered whether it would be appropriate to update the $50 packaged cost threshold fo r inflation when examining potential bypass list additions. As discu ssed in the CY 2010 OPPS/ ASC final rule with comment period (74 FR 60328), the real value of this packaged cost threshold criterion has declined due to inflation, making the pack aged cost threshold more restrictive over time when considering additions to the bypass li st. Therefore, adjusting the threshold by the market basket increase would prevent contin uing decline in the threshold’s real value.

Based on the same rationale described fo r the CY 2014 OPPS/ASC final rule with comment period (78 FR 74838), we are proposing for CY 2015 to continue to update the packaged cost threshold by the market bask et increase. By applying the final CY 2014 market basket increase of 1.7 percent to the prior nonrounded do llar threshold of $54.73 (78 FR 74838), we determined that the threshold remains for CY 2015 at $55 ($55.66CMS-1613-P 60 rounded to $55, the nearest $5 increment). Therefore, we are proposing to set the geometric mean packaged cost threshold on the CY 2013 claims at $55 for a code to be considered for addition to the CY 2015 OPPS bypass list.

● The code is not a code for an unlisted service. Unlisted codes do not describe a specific service, and thus th eir costs would not be appropr iate for bypass list purposes. In addition, we are proposing to conti nue to include on the bypass list HCPCS

codes that CMS medical adviso rs believe have minimal associated packaging based on

their clinical assessment of the complete CY 2015 OPPS proposal. Some of these codes were identified by CMS medical advisors a nd some were identified in prior years by commenters with specialized knowledge of th e packaging associated with specific services. We also are proposing to conti nue to include certain HCPCS codes on the bypass list in order to purposefully direct the assignment of p ackaged 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 hosp ital critical care serv ice) to the bypass list (73 FR 68513). As a result of the multiple imaging composite APCs that we established in CY 2009, the program logic for creating “pse udo” single procedure claims from bypassed codes that are also members of multiple imaging composite APCs changed. When creating the set of “pse udo” single procedure claims, clai ms that contain “overlap bypass codes” (those HCPCS codes th at are both on the bypass list and are members of the multiple imaging composite APCs) were identif ied first. These HCPCS codes were thenCMS-1613-P 61 processed to create multiple imaging composite “single session” bills, that is, claims containing HCPCS codes from only one imagi ng family, thus suppressing the initial use of these codes as bypass codes. However, th ese “overlap bypass codes” were retained on the bypass list because, at the end of the “pse udo” single processing logic, we reassessed the claims without suppression of the “ overlap bypass codes” under our longstanding “pseudo” single process to determine whethe r we could convert additional claims to “pseudo” single procedure claims. (We refer r eaders to section II.A.2.b. of this proposed

rule for further discussion of the treatment of “overlap bypass codes.”) This process also created multiple imaging composite “single session” bills that could be used for calculating composite APC costs. “Overlap bypass codes” that are members of the proposed multiple imaging composite APCs ar e identified by asterisks (*) in Addendum N to this proposed rule (which is availa ble via the Internet on the CMS Web site). Addendum N to this proposed rule (which is available via the Internet on the CMS Web site) includes the proposed list of bypass codes for CY 2015. The proposed list of bypass codes contains codes that were reported on claims for services in CY 2013 and, therefore, includes codes that were in effect in CY 2013 and used for billing but

were deleted for CY 2014. We retained these deleted bypass codes on the proposed CY 2015 bypass list because these codes ex isted in CY 2013 and were covered OPD services in that period, and CY 2013 claims data are used to calculate CY 2015 payment rates. Keeping these deleted bypass codes on the bypass list potentially allows us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap bypass codes” that were members of the propos ed multiple imaging composite APCs areCMS-1613-P 62 identified by asterisks (*) in the third co lumn of Addendum N to this proposed rule. HCPCS codes that we are proposing to add fo r CY 2015 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 2015 bypass list because these codes were either deleted from the HCPCS before CY 2013 (and therefore were not covered OPD services in CY 2013) or are not separately payable codes under the proposed CY 2015 OPPS because these codes are not used for ratesetting through the bypass proce ss. The list of codes proposed for removal from the bypass list includes those that would be affected by the proposed CY 2015 OPPS packaging policy described in sect ion II.A.3. of this proposed rule.

TABLE 1.—HCPCS CODES PROPOSED TO BE REMOVED FROM THE CY 2015 BYPASS LIST

HCPCS

Code HCPCS Short Descriptor 11056 Trim skin lesions 2 to 4 11300 Shave skin lesion 0.5 cm/< 11301 Shave skin lesion 0.6-1.0 cm 11719 Trim nail(s) any number 11720 Debride nail 1-5 11721 Debride nail 6 or more 17000 Destruct premalg lesion 17110 Destruct b9 lesion 1-14 29240 Strapping of shoulder 29260 Strapping of elbow or wrist 29280 Strapping of hand or finger 29520 Strapping of hip 29530 Strapping of knee 51741 Electro-uroflowmetry first 51798 Us urine capacity measure 53601 Dilate urethra stricture 53661 Dilation of urethraCMS-1613-P 63

HCPCS

Code HCPCS Short Descriptor 54240 Penis study 67820 Revise eyelashes 69210 Remove impacted ear wax uni 69220 Clean out mastoid cavity 70030 X-ray eye for foreign body 70100 X-ray exam of jaw <4views 70110 X-ray exam of jaw 4/> views 70120 X-ray exam of mastoids 70130 X-ray exam of mastoids 70140 X-ray exam of facial bones 70150 X-ray exam of facial bones 70160 X-ray exam of nasal bones 70200 X-ray exam of eye sockets 70210 X-ray exam of sinuses 70220 X-ray exam of sinuses 70240 X-ray exam pituitary saddle 70250 X-ray exam of skull 70260 X-ray exam of skull 70320 Full mouth x-ray of teeth 70328 X-ray exam of jaw joint 70330 X-ray exam of jaw joints 70355 Panoramic x-ray of jaws 70360 X-ray exam of neck 71021 Chest x-ray frnt lat lordotc 71022 Chest x-ray frnt lat oblique 71023 Chest x-ray and fluoroscopy 71030 Chest x-ray 4/> views 71035 Chest x-ray special views 71100 X-ray exam ribs uni 2 views 71101 X-ray exam unilat ribs/chest 71110 X-ray exam ribs bil 3 views 71111 X-ray exam ribs/chest4/> vws 71120 X-ray exam breastbone 2/>vws 71130 X-ray strenoclavic jt 3/>vws 72020 X-ray exam of spine 1 view 72040 X-ray exam neck spine 2-3 vw 72050 X-ray exam neck spine 4/5vws 72052 X-ray exam neck spine 6/>vwsCMS-1613-P 64

HCPCS

Code HCPCS Short Descriptor 72069 X-ray exam trunk spine stand 72070 X-ray exam thorac spine 2vws 72072 X-ray exam thorac spine 3vws 72074 X-ray exam thorac spine4/>vw 72080 X-ray exam trunk spine 2 vws 72090 X-ray exam scloiosis erect 72100 X-ray exam l-s spine 2/3 vws 72110 X-ray exam l-2 spine 4/>vws 72114 X-ray exam l-s spine bending 72120 X-ray bend only l-s spine 72170 X-ray exam of pelvis 72190 X-ray exam of pelvis 72202 X-ray exam si joints 3/> vws 72220 X-ray exam sacrum tailbone 73000 X-ray exam of collar bone 73010 X-ray exam of shoulder blade 73020 X-ray exam of shoulder 73030 X-ray exam of shoulder 73050 X-ray exam of shoulders 73060 X-ray exam of humerus 73070 X-ray exam of elbow 73080 X-ray exam of elbow 73090 X-ray exam of forearm 73100 X-ray exam of wrist 73110 X-ray exam of wrist 73120 X-ray exam of hand 73130 X-ray exam of hand 73140 X-ray exam of finger(s) 73510 X-ray exam of hip 73520 X-ray exam of hips 73540 X-ray exam of pelvis & hips 73550 X-ray exam of thigh 73560 X-ray exam of knee 1 or 2 73562 X-ray exam of knee 3 73564 X-ray exam knee 4 or more 73565 X-ray exam of knees 73590 X-ray exam of lower leg 73600 X-ray exam of ankleCMS-1613-P 65

HCPCS

Code HCPCS Short Descriptor 73610 X-ray exam of ankle 73620 X-ray exam of foot 73630 X-ray exam of foot 73650 X-ray exam of heel 73660 X-ray exam of toe(s) 74000 X-ray exam of abdomen 74010 X-ray exam of abdomen 74020 X-ray exam of abdomen 74022 X-ray exam series abdomen 76100 X-ray exam of body section 76510 Ophth us b & quant a 76514 Echo exam of eye thickness 76516 Echo exam of eye 76519 Echo exam of eye 76645 Us exam breast(s) 76816 Ob us follow-up per fetus 76882 Us xtr non-vasc lmtd 76970 Ultrasound exam follow-up 76977 Us bone density measure 77072 X-rays for bone age 77073 X-rays bone length studies 77074 X-rays bone survey limited 77076 X-rays bone survey infant 77077 Joint survey single view 77078 Ct bone density axial 77079 Ct bone density peripheral 77080 Dxa bone density axial 77081 Dxa bone density/peripheral 77082 Dxa bone density vert fx 77083 Radiographic absorptiometry 80500 Lab pathology consultation 80502 Lab pathology consultation 85097 Bone marrow interpretation 86510 Histoplasmosis skin test 86850 Rbc antibody screen 86870 Rbc antibody identification 86880 Coombs test direct 86885 Coombs test indirect qualCMS-1613-P 66

HCPCS

Code HCPCS Short Descriptor 86886 Coombs test indirect titer 86900 Blood typing abo 86901 Blood typing rh (d) 86904 Blood typing patient serum 86905 Blood typing rbc antigens 86906 Blood typing rh phenotype 86930 Frozen blood prep 86970 Rbc pretx incubatj w/chemicl 86977 Rbc serum pretx incubj/inhib 88104 Cytopath fl nongyn smears 88106 Cytopath fl nongyn filter 88107 Cytopath fl nongyn sm/fltr 88108 Cytopath concentrate tech 88112 Cytopath cell enhance tech 88120 Cytp urne 3-5 probes ea spec 88160 Cytopath smear other source 88161 Cytopath smear other source 88162 Cytopath smear other source 88172 Cytp dx eval fna 1st ea site 88173 Cytopath eval fna report 88182 Cell marker study 88184 Flowcytometry/ tc 1 marker 88189 Flowcytometry/read 16 & > 88300 Surgical path gross 88302 Tissue exam by pathologist 88304 Tissue exam by pathologist 88305 Tissue exam by pathologist 88307 Tissue exam by pathologist 88312 Special stains group 1 88313 Special stains group 2 88321 Microslide consultation 88323 Microslide consultation 88325 Comprehensive review of data 88329 Path consult introp 88331 Path consult intraop 1 bloc 88342 Immunohisto antibody slide 88346 Immunofluorescent study 88347 Immunofluorescent studyCMS-1613-P 67

HCPCS

Code HCPCS Short Descriptor 88348 Electron microscopy 88358 Analysis tumor 88360 Tumor immunohistochem/manual 88361 Tumor immunohistochem/comput 88365 Insitu hybridization (fish) 88368 Insitu hybridization manual 88385 Eval molecul probes 51-250 88386 Eval molecul probes 251-500 89049 Chct for mal hyperthermia 89220 Sputum specimen collection 89230 Collect sweat for test 89240 Pathology lab procedure 92020 Special eye evaluation 92025 Corneal topography 92060 Special eye evaluation 92081 Visual field examination(s) 92082 Visual field examination(s) 92083 Visual field examination(s) 92133 Cmptr ophth img optic nerve 92134 Cptr ophth dx img post segmt 92136 Ophthalmic biometry 92225 Special eye exam initial 92226 Special eye exam subsequent 92230 Eye exam with photos 92250 Eye exam with photos 92285 Eye photography 92286 Internal eye photography 92520 Laryngeal function studies 92541 Spontaneous nystagmus test 92542 Positional nystagmus test 92550 Tympanometry & reflex thresh 92552 Pure tone audiometry air 92553 Audiometry air & bone 92555 Speech threshold audiometry 92556 Speech audiometry complete 92557 Comprehensive hearing test 92567 Tympanometry 92570 Acoustic immitance testingCMS-1613-P 68

HCPCS

Code HCPCS Short Descriptor 92582 Conditioning play audiometry 92603 Cochlear implt f/up exam 7/> 92604 Reprogram cochlear implt 7/> 92626 Eval aud rehab status 93005 Electrocardiogram tracing 93017 Cardiovascular stress test 93225 Ecg monit/reprt up to 48 hrs 93226 Ecg monit/reprt up to 48 hrs 93270 Remote 30 day ecg rev/report 93278 Ecg/signal-averaged 93279 Pm device progr eval sngl 93280 Pm device progr eval dual 93281 Pm device progr eval multi 93282 Icd device progr eval 1 sngl 93283 Icd device progr eval dual 93284 Icd device progr eval mult 93285 Ilr device eval progr 93288 Pm device eval in person 93289 Icd device interrogate 93290 Icm device eval 93291 Ilr device interrogate 93292 Wcd device interrogate 93293 Pm phone r-strip device eval 93296 Pm/icd remote tech serv 93299 Icm/ilr remote tech serv 93701 Bioimpedance cv analysis 93786 Ambulatory bp recording 93788 Ambulatory bp analysis 93875 Extracranial study 94015 Patient recorded spirometry 94690 Exhaled air analysis 95803 Actigraphy testing 95869 Muscle test thor paraspinal 95900 Motor nerve conduction test 95921 Autonomic nrv parasym inervj 95970 Analyze neurostim no prog 96900 Ultraviolet light therapy 96910 Photochemotherapy with uv-bCMS-1613-P 69

HCPCS

Code HCPCS Short Descriptor 96912 Photochemotherapy with uv-a 96921 Laser tx skin 250-500 sq cm 98925 Osteopath manj 1-2 regions 98926 Osteopath manj 3-4 regions 98927 Osteopath manj 5-6 regions 98928 Osteopath manj 7-8 regions 98929 Osteopath manj 9-10 regions 98940 Chiropract manj 1-2 regions 98941 Chiropract manj 3-4 regions 98942 Chiropractic manj 5 regions G0127 Trim nail(s) G0130 Single energy x-ray study G0166 Extrnl counterpulse, per tx G0239 Oth resp proc, group G0389 Ultrasound exam aaa screen G0404 Ekg tracing for initial prev G0424 Pulmonary rehab w exer Q0091 Obtaining screen pap smear

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs) For CY 2015, we are proposing to continue to use the hospital-specific overall ancillary and departmental co st-to-charge ratios (CCRs) to convert charges to estimated costs through applicatio n of a revenue code-to-cost cente r crosswalk. To calculate the APC costs on which the proposed CY 2015 APC payment rates are based, we calculated hospital-specific overall anci llary CCRs and hospital-spec ific departmental CCRs for each hospital for which we had CY 2013 claims data by comparing these claims data to the most recently available hospital cost repo rts, which, in most cases, are from CY 2012. For the CY 2015 OPPS proposed rates, we us ed the set of claims processed during CY 2013. We applied the hospital-specific CCR to the hospital’s charges at the mostCMS-1613-P 70 detailed level possible, based on a revenue c ode-to-cost center crossw alk that contains a hierarchy of CCRs used to estimate costs fr om charges for each revenue code. That

crosswalk is available for review and continuous comment on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. To ensure the completeness of the re venue code-to-cost center crosswalk, we reviewed changes to the list of revenue code s for CY 2013 (the year of claims data we used to calculate the propos ed CY 2015 OPPS payment rates) and found that the National Uniform Billing Committee ( NUBC) did not add any new revenue codes to the NUBC 2013 Data Specifications Manual. In accordance with our longstanding policy, we calculated CCRs for the standard and nonstandard cost centers accepted by the elec tronic cost report database. In general, the most detailed level at which we calculated CCRs was the hospital-specific departmental level. For a discussion of the hospital-specific overall ancillary CCR calculation, we refer readers to the CY 2007 OP PS/ASC final rule with comment period (71 FR 67983 through 67985). The calculation of blood costs is a longstanding exception (since the CY 2005 OPPS) to this general methodology for calculation of CCRs used for converting charges to costs on each claim. Th is exception is discussed in detail in the

CY 2007 OPPS/ASC final rule with comment period and discussed further in section II.A.2.d.(2) of this proposed rule. For the CCR calculation process, we used th e same general approach that we used in developing the final APC rates for CY 2007 and thereafter, using the revised CCRCMS-1613-P 71 calculation that excluded the costs of parame dical education programs and weighted the outpatient charges by the volume of outpatient services furnished by the hospital. We

refer readers to the CY 2007 OPPS/ASC fina l rule with comment period for more information (71 FR 67983 through 67985). We first limited the population of cost reports to only those hospitals that filed out patient claims in CY 2013 before determining

whether the CCRs for such hospitals were valid.

We then calculated the CCRs for each co st center and the overall ancillary CCR for each hospital for which we had claims data. We did this using hospital-specific data from the Hospital Cost Report Information Sy stem (HCRIS). We used the most recent available cost report data, which, in most cases, were from cost reports with cost reporting periods beginning in CY 2012. For this proposed rule, we used the most recently submitted cost reports to calculate the CCRs to be used to calculate costs for the proposed CY 2015 OPPS payment rates. If th e most recently available cost report was submitted but not settled, we looked at the last settled cost report to determine the ratio of submitted to settled cost using the overall ancillary CCR, and we then adjusted the most recent available submitted, but not settled, cost report using that ratio. We then calculated both an overall ancillary CCR and co st center-specific CCRs for each hospital. We used the overall ancillary CCR referenced above for all purposes that require use of an overall ancillary CCR. We are proposing to continue this longstanding methodology

for the calculation of costs for CY 2015. Since the implementation of the OPPS, some commenters have raised concerns about potential bias in the OPPS cost-basedweights due to “charge compression,” whichCMS-1613-P 72 is the practice of applying a lower charge markup to higher cost services and a higher charge markup to lower cost services. As a result, the cost-based weights may reflect some aggregation bias, undervaluing high-co st items and overvaluing low-cost items when an estimate of average markup, embodied in a single CCR, is applied to items of widely varying costs in the same cost center. This issue was evaluated in a report by the Research Triangle Institute, International (RTI). The RT I final report can be found on

RTI’s Web site at: http://www.rti.org/re ports/cms/HHSM-500-2005- 0029I/PDF/Refining_Cost_to_C harge_ratios_200807_Final.pdf . For a complete discussion of the RTI recommendations, public comments, and our responses, we refer

readers to the CY 2009 OPPS/ ASC final rule with comm ent period (73 FR 68519 through 68527). We addressed the RTI finding that ther e was aggregation bias in both the IPPS and the OPPS cost estimation of expensive and inexpensive medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 45467) . Specifically, we created one cost center for “Medical Supplies Charged to Pati ents” and one cost center for “Implantable Devices Charged to Patients,” essentially splitting the then current cost center for “Medical Supplies Charged to Patients” into one cost center for low-cost medical supplies and another cost center for high-cost implantable devices in order to mitigate some of the effects of charge compression. In determining the items that should be reported in these respective cost centers, we adopted commenters’ recommendations that hospitals should use revenue codes established by the AHA’s NUBC to determine the items that should be reported in the “Med ical Supplies Charged to Patients” and theCMS-1613-P 73 “Implantable Devices Charged to Patients” cost centers. For a complete discussion of the

rationale for the creation of the new cost center for “Implantable Devices Charged to Patients,” a summary of public comments r eceived, and our responses to those public comments, we refer readers to the FY 2009 IPPS final rule. The cost center for “Implantable Devices Charged to Patients” has been available for use for cost reporting periods beginni ng on or after May 1, 2009. In the CY 2013

OPPS/ASC final rule with comm ent period, we determined th at a significant volume of hospitals were utilizing the “Implantable De vices Charged to Patients” cost center.

Because a sufficient amount of data from whic h to generate a mean ingful analysis was available, we established in the CY 2013 OPPS/ASC final rule with comment period a policy to create a distinct CCR using the “Imp lantable Devices Charged to Patients” cost center (77 FR 68225). We retained this policy for the CY 2014 OPPS and are proposing to continue this practice for the CY 2015 OPPS.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we finalized our proposal to crea te new standard cost cente rs for “Computed Tomography (CT),” “Magnetic Resonance Imaging (MRI), ” and “Cardiac Cathet erization,” and to require that hospitals report the costs and ch arges for these services under these new cost centers on the revised Medicare cost report Form CMS 2552-10. As we discussed in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI also found that the costs and charges of CT scans, MRIs, and car diac catheterization di ffer significantly from the costs and charges of other services include d in the standard associated cost center.

RTI concluded that both the IPPS and the OPPS relative payment weights would betterCMS-1613-P 74

estimate the costs of those services if CMS were to add standard costs centers for CT scans, MRIs, and cardiac catheterization in or der for hospitals to report separately the costs and charges for those services and in order for CMS to calculate unique CCRs 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 co st centers for CT scans, MRIs, and cardiac

catheterization. The new standard cost centers for CT scan s, MRIs, and cardiac

catheterization were effective for cost re port periods beginning on or after May 1, 2010, on the revised cost report Form CMS-2552-10. Using the December 2013 HCRIS update which we used to estimate costs in the CY 2015 OPPS ratesetting process, we were able to calculat e a valid implantable device CCR for 2,895 hospitals, a valid MRI CCR for 1,886 hospitals, a valid CT scan CCR for 1,976 hospitals, and a valid Cardiac Ca theterization CCR for 1,364 hospitals. In our CY 2014 OPPS/ASC proposed rule discussion (78 FR 43549), we noted that, for CY 2014, the estimated changes in geometric mean estimated APC cost of using

data from the new standard cost centers for CT scans and MRIs appeared consistent with RTI’s analysis of cost report and claims data in the July 2008 final report (pages 5 and 6). RTI concluded that “in hospitals that aggreg ate data for CT scanning, MRI, or nuclear

medicine services with the standard lin e for Diagnostic Radiology, costs for these services all appear substantia lly overstated, while the costs for plain films, ultrasound and other imaging procedures are correspondingly un derstated.” We also noted that there were limited additional impacts in the impl antable device-related APCs from adoptingCMS-1613-P 75 the new cost report Form CMS 2552-10 because we had used data from the standard cost center for implantable medical devices beginning in CY 2013 OPPS ratesetting, as

discussed above. As we indicated in prior rulema king (77 FR 68223 through 68225), once we determined that cost report data for the ne w standard cost centers were sufficiently available, we would analyze that data and, if appropriate, we would propose to use the

distinct CCRs for new standard cost centers described abov e in the calculation of the OPPS relative payment weights. As stat ed in the CY 2014 OPPS/ASC proposed rule (78 FR 43550), we have conducted our analysis and concluded that we should develop

distinct CCRs for each of the new cost centers and use them in ratese tting. Therefore, we began in the CY 2014 OPPS, and are proposing to continue for the CY 2015 OPPS, to calculate the OPPS relative payment wei ghts using distinct CCRs for cardiac catheterization, CT scan, MRI, and implantable medical devices. Section XXIII. of this proposed rule includes the impacts of calculating the pr oposed CY 2015 OPPS relative payment weights using these ne w standard cost centers.

TABLE 2.—CCR STATISTICAL VALUES BASED ON USE OF DIFFERENT COST ALLOCATION METHODS

CT MRI Cost Allocation Method Median CCR Mean CCR Median CCR Mean CCR All Providers 0.0480 0.0620 0.0918 0.1164 Square Feet Only 0.0383 0.0503 0.0793 0.1036 Direct Assign 0.0683 0.0761 0.1069 0.1312 Dollar Value 0.0584 0.0739 0.1055 0.1299 Direct Assign and Dollar Value 0.0584 0.0738 0.1053 0.1294CMS-1613-P 76

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74847), we finalized a policy to remove claims from provi ders that use a cost allocation method of “square feet” to calculate CCRs used to esti mate costs associated with the CT and MRI APCs. This change allows hospitals additional time to use one of the more accurate cost allocation methods, and thereby improve the accuracy of the CCRs on which the OPPS relative payment weights are developed. As part of this transitional policy to estimate the CT and MRI APC relative payment weights usi ng only cost data from providers that do not use “square feet” as the cost allocation statistic, we stated in the CY 2014 OPPS/ASC final rule with comment period that we will s unset this policy in 4 years once the updated cost report data become available for rateset ting purposes. We stated that we believe that 4 years is sufficient time for hospitals that have not done so to transition to a more

accurate cost allocation method and for the related data to be available for ratesetting purposes. Therefore, in CY 2018, we w ill estimate the CT and MRI APC relative payment weights using cost data from all providers, regardless of the cost allocation statistic employed.CMS-1613-P 77

TABLE 3.—PERCENTAGE CHANGE IN ESTIMATED COST FOR CT AND MRI APCs WHEN EXCLUDING CL AIMS FROM PROVIDERS USING “SQUARE FEET” AS THE CO ST ALLOCATION METHOD Proposed CY 2015

APC Proposed CY 2015 APC Descriptor Percent Change 0283 Computed Tomography with Contrast 9.3%

0284 Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast 4.2% 0331 Combined Abdomen and Pelvis CT without Contrast 12.0% 0332 Computed Tomography without Contrast 14.1%

0333 Computed Tomography wit hout Contrast followed by Contrast 12.1% 0334 Combined Abdomen and Pelvis CT with Contrast 10.1%

0336 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast 7.4%

0337 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast f 6.0% 0383 Cardiac Computed Tomographic Imaging 4.3% 0662 CT Angiography 10.3% 8005 CT and CTA without Contrast Composite 12.7% 8006 CT and CTA with Contrast Composite 9.2% 8007 MRI and MRA without Contrast Composite 6.3% 8008 MRI and MRA with Contrast Composite 6.3%CMS-1613-P 78

In summary, we are proposing to con tinue using data from the “Implantable Devices Charged to Patients” and “Cardiac Cathet erization” cost centers to create distinct CCRs for use in calculating the OPPS relativ e payment weights for the CY 2015 OPPS. For the “Magnetic Resonance Imaging (MR I)” and “Computed Tomography (CT) Scan” APCs identified in Table 3 of this proposed rule, we are proposing to continue our policy of removing claims from cost modeling for thos e providers using “square feet” as the cost

allocation statistic for the CY 2015 OPPS. 2. Proposed Data Development Process and Ca lculation of Costs Used for Ratesetting In this section of this pr oposed rule, we discuss the us e of claims to calculate the proposed OPPS payment rates for CY 2015. The Hospital OPPS page on the CMS Web site on which this proposed rule is posted ( http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/index.html ) provides an accounting of claims used in the development of the proposed payment rates. That accounting provides additional detail regarding the number of claims derived at each stage of the process. In addition, below in this section we discuss the file of claims that comprises the data set that is available for purchase under a CMS data use agreement. The CMS Web site,http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html , includes information about purchasing the “OPPS Limited Data Set,” which now include s the additional variables previously available only in the OPPS Id entifiable Data Set, includi ng ICD-9-CM diagnosis codesCMS-1613-P 79 and revenue code payment amounts. This file is derived from the CY 2013 claims that

were used to calculate the proposed payment rates for the CY 2015 OPPS. In the history of the OPPS, we have traditionally established the scaled relative weights on which payments are based using APC median costs, which is a process

described in the CY 2012 OPPS/ASC final ru le with comment period (76 FR 74188). However, as discussed in more detail in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we finalized the use of geometric mean costs to calculate the relative weights on which the CY 2013 OPPS payment rates were based. While this po licy changed the cost metric on which the relative payments are based, the data proce ss in general remained the same, under the methodologies that we used to obtain appr opriate claims data and accurate cost information in determining estimated servic e cost. For CY 2015, we are proposing to continue to use geometric mean costs to calculate the relative weights on which the proposed CY 2015 OPPS payments rates are based. We used the methodology described in s ections II.A.2.a. throu gh II.A.2.f. of this proposed rule to calculate the costs we used to establish the pr oposed relative weights used in calculating the proposed OPPS paym ent rates for CY 2015 shown in Addenda A and B to this proposed rule (w hich are available via the Inte rnet on the CMS Web site). We refer readers to section II.A.4. of this pr oposed rule for a discussion of the conversion of APC costs to scaled payment weights.CMS-1613-P 80 a. Claims Preparation For this proposed rule, we used the CY 2013 hospital outpatient claims processed through December 31, 2013, to calculate the geom etric mean costs of APCs that underpin the proposed relative payment weights for CY 2015. To begin the calculation of the proposed relative payment weights for CY 2015, we pulled all claims for outpatient

services furnished in CY 2013 from the nationa l claims history file. This is not the population of claims paid under the OPPS, but all outpatient claims (including, for example, critical access hospital (CAH) claims and hospital claims for clinical laboratory tests for persons who are neither inpati ents nor outpatients of the hospital). We then excluded claims with condition codes 04, 20, 21, and 77 because these are claims that providers submitted to Me dicare knowing that no payment would be made. For example, providers submit claims w ith a condition code 21 to elicit an official

denial notice from Medicare and document th at a service is not covered. We then

excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Mari ana Islands because hospitals in those geographic areas are not paid under the OPPS, and, therefore, we do not use claims for services furnished in these areas in ratesetting. We divided the remaining claims into the three groups shown below. Groups 2 and 3 comprise the 119 million claims that contain hosp ital bill types paid

under the OPPS. 1. Claims that were not bill types 12 X (Hospital Inpatient (Medicare Part B only)), 13X (Hospital Outpatient), 14X (H ospital--Laboratory Services Provided toCMS-1613-P 81 Nonpatients), or 76X (Clinic--Community Mental Health Center). Other bill types are not paid under the OPPS; therefore, these claims were not used to set OPPS payment. 2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 13X are hospital outpatient claims. Claims w ith bill type 14X are laboratory specimen

claims. 3. Claims that were bill type 76X (CMHC). To convert charges on the claims to estimated cost, we multiplied the charges on each claim by the appropriate hos pital-specific CCR associated with the revenue code 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-inclus ive rate; those from hospitals with obviously erroneous CCRs (greater than 90 or less th an 0.0001); and those from hospita ls with overall ancillary

CCRs that were identified as outliers (that exceeded +/-3 st andard deviations from the geometric mean after removi ng error CCRs). In addition, we trimmed the CCRs at the cost center (that is, depart mental) level by removing the CCRs for each cost center as outliers if they exceeded +/- 3 standard devia tions from the geometric mean. We used a four-tiered hierarchy of cost center CCRs, which is the revenue code-to-cost center crosswalk, to match a cost center to ever y possible revenue code appearing in the outpatient claims that is re levant to OPPS services, with the top tier being the most common cost center and the last tier being th e default CCR. If a hospital’s cost center CCR was deleted by trimming, we set the CCR for th at cost center to “missing” so thatCMS-1613-P 82

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 questi on as the default CCR. For example, if a visit was reported under the clinic revenue code but the hospital did not have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the clinic revenue code.

The revenue code-to-cost center crosswalk is available for inspection on the CMS Web

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

. Revenue codes that we do not use in establishing relative costs or to model impacts are identified with an “N” in the revenue

code-to-cost center crosswalk. We applied the CCRs as described above to claims with bill type 12X, 13X, or 14X, excluding all claims from CAHs and hospi tals in Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the Northern Ma riana Islands and claims from all hospitals for which CCRs were flagged as invalid.

We identified claims with condition code 41 as partial hospitalization services of hospitals and moved them to another file. We note that the separate file containing partial hospitalization claims is included in the files that are available for purchase as

discussed above.

We then excluded claims without a HC PCS code. We moved to another file claims that contained only influenza a nd pneumococcal pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at reasona ble cost; therefore, these claims are not

used to set OPPS rates.CMS-1613-P 83 We next copied line-item costs for drugs, blood, and brachytherapy sources to a separate file (the lines stay on the claim, but are copied ont o another file). No claims were deleted when we copied these lines onto another file. These line-items are used to calculate a per unit arithmetic and geometri c mean and median cost and a per day arithmetic and geometric mean and medi an cost for drugs and nonimplantable biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well as other information used to set payment ra tes, such as a unit-to-day ratio for drugs. Prior to CY 2013, our payment policy fo r nonpass-through separately paid drugs and biologicals was based on a redistribut ion methodology that accounted for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. This methodology typically would have required us to reduce the cost associated with packaged coded and uncoded drugs in order to allocate that cost. However, for CY 2013, we paid for separately payable drugs and biologicals under the O PPS at ASP+6 percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not redistribute th e pharmacy overhead costs from packaged drugs to separately paid drugs. For the CY 2014 OPPS, we continued the CY 2013 payment policy for separately payable drugs and biologicals, and we are proposing to continue this payment policy for CY 2015. We refer readers to section V.B.3. of this proposed rule for a complete discussion of our CY 2015 proposed payment policy for separately paid drugs and biologicals.

We then removed line-items that we re not paid during claim processing, presumably for a line-item rejection or de nial. The number of edits for valid OPPSCMS-1613-P 84 payment in the Integrated Outpatient C ode Editor (I/OCE) and elsewhere has grown significantly in the past few years, especially with the implementation of the full spectrum of National Correct Codi ng Initiative (NCCI) edits. To ensure that we are using valid claims that represent the cost of payabl e services to set payment rates, we removed

line-items with an OPPS status indicator that were not paid during claims processing in the claim year, but have a status indicator of “S,” “T,” and “V” in the prospective year’s payment system. This logic preserves charges for services that woul d not have been paid in the claim year but for which some estimate of cost is needed for the prospective year, such as services newly removed from the inpatient list for CY 2014 that were assigned status indicator “C” in the claim year. It al so 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 sa me claim or the code otherwise violates claims processing edits. For CY 2015, we are proposing to con tinue the policy we implemented for

CY 2013 and CY 2014 to exclude line-item da ta for pass-through dr ugs and biologicals (status indicator “G” for CY 2013) and nonpa ss-through drugs and biologicals (status indicator “K” for CY 2013) where the char ges reported on the clai m for the line were either denied or rejected during claims pro cessing. Removing lines that were eligible for payment but were not paid ensures that we ar e 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 pa yment. For example, editsCMS-1613-P 85 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 likel y 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 2014 O PPS/ASC final rule with comment period (78 FR 74849) of line-items with a status indica tor of “S,” “T,” “V,” or “X,” we believe that unpaid line-items represent services that are invalidly re ported and, therefore, should not be used for ratesetting. We believe that removing lines with va lid status indicators that were edited and not paid during claims processing increase s the accuracy of the data used for ratesetting purposes. For the CY 2015 OPPS, as part of our pr oposal to continue packaging clinical diagnostic laboratory tests, we also are pr oposing to apply the line item trim to these services if they did not receive payment in the claims year. Removing these lines ensures that, in establishing the CY 2015 OPPS rela tive payments weights, we appropriately

allocate the costs associated with packaging these services. b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims (1) Splitting Claims For the CY 2015 OPPS, we then split the remaining claims into five groups: single majors; multiple majors; single minors; multiple minors; and other claims. (Specific definitions of these groups are presented below.) We note that, under the proposed CY 2015 OPPS packaging policy, we ar e proposing to delete status indicator

“X” and revise the title and desc ription of status indicator “Q1” to reflect that deletion, as

discussed in sections II.A.3. and XI. of this proposed rule. We note that we also areCMS-1613-P 86 proposing to create status indicator “J1” to reflect the comprehensive APCs discussed in section II.A.2.e. of this proposed rule. Fo r CY 2015, we are proposing to define major procedures as any HCPCS code having a status i ndicator of “J1,” “S,” “T,” or “V”; define minor procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; and classify “other” procedures as any code having a status indicator other than one that we have classified as majo r or minor. For CY 2015, we are proposing to continue to assign status i ndicator “R” to blood and blood pr oducts; status indicator “U” to brachytherapy sources; status indicator “Q1” to all “STV-pac kaged codes”; status indicator “Q2” to all “T-packaged codes”; and status indicator “Q3” to all codes that may be paid through a composite APC based on composite-specific criteria or paid separately through single code APCs when the criteria are not met.

As discussed in the CY 2009 OPPS/AS C final rule with comment period (73 FR 68709), we established status indicato rs “Q1,” “Q2,” and “Q3” to facilitate

identification of the different categories of codes. We are proposing to treat these codes in the same manner for data purposes for CY 2015 as we have treated them since CY 2008. Specifically, we are continuing to ev aluate whether the criteria for separate payment of codes with status indicator “Q1” or “Q2” are met in determining whether they are treated as major or minor codes. Code s with status indicato r “Q1” or “Q2” are carried through the data either w ith status indicator “N” as p ackaged or, if they meet the criteria for separate payment, they are given the status indicator of the APC to which they are assigned and are considered as “pseudo” si ngle procedure claims for major codes. Codes assigned status indicator “Q3” are paid under individual APCs unless they occur inCMS-1613-P 87 the combinations that qualify for payment as composite APCs and, therefore, they carry

the status indicator of the individual APC to which they are assigned through the data process and are treated as major codes duri ng both the split and “p seudo” single creation process. The calculation of the geometric mean costs for composite APCs from multiple procedure major claims is discussed in section II.A.2.f. of this proposed rule. Specifically, we are proposing to divide the remaining claims into the following five groups: 1. Single Procedure Major Claims: Cl aims with a single separately payable procedure (that is, status indicator “S,” “T ,” or “V” which includes codes with status indicator “Q3”); claims with status indicat or “J1,” which receive special processing for comprehensive APCs, as discussed in section II.A.2.e. of this proposed rule; claims with one unit of a status indicator “Q1” code (“ STV-packaged”) where there was no code with status indicator “S,” “T,” or “V” on the same claim on the same date; or claims with one unit of a status indicator “Q2” code (“T- packaged”) where there was no code with a

status indicator “T” on the sa me claim on the same date. 2. Multiple Procedure Major Claims: Cl aims with more than one separately payable procedure (that is, stat us indicator “S,” “T,” or “V ” which includes codes with status indicator “Q3”), or multiple units of one payable procedure. These claims include

those codes with a status indicator “Q2” code (“T-packaged”) where there was no procedure with a status indicator “T” on the same claim on the same date of service but where there was another separately paid proc edure on the same claim with the same date of service (that is, another code with status indicator “S” or “V ”). We also include in thisCMS-1613-P 88

set claims that contained one unit of one c ode 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: Clai ms with a single HCPCS code that was assigned status indicator “F,” “G,” “H,” “K ,” “L,” “R,” “U,” or “N” and not status indicator “Q1” (“STV-packaged”) or stat us indicator “Q2” (“T-packaged”) code. 4. Multiple Procedure Minor Claims: Claims with multiple HCPCS codes that are assigned status indicator “F ,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; claims that

contain more than one code with status indi cator “Q1” (“STV-packaged”) or more than one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” or “V” on the same date of service; or claims that contain more than one code with status indicator “Q2” (T-packaged), or “Q2” and “Q 1,” 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 c ontain no services pa yable under the OPPS (that is, all status indicators other than thos e listed for major or minor status). These

claims were excluded from the files used for the OPPS. Non-OPPS claims have codes paid under other fee schedules, for example, durable medical equipment, and do not contain a code for a separately payable or packaged OPPS service. Non-OPPS claims include claims for therapy services paid sometimes under the OPPS but billed, in these non-OPPS cases, with revenue code s indicating that the therapy services would be paid under the Medicare Physician Fee Schedule (MPFS).CMS-1613-P 89 The claims listed in numbers 1, 2, 3, and 4 above are included in the data file that can be purchased as described above. Clai ms that contain codes to which we have assigned status indicators “Q1” (“STV-packag ed”) and “Q2” (“T-packaged”) appear in the data for the single major file, the multiple major file, and the multiple minor file used for ratesetting. Claims that contain codes to which we have assi gned status indicator “Q3” (composite APC members) appear in both the data of the single and multiple major files used in this propose d rule, depending on the specifi c composite ca lculation. (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 clai ms for dates of service to determine if we could break them into “pseudo” single procedur e claims using the dates of service for all

lines on the claim. If we c ould create claims with single major procedures by using dates of service, we created a single procedure claim record for each separately payable procedure on a different date of service (that is, a “pseudo” single procedure claim). We also are proposing to use the bypa ss codes listed in Addendum N to this proposed rule (which is available via the Internet on our Web site) and discussed in section II.A.1.b. of this proposed rule to remove separately payable procedures which we determined contained limited or no packaged costs or that were otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As discussed above, we ignore the “overlap bypass codes,” that is , those HCPCS codes that are both on the bypass list and are members of the multiple imaging composite APCs, in this initialCMS-1613-P 90 assessment for “pseudo” single procedure claims. The proposed CY 2015 “overlap bypass codes” are listed in Adde ndum N to this proposed rule (which is available via the Internet on the CMS Web site). When one of the two separately payable procedures on a multiple procedure claim was on the bypass li st, 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 pr ocedure (but no bypass code) retained the packaged revenue code charges and the p ackaged 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 divi ding the cost for the multiple units by the

number of units on the line. If one unit of a single, separately payable procedure code

remained on the claim after removal of the multiple units of the bypass code, we created a “pseudo” single procedure claim from that residual claim record, which retained the costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use claims that would otherwise be multiple procedure claims and could not be used.

We then assessed the claims to determin e if the proposed crit eria for the multiple imaging composite APCs, discussed in secti on II.A.2.f.(5) of this proposed rule, were met. If the criteria for the imaging composite APCs were met, we created a “single session” claim for the applicable imaging co mposite 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 pack aged and, if so, the code ceased to be available for furtherCMS-1613-P 91 assessment as part of the composite APC. Because the packaged code would not be a separately payable procedure, we considered it to be unavailable fo r use in setting the composite APC costs on which the proposed CY 2015 OPPS relative payment weights are based. Having identified “single session” claims for the imaging composite APCs, we reassessed the claim to determine if, after removal of all lines for bypass codes, including the “overlap bypass c odes,” a single unit of a sing le separately payable code remained on the claim. If so, we attributed the packaged costs on the claim to the single unit of the single remaining separately payable code other than the bypass code to create a “pseudo” single procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” single procedure claim. This allowed us to use more claims data for ratesetting purposes. We also are proposing to examine the multiple procedure minor claims to determine whether we could create “pseudo” single procedure claims. Specifically, where the claim contained multiple codes withstatus indicator “Q1” (“STV-packaged”) on the same date of service or contained multiple units of a single code with status indicator “Q1,” we selected the status indi cator “Q1” HCPCS code that had the highest CY 2014 relative payment weight, and set the units to one on that HCPCS code to reflect our policy of paying only one unit of a code w ith a status indicator of “Q1.” We then packaged all costs for the following into a sing le cost for the “Q1” HCPCS code that had the highest CY 2014 relative payment weight to create a “pseudo” si ngle procedure claim

for that code: additional units of the status indicator “Q1” HCPCS code with the highest CY 2014 relative payment weight; other codes wi th status indicator “Q1”; and all otherCMS-1613-P 92 packaged HCPCS codes and packaged revenue code costs. We changed the status

indicator for the selected code from the data st atus indicator of “N” to the status indicator of the APC to which the selected procedure was assigned for furthe r data processing and considered this claim as a major procedure clai m. We used this claim in the calculation of the APC geometric mean cost for th e status indicator “Q1” HCPCS code. Similarly, if a multiple procedure minor claim contained multiple codes with status indicator “Q2” (“T-packaged”) or mu ltiple units of a single code with status indicator “Q2,” we selected the status indi cator “Q2” HCPCS code that had the highest CY 2014 relative payment weight and set the uni ts to one on that HCPCS code to reflect our policy of paying only one unit of a code w ith a status indicator of “Q2.” We then packaged all costs for the following into a sing le cost for the “Q2” HCPCS code that had the highest CY 2014 relative payment weight to create a “pseudo” si ngle procedure claim

for that code: additional units of the status indicator “Q2” HCPCS code with the highest CY 2014 relative payment weight; other codes with status indicator “Q2”; and other packaged HCPCS codes and packaged revenue code costs. We changed the status

indicator for the selected code from a data st atus indicator of “N” to the status indicator

of the APC to which the selected code was a ssigned, and we consider ed this claim as a major procedure claim. If a multiple procedure minor claim contai ned multiple codes with status indicator “Q2” (“T-packaged”) and status indicator “Q1” (“STV-packaged”), we selected the T-packaged status indicator “Q2” HCPCS code that had the highest re lative payment weight for CY 2014 and set the units to one on that HCPCS code to reflect our policy ofCMS-1613-P 93 paying only one unit of a code with a status indicator of “Q2.” We then packaged all costs for the following into a single cost for the selected (“T-packaged”) HCPCS code to create a “pseudo” single proce dure claim for that code: ad ditional units of the status indicator “Q2” HCPCS code with the highe st CY 2014 relative pa yment weight; other codes with status indicator “Q2”; codes with status indicator “Q 1” (“STV-packaged”); and other packaged HCPCS codes and packaged revenue code costs. We selected status indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2014 relative payment wei ghts. If a status indicator “Q1” HCPCS code had a higher CY 2014 relative payment we ight, it became the primary code for the simulated single bill process. We changed th e status indicator for the selected status indicator “Q2” (“T-packaged”) code from a da ta status indicator of “N” to the status

indicator of the APC to which the selected code was assigned and we considered this claim as a major procedure claim. We then applied our proposed proce ss 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 cl aims from them, if they met the criteria for single procedure claims. Conditionally pack aged codes are identified using status indicators “Q1” and “Q2,” a nd are described in section XI.A. of this proposed rule. Lastly, we excluded those claims that we were not able to convert to single procedure claims even after applying all of the techniques for creation of “pseudo” single procedure claims to multiple procedure majo r claims and to multiple procedure minor claims. As has been our practice in recent ye ars, we also excluded claims that containedCMS-1613-P 94 codes that were viewed as independently or conditionally bilateral a nd that contained the bilateral modifier (Modifier 50 (Bilateral procedure)) because the line-item cost for the code represented the cost of two units of the procedure, notwithstanding that hospitals

billed the code with a unit of one. We are proposing to continue to apply the methodology described above for the purpose of creating “pseudo” single pro cedure claims for the CY 2015 OPPS. c. Completion of Claim Records and Geometric Mean Cost Calculations (1) General Process We then packaged the costs of pack aged HCPCS codes (codes with status

indicator “N” listed in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) and the costs of those lines for codes w ith status indicator “Q1” or “Q2” when they are not separately paid), and the costs of the services reported under packaged revenue codes in Table 4 be low that appeared on the claim without a HCPCS code into the cost of the single ma jor procedure remaining on the claim. For a more complete discussion of our propos ed CY 2015 OPPS packaging policy, we refer readers to section II.A.3. of this proposed rule.

As noted in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66606), for the CY 2008 OPPS, we adopt ed an APC Panel recommendation that

CMS should review the final lis t of packaged revenue codes for consistency with OPPS policy and ensure that future versions of th e I/OCE edit accordingly. As we have in the past, we are proposing to conti nue to compare the final list of packaged revenue codesCMS-1613-P 95 that we adopt for CY 2015 to the revenue c odes that the I/OCE will package for CY 2015 to ensure consistency. In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we replaced the NUBC standard abbreviations for the revenue codes liste d in Table 2 of the CY 2009 OPPS/ASC proposed rule with the mo st current NUBC descriptions of the revenue code categories and subcategories to better articulate the meanings of the revenue codes without changing the list of revenue codes. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we finalized changes to the packaged revenue code list based on our examination of the updated NUBC codes and public comment on the CY 2010 proposed list of packaged revenue codes. For CY 2015, as we did for CY 2014, we reviewed the changes to revenue codes that were effective during CY 2013 for purposes of determining the charges reported with

revenue codes but without HCPCS codes that we would propose to package for CY 2015. We believe that the charges reported under the revenue codes listed in Table 4 below continue to reflect ancillary and supportive services for which hospitals report charges without HCPCS codes. Therefore, for CY 2015, we are proposing to continue to package

the costs that we derive from the char ges reported without HCPCS codes under the revenue codes displayed in Table 4 below fo r purposes of calculating the geometric mean costs on which the proposed CY 2015 OPPS/ASC payment rates are based.CMS-1613-P 96

TABLE 4.—PROPOSED CY 2015 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 a nd Devices; Non-sterile Supply 0272 Medical/Surgical Supplies and Devices; Sterile Supply 0275 Medical/Surgical Supplies and Devices; Pacemaker 0276 Medical/Surgical Supplies a nd Devices; Intraocular Lens 0278 Medical/Surgical Supplies and Devices; Other Implants 0279 Medical/Surgical Supplies and Devices; Other Supplies/Devices 0280 Oncology; General Classification 0289 Oncology; Other Oncology 0343 Nuclear Medicine; Diagnostic Radiopharmaceuticals 0344 Nuclear Medicine; Therapeutic Radiopharmaceuticals 0370 Anesthesia; General Classification 0371 Anesthesia; Anesthesia Incident to Radiology 0372 Anesthesia; Anesthesia Inci dent to Other DX Services 0379 Anesthesia; Other Anesthesia

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

0392 Administration, Processing and Stor age for Blood and Blood Components; Processing and StorageCMS-1613-P 97

Revenue

Code Description

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

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

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

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

0804 Inpatient Renal Dialysis; Inpatient C ontinuous Cycling Peritoneal Dialysis (CCPD) 0809 Inpatient Renal Dialysis; Other Inpatient Dialysis 0810 Acquisition of Body Component s; General Classification 0819 Acquisition of Body Co mponents; Other Donor 0821 Hemodialysis-Outpatient or Home; He modialysis Composite or Other Rate 0824 Hemodialysis-Outpatient orHome; Maintenance – 100% 0825 Hemodialysis-Outpatient or Home; Support ServicesCMS-1613-P 98

Revenue

Code Description 0829 Hemodialysis-Outpatient or Home; Other OP Hemodialysis

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

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

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

In accordance with our longstanding po licy, 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 after July 1, 2014, the I/OCE assigned packaging flag number 3 to claims on which hospitals submitted token charges less than $1.01 for a serv ice with status indicator “S” or “T” (a major separately payable service under the OPPS) for which the Medicare Administrative Contractor (MAC) was required to allocate the sum of charges for services with a status indicator equaling “S” or “T” based on the re lative payment weight of the APC to which each code was assigned. We do not believe th at 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 paymen t) 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 pro cesses for the CY 2015

OPPS.CMS-1613-P 99 For the remaining claims, we are proposi ng to then standardiz e 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 th at furnished the service and dividing the cost for the separately paid HCPCS code furnishe d by the hospital by that wage index. The claims accounting that we provide for the propo sed and final rule contains the formula we

use to standardize the total cost for the effect s of the wage index. As has been our policy since the inception of the OPPS, we are pr oposing to use the pre-reclassified wage

indices for standardization because we believe that they better reflect the true costs of

items and services in the area in wh ich the hospital is located than the post-reclassification wage indices and, ther efore, would result in the most accurate unadjusted geometric mean costs. We are pr oposing to use these pr e-reclassified wage indices for standardization using the new OM B labor market area delineations described in section II.C. of this proposed rule. In accordance with our longstanding practi ce, we also are proposing to exclude single and “pseudo” single proc edure claims for which the total cost on the claim was outside 3 standard deviations from the geom etric 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 114 m illion claims were left. Using theseCMS-1613-P 100 approximately 114 million claims, we crea ted approximately 94 million single and “pseudo” single procedure claims, of which we used approximately 94 million single bills (after trimming out approximately 1 milli on claims as discussed in section II.A.1.a. of this proposed rule) in the CY 2015 geometri c mean cost development and ratesetting. As discussed above, the OPPS has histor ically developed th e relative weights on which APC payments are based using APC median costs. For the CY 2013 OPPS and the CY 2014 OPPS, we calculated the APC re lative payment weights using geometric mean costs, and we are proposing to do the sa me for CY 2015. Therefore, the following

discussion of the 2 times rule violation a nd the development of the relative payment weight refers to geometric means. For more detail about the CY 2015 OPPS/ASC policy to calculate relative payment weights based on geometric means, we refer readers to

section II.A.2.f. of this proposed rule. We are proposing to use these claims to calculate the CY 2015 geometric mean costs for each separately payable HCPCS code and each APC. The comparison of HCPCS code-specific and APC geometric mean costs determines the applicability of the 2 times rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items and services within an APC group shall not be treated as comparable with respect to the use of resources if the highest median cost (o r mean cost, if elected by the Secretary) for an item or service within the group is more than 2 times greater than the lowest median cost (or mean cost, if so el ected) for an item or service within the same group (the 2 times rule). While we have hist orically applied the 2 times rule based on median costs, in the CY 2013 OPPS/ASC fina l rule with comment period (77 FR 68270),CMS-1613-P 101 as part of the CY 2013 policy to develop th e OPPS relative payment weights based on geometric mean costs, we also applied the 2 times rule based on geometric mean costs. For the CY 2015 OPPS, we are proposing to continue to develop the APC relative payment weights based on geometric mean costs. We note that, for purposes of identifying significant HCPCS codes for examination in the 2 times rule, we consid er codes that have more than 1,000 single major claims or codes that ha ve both greater th an 99 single major claims and contribute at least 2 percent of the singl e major claims used to establish the APC geometric mean cost to be significant. This longstanding de finition of when a HCPC S code is significant for purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims is negligible within the set of approximately 94 million single procedure or single session claims we use for establishing geomet ric mean costs. Similarly, a HCPCS code for which there are fewer than 99 single bills and which comprises le ss than 2 percent of the single major claims within an APC will have a negligible impact on the APC geometric mean. We note that this met hod of identifying significant HCPCS codes within an APC for purposes of the 2 times rule was used in prior years under the median-based cost methodology. Under our proposed CY 2015 policy to continue to base the relative payment weights on geometri c mean costs, we believe that this same consideration for identifying significant HCPCS codes should apply because the principles are consistent w ith their use in the median-based cost methodology. Unlisted

codes are not used in establis hing the percent of claims cont ributing to the APC, nor are

their costs used in the calculation of the AP C geometric mean. Finally, we reviewed theCMS-1613-P 102 geometric mean costs for the services for wh ich we are proposing to pay separately under this proposed rule, and we r eassigned HCPCS codes to different APCs where it was necessary to ensure clini cal and resource homogeneity within the APCs. The APC geometric means were recalculated after we r eassigned the affected HCPCS codes. Both the HCPCS code-specific geometric means a nd the APC geometric means were weighted

to account for the inclusion of multiple units of the bypa ss codes in the creation of “pseudo” single procedure claims. As we discuss in sections II.A.2.d., II.A.2.f ., and VIII.B. of this proposed rule, in some cases, APC geometric mean costs are ca lculated using variations of the process outlined above. Specifically, section II.A.2.d. of this proposed rule addresses the proposed calculation of single APC criteria -based geometric mean costs. Section II.A.2.f. of this proposed rule discusses the proposed calculati on of composite APC criteria-based geometric mean costs. Secti on VIII.B. of this propos ed rule addresses the methodology for calculating the proposed geomet ric mean costs for partial hospitalization

services. (2) Recommendations of the Pa nel Regarding Data Development At the March 2014 meeting of the Pane l, we discussed the claims accounting process for the CY 2014 OPPS final rule, th e final CY 2014 policy of adopting the new standard cost centers for CT, MRI, and cardi ac catheterization in th e new Medicare cost report Form CMS-2552-10, as well as the calcul ation of estimated cost for those APCs.CMS-1613-P 103 At the March 2014 Panel meeting, the Panel made a number of recommendations related to the data process. The Panel’s data-related recommendations and our responses

follow.

Recommendation: The Panel recommends that the work of the Data

Subcommittee continue. CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that CMS provide the Panel with a list

of APCs for which costs fluctu ate by more than 10 percent. CMS Response: We are accepting this recommendation.

Recommendation: The Panel recommends that CMS provide the Panel with data on comprehensive APCs as well as the effect of conditional packaging on visit codes. CMS Response: We are accepting this recommendation. d. Proposed Calculation of Single Procedure APC Criteria-Based costs (1) Device-Dependent APCs Historically, device-dependent APCs are populated by HCPCS codes that usually, but not always, require that a device be implan ted or used to perform the procedure. The standard methodology for calculating device-dep endent APC costs utilizes claims data that generally reflect the full cost of the required device by us ing only the subset of single procedure claims that pass th e procedure-to-device and devi ce-to-procedure edits; do not contain token charges (less than $1.01) for devices; a nd, until January 1, 2014, did not

contain the “FB” modifier si gnifying that the device was fu rnished without cost to the provider, or where a full credit was receive d; and do not contain the “FC” modifierCMS-1613-P 104 signifying that the hospital recei ved partial credit for the device . For a full history of how we have calculated payment rates for device -dependent APCs in previous years and a detailed discussion of how we developed th e standard device-dependent APC ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 through 66742). Overviews of the procedure-to -device edits and device-to-procedure edits used in ratesetting for device-dependent APCs are available in

the CY 2005 OPPS final rule with comment period (69 FR 65761 through 65763) and the

CY 2007 OPPS/ASC final rule with co mment period (71 FR 68070 through 68071). In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74859), we finalized a policy to define 29 de vice-dependent APCs as single complete services and to assign them to comprehensiv e APCs that provide all-inclusive payments for those services, but we delayed impl ementation of this policy until CY 2015 (78 FR 74862). This policy is a further step toward improving the prospective nature of our payments for these services where the co st of the device is relatively high compared

to the other costs that contri bute to the cost of the serv ice. Table 5 of the CY 2014

OPPS/ASC final rule with comm ent period provided a list of the 39 APCs recognized as device-dependent APCs and identified the 29 device-dependent APCs that are converted to comprehensive APCs. In addition, in the CY 2014 OPPS/ASC final rule with comment period we finalized a policy for th e treatment of the remaining 10 devicedependent APCs that applied our standard APC ratesetting methodol ogy to calculate the CY 2014 payment rates for these APCs, but implementation of this policy was also delayed until CY 2015.CMS-1613-P 105 As proposed in the CY 2014 OPPS/AS C proposed rule (78 FR 43556 through 43557), for CY 2015, we are proposing to no long er implement procedure-to-device edits and device-to-procedure edits for any APC. Under this proposed policy, which was

discussed but not finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 74858), hospitals are still e xpected to adhere to the guidelines of correct coding and append the correct device code to the claim, when applicable. However, claims would no longer be returned to providers when specific procedure and device code pairings do not a ppear on a claim. As we stated in both the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 through 748598), we believe that this is appropriate because of the experience hospi tals now have had in coding and reporting these claims fully and, for the more costly devices, the comprehensive APCs will reliably

reflect the cost of the device if it is included anywhere on the claim. Therefore, we do not believe that the burden imposed upon hospita ls to adhere to th e procedure-to-device edits and device-to-procedure edits and the burden imposed upon the Medicare program

to maintain those edits continued to be warra nted. As with all other items and services recognized under the OPPS, we expect hosp itals to code and report their costs appropriately, regardless of whether ther e are claims processing edits in place. The proposed CY 2015 comprehensive APC policy consolidates and restructures the 39 current device-dependent APCs into 26 (of the total 28) comprehensive APCs, which are listed below in Table 5. The compre hensive APC policy is discussed in section II.A.2.e. of this proposed rule. As a resu lt of the proposed CY 2015 comprehensive APCCMS-1613-P 106 policy, device-dependent APCs would no longe r exist in CY 2015 because these APCs will have all been converted to comprehensive APCs. In conjunction with the proposed termination of device-dependent APCs and as discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74857 th rough 74858), we are proposing to no longer use procedure-to-device edits and device-to -procedure edits for any APC because we

continue to believe that the eliminat ion of device-to-procedure edits and procedure-to-device edits is appropriate c onsidering the experien ce that hospitals now have in coding and reporting these claims fu lly and, for the more costly devices, the comprehensive APCs will reliably reflect the cost of the device if it is included anywhere

on the claim. While we believe that device-to-procedur e edits and procedure- to-device edits are no longer necessary, we are sensitive to the conc erns raised by stakeholders in the past

about the costs of devices bei ng reported and captured. In lig ht of these concerns, we are proposing to create claims pr ocessing edits that require any of the device codes used in the previous device-to-procedure edits to be present on the claim whenever a procedure code assigned to any 1 of the 26 propos ed comprehensive APCs (of a total of 28 proposed comprehensive APCs) listed below in Ta ble 5 is reported on the claim to ensure that device costs are captured by hospitals. We expect that hospitals would use an appropriate device code consistent with correct coding in order to ensure that device costs are always reported on the claim, so that cost s are appropriately captured in claims that CMS uses for ratesetting.CMS-1613-P 107 Table 5 below provides a list of the 26 proposed CY 2015 comprehensive APCs, which we previously recognized as device-d ependent APCs for CY 2014. This proposal would result in the term “device-dependent APC” no longer being employed beginning in

CY 2015.CMS-1613-P 108

TABLE 5.—PROPOSED APCs THAT WO ULD REQUIRE A DEVICE CODE TO BE REPORTED ON A CLAIM WHEN A PROCEDURE ASSIGNED TO ONE OF THESE APCs IS REPORTED

APC APC Title 0039 Level III Neurostimulator 0061 Level II Neurostimulator 0083 Level I Endovascular 0084 Level I EP 0085 Level II EP 0086 Level III EP 0089 Level III Pacemaker 0090 Level II Pacemaker 0107 Level I ICD 0108 Level II ICD 0202 Level V Female Reproductive 0227 Implantation of Drug Infusion 0229 Level II Endovascular 0259 Level VII ENT Procedures 0293 Level IV Intraocular 0318 Level IV Neurostimulator 0319 Level III Endovascular 0384 GI Procedures with Stents 0385 Level I Urogenital 0386 Level II Urogenital 0425 Level V Musculoskeletal 0427 Level II Tube/Catheter 0622 Level II Vascular Access 0648 Level IV Breast Surgery 0652 Insertion of IP/Pl. Cath. 0655 Level IV Pacemaker

(2) Blood and Blood Products Since the implementation of the OPPS in A ugust 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 costsCMS-1613-P 109 of blood and blood products, as well as for the co sts of collecting, processing, and storing blood and blood products, are made through the OPPS payments for specific blood product APCs. For CY 2015, we are proposing to continue to establish payment rates for blood and blood products using our blood-specific CCR me thodology, 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 methodolog y 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 hospita ls not reporting a blood-specific cost center

often resulted in an underestimation of the tr ue 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 bl ood-specific CCRs to hospitals’ overall CCRs for those hospitals that do report costs and charges fo r blood cost centers. We would apply this mean ratio to the overall CCRs of hospitals not reporti ng costs and charges for blood cost centers on their cost reports in order to simulate blood-sp ecific CCRs for those hospitals. We are proposing to calculate the costs upon which the proposed CY 2015 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-sp ecific simulated blood-specific CCR for hospitals that did not report costs and charges for a blood cost center.

We continue to believe that the hos pital-specific simulated blood-specific CCR methodology better 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 blood-specific CCR across hospitals. Because this methodology takes into account the uniqueCMS-1613-P 110 charging and cost accounting structure of each hospita l, we believe that it yields more accurate estimated costs for these products. We continue to believe that this methodology in CY 2015 will result in costs for blood and blood products that appropriately reflect the relative estimated costs of these products for hospitals without blood cost centers and, therefore, for these blood products in general. We note that, as discussed in section II.A.2.e. of the CY 2014 OPPS/ASC final rule with comment period and this proposed rule, we estab lished comprehensive APCs that will provide all-inclusive payments for certain device-depende nt procedures. Under this policy, we include the costs of blood and blood products when calcu lating the overall costs of these comprehensive APCs. We are proposing to continue to apply the blood-specific CCR methodology described in this section when calculating the costs of the blood and blood products that appear on claims with services assigned to the comprehensive APCs. Be cause the costs of blood and blood products

would be reflected in the overall costs of th e comprehensive APCs (and, as a result, in the proposed payment rates of the comprehensive AP Cs), we are proposing not to make separate payments for blood and blood products when they appear on the same claims as services assigned to the comprehensive APCs.CMS-1613-P 111 We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for the proposed CY 2015 payment rates for blood and blood products(which are identified with status indicator “R”). For a more detailed discussion of the bloodspecific CCR methodology, we refer readers to the CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66807 through 66810). (3) Brachytherapy Sources Section 1833(t)(2)(H) of the Act mandates the creation of additional groups of

covered OPD services that cla ssify devices of brachytherapy consisting of a seed or seeds (or radioactive source) (“brachytherapy sources”) separately from other services or groups of services. The statut e provides certain criteria fo r the additional groups. For the history of OPPS payment for brachytherapy sour ces, we refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC fina l rule with comment period (77 FR 68240 through 68241). As we have stated in prio r OPPS updates, we believe that adopting the general OPPS prospective payment methodology for brachytherapy sources is appropriate for a number of reasons (77 FR 68240). The general OPPS payment methodology uses 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 pe r source across hospita ls by averaging the extremely high and low values, in contrast to payment based on hospitals’ charges adjusted to cost. We believe that the OPPS prospective payment methodology, as opposed to payment based on hospitals’ charge s adjusted to cost, would also provideCMS-1613-P 112 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. We refer

readers to the CY 2008 OPPS/ ASC final rule with comm ent period (72 FR 66779 through 66787), the CY 2009 OPPS/ASC final rule w ith comment period(73 FR 68668 through 68670, the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533 through 60537), the CY 2011 OPPS/ASC final rule w ith comment period (75 FR 71978 through 71981), and the CY 2012 OPPS/ASC final ru le with comment period (76 FR 74160 through 74163) for further discussion of the history of OPPS payment for brachytherapy

sources. For CY 2015, we are proposing to use the costs derived from CY 2013 claims data to set the proposed CY 2015 payment ra tes for brachytherapy sources, as we are proposing to use to set the proposed payment ra tes for most other items and services that would be paid under the CY 2015 OPPS. We based the proposed payment rates for brachytherapy sources on the geometric mean un it costs for each source, consistent with the methodology proposed for other items and serv ices paid under the OPPS, as discussed in section II.A.2. of this proposed rule. We also are proposing to continue the other payment policies for brachytherapy sources that 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 not otherwise specified (NOS) codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or non-stranded prospective payment rate for such sources, re spectively, on a per source basis (as opposedCMS-1613-P 113 to, for example, a per mCi), which is base d on the policy we established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66785). We also are proposing to continue the policy we first implemented in the CY 2010 OPPS/AS C final rule with comment period (74 FR 60537) regarding paym ent 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 peri od (72 FR 66786; which was delayed until January 1, 2010 by section 142 of Pub. L. 110-275). That policy is intended to enable us to assign new HCPCS codes for new brachyt herapy sources to their own APCs, with prospective payment rates set based on our c onsideration of external data and other relevant information regard ing the expected costs of the sources to hospitals.

We refer readers to Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for th e proposed CY 2015 payment rates for brachytherapy sources, which are identified with status indica tor “U.” We are inviting public comments on this proposed policy a nd requesting recommendations for new HCPCS codes to describe new brachytherapy so urces consisting of a radioactive isotope, including a detailed rationale to su pport recommended new sources. Such

recommendations should be directed to th e Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare and Medica id 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 through our program

transmittals. e. Establishment of Comprehensive APCsCMS-1613-P 114 In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), effective January 1, 2015, we finalized a comprehensive payment policy that bundles or “packages” payment for the most costly medical device implantation procedures under the OPPS at the claim level. We defined a comprehensive APC (C-APC) as a classification for the provision of a primary service and all adjunctive services provided to support the delivery of the primary service. We established comprehensive APCs as a category broadly for OPPS payment and established 29 comprehensive APCs to prospectively pay for 167 of the most costly device-dependent services beginning in CY 2015 (78 FR 74910). Under this policy, we designated each service described by a HCPCS code assigned to a comprehensive APC as the primary service and, with few exceptions, consider all other services reported on a hospital Medicare Part B claim in combination with the primary service to be related to the delivery of the primary service (78 FR 74869). In addition, under this policy, we calculate a single payment for the entire hospital stay, defined by a single claim, regardless of the date of service span. This compre hensive APC packaging policy “packages” payment for all items and servic es typically packaged under the OPPS, but also packages payment for other items and serv ices that are not typically packaged under the OPPS, except in the context of comprehensive APC payments (78 FR 74909). Because of the overall complexity of this new policy and our introduction of complexity adjustments in the CY 2014 OPPS/ ASC final rule with comment period, we modeled the dynamics of the policy as if we were implementing it for CY 2014, but delayed the effective date until January 1, 2015, to allow additional time for analysis,CMS-1613-P 115 opportunity for public comment, and systems prep aration. In this se ction of this CY 2015 OPPS/ASC proposed rule, we review the pol icies finalized in the CY 2014 OPPS/ASC final rule with comment period for comprehe nsive APCs. We then outline our proposed policy for CY 2015, which includes several clar ifications and proposedmodifications in response to public comments received. Finally, we summarize and respond to the public comments we received in response to the comprehensive APC policy outlined in the CY 2014 OPPS/ASC final rule with comment pe riod. In this section, we use the terms “service” and “procedure” interchangeably. (1) Background In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861 through 74910), we finalized a policy with a delayed implementation date of CY 2015, whereby we designated certain covered OPD services as “primary services” (identified by a new OPPS status indicator of “J1”) assigned to comprehensive APCs. When such a primary service is reported on a hosp ital Medicare Part B claim, taking into account the few exceptions that are discussed below, we trea t all other items and services reported on the claim as integral, ancillary, supportive, depe ndent, and adjunctive to the primary service (hereinafter collectively referred to as “adjunctive services”) and representing components of a comprehensive service ( 78 FR 74865). This results in a single prospective payment for the primary, compre hensive service based on the cost of all reported services at the claim level. We onl y exclude charges for services that are not payable under the OPPS, such as certain ma mmography and ambulance services that are

never covered OPD services in accordance with section 1833(t)(1 )(B)(iv) of the Act;CMS-1613-P 116 brachytherapy seeds, which must receive separate payment under section 1833(t)(2)(H) of the Act; pass-through drugs and devices, wh ich also require separate payment under section 1833(t)(6) of the Act; and self-administered drugs (S ADs) that are not otherwise packaged as supplies because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act (78 FR 74865). The ratesetting process set forth in the CY 2014 OPPS/ASC final rule with comment period for the comprehensive AP C payment bundle policy is summarized as follows(78 FR 74887): APC assignment of primary (“J1”) services. During ratesetting, single claims reporting a single procedure described by a HCPC S code assigned to status indicator “J1” are used to establish an APC assignment fo r each procedure described by that HCPCS code. The geometric mean of the total estimated costs on each claim is used to establish resource similarity for each procedure code’s APC assignment and is evaluated within the context of clinical similarity, with assi gnment starting from the APC assignments in effect for the current payment year. Claims reporting multiple procedures described by HCPCS codes assigned to status indicator “J1” are identified and the procedures are then assigned to a comprehensive APC based on the primary HCPCS code that has the highest APC geometric mean cost. This ensures that multiple procedures described by HCPCS codes assigned to status indicator “J1” re ported on claims are al ways paid through and assigned to the comprehensive APC that woul d generate the highest APC payment. If multiple procedures described by HCPCS codes assigned to status indicator “J1” that are reported on the same claim have the same AP C geometric mean estimated cost, as wouldCMS-1613-P 117 be the case when two different procedures described by HCPCS codes assigned to status indicator “J1” are assigned to the same APC, identification of the primary service is then based on the procedure described by the HCPCS code assigned to status indicator “J1” with the highest HCPCS-level geometric mean cost. When there is no claims data available upon which to establish a HCPCS- level comprehensive geometric mean cost, we model a HCPCS-level geometric mean cost for the sole purpose of appropriately assigning the primary service reported on a claim. The comprehensive APC assignment of each procedure described by HCPCS codes a ssigned to status indicator “J1” is then confirmed by verifying that the APC assignm ent remains appropriate when considering the clinical similarity, as well as the estimated cost of all claims reporting each procedure described by HCPCS codes assigned to st atus indicator “J1,” including simple and complex claims, with multiple devi ce-related procedures (78 FR 74887). Complexity adjustments and determi nation of final comprehensive APC groupings. We then considered reassigning comple x subsets of claims for each primary service described by a HCPCS code assigned to status indicator “J1.” All claims reporting more than one procedure descri bed by HCPCS codes assigned to status

indicator “J1” are evaluated for the existe nce of commonly occurr ing combinations of procedure codes reported on claims that ex hibit a materially greater comprehensive geometric mean cost relative to the geometri c mean cost of the claims reporting that primary service. This indicates that the s ubset of procedures id entified by the secondary HCPCS code has increased resource requirement s relative to less complex subsets of that procedure (78 FR 74887). The CY 2014 comple xity adjustment crite ria are as follows:CMS-1613-P 118

● The comprehensive geometric meancost of the claims reporting the combination of procedures was more than two times the comprehensive geometric mean cost of the single major claims reporting only the primary service;

● There were more than 100 claims in th e data year reporting the specific code combination;

● The number of claims reporting the specific code combination exceeded 5 percent of the volume of a ll claims reporting the designa ted primary service; and

● There would be no violation of the “2 times” rule within the receiving comprehensive APC (78 FR 74886). If a combination of procedure codes re ported on claims is identified that meets these requirements, that is, commonly occu rring and exhibiting materially greater resource requirements, the combination of procedure codes is further evaluated to confirm clinical validity as a complex s ubset of the primary procedure and the combination of procedure codes is then identi fied as complex, and primary service claims with that combination of procedure codes are subsequently reassigned as appropriate. If a combination of procedure codes does not m eet the requirement for a materially greater resource requirement or does not occur comm only, the combination of procedure codes is not considered to be complex, and primary service claims with that combination of procedure codes are not reas signed. All combinations of procedures described by HCPCS codes assigned to status indicator “J1” for each primary service are similarly

evaluated. Once all combinati ons of procedures described by HCPCS codes assigned to

status indicator “J1” have b een evaluated, all claims identified for reassignment for eachCMS-1613-P 119 primary service are combined and the group is assigned to a higher level comprehensive APC within a clinical family of comprehensive APCs, that is, an APC with greater estimated resource requirements than the initi ally assigned comprehensive APC and with appropriate clinical homogeneit y. We assessed resource vari ation for reassigned claims within the receiving APC using the geometric m ean cost for all reassigned claims for the primary service relative to other services as signed to that APC using the 2 times rule criteria (78 FR 74887).

For new HCPCS codes and codes without da ta, we use the best data available to us to identify combinations of procedure code s that represent a more complex form of the primary service and warrant reassignment to a higher level APC. We will reevaluate our APC assignments and identification and APC placement of complex claims once claims

data become available. (2) Proposed CY 2015 Policy for Comprehensive APCs (a) Proposed Methodology

After consideration of th e public comments we receive d, which are discussed in detail below, in this section we desc ribe our proposed payment methodology for comprehensive APCs for CY 2015. The basi c steps for calculating the comprehensive APC payments remain the same as those fi nalized in the CY 2014 OPPS/ASC final rule with comment period, except for the complexityadjustment criteria described briefly above (78 FR 74885 through 74888). For CY 20 15, we are proposing to restructure and consolidate some of the current device-depend ent APCs to improve both the resource and clinical homogeneity of these APCs. In a ddition, instead of assi gning any add-on codesCMS-1613-P 120

to status indicator “J1” as finalized in the CY 2014 OPPS/ ASC final rule with comment period (78 FR 74873 through 74883), we are propos ing to package all add-on codes, but to allow certain add-on codes to qualify a pr ocedure code combination for a complexity adjustment. Further, we are proposing to convert all current device-dependent APCs remaining after the proposed restructuring and consolidation of some of these APCs to comprehensive APCs. We also are propos ing two new comprehe nsive APCs, C-APC 0067 for single-session cranial stereotactic radiosurgery (SRS) and C-APC 0351 for intraocular telescope implantation. In addition, we are prop osing to reassign CPT codes 77424 and 77425 that describe intraoperative radiation therapy tr eatment (IORT) to CAPC 0648 (Level IV Breast and Skin Surgery). We discuss in detail below our proposed new complexity adjustment crite ria and our proposal to pack age all add-on codes, but to allow complexity adjustments for qualifying code combinations of primary codes and add-on codes currently assigned to device-intensive comprehensive APCs. The steps are

as follows: Step 1: Select primary (“J1”) services. We continue to believe that the comprehensive packaging of adjunctive serv ices into a primary service will further improve cost validity, payment accuracy, beneficiary transparency, and hospital efficiency (78 FR 74861). As in CY 2014, fo r CY 2015, we are propos ing that services assigned to comprehensive APCs be designate d as primary services for comprehensive APCs, using new status indicat or “J1” as listed in Adde ndum J and Addendum B to this proposed rule (which are available via the In ternet on the CMS Web s ite). We also areCMS-1613-P 121 proposing to package all add-on codes, as di scussed in detail below, and that none of these add-on codes will be considered primary services assigned to status indicator “J1.” Treatment of add-on codes. We are proposing to assign all add-on codes status indicator “N” (unconditionally packaged). Therefore, under this proposal no add-on codes will be assigned to stat us indicator “J1.” However, we are proposing to evaluate a limited set of add-on codes assigned to the current device-dependent APCs, and to

establish that when these add-on codes are re ported in conjunction wi th a primary service a potential complexity adjustment under the pr oposed complexity adjustment criteria may be warranted (discussed further in Step 5 below). Step 2: Definition of the payment package (comprehensive service). We are proposing the following changes to the comp rehensive APCs payment packaging policy for the services that are assigned to status i ndicator “J1” or designated as primary services assigned to a comprehensive APC:

● We are proposing to restructure and c onsolidate the curren t device-dependent APCs, including some procedure code reassi gnments to improve clinical and resource homogeneity;

● We are proposing to package all of the add-on procedure codes, after we review and evaluate add-on codes reported in conjunction with primary “J1” services under the proposed complexity adjustment crite ria for a potential complexity adjustment;

● We are proposing to create more co mprehensive APCs, including converting all device-dependent APCs (including thos e that were not in cluded in the CY 2014CMS-1613-P 122 policy) and to create new comprehensive AP Cs for single session cranial stereotactic radiosurgery and intraocu lar telescope implantation.

As stated in the CY 2014 OPPS/ASC final rule with comment period, we define the comprehensive APC payment packaging policy as including all covered OPD services on a hospital Medicare Part B claim reporting a prim ary service that is assigned to status indicator “J1,” excl uding services that cannot be c overed OPD services or that cannot by statute be paid under the OPPS. Services packaged for payment under the comprehensive APC payment packaging policy, that is, services that are typically integral, ancillary, suppo rtive, dependent, or adjunctive to the primar y service, provided during the delivery of the comprehensive service, include di agnostic procedures, laboratory tests and other diagnos tic tests and treatments that a ssist in the delivery of the primary procedure; visits and evaluations pe rformed in association with the procedure; uncoded services and supplies used during the service; outpatient department services that are similar to therapy and delivered either by therapists or non-therapists as part of the comprehensive service; durable medical e quipment as well as pros thetic and orthotic items and supplies when provided as part of the outpatient service; and any other components reported by HCPCS codes that are provided during the comprehensive service, except excluded services that are described below (78 FR 74865). Items packaged for payment provided in conjunction with the primary service also include all drugs, biologicals, and radiopharmaceuticals, re gardless of cost, except those drugs with pass-through payment status and those drugs that are usually self-administered (SADs), unless they function as packaged supp lies (78 FR 74868 through 74869 and 74909). WeCMS-1613-P 123

refer readers to the Medicare Benefit Polic y Manual, Chapter 15, Covered Medical and Other Health Services, Section 50.2.M, fo r a description of our policy on selfadministered drugs treated as hospital outpatie nt supplies, including lists of SADs that function as supplies and those th at do not function as supplies. Services excluded from the comprehensive APC payment packaging policy are as

follows: SADs that are not considered s upplies, because they are not covered under Medicare Part B under section 1861(s)(2)(B) of the Act; services excluded from the OPPS according to section 1833(t) (1)(B) of the Act in cluding recurring therapy services, which we considered unrelated to the comprehe nsive service (defined as therapy services reported on a separate facility claim for recurring services), ambulance services, diagnostic and screening mammography, the an nual wellness visit providing personalized prevention plan services, and pass-through drugs and devices that are paid according to section 1833(t)(6) of the Act. We also exclude preventive services defined in 42 CFR 410.2, “(1) [t]he specific services listed in section 1861(ww)(2) of the Act, with the explicit exclusion of electrocardiograms; (2) [t]he Initial Preventive Physical Examination (IPPE) (as specified by section 1861(ww)(1) of the Act); and (3) Annual Wellne ss Visit (AWV), providing

Personalized Prevention Plan Services (PPPS) (as specifiedby section 1861(hhh)(1) of the Act).” These preventive services are li sted by their HCPCS codes in Addendum J to this proposed rule and include : annual wellness visits pr oviding personalized prevention plan services; initial preventive physical examinations; pneumococcal, influenza, and hepatitis B vaccines and administrati ons; mammography screenings; pap smearCMS-1613-P 124 screenings and pelvic examina tion screenings; prostate cancer screening tests; colorectal cancer screening tests; diabet es outpatient self-management training services; bone mass measurements; glaucoma screenings; medical nutrition therapy services; cardiovascular screening blood tests; diabetes screening tests; ultrasound scr eenings for abdominal aortic aneurysm; and additional preven tive services as defined in section 1861(ddd)(1) of the

Act. We defined and discussed these services in detail for hospital billing purposes in the

CY 2011 OPPS/ASC final rule with comment period pursuant to coverage and payment provisions in the Affordable Care Act (75 FR 72013 through 72020). This proposed policy is consistent with our policy to exclude preventive services from the proposed ancillary services pack aging policy, will encourage the provision of preventive services, and provi de maximum flexibility to beneficiaries across different sites of service in receiving preventive servi ces. In addition, the statute does not permit assessment of beneficiary cost-sharing for mo st preventive services, and some receive cost-based payment (75 FR 72013 through 72020; 78 FR 74962). While any beneficiary cost-sharing attributable to preventive servi ces, if they were packaged, would be very small in relation to the comprehensive service overall, we believe that we should exclude these services from the OPPS beneficiary copa yment calculations, as discussed in section II.I. of this proposed rule. We note that one preventive servic e (HCPCS code G0102 (Prostate cancer screening; di gital rectal examination)) is proposed for continued packaging under the OPPS in CY 2015, both broadly and in the context of comprehensive services. Currently, this HCPC S code is packaged because it is includedCMS-1613-P 125 in evaluation and management services. We note that beneficiary cost-sharing is not waived for the service described by HCPCS code G0102. Consistent with the policy finalized in the CY 2014 OPPS/ASC final rule with comment period, we exclude brachytherapy serv ices and pass-through drugs, biologicals and devices that are separately payable by statute (78 FR 74868, 74909) . In addition, we exclude services assigned to OPPS status indi cator “F” that are not paid under the OPPS and are instead paid on a reasonable cost basis (certain CRNA services, Hepatitis B vaccines, and corneal tissue acquisition, which is not part of a comprehensive service for CY 2015). In Addendum J to this proposed ru le, we list the HCPCS codes that describe the services proposed for exclusion from the comprehensive APC payment bundling policy.

As we discussed in the CY 2014 OPPS/AS C final rule with comment period, we did not model a budget neutrality adjustment for newly included services that would otherwise be paid under non-OPPS fee schedu les (for example, therapy and DMEPOS) because the policy would not be implemen ted until CY 2015, and the estimated costs were very low (78 FR 74901). We reflect th e inclusion of the propos ed new costs (which remain very low) in our annual adjustme nt for CY 2015 budget neutrality (we refer readers to section XXI. of this proposed rule).CMS-1613-P 126

TABLE 6.—PROPOSED COMPREHENS IVE APC PAYMENT BUNDLING POLICY EXCLUSIONS FOR CY 2015

Ambulance services Brachytherapy Diagnostic and mamm ography screenings Physical therapy, speech-la nguage pathology and occupation al therapy services - Therapy services reported on a separate facility claim for recurring services Pass-through drugs, bi ologicals and devices Preventive services defined in 42 CFR 410.2: • Annual wellness visits providing pers onalized prevention plan services • Initial preventive physical examinations • Pneumococcal, influenza, and hepati tis B vaccines and administrations • Mammography Screenings • Pap smear screenings and pelv ic examination screenings • Prostate cancer screening tests • Colorectal cancer screening tests • Diabetes outpatient self-management training services • Bone mass measurements • Glaucoma screenings • Medical nutrition th erapy services • Cardiovascular screening blood tests • Diabetes screening tests • Ultrasound screenings for abdominal aortic aneurysm • Additional preventive services (as defi ned in section 1861(ddd)(1) of the Act) Self-administered drugs - Drugs that are us ually self-administered and do not function as supplies in the provision of the comprehensive service Services assigned to OPPS st atus indicator “F” (Certain CRNA services, Hepatitis B vaccines and corneal tissue acquisition) Services assigned to OPPS status indi cator “L” (Influenza and pneumococcal pneumonia vaccines) Certain Part B inpatient serv ices – Ancillary Part B inpa tient services payable under Part B when the primary “J1” service for th e claim is not a payable Part B inpatient service (for example, exhausted Medicare Pa rt A benefits, benefi ciaries with Part B only)

Step 3: Ranking of primary services initial comprehensive APC assignments. We are proposing to continue to define each hospi tal Medicare Part B cl aim reporting a single unit of a single primary service assigned to status indicator “J1” (approximately 80CMS-1613-P 127 percent of the CY 2013 claims) as a single major procedure claim (78 FR 74871). We would sum all line item charges for serv ices included in the comprehensive APC payment, convert the charges to costs, and calculate the “comprehensive” geometric mean cost of one unit of each service assigned to status indicator “J 1.” (We note that we use the term “comprehensive” to describe th e geometric mean cost of a claim reporting “J1” service(s) or the geometric mean cost of a comprehensive APC, inclusive of all of the items and services in the comprehensiv e APC payment bundle). Charges for services that would otherwise have been separately payable subject to longstanding adjustments, including the multiple procedure reduction (for example, HCPCS codes assigned to status indicators “A,” “S,” “T,” or “V”) would be added to the charges for the primary service. This process differs from our traditiona l cost accounting methodology only in that all such services on the claim are packaged (excep t certain services as described above). We would apply our standard data trim, excluding claims with extremely high primary units

or extreme costs. The comprehensive geometric mean costs ar e used to establish resource similarity and, along with clinical similarity, dictate th e assignment of the primary services to the comprehensive APCs. We are proposing to establish a ranking of each primary service (single unit only) assigned to status indicator “J1” according to their comprehensive geometric mean costs. For CY 2015, we are proposing not to assi gn any add-on codes to

status indicator “J1” because th ey are proposed to be packaged. For the minority of claims reporting more than one primary service assigned to status indicator “J1” or units thereof (appr oximately 20 percent of CY 2013 claims), weCMS-1613-P 128 are proposing to continue to id entify one “J1” service as the primary service for the claim based on our cost-based ranking of primary services. We then assign these multiple “J1” procedure claims to the comprehensive APC to which the service designated as the primary service is assigned. If the reporte d “J1” services reported on a claim map to different comprehensive APCs, we designa te the “J1” service assigned to the comprehensive APC with the highest comprehe nsive geometric mean cost as the primary service for that claim. If the reported multip le “J1” services on a claim map to the same comprehensive APC, we designate the most cost ly service as the primary service for that claim. This process results in initial assi gnments of claims for the primary services assigned to status indicator “J1” to the most appropriate comprehensive APCs based on both single and multiple procedure claims re porting these services and clinical and resource homogeneity. Step 4 - Complexity adjustments and de termination of final comprehensive APC groupings. We are proposing to use the proposed complexity adjustments to provide increased payment for certain comprehensiv e services. We are proposing to apply a complexity adjustment by promoting qualifying “J1” service code combinations or code

combinations of a “J1” services and certainadd-on codes (as described further below) from the originating comprehensive APC (the comprehensive APC to which the designated primary service is first assigned) to a higher paying comprehensive APC in the same clinical family of comprehensive APCs , if reassignment is clinically appropriate and the reassignment would not create a 2 times rule violation in th e receiving APC (the higher paying comprehensive APC in the same clinical family of comprehensive APCs).CMS-1613-P 129 We are proposing to implement this type of complexity adjustment when the code combination represents a complex, costly form or version of the primary service according to the following criteria:

● Frequency of 25 or more claims re porting the code combination (frequency threshold); and

● Violation of the 2 times rule, that is, the comprehensive geometric mean cost of the complex code combination exceeds the comprehensive geometric mean cost of the lowest significant HCPCS code assigned to the comprehensive APC (cost threshold). After designating a singl e primary service for a claim, we are proposing to

evaluate that service in co mbination with each of the ot her procedure codes reported on the claim assigned to status indicator “J1” (o r certain add-on codes) to determine if they meet the complexity adjustment criteria. For new HCPCS codes, we are proposing to determine initial comprehensive APC assignmen ts and complexity adjustments using the best data available, mapping the new HC PCS codes to predecessor codes wherever possible. Once we have determined that a particular code combination of “J1” services (or combinations of “J1” services reported in conjunction with certain add-on codes) represents a complex version of the primary service because it is sufficiently costly, frequent, and a subset of the primary comprehensive service overall according to the criteria described above, we are proposing to promote the co mplex version of the primary service as described by the code combination to the next higher cost comprehensive APC within the clinical family, unless the APC rea ssignment is not clini cally appropriate, theCMS-1613-P 130 reassignment would create a 2 times rule viola tion in the receiving APC, or the primary service is already assigned to the highest cost APC within the comprehensive APC clinical family. We are not proposing to create new APCs with a geometric mean cost that is higher than the highest cost compre hensive APC in a clinical family just to accommodate potential complexity adjustments. Therefore, the highest payment for any code combination for services assigned to a comprehensive APC will be the highest paying comprehensive APC in the clinical family. As discussed below, we are proposing thatadd-on codes reported in conjunction

with a “J1” service would r eceive complexity adjustments when a qualifying add-on code is reported in conjunction with the primary service assigned to stat us indicator “J1” and

satisfies the criteria described a bove for a complexity adjustment ( ≥ 25 claims with the

code combination and no violations of the 2 times rule). Any combinations of HCPCS codes that fail to meet the proposed complex ity adjustment criteria (frequency and cost thresholds) would not be identified as co mplex subsets of the primary procedure and would not be reassigned to a higher paying co mprehensive APC within the same clinical family of comprehensive APCs. We are pr oviding the proposed lis t of qualifying code combinations (including add-on codes) in Adde ndum J to this proposed rule (which is available via the Internet on the CMS Web site). Complexity Test for Eligible Add-On Codes. We are proposing to package all add-on codes into the payment for the compre hensive APC. However, add-on codes that are assigned to the current device-dependent AP Cs listed in Table 5 of this proposed rule will be evaluated for a possible complexity adjustment when they are reported inCMS-1613-P 131 conjunction with a designated primary service assigned to status indicator “J1.” We are proposing to only evaluate the add-on c odes that are assigned to the current device-dependent APCs for potential complex ity adjustments because we believe that, in certain cases, these procedure codes may re present services with additional medical

device costs that result in significantly more complex a nd costly procedures. To determine which combinations of primary serv ice codes reported in conjunction with the add-on code may qualify for a complexity ad justment for CY 2015, we are proposing to apply the proposed frequency and cost criteria discussed above (25 or more claims and no “2 times” rule violations), testing claims reporting one unit of a single primary service assigned to status indicator “J 1” and any number of units of a single add-on code. If the frequency and cost criteria for a complexity adjustment are met, and reassignment to the next higher cost APC in the clinical familyis appropriate, we are proposing to make a complexity adjustment for the code combinati on; that is, we are pr oposing to reassign the primary service code reported in conjuncti on with the add-on code combination to a higher cost comprehensive APC within the same clinical family of comprehensive APCs. If any add-on code combination reported in conjunction with the primary service code does not qualify for a complexity adjustment, payment for these services will be packaged. We are listing the complexity adjustments proposed for add-on code

combinations for CY 2015, along with all of the other pr oposed complexity adjustments, in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site). One primary service code and a dd-on code combination (CPT code 37225 and 37233) that satisfied the frequency and cost criteria is not being proposed for aCMS-1613-P 132 complexity adjustment because we believe that these claims are miscoded. Of the 35 qualifying claims reporting this code comb ination, only three claims contained the appropriate base code (CPT c ode 37228) for CPT add-on code 37233. We note that, in response to public comments received, we are providing in Addendum J to this proposed rule a br eakdown of cost statistics for each code combination that would qualify for a complex ity adjustment (including primary code and add-on code combinations). Addendum J to this proposed rule also contains summary

cost statistics for each of the code combin ations proposed to be reassigned under a given primary code. The combined statistics for all proposed reassigned complex code combinations are represented by an alphanumeric code with the last 4 digits of the designated primary service followed by “A” (indi cating “adjustment”). For example, the geometric mean cost listed in Addendum J for the code combination described by CPT code 33208A assigned to C-APC 0655 includes a ll code combinations that are proposed to be reassigned to C-APC 0655 when CPT code 33208 is the primary code. Providing

the information contained in Addendum J in this proposed rule will allow stakeholders the opportunity to better assess the impact a ssociated with the proposed reassignment of each of the code combinations elig ible for a complexity adjustment. (b) Additional Proposed Comprehensive APCs

Several commenters to the CY 2014 OPPS/ASC proposed ru le questioned why we only converted a subset of the device- dependent APCs to comprehensive APCs (78 FR 74864). We responded that while we were initially adopting a subset of the most costly device-dependent services, we may extend comprehensive payments to otherCMS-1613-P 133 procedures in future years as part of a broader packaging initia tive (78 FR 74864). Upon further review for CY 2015, we believe that the entire set of the currently device-dependent APCs (after the proposed reorganization and c onsolidation of the current device-dependent APCs) are appropr iate candidates for comprehensive APC payment because the device-dependent APCs not included in last year’s comprehensive APC payment proposal are similar to the orig inal 29 device-dependent APCs that were proposed as comprehensive APCs in CY 2014. Similar to the original 29 devicedependent APCs for CY 2014 that were conve rted to C-APCs, the additional devicedependent APCs that are being propose d for conversion to C-APCs contain comprehensive services primarily intended for the implantation of costly medical devices. Therefore, we ar e proposing to apply the comp rehensive APC payment policy to the remaining device-dependent APCs for CY 2015. In addition, since the pu blication of the CY 2014 O PPS/ASC final rule with comment period, stakeholders brought several services to our atte ntion as appropriate candidates for comprehensive APC payment. Stakeholders recommended that we create comprehensive APCs for these procedures and technologies or assign them to a previously proposed comprehensive APC. We agree with the stakeholders. Similar to the other services designated as C-AP Cs in CY 2014, these procedures are comprehensive single-session services with hi gh-cost implantable de vices or high-cost equipment. For CY 2015, we are proposing to convert the following existing APCs into comprehensive APCs: APC 0067 (Single Session Cranial Stereotactic Radiosurgery) and APC 0351 (Level V Intraocular Surgery)). APC 0351 only contains one procedure –CMS-1613-P 134 0308T (Insertion of ocular tele scope prosthesis including rem oval of crystalline lens). We also are proposing to assign the CPT codes for IORT (CPT codes 77424 and 77425) to C-APC 0648 (Level IV Breast and Skin Su rgery) because IORT is a single session comprehensive service that includes breast surgery combined with a special type of radiation therapy that is de livered inside the surgical cavity but is not technically brachytherapy. The HCPCS codes that we ar e proposing to assign to these APCs in CY 2015 would be assigned to status indicator “J1.” (c) Proposed Reconfiguration and Rest ructuring of the Comprehensive APCs

Based on further examination of the structure of the comprehensive APCs

illustrated in the CY 2014 OPPS/ASC final rule with comment period and an evaluation of their comprehensive geometric mean co sts (using the updated CY 2013 claims data), we are proposing to reorganize, combine, and restructure some of the comprehensive APCs. The purpose of this APC restructur ing is to improve resource and clinical homogeneity among the services assigned to certain comprehensive APCs and to eliminate APCs for clinically similar serv ices, but with overla pping geometric mean costs. The services we are proposing to a ssign to each of the comprehensive APCs for CY 2015, along with the relevant cost statis tics, are provided in Addendum J to this proposed rule. Addendum J is avai lable at the CMS Web site at:http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . Table 7 below lists the additional 28 APCs proposed under the CY 2015 comprehensive APC policy.CMS-1613-P 135 In summary, our proposal to reorganize, combine, and restructure some of the comprehensive APCs includes th e following proposed changes:

● Endovascular clinical family (renamed Vascular Procedures, VASCX). We are proposing to combine C-APCs 0082, 0083, 0104, 0229, 0319, and 0656 illustrated for CY 2014 to form three proposed levels of comprehensive endovascular procedure APCs: C-APC 0083 (Level I Endovasc ular Procedures); C-APC 0229 (Level II Endovascular Procedures); and C-APC 0319 (Level IV Endovascular Procedures).

● Automatic Implantable Cardiac Defibrillators, Pacemakers, and Related Devices (AICDP). We are proposing to combine C-APCs 0089, 0090, 0106, 0654, 0655, and 0680 as illustrated for CY 2014 to form three proposed levels of comprehensive

APCs within a broader series of APCs for pacemaker implantation and similar proceduresas follows: APC 0105 (Level I Pacemaker and Similar Procedures), a noncomprehensive APC; C-APC 0090 (Level II Pa cemaker and Similar Procedures); C-APC 0089 (Level III Pacemaker and Similar Procedures); and C-APC 0655 (Level IV Pacemaker and Similar Procedures).

● We are proposing to delete the clin ical family for Event Monitoring, which only had one comprehensive APC (C-APC 0680 (Insertion of Patient Activated Event)) with a single CPT code 33282 as illustrate d for CY 2014. We also are proposing to reassign CPT code 33282 to C-APC 0090, which c ontains clinically similar procedures.

● In the urogenital family, we are proposi ng two levels instead of three levels for Urogenital Procedures, and to reassign several codes from APC 0195 to C-APC 0202 (Level V Female Reproductive Procedures).CMS-1613-P 136

● We are proposing to rename the arthr oplasty family of APCs to Orthopedic Surgery. We also are proposing to reassi gn several codes from APC 0052 to C-APC 0425, which we are proposing to rename “Lev el V Musculoskeletal Procedures Except

Hand and Foot.”

● We are proposing three levels of electrophysiologic proc edures, using the

current inactive APC “0086” instead of APC 0444, to have consecutive APC grouping numbers for this clinical family and re naming APC 0086 “Level III Electrophysiologic Procedures.” In addition, we are proposing to replace composite APC 8000 with proposed C-APC 0086 as illustrated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74870). We also are proposing three new clinical families: Gastrointestinal Procedures (GIXXX) for gastrointestinal stents, Tube/Catheter Change s (CATHX) for insertion of various catheters, and Radiation Oncol ogy (RADTX), which would include C-APC 0067 for single session cranial SRS. (3) Public Comments We received nine public comments in response to the CY 2014 OPPS/ASC final rule with comment period regarding our pol icy for comprehensive APCs from device manufacturers, the hospital community, and ot hers. The commenters generally supported broader payment bundles, as long as the payment bundles are appropriately and accurately structured and provi de adequate payment. Commenters expressed continued concern regarding the data provided in support of the comprehensive APC policy, the ability to replicate the methodology, and the ability of comprehensive APCs toCMS-1613-P 137 adequately pay for complex services for pa tients. The comments, which were largely provided in the context of specifi c devices or drugs, or in re gard to a specific clinical family of comprehensive APCs, are summarized below and accompanied by our

responses. Endovascular Family

Comment : Several commenters addresse d the endovascular family of comprehensive APCs. The commenters expressed difficulty replicating CMS’ methodology, especially complexity reassignmen ts for procedures in this family of services that is historically component-b ased and include many new codes and add-on codes. The commenters requested clarifica tion of how CMS determined comprehensive APC assignments and complexity adjustment s associated with add-on codes and other procedures. One commenter expressed concern rega rding payment levels for vascular procedures involving multiple vessels. The commenter recommended changes to the complexity adjustment criteria in order to allow for adjustments and to provide adequate payment for seven code combinations of lo wer extremity endovascular revascularization procedures assigned to C-APCs 0083 (Level I Endovascular Procedures), 0229 (Level II Endovascular Procedures) and 0445 (Level I II Endovascular Procedures). The code combinations identified by the commenter were CPT code 37221 and 37222; 37229 and 37232; 37230 and 37232; 37231 and 37232; 37229 and 37234; 37231 and 37233; and 37231 and 37234. Procedures described by add-on codes (CPT codes 37222, 37232, 37233 and 37234) are furnished in conjunction w ith each of these code combinations.CMS-1613-P 138

The commenter stated that each of the code combinations failed to meet the CY 2014 finalized cost threshold for a complexity ad justment (for example, the comprehensive geometric mean cost of the code comb ination was more than two times the comprehensive geometric mean cost of th e single major claims reporting only the primary “J1” service), but that some of the code combinations met the CY 2014 frequency of ≥ 100 claims and ≥ 5 percent of the total claims volume for the primary service, including CPT codes 37221 and 37222 (Ili ac artery revascularization (multiple vessels) with stent), 37229 and 37232 (Tibial/per oneal artery revascularization (multiple vessels) with atherectomy), and 37230 and 37232 (Tibial/peroneal artery revascularization (multiple vessels) with sten t). The other four code combinations met

the ≥ 5 percent volume threshold for the claims reporting the primary service, but in the relevant data year the frequency of these c ode combinations ranged from 13 to 22 cases, including CPT codes 37231 and 37232 (Tibial/peroneal artery revascularization (multiple vessels) with stent and atherectomy) , 37229 and 37234 (Tibial/peroneal artery revascularization with atherectomy (multiple vessels) and with stent (multiple vessels)), 37231 and 37233 (Tibial/peroneal artery revasc ularization with stent and atherectomy (multiple vessels)), and 37231 and 37234 (Tibial/pe roneal artery revascularization with stent (multiple vessels) and atherectomy). Inno case did the geometric mean cost of the code combinations exceed the geometric mean cost of the single “J1” claims for the primary service alone by at least two times. To qualify these code combinations for a complexity adjustment, the commenter recommended using a 1.5 instead of 2 times rule, patterned after the 50 percent multipleCMS-1613-P 139 procedure reduction and based on the inabi lity of hospitals to garner 100 percent efficiency when performing multiple procedures. The commenter stated that this slightly

lower cost threshold would st ill be significant and, therefor e, would appropriately allow complexity reassignment only for cases th at are meaningfully underpaid under the threshold. (We received similar inquirie s from other commenters regarding our application of the statutory “2 time s” rule that are discussed below.) In addition, the commenter recommended that CMS omit the CY 2014 required claim frequency threshold of greater than 100 claims with the specific combination of procedure codes. The commenter believed th at the frequency thre shold requiring that complex claims for a particular procedure c ode combination exceed 5 percent of the total volume of claims reporting the primary servi ce alone is sufficient to ensure additional payment for only higher volume cases, and that an additional frequency threshold is not necessary. The commenter believed that the threshold should not depend on the procedures’ frequency in prior years, which can fluctuate significantly.

The commenter asked for clarification re garding our treatment of add-on codes, recommending that all add-on codes assigned to the endovascular comprehensive APCs be equally eligible for complexity adjustme nts. The commenter noted that Table 10 of

the CY OPPS/ASC 2014 final rule with comment period (78 FR 74889 through 74900) listed complexity adjustments for only a sm all number of add-on codes (for example, certain drug-eluting stent codes) , and did not list complexity adjustments for any of the add-on codes for peripheral artery revasculariz ation associated with procedures assigned to C-APCs 0083, 0229 and 0445. The commenter could not assess whether only someCMS-1613-P 140

add-on code combinations were considered fo r complexity adjustments, or whether all

combinations were considered but eliminated due to not meeting the cost or frequency

criteria. Similarly, another commenter requested additional information regarding application of the complexity criteria to al l of the percutaneous coronary intervention (PCI) related code combinations in Table 10 of the CY 2014 OPPS/AS C final rule with comment period. In particul ar, the commenter was not sure whether the C9600-C9602 code combination required intervention in an additional vessel, whether a second stent in a new vessel is required, or whether one stent and rotational atherectom y together with an additional stent in the same vessel would qua lify the procedure(s) for a complexity adjustment. The commenter believed that it would not be appropr iate to apply an adjustment only when the second intervention was in a separate vessel, where a procedure involving placement of a stent in one vessel and a second stent in a branch of

the same vessel would not be eligible for complexity adju stment, but placement of two stents in two separate vessels would be eligible because the resources required are potentially very similar. Regarding claims with more than one unit of HCPCS code C9606, the commenter was not sure whether th e second revascularization procedure must involve a second episode of acu te myocardial infarction (A MI) in the same outpatient encounter, or whether the complexity adjust ment would apply when there is a single episode of AMI in two separate vessels or in the same vessel. Regardless of CMS’ intent, the commenter questioned why interventions involving patients with AMI or totalCMS-1613-P 141 chronic occlusions are mapped to the same AP Cs as those that involve patients with lower levels of complexity. Response: We begin by clarifying ho w we treated add-on codes, which are particularly common in the vascular family of comprehensive APCs, in modeling the CY 2014 payments for comprehensive APCs. The CPT Editorial Panel defines add-on codes as codes that describe procedures that are commonly carried ou t in addition to the primary procedure performed, listing add-on codes in Appendix D of the CPT codebook (2014 CPT Codebook Professional Edition, page xiv). The CPT codebook states that add-on codes are always performed in additi on to the primary or “base” service or procedure and must never be reported as a st and-alone code. Add-on codes can also be Level II HCPCS codes, such as HCPCS codes C9601, C9603, C9605 and C9608, which are the drug-eluting stent inse rtion add-on codes that parall el the non-drug eluting stent insertion add-on CPT codes 92929, 92934, 92938 a nd 92944, respectively. In Table 15

of the CY 2014 OPPS/ASC final rule with comment period, we listed all add-on codes that are currently assigned to de vice-dependent APCs (78 FR 74944). Historically and in most cases, the O PPS assigned add-on code s to the same APC as the base code and applied a multiple procedure reduction when these codes were reported with the base code. Because add-on codes represent an extension or continuation of or are adjunctive to a primary service, beginning in CY 2014, we unconditionally packaged add-on codes, excep t for drug administration services, and addon codes assigned to device-dependent APCs due to the delayed implementation of the comprehensive APC policy until CY 2015 (78 FR 74943). We discussed in that sameCMS-1613-P 142 final rule with comment period how this policy will improve the accuracy of OPPS ratesetting, as we would no longer be reli ant on incorrectly code d single add-on code claims to set OPPS payment rates for add-on codes (78 FR 74942). In the CY 2014 OPPS/ASC proposed ru le, we proposed to unconditionally package add-on codes assigned to comprehensiv e APCs and to assign the procedures to status indicator “N” (78 FR 43559). They were not proposed as primary services assigned to status indicator “J 1” because they would always be furnished adjunctive to another primary service assigned status in dicator “J1.” We had not proposed a complexity adjustment, so there was no need to consider whether the multiple procedure claims that correctly report an add-on code should be promoted to a higher comprehensive APC.

In the CY 2014 OPPS/ASC final rule with comment period, we designated certain especially costly add-on codes as primary serv ices assigned to status indicator “J1.” (We

refer readers to Table 9 in the 2014 OPPS fi nal rule with comment period (78 FR 74873 through 74883), which provided the APC assignm ents for HCPCS codes proposed to be assigned to status indicator “J 1” for CY 2014 and were displa yed for illustration.) Other add-on codes assigned to the device-dependent APCs illustrated as comprehensive APCs were packaged because of the CY 2014 policy to package most add-on codes under the OPPS. Because these packaged add-on codes we re not sufficiently costly, they were not designated as primary “J1” services. As a result, for example, CPT codes 37222, 37232, 37233, and 37234 were not assigned status i ndicator “J1” in the CY 2014 OPPS/ASC final rule with comment period and instead we re packaged similar to almost all of theCMS-1613-P 143 other add-on codes. However, for CY 2014, because the implementation of the comprehensive APC policy was delayed until CY 2015, payment for services described by add-on codes assigned to a device-depende nt APC are paid separately under the OPPS (78 FR 74943). In response to the comments we rece ived on the CY 2014 OPPS/ASC final rule with comment period, we considered ways to refine and simplify the complexity test

when add-on codes that are cu rrently assigned to the device- dependent APCs are reported with primary services proposed to be assi gned to comprehensive APCs for CY 2015 in this proposed rule. Becaus e services described by a dd-on codes are by definition adjunctive and furnished in addition to primar y services assigned status indicator “J1,”

we believe that the add-on code s should not be classified as primary services themselves because they cannot serve as the primary serv ice provided to a patient. However, we

continue to believe that we should recognize the additional cost and complexity of certain cases involving procedures described by certain especially costly add-on codes that are currently assigned to a device-dependent APC in CY 2014 because like certain combinations of “J1” procedure codes, primary service code and add-on code combinations can represent more complex and significantly more costly variations of the primary service. Therefore, we are proposi ng to revert to our or iginal CY 2014 proposal for comprehensive APCs in which we woul d not consider any a dd-on codes that are currently assigned to device-dependent APCs as primary services assigned to status indicator “J1” (78 FR 43559). For CY 2015, we are proposing to allow certain combinations of primary service codes and es pecially costly add-on codes representing aCMS-1613-P 144 more costly, complex variation of a procedur e to trigger a complexity adjustment. We refer readers to section II.A.2.e.(3)(a) of this proposed rule for a detailed description of our proposed new methodology of evaluating pr imary service procedures reported in conjunction with add-on codes fo r complexity adjustments. Also, in evaluating the comprehens ive APC assignments based on CY 2013 claims data, we are proposing to consolidat e and restructure the vascular comprehensive APCs, in addition to other APCs. We refer readers to section II.A.2.e.(3)(c) of this proposed rule for a discussion of the proposed reconfiguration, and to Addendum J to this proposed rule for the updated cost statistics and proposed complexity adjustments for the

services to address the commenters’ concerns . We are proposing complexity adjustments for several of the services indicated by th e commenters, although so me of the services continue to fail one or both of the proposed complexity criteria even under the proposed relaxed frequency and cost thresholds. We agree with the commenters that we should revise the criteria for complexity adjustments. The delay in implementation afforded additional time for CMS and commenters to further analyze and consider the cost data. After further analysis and consideration of the public comments in response to the CY 2014 OPPS/ASC final rule with comment period, we believe that the comple xity adjustment criteri a in that final rule with comment period were too restrictive. N one of the code combinations illustrated as qualifying for complexity adjustments in the CY 2014 OPPS/ASC final rule with comment period met all of the frequency and cost thresholds set forth in the CY 2014 OPPS/ASC final rule with comment period, and no code combinations would qualifyCMS-1613-P 145 under those criteria in CY 2015 using the CY 2013 cost data. However, we believe that especially costly and sufficiently freque nt code combinations should qualify for a complexity adjustment. In calculating the geometric mean cost s for comprehensive APC services using the claims data for CY 2013, we noted that ma ny of the comprehensive APCs in the same clinical family illustrated in the CY 2014 OPPS/ASC final rule with comment period had similar or overlapping comprehensive geometri c mean costs, meaning that the geometric

mean costs were close to one another or that the range of costs for procedures assigned to one comprehensive APC significantly overlap ped the range of costs for procedures assigned to another comprehensive APC in the same clinical family. We are proposing to restructure and consolidate these comprehens ive APCs, as further described in section II.A.2.e.(3)(c) of this proposed rule, in orde r to better distinguish service groups having different resource requirements. The proposed restructuring and consolidation eliminates the need for many of the complexity adju stments illustrated in the CY 2014 OPPS/ASC final rule with comment period because we are proposing to promote the primary service to a higher cost comprehensive APC for CY 2015 as compared to its illustrated comprehensive APC assignment for CY 2014. For example, for CY 2014, we illustrated complexity adjustments for the CPT code combinations 37228 and 35476, 37228 and 37220, 37228 and 37224, and multiple units of CPT code 37228 from C-APC 0083, the primary service CPT code 37228 was assigned with a comprehensive geometric mean cost of $4,230 to C-APC 0104 with a comprehensive geometric mean cost of $8,554. For CY 2015, we are proposing to consolidate C-APCs 0104 and 0229, and to retain C-APCCMS-1613-P 146 0229. Considering our proposed initial as signment of CPT code 37228 to C-APC 0229, CPT code 37228 has a proposed CY 2015 geometric mean cost of $7,250 and C-APC 0229 has a CY 2015 proposed comprehensive ge ometric mean cost of approximately $9,998. We agree with the commenters that co mplexity adjustments should be based upon criteria that demonstrate that the complex co mbination is both sufficiently frequent and sufficiently costly such that a payment adjust ment is warranted within a similar clinical family, if possible. Our reliance on clinical comparisons of each code combination in determining the complexity adjustments illust rated for CY 2014 likel y contributed to the difficulty experienced by commenters in reproducing the results of the policy. Accordingly, we further analyzed the cost data in order to identify viable alternatives for complexity adjustment criteria. For CY 2015, we are proposing the following new complexity adjustment criteria to evaluate HCPCS code combinations for complexity adjustments:

● Frequency of 25 or more claims re porting the code combination (frequency threshold); and

● Violation of the “2 times” rule; that is, the comprehe nsive geometric mean cost of the “complex” code combination exceeds th e comprehensive geometric mean cost of the lowest significant HCPCS code assigned to the originating comprehensive APC by at least 2 times (cost threshol d). (“Significant” means frequency >1000 claims, or frequency > 99 claims and contri buting at least 2 percent of the single major claims usedCMS-1613-P 147 to establish the originating comprehensiv e APC’s geometric mean cost, including the claims reporting the complex code pair).

To illustrate how this sec ond criterion is applied, for example, consider CPT code 33208 as the primary service reported in conjunction with HCPCS code C9600. CPT code 33208 is assigned to APC 0089. The lowe st cost significant procedure assigned to APC 0089 is CPT code 33228, with a geometric mean cost of $8,669. There are 43

instances of the code combination of CPT code 33208 and HCPCS code C9600 in the CY 2013 claims data with a geometric mean cost of $21,914, which exceeds the geometric mean cost of CPT code 33228 ( $8,669) by greater than two times ($21,914 > $17,338). Therefore, the code combinati on of CPT code 33208 and HCPCS code C9600 is assigned through a complexity adjustment to APC 0655, which is th e next higher cost APC in the AIDCP clinical family of comprehensive APCs.

Whereas the criteria finalized in the CY 2014 OPPS/ASC final rule with comment period evaluated the marginal cost contribution of the addi tional procedure in comparison to the designated primary service alon e (78 FR 74886), the proposed complexity adjustment criterion would employ our standa rd “2 times” rule (discussed in section III.B.2. of this proposed rule), comparing the costs associated with the code combination to the cost of other services assigned to the same comprehensive APC. We are proposing to make a complexity adjustment by reassi gning a particular code combination to a higher cost comprehensive APC if there ar e 25 or more claims reporting the code combination in the data year and their comp rehensive geometric mean cost exceeds the geometric mean cost of the lowest significan t HCPCS code in the initial comprehensiveCMS-1613-P 148 APC by more than two times according to our standard “2 times” rule comparison. By “significant HCPCS c ode,” we mean our standard th reshold for volume significance of the other codes being compared to the comp lex code combinations requiring a frequency >1000; or frequency > 99 and contributing at least 2 percent of the single major claims used to establish the comprehensive APC ge ometric mean cost, including the claims reporting the complex code pair). We are prop osing to apply the same test in assessing whether the complexity reassignment would create a “2 times” rule violation in the newly assigned comprehensive APC. However, if the claims comprise significant volume and violate the “2 times” rule cost differential, we are proposing to consider alternative comprehensive APC assignments, such as not making a complexity adjustment for the code combination, or not assigning the case to a higher cost APC within the same clinical family. In doing so, we also would require th e complex code combination to be clinically similar to other procedures assigned to the comprehensive APC to which the complex code combination is reassigned. This is us ually the case because complexity adjustments are confined to higher cost APCs within the same clinical family. Comment: One commenter questioned th e assignment of procedures within C-APCs 0083 (Level I E ndovascular Procedures), 0229 (Level II Endovascular Procedures) and 0319 (Level IV Endovascular Procedures). The commenters believed that some of the procedures assigned to C-APC 0083 should be a ssigned to C-APC 0229, and stated that the adjunctive service rather than the primary service appeared to be driving the comprehensive APC mapping, sp ecifically CPT code combinations 35476 and 37205, 35475 and 37205, 35471 and 37205, and 37220 and 37205.CMS-1613-P 149 Response: CPT code 37205 was deleted for CY 2014, and we are proposing to

cross-walk CPT code 37205 to CPT code 37236 for CY 2015 based on the code descriptors. Until claims data are available for new codes, we are proposing to continue to make comprehensive APC assignments base d on our best assessment of clinical and resource similarity (as we do for standard APC assignments), including examining the historical cost data for any predecessor code(s). Applyi ng our proposed CY 2015 complexity adjustment criteria (significant volume of 25 or more complex claims and a

“2 times” rule violation assessment relative to the lowest service within the originating comprehensive APC) would result in several co mplexity adjustments related to CPT code 37205, which are listed in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site). We ar e proposing to provide these complexity adjustments when CPT code 37236 is reporte d in lieu of CPT code 37205 for each of

these code combinations. Comment: One commenter expressed concern regarding payment for certain anticoagulant and other drugs that are commonl y furnished with services assigned to the endovascular family of comprehensive AP Cs, particularly Angiomax, Cleviprex, Recothrom and Agratroban. The commenter asked CMS to clarify that the proposed definition of a comprehensive APC includes ad junctive supplies, as well as adjunctive services. The commenter asserted that the proposed comprehensive APC payment methodology violates the OPPS statutory requirem ents for separate payment of specified covered outpatient drugs (SCODs) and the “2 times” rule. The commenter stated that CMS did not discuss application of the “2 times” rule in the statutory context, and notedCMS-1613-P 150 that by design CMS selected primary procedures that were far more costly than the other services included in the comprehensive APC payment bundle. The commenter also asserted that the comprehensive APC policy is premature because it lacks clinical quality metrics and other safeguards for quality of outpatient care. The commenter recommended alternative policies to incentivize cost-effectiveness, such as required data submission on hospital treatment decisions and making hospitals whole for use of

cost-effective items and servic es including drugs. The commenter did not believe that Medicare’s three hospital inpatient quality in centive programs include measures that are relevant for the comprehensive device-depende nt procedures when they are furnished on an outpatient basis. Response: In finalizing our CY 2014 polic y to package drugs a nd biologicals that function as surgical supplies, we explaine d that CMS has the st atutory authority to package the payment of any drugs, biological s, and radiopharmaceuticals, including those that meet the statutory definition of a SCOD (78 FR 74931). Also, in finalizing our CY 2008 policy packaging all diagnostic ra diopharmaceuticals and contrast agents, except those with pass-through status, we expl ained that CMS has th e statutory authority to package the payment of any drugs, biol ogicals, and radiopharmaceuticals, including those that meet the statutory defi nition of a SCOD (72 FR 66766). Our proposed definition of a comprehensiv e APC includes adjunctive supplies, as well as adjunctive serv ices. In the CY 2014 OPPS/ASC fi nal rule with comment period, we packaged all drugs, biologicals, and ra diopharmaceuticals into the comprehensive APC payment, with the exception of certain drugs that are usually self-administeredCMS-1613-P 151 (SADs) and, therefore, not covered under Medi care Part B. We applied our existing policy that defines certain SADs as hospita l supplies paid under the OPPS, such that

these SADs would be included in th e comprehensive APC payment bundle (78 FR 74868). For CY 2015, we are proposi ng to retain these aspects of our comprehensive APC policy. We are proposi ng to continue to package all drugs, biologicals, and radiopharmaceuticals into the comprehensive APC payment, including those SADs defined as hospital supplies, which are packaged in the OPPS (Medicare Benefit Policy Manual Chapter 15, Section 50.2.M, available athttp://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Downloads/bp102c15.pdf ). Therefore, beginning in CY 2015, Angiomax, Cleviprex, Recothro m, Agratroban, and any other drugs, biologicals, and radiopharmaceuticals (except fo r SADs that are not considered hospital supplies) would be packaged when administered to a patient receiving a comprehensive service. There would be no separate paymen t for these non-pass-th rough drugs under the OPPS regardless of cost or any other factors. We appreciate the commenters’ concer ns regarding ensuring the quality of hospital outpatient care. In s ection XIII. of this proposed ru le, we discuss the Hospital OQR Program for CY 2015. To the extent that inpatient quality measures would not apply to the comprehensive services propos ed for CY 2015, stakeholders should suggest specific measures that would be relevant in response to the section of the proposed rule dealing with hospital outpatient quality measures.CMS-1613-P 152 Automatic Implantable Cardiac Defibrilla tors and Pacemakers and Related Devices (AICDP) Comment: One commenter asked CMS to create a comprehensive APC for Cardiac Resynchronization Therapy Pacemaker (CRT-P) in the absence of defibrillation (CPT code 33225) because the comprehensive APC packaging policy decreases payment relative to the multiple procedure reduction policy. The commenter requested a complexity adjustment when CPT code 33225 is reported in combination with CPT code 33206, 33207, 33208, or 33214 because of their high mean cost relative to all other pacemaker insertion procedures assigned to C-APC 0089 (Level III Insertion/replacement of Permanent Pacemaker) and C-APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker or Pacing Electrode). Response: CPT code 33225 is an add-on code that was not assigned to status

indicator “J1” in the CY 2014 OPPS/ASC fina l rule with comment period. For CY 2015, we are proposing to continue packaging this service, but to provide a complexity adjustment when the service is furnished in conjunction with CPT code 33207, 33208, or

33228 from C-APC 0089 to C-APC 0655 because these code combinations meet the proposed complexity adjustment criteria. The code combinations of CPT 33206 and 33225 and 33214 and 33225 meet the proposed co st threshold, but not the proposed frequency threshold and, therefore, we do notbelieve that we should provide complexity adjustments for these code combinations. Se rvices that are reported fewer than 25 times a year do not comprise significant volume and are not sufficiently frequent serviceCMS-1613-P 153 combinations in the context of the propos ed comprehensive APC policy and proposed complexity adjustment criteria and, therefore, do not qualify for a complexity adjustment.

Neurostimulators

Comment: One commenter recommende d splitting C-APC 0318 (Level II Implantation of Neurostimulator) to achieve a narrower cost range, placing vagal nerve and spinal cord stimulation in its own comprehensive APC and creating a separate comprehensive APC for other neurostimul ator devices. The commenter also recommended reassigning CPT code 61886 to C-APC 0039 (Level I Implantation of Neurostimulator) to place all si ngle generator procedures in th e lower APC. In contrast, another commenter supported the complexity adjustments and the final comprehensive APC structure proposed for the neurostimulat or family. The commenter stated in response to the CY 2014 OPPS/AS C final rule with comment period that appropriately differentiating payment rates for less-intensi ve pulse generator replacements from the more intensive initial system implants, which include placement of lead array(s), and also appropriately distinguishing payment rates be tween simpler less resource-intensive nerve stimulation procedures (for example, sacr al nerve stimulation) and more complex resource-intensive nerve stimulation procedures (for example, spinal cord stimulation) is most appropriate. This commenter supporte d mapping the spinal cord stimulation system implants into C-APC 0318 because these impl ants have similar procedural complexity

and resource utilization with the other procedures assigned to C-APC 0318. Response: Some of the procedure codes assigned to the different neurostimulator comprehensive APCs illustrated for CY 2014 had similar or overlapping costs, inCMS-1613-P 154 particular C-APCs 0040 and 0061, which had co mprehensive geometric mean costs of $4,715 and $6,567 respectively. Having also updated the APCs based on CY 2013 cost data, for CY 2015, we are proposing to restru cture the neurostimulator comprehensive APCs from four comprehensive APCs to three comprehensive APCs within a single

series of APCs titled “Neurostimulator and Related Procedures.” We are proposing to begin this series with the non-comprehensive APC 0688 followed by the three levels of comprehensive APCs for neurostimulator pro cedures as follows: C-APC 0061 (Level II Neurostimulator and Related Procedures); C-APC 0039 (Level III Neurostimulator and Related Procedures); and C-APC 0318 (L evel IV Neurostimulator and Related Procedures). This proposed reconfiguration woul d establish groups of neurostimulator

device-related services that have different and nonoverlapping cost ranges while applying the “2 times” rule, including several co mplexity adjustments for complex code combinations. We believe that the proce dures proposed for assignment to C-APC 0318 for CY 2015 are clinically similar and similar in associated resources and, therefore, should be assigned to the same comprehensiv e APC. We also believe that CPT code 61886 more appropriately belongs in the hi gher level C-APC 0318 rather than C-APC 0039 based on its cost and complexity because it describes implantation of a cranial

neurostimulator with connection to two or more electrode arrays. We do not believe that CPT code 61886 should be assigned to C-APC 0039 with less complex procedures.CMS-1613-P 155 Urogenital Comment: Several commenters addressed the urogenital clinical family of comprehensive APCs. One commenter recommended that CMS exempt C-APC 0202 (Level VII Female Reproductive Procedures) from the comprehensive APC policy, due to the variability in geometric mean costs between cases with a single “J1” procedure and cases with multiple procedures furnished during the same surgical session (not otherwise specified). Alternatively, the commenter reco mmended different complexity criteria that would reassign the claims assigned to C- APC 0202 (Level VII Female Reproductive Procedures) to C-APC 0385 (L evel I Urogenital Procedures ) or C-APC 0386 (Level II Urogenital Procedures). The commenter suggested that we make a complexity adjustment for any claim with a service assigned to status indicator “J1” and at least two additional surgical procedures. The comme nter also suggested the following possible alternative cost criteria: (1) using per cent of total device co sts reported on a claim instead of the presence of a second service as signed status indicat or “J1” to assess costliness; or (2) using a cost threshold of 1.5 instead of 2 tim es the cost of single claims for the primary service. The commenter also suggested a volume threshold of 50 instead of 100 claims. Finally, the commenter as ked CMS to clarify how it determined

uncommon clinical scenarios or extreme res ource values for the complexity adjustment, and what data or information qualifies code combinations for reassignment. Response: The commenter was not clear regarding which surgical procedures we should count or consider in determining comp lexity adjustments, for example specific services assigned status indicator “J1” that do not meet our proposed complexity criteriaCMS-1613-P 156 or surgical procedures that are not assigned to a comprehensive APC. It was not clear

whether the commenters’ recommendations were mutually exclusive, or recommended in

some combination with one another. Als o, it was not clear whether the commenter was suggesting that any two surgical procedures, even those not assigned to a comprehensive APC, should qualify a claim for complexity adjustment. As discussed above, for CY 2015, we are proposing different complexity ad justment criteria than those that were

discussed in the CY 2014 OPPS/ ASC final rule with comm ent period. As discussed above, for CY 2015, we are proposing less stri ngent complexity ad justment criteria – codes combinations, either two “J1” service codes or a “J1” service code and an add-on code that is eligible for a complexity adju stment must appear at least 25 times in the

claims data and violate the 2 times rule. Ex tremely few claims involve the provision of more than two surgical procedures. Therefor e, we do not believe that it is necessary or appropriate to complicate our proposed me thodology by attempting to isolate marginal costs associated with other packaged surgical procedures. The complexity adjustment (both in the CY 2014 OPPS/ASC final rule with comment pe riod and proposed in this CY 2015 OPPS/ASC proposed rule) would r eassign all claims reporting a qualifying code combination, whether or not additional (third, fourth, or s ubsequent) services assigned to a comprehensive APC appear on the claim. Stem Cell Transplant Comment: One commenter recommended that CMS apply the comprehensive service concept to outpatient stem cell transp lant (SCT) because the procedures occur in small volume and, due to their clinical natu re, are almost always multiple procedureCMS-1613-P 157

claims that are unusable under the standard ratesetting methodology. Specifically, the commenter requested that CMS create three comprehensive APCs for autologous outpatient SCT, where donor and recipient ar e the same; allogene ic-related outpatient SCT, where donor and recipient are biological ly related; and allogeneic-unrelated transplants, where donor and recipient are biol ogically unrelated. The commenter stated

that the costs associated w ith these three types of outpatient SCT vary significantly according to the donor search and acquisition costs, which are relatively modest for autologous outpatient SCT, $5,000 to $20,000 for al logeneic-related outpatient SCT, and $30,000 to $80,000 for allogeneic unrelated outpa tient SCT. The commenter discussed

how the low CCR associated with revenue code 0819 (Blood and Blood Products), which must be used to report donor search and acqui sition charges, makes providers hesitant to report high donor charges and contribut es to incorrectly coded claims. Due to inaccuracies in cost reporting a nd exclusion of certain multiple procedure claims from ratesetting, the commenter believ ed that outpatient SCT payment is based on only a handful of incorrectly and incomple tely coded single procedure claims. The commenter also believed that comprehensiv e APCs would improve payment adequacy by allowing the use of multiple procedure claims , provided CMS also create a separate and

distinct CCR for donor search a nd acquisition charges so that they are not diluted by lower cost services. Alternatively, the comm enter suggested that CMS require transplant centers to report their actual costs on outpatient claims for allogeneic SCT, and apply a default CCR of 1.0 for claims reporting the out patient allogeneic procedure CPT code.CMS-1613-P 158 Response: For CY 2015, we are proposi ng to continue to pay separately for allogeneic transplantation procedures under APC 0111 (Blood Product Exchange) and APC 0112 (Apheresis and Stem Cell Procedures ), with proposed rule geometric mean costs of approximately $1,127 and $3,064, respectively. Allogeneic harvesting procedures, which are performed not on the beneficiary but on a donor, cannot be paid separately under the OPPS because hospitals may bill and receive payment only for services provided to the Medi care beneficiary who is the re cipient of the SCT and whose illness is being treated with the transplant. We stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60575) a nd in section 231.11 of Chapter 4 of the Medicare Claims Processing Manual (Pub. 100-04 ) that payment for allogeneic stem cell acquisition services (such as harvesting procedures and donor evaluation) is packaged into the payment for the transplant procedur e (either the Medicare Severity – Diagnosis Related Group (MS-DRG) when the transplantis performed inpatie nt, or the APC when the transplant is performed outpatient). Hosp itals should report all a llogeneic outpatient SCT acquisition charges on the recipient’s outpatient claim as uncoded charges under

revenue code 0819. While converting the outpatient SCT APCs to comprehensive APCs would reduce to small degree the differential between the OPPS payment rate and the costs as represented in the public comment we received, it would only provide a relatively modest increase in payment, consistent with our prev ious data studies on this issue. We believe

that we need to further examine the costs asso ciated with this serv ice and how they could best be captured for payment ratesetting purposes in the OPPS. This service remains lowCMS-1613-P 159 volume in the HOPD, but we will continue to monitor this issue and the volume of outpatient allogeneic transplant services. General Comments on Comprehensive APCs We also received several general comme nts that were not related to specific comprehensive APCs, as described below. Comment: Many of the commenters reco mmended continued refinement of the comprehensive APC payment methodology to better identify and r ecognize the costs associated with complex services and patient s. Some commenters suggested developing a list similar to the IPPS listing of compli cations and comorbidities (CCs) and major complications and comorbidities (MCCs) to identify complications and comorbidities associated with higher acuity patients in the outpatient setting. Other commenters suggested additional reimbursement when additional services, testing, or drugs are needed for patients with certain diagnoses (f or example, end stage renal disease), or patients needing extended recovery time followi ng a procedure in order to assess or treat comorbidities and ensure safe discharge. One commenter asserted that there is a critical difference between “complex” patients a nd “complex” procedures. The commenter stated that because the CY 2014 complexity ad justment test is multiple procedure-based rather than patient severity-based similar to the MS-DRG system, it is incredibly difficult for two procedures to meet the complexity test , particularly the 2 times rule requirement.

The commenter believed that the cost thre shold for the complexity test is not commensurate with the marginal payment increase.CMS-1613-P 160 Response: We believe that some of these commenters misunderstood the complexity adjustment criteria described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74886). The complexity adjustment criteria for the illustrated CY 2014 payment rates compared the comprehens ive cost of the complex claims to the comprehensive cost of the single major cl aims for the primary service, not the comprehensive geometric mean cost of the initial comprehensive APC (78 FR 74886). However, for CY 2015, we believe that it would be more a ppropriate to use the 2 times rule, which compares the geometric mean cost of the code combination to the geometric mean cost of the lowest cost service assigne d to the comprehensive APC with significant claims volume (> 1000 single claims or > 99 si ngle and at least 2 percent of the total volume of single claims assigned to the APC). For further description of the 2 times rule, we refer readers to section III.B of this proposed rule. We agree with the commenter that the CY 2014 complexity adjustment cost criterion was too high of a threshold. Therefore, we are proposing to change the cost criterion for the complexity adjustment to twice the geometric mean cost of the lowe st cost service havi ng significant claims volume (as described above) in the APC. Section 1833(t)(2) of the Act provide s a procedure-based payment methodology for the OPPS, which is unlike the IPPS that makes payments based on both diagnoses and procedures. Currently OPPS payments are not based on patient severity or diagnosis like under the IPPS. The complexity adjustment te st is procedure-base d because the current OPPS payment methodology is procedure-based.CMS-1613-P 161 Comment: Several commenters recommended alternative complexity adjustment criteria, including a cost threshold of 1.5 inst ead of 2 times; a numeric volume test of 50 claims instead of 100, or omitting the numeric test; or basing the complexity adjustment on the number of surgical procedures on a cl aim (any claim with a service assigned to

status indicator “J1” and at least two additional surgical pr ocedures). Some commenters asserted generally that there should be tests other than the presence of two or more “J1” services on a claim. In addition, most of the commenters requested further information regarding how CMS determined complexity reassignments, including treatment of add-on codes. The commenters requested that CM S provide an addendum to the OPPS rule containing this information. Response: As discussed above, for CY 2015, we are proposing less stringent frequency and cost thresholds for complexity adjustments. In addition, in response to public comments, we are presenting the proposed complexity adjustment cost

information in a more detailed format in Adde ndum J to this proposed rule, rather than in long tables within the preamble text.

Comment: Several commenters re quested that CMS maintain the device-dependent edits to ensure accurate cost reporting and attri bution. One commenter requested in particular that CMS maintain the device-dependent edits for prostate cryoablation (CPT code 55873), percutaneous renal cryoablation, and other urogenital

services to ensure accura te coding and payment. The commenter believed that comprehensive groupings will exacerbate reporti ng error if CMS discontinued the edits.CMS-1613-P 162 Response: We appreciate the commente rs’ concerns regard ing accurate coding, and we understand that providers sometimes fa il to itemize costs for packaged services separately on claims for the primary serv ice(s). Our policy for comprehensive APCs reduces the need for separate itemization of packaged services by establishing clear packaging allocation rules at the hospital claim level. However, as we have observed in attempting to assess the marginal cost attri butable to add-on codes and other packaged services, it is best if CMS can reliably identi fy and isolate these costs using claims data. Therefore, we are continuing to require hos pitals to report al l charges, including packaged charges, on claims to ensure all costs are reported and enable reliable cost estimation for packaged items and services. It is important that hospitals report all

HCPCS codes consistent with their descri ptors, CPT and/or CMS instructions, and correct coding principles, and that they report all charges for all services they furnish. We are proposing to package all device-d ependent add-on codes, although we would evaluate their additional cost for purpose s of applying the proposed complexity adjustment criteria. Instead of eliminating all device-depe ndent edits, beginning in CY 2015, we are proposing to continue to require the reporting of a device code for all procedures that are currently assigned to a device-dependent AP C in CY 2014. However to reduce hospitals’ administrative burden, we are proposing that the device claims edit would be satisfied by the reporting of any me dical device C-code currently liste d among the device edits for the CY 2014 device-dependent APCs. A particular device C-code or codes would no longerCMS-1613-P 163 be required for a particular procedure. We re fer readers to section IV.B. of this proposed

rule for a detailed discussi on of this proposed policy.

Comment: Several commenters recomm ended that CMS conduct a demonstration to confirm estimated savings, or delay th e comprehensive APC payment policy pending further study. Response: The comprehensive APC payment policy was finalized in the

CY 2014 OPPS/ASC final rule with comment period with delayed implementation until CY 2015, and we do not believe that further de lay is necessary. We also do not believe

that a demonstration is n ecessary. We delayed implem entation until CY 2015, and the public comments we received on the CY 2014 OPPS/ASC final rule with comment period do not reflect a need for fundamental changes to the policy or further delay in implementing the policy. The comprehensive APC policy is another step towards making the OPPS more of a prospective paymen t system and less of a fee schedule-type payment system with separate payment fo r each individually coded service. The rationale and statutory author ity for the comprehensive APC policy was fully explained

in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74861). The public comments were largely supportive of the comprehensive APC payment methodology, provided we improve the transparency and re producibility of the methodology and refine the complexity adjustments for the most costly, complex cases. These complex cases are mostly confined to three clinical familie s (endovascular, pacemaker/defibrillator, and neurostimulator). In response to comments and additional analysis including the newCMS-1613-P 164 CY 2013 claims data, we are proposing to re fine the complexity adjustment criteria discussed in section II.A.2.e.( 3)(a) of this proposed rule. (4) Proposed List of CY 2015 Comprehensiv e APCs and Summary of Proposed Policies In summary, we are proposing to continue to define a comprehensive service as a classification for the provision of a primar y service and all adjunctive services and supplies reported on the hospita l Medicare Part B claim, with few exceptions, resulting in a single beneficiary copayment per claim. The comprehensive APC payment bundle would include all hospital services reported on the claim that are covered under Medicare Part B, except for the excluded services or services requiring separate payment by statute

as noted above. We are proposing to continue to define a clinical family of comprehensive APCs as a set of clinically related comprehensive AP Cs that represent different resource levels of clinically comparable services. We ar e proposing a total of 28 comprehensive APCs within 13 clinical families for CY 2015, as described below.

TABLE 7.—CY 2015 PROPOSED COMPREHENSIVE APCs

Clinical Family Proposed CY 2015 C-APC APC Title Proposed CY 2015

APC Geometric Mean Cost AICDP 0090 Level II Pacemaker and Similar Procedures $6,961.45 AICDP 0089 Level III Pacemaker and Similar Procedures $9,923.94 AICDP 0655 Level IV Pacemaker and Similar Procedures $17,313.08 AICDP 0107 Level I ICD and Similar Procedures $24,167.80 AICDP 0108 Level II ICD and Similar Procedures $32,085.90 BREAS 0648 Level IV Breast and Skin Surgery $7,674.20 CATHX 0427 Level II Tube or Catheter Changes or Repositioning $1,522.15 CATHX 0652 Insertion of Intr aperitoneal and PleuralCMS-1613-P 165

Clinical Family Proposed CY 2015 C-APC APC Title Proposed CY 2015

APC Geometric Mean Cost Catheters $2,764.85 ENTXX 0259 Level VII ENT Procedures $31,273.34 EPHYS 0084 Level I Electrophysiologic Procedures $922.84 EPHYS 0085 Level II Electrophysiologic Procedures $4,807.69 EPHYS 0086 Level III Electrophysiologic Procedures $14,835.04 EYEXX 0293 Level IV Intr aocular Procedures $9,049.66 EYEXX 0351 Level V Intraocular Procedures $21,056.40 GIXXX 0384 GI Procedures with Stents $3,307.90 NSTIM 0061 Level II Neurostimulator & Related Procedures $5,582.10 NSTIM 0039 Level III Neurostimulator & Related Procedures $17,697.46 NSTIM 0318 Level IV Neurostimulator & Related Procedures $27,283.10 ORTHO 0425 Level V Musculoskeletal Procedures Except Hand and Foot $10,846.49 PUMPS 0227 Implantation of Drug Infusion Device $16,419.95 RADTX 0067 Single Session Cranial Stereotactic Radiosurgery $10,227.12 UROGN 0202 Level V Female Reproductive Procedures $4,571.06 UROGN 0385 Level I Urogenital Procedures $8,019.38 UROGN 0386 Level II Urogenital Procedures $14,549.04 VASCX 0083 Level I Endovascular Procedures $4,537.95 VASCX 0229 Level II Endovascular Procedures $9,997.53 VASCX 0319 Level III Endovascular Procedures $15,452.77 VASCX 0622 Level II Vascular Access Procedures $2,635.35

Clinical Family Descriptor Key: AICDP = Automatic Implantable Cardiac Defi brillators, Pacemakers, and Related Devices BREAS = Breast Surgery CATHX = Tube/Catheter Changes ENTXX = ENT Procedures EPHYS = Cardiac Electrophysiology EYEXX = Ophthalmic Surgery GIXXX = Gastrointestinal Procedures NSTIM = Neurostimulators ORTHO = Orthopedic Surgery PUMPS = Implantable Drug Delivery Systems RADTX = Radiation Oncology UROGN = Urogenital ProceduresCMS-1613-P 166

VASCX = Vascular Procedures We are proposing a comprehensive APC payment methodology that adheres to the same basic principles as those finaliz ed in the CY 2014 OPPS/ ASC final rule with comment period, with the followi ng proposed changes for CY 2015:

● We are proposing to reorganize and cons olidate several of the current devicedependent APCs and CY 2014 comprehensive APCs;

● We are proposing to expand the comprehensive APC policy to include all device-dependent APCs and to create two other new comprehensive APCs (C-APC 0067 and C-APC 0351);

● We are proposing new complexity adjustment criteria:

● Frequency of 25 or more claims re porting the HCPCS code combination (the frequency threshold); and

● Violation of the “2 times” rule; that is, the comprehensive geometric mean cost of the complex code combination exceeds the comprehensive geometric mean cost of the lowest significant HCPCS code assigned to the comprehensive APC by more than 2 times (the cost threshold). We are proposing to package all ad d-on codes, although we would evaluate claims reporting a single primary service code reported in combination with an applicable add-on code (we refer readers to Table 9 in th is proposed rule for the list of applicable add-on codes) for complexity adjustments. We believe that the proposed criteria would improve transparency, reduce subjectivity in complexity assignments, reduce the beneficiary copayment for some cases, and reduce burden on other stakeholders in analyzing the comprehensive APC assignments . The proposed policies would result inCMS-1613-P 167 52 complexity adjustments listed in Addendum J to this proposed rule (which is available via the Internet on the CMS Web site). f. Calculation of Composite APC Criteria-Based Costs

As discussed in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals to provide necessary, high quality care as efficiently as possible. For CY 2008, we developed composite APCs to provide a single payment for groups of services that are typically performed together during a single clinical encounter and that result in the provision of a complete service. Combining payment for multiple, independent services into a single OPPS payment in this way enable s hospitals to manage their resources with maximum flexibility by monitoring and adjustin g the volume and efficiency of services themselves. An additional advantage to the co mposite APC model is that we can use data from correctly coded multiple procedure claims to calculate payment rates for the specified combinations of services, ratherthan relying upon single procedure claims which may be low in volume and/or incorr ectly coded. Under th e OPPS, we currently have composite policies for extended assessment and management services, low dose rate (LDR) prostate brachytherapy, cardiac el ectrophysiologic evaluation and ablation services, mental health services, multiple imaging services, and cardiac resynchronization therapy services. We refer readers to the CY 2008 OPPS/AS C final rule with comment period for a full discussion of the development of the composite APC methodology (72 FR 66611 through 66614 and 66650 thr ough 66652) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more recent background.CMS-1613-P 168 For CY 2015, we are proposing to conti nue our composite APC payment policies for LDR prostate brachytherapy services, mental health services, and multiple imaging services, as discussed below. In addition, we note that we finalized a policy in the

CY 2014 OPPS/ASC final rule with comment period to modify our longstanding policy to provide payment to hospitals in certai n circumstances when extended assessment and management of a patient occur (78 FR 74910 through 74912). For CY 2014, we created one new composite APC, entitled “Extended Assessment and Management (EAM) Composite” (APC 8009), to provide payment for all qualifying extended assessment and management encounters rather than rec ognize two levels of EAM composite APCs (78 FR 74910 through 74912). Under this polic y, we allow any visits, a Level 4 or 5 Type A ED visit or a Level 5 Type B ED vis it furnished by a hospital in conjunction with

observation services of substantial dura tion to qualify for payment through EAM composite APC 8009. For CY 2015, we are proposing to pay for qualifying extended assessment and management services through composite APC 8009. For CY 2015, we also are proposing to discontinue our co mposite APC payment policies for cardiac electrophysiologic evaluation a nd ablation services (APC 8000), and to pay for these services through comprehensive APC 0086 (Level III Electrophysiologi c Procedures), as presented in a proposal include d under section II.A .2.e. of this proposed rule. As such, we are proposing to delete APC 8000 for CY 2015. We note that we finalized a policy to discontinue and supersede the cardiac resynchronization therapy composite APC with comprehensive APC 0108 (Level II Implantation of Cardioverter-Defibrillators (IC Ds)), as discussed in section II.A.2.e. ofCMS-1613-P 169

the CY 2014 OPPS/ASC final rule with co mment period (78 FR 74902). For CY 2014, APC 0108 is classified as a composite AP C, as discussed in the CY 2014 OPPS/ASC final rule with comment period, because comp rehensive APCs were not made effective until CY 2015 (78 FR 74925). For CY 2015, with the implementation of our new comprehensive APC policy, we are proposing to effectuate the policy finalized in the

CY 2014 OPPS/ASC final rule with co mment period, and pay for cardiac resynchronization therapy se rvices through comprehensive APC 0108 (proposed to be

renamed “Level II ICD and Similar Procedures ”), which is discussed in section II.A.2.e. of this proposed rule. (1) Extended Assessment and Mana gement Composite APC (APC 8009) Beginning in CY 2008, we included composite APC 8002 (Level I Extended Assessment and Management (EAM) Com posite) and composite APC 8003 (Level II Extended Assessment and Management (EAM ) Composite) in the OPPS to provide payment to hospitals in certain circumstances when extended assessment and management of a patient occur (an extended vi sit). In most of these circumstances,

observation services are furnished in c onjunction with evaluation and management services as an integral part of a patien t’s extended encounter of care. From CY 2008 through CY 2013, in the circumstances when 8 or more hours of observation care was provided in conjunction with a high level visit, critical care , or direct referral for observation and is an integral part of a patient’s extended encounter of care, and was not furnished on the same day as surgery or post-operatively, a single OPPS payment was

made for the observation and evaluation and management services through one of the twoCMS-1613-P 170 composite APCs as appropriate We refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163 through 741 65) for a full discussion of this longstanding policy for CY 2013 and prior years. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74910), we cr eated one new composite APC, APC 8009 (Extended Assessment and Management (EAM) Composite), to provide payment for all qualifying extended assessment and management encounters rather than recognizing two levels of EAM composite services. Unde r the CY 2014 finalized policy, we no longer recognize composite APC 8002 or APC 8003. Beginning in CY 2014, we allowed services identified by the new single clinic visit HCPCS code G0463, a Level 4 or 5 Type A ED visit (CPT codes 99284 or 99285), a Le vel 5 Type B ED visit (HCPCS code G0384) or critical care (CPT code 99291) provided by a hospital in conjunction with

observation services of substantial duration (8 or more hours) (provided the observation was not furnished on the same day as surger y or post-operatively) (78 FR 74910 through 74912) to qualify for payment through EAM composite APC 8009. For CY 2015, we are proposing to con tinue our CY 2014 finalized policy to provide payment for all qualifying extended assessment and management encounters through composite APC 8009. As we did for CY 2014, for CY 2015, we are proposing to allow a clinic visit and certain high level ED visits furnished by a hospital in conjunction

with observation services of substantial durati on (8 or more hours) to qualify for payment through the EAM composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). Specifically, we are pr oposing to continue to allow a clinic visit, a Level 4 or Level 5 Type A ED visit, or a Level 5 Type B ED visitCMS-1613-P 171 furnished by a hospital or a direct referra l for observation (identified by HCPCS code G0379) performed in conjunction with observa tion services of subs tantial duration to qualify for payment through composite APC 8009 (provided the observation is not furnished on the same day as surgery or post-operatively). We note that, for CY 2015, we are proposing to continue our current policy where one servic e code describes all

clinic visits. We refer re aders to the CY 2014 OPPS/ASC fi nal rule with comment period (78 FR 74910 through 74912) for a full discussi on of the creation of composite APC

8009. As we noted in the CY 2014 OPPS/ASC final rule with comment period, the

historical cost data used a nnually to calculate the geometri c mean costs and payment rate for composite APC 8009 would not reflect the si ngle clinic visit code that was new for CY 2014 (HCPCS code G0463) until our CY 2016 rulemaking cycle. We stated in the

CY 2014 OPPS/ASC final rule with comment period (78 FR 74910 through 74912) that when hospital claims data for the CY 2014 clin ic and ED visit codes become available, we would calculate the geometric mean cost for the EAM composite APC 8009 using CY 2014 single and “pseudo” single procedure claims that meet each of the following

criteria:

● The claims do not contain a HCPCS code to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By se lecting these claims from single and “pseudo” single claims, we ensure that they would not contain a code for a service with

status indicator “T” on the same date of service.)CMS-1613-P 172

● The claims contain 8 or more un its of HCPCS code G0378 (Observation services, per hour.)

● The claims contain one of the follo wing codes: HCPCS code G0379 (Direct referral of patient for hospital observation care ) on the same date of service as HCPCS code G0378; or CPT code 99291 (Critical car e, evaluation and management of the critically ill or cr itically injured patient; first 30– 74 minutes); or HCPCS code G0463 (Hospital outpatient clinic visit for assessm ent and management of a patient) provided on the same date of service or 1 day before the date of service for HCPCS code G0378.

Because we have no available cost da ta for HCPCS code G0463, for CY 2015, we are proposing to calculate the geometric mean cost for procedures assigned to APC 8009 using CY 2013 single and “pseudo” single procedure claims that met each of the following criteria:

● The claim did not contain a HCPCS c ode to which we have assigned status indicator “T” that is reported with a date of service 1 day earlier than the date of service associated with HCPCS code G0378. (By se lecting these claims from single and “pseudo” single claims, we assured that they would not contain a code for a service with

status indicator “T” on the same date of service.)

● The claim contained 8 or more un its of HCPCS code G0378 (Observation services, per hour.)

● The claim contained one of the follo wing codes: HCPCS code G0379 (Direct referral of patient for hospital observation care ) on the same date of service as HCPCS code G0378; or CPT code 99201 (Office or othe r outpatient visit fo r the evaluation andCMS-1613-P 173 management of a new patient (Level 1)); CPT code 99202 (Office or other outpatient visit for the evaluation and management of a new patient (Level 2)); CPT code 99203 (Office or other outpatient visit for the ev aluation and management of a new patient (Level 3)); CPT code 99204 (Office or othe r outpatient visit for the evaluation and management of a new patient (Level 4)); CPT code 99205 (Office or other outpatient visit for the evaluation and management of a new patient (Level 5)); CPT code 99211 (Office or other outpatient visit for the eval uation and management of an established patient (Level 1)); CPT code 99212 (Office or other outpatient visit for the evaluation and management of an established patient (L evel 2)); CPT code 99213 (Office or other outpatient visit for the evaluation and manageme nt of an established patient (Level 3)); CPT code 99214 (Office or other outpatient vi sit for the evaluation and management of an established patient (Level 4)); CPT code 99215 (Office or other outpatient visit for the evaluation and management of an establ ished patient (Level 5)); CPT code 99284 (Emergency department visit for the evaluati on and management of a patient (Level 4)); CPT code 99285 (Emergency department visit for the evaluation and management of a patient (Level 5)); or HCPCS code G0384 (T ype B emergency department visit (Level 5)); or CPT code 99291 (Critical care, evaluatio n and management of th e critically ill or critically injured patient; first 30-74 minutes) provided on the same date of service or 1 day before the date of service for HCPCS code G0378. The proposed CY 2015 geometric mean co st resulting from this methodology for EAM composite APC 8009 is approximately $1,287. (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)CMS-1613-P 174 LDR prostate brachytherapy is a treatm ent for prostate cancer in which hollow

needles or catheters are inserted into the prostate, followed by permanent implantation of

radioactive sources into the prostate through the needles/ca theters. At least two CPT codes are used to report the composite treatme nt service because ther e are separate codes that describe placement of the needles/cathete rs and the application of the brachytherapy sources: CPT code 55875 (Transperineal placemen t of needles or catheters into prostate for interstitial radioelement application, w ith or without cystos copy) and CPT code 77778 (Interstitial radiation source application; co mplex), which are genera lly present together

on claims for the same date of service in the same operative session. In order to base payment on claims for the most common clinic al scenario, and to further our goal of providing payment under the OPPS for a larger b undle of component services provided in a single hospital encounter, beginning in CY 2008, we began providing a single payment for LDR prostate brachytherapy when the co mposite service, reported as CPT codes 55875 and 77778, is furnished in a single hospita l encounter. We base the payment for composite APC 8001 (LDR Prostate Brachyt herapy Composite) on the geometric mean

cost derived from claims for the same date of service that contain both CPT codes 55875 and 77778 and that do not contain other separate ly paid codes that are not on the bypass

list. We refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for a full histor y of OPPS payment for LDR prostate brachytherapy services and a detailed descrip tion of how we developed the LDR prostate brachytherapy composite APC.CMS-1613-P 175 For CY 2015, we are proposing to c ontinue to pay for LDR prostate brachytherapy services usi ng the composite APC payment methodology proposed and implemented for CY 2008 through CY 2014. Th at is, we are proposing to use CY 2013 claims reporting charges for both CPT codes 55875 and 77778 on the same date of service with no other separately paid procedur e codes (other than those on the bypass list) to calculate the proposed payment rate fo r composite APC 8001. Consistent with our CY 2008 through CY 2014 practice, we are prop osing not to use the claims that meet these criteria in the calculation of the geomet ric mean costs of procedures or services assigned to APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 0651 (Complex Interstitial Radiati on Source Application), the APCs to which CPT codes 55875 and 77778 are assigned, respectivel y. We are proposing to continue to calculate the geometric mean costs of proce dures or services a ssigned to APCs 0163 and 0651 using single and “pseudo” single procedure claims. We con tinue to believe that this composite APC contributes to our goal of cr eating hospital incentives for efficiency and cost containment, while providing hospitals w ith the most flexibility to manage their

resources. We also continue to believe that data from claims reporting both services required for LDR prostate brachytherapy provide the most accurate geometric mean cost upon which to base the proposed composite APC payment rate. Using a partial year of CY 2013 cl aims data available for the CY 2015 OPPS/ASC proposed rule, we were able to use 379 claims that contained both CPT codes 55875 and 77778 to calculate the geometric mean cost of these procedures upon whichCMS-1613-P 176 the proposed CY 2015 payment rate for composite APC 8001 is based. The proposed geometric mean cost for composite APC 8001 for CY 2015 is approximately $3,669. (3) Mental Health Services Composite APC (APC 0034) For CY 2015, we are proposing to conti nue our longstanding policy of limiting the aggregate payment for specified less res ource-intensive mental health services furnished on the same date to the payment for a day of partial hos pitalization services provided by a hospital, which we consider to be the most resource-intensive of all outpatient mental health services. We refe r readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 through 18455) for the initial discussion of this longstanding policy and the CY 2012 OPPS/ ASC final rule with comment period (76 FR 74168) for more recent background. Specifically, we are proposing that when the aggregate payment for specified mental health services provided by one hospi tal to a single beneficiary on one date of service based on the payment rates associated with the APCs for the individual services exceeds the maximum per diem payment rate fo r partial hospitalizati on services provided by a hospital, those specified mental hea lth services would be assigned to APC 0034 (Mental Health Services Composite). We ar e proposing to continue to set the payment rate for APC 0034 at the same payment rate th at we are proposing to establish for APC 0176 (Level II Partial Hospitaliz ation (4 or more services) for hospital-based PHPs), which is the maximum partial hospitalization per diem payment rate for a hospital, and that the hospital conti nue to be paid one unit of APC 0034. Under this policy, the I/OCE would continue to determine whether to pay for these specified mental health servicesCMS-1613-P 177 individually, or to make a single payment at the same payment rate established for APC 0176 for all of the specified mental health services furnished by the hospital on that single date of service. We continue to believe that the costs associated with administering a partial hospitalization program at a hospital represent the most resourceintensive of all outpatient mental health serv ices. Therefore, we do not believe that we should pay more for mental health servic es under the OPPS than the highest partial hospitalization per diem payment rate for hospitals. (4) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) Effective January 1, 2009, we provide a si ngle payment each time a hospital bills more than one imaging procedure within an im aging family on the same date of service, in order to reflect and promote the efficien cies hospitals can ac hieve when performing multiple imaging procedures during a singl e session (73 FR 41448 through 41450). We utilize three imaging families based on imaging modality for purposes of this methodology: (1) ultrasound; (2) computed tomography (CT) and computed tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple imaging composite policy and their respective families are listed in Table 12 of the

CY 2014 OPPS/ASC final rule with co mment period (78 FR 74920 through 74924). While there are three imaging families, there are five multiple imaging composite APCs due to the statutory requirement unde r section 1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging servi ces provided with and without contrast. While the ultrasound procedures included in the policy do not involve contrast, bothCMS-1613-P 178

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 w ith Contrast Composite). We define the single imaging session fo r the “with contrast” composite APCs as having at least one or more imaging procedures from the same family performed with

contrast on the same date of service. Fo r example, if the hosp ital performs an MRI without contrast during the same session as at least one other MRI with contrast, the hospital will receive payment for APC 8008, the “with contrast” composite APC. We make a single payment for those imaging procedures that qualify for composite APC payment, as well as any packag ed services furnished on the same date of service. The standard (noncomposite) APC assignments continue to apply for single imaging procedures and multiple imaging pro cedures performed across families. For a full discussion of the development of th e multiple imaging composite APC methodology,

we refer readers to the CY 2009 OPPS/A SC final rule with comment period (73 FR 68559 through 68569). For CY 2015, we are proposing to con tinue to pay for all multiple imaging procedures within an imaging family perfor med on the same date of service using the multiple imaging composite APC payment methodology. We continue to believe thatCMS-1613-P 179 this policy will reflect and promote the e fficiencies hospitals can achieve when performing multiple imaging procedures dur ing a single session. The proposed CY 2015 payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008) are based on geometric mean costs calculated from a partial year of CY 2013 claims availabl e for the proposed rule that qualified for composite payment under the current policy (t hat is, those claims with more than one procedure within the same family on a single da te of service). To calculate the proposed geometric mean costs, we used the same me thodology that we used to calculate the final CY 2013 and CY 2014 geometric mean costs for these composite APCs, as described in

the CY 2014 OPPS/ASC final rule with co mment period (78 FR 74918). The imaging HCPCS codes referred to as “overlap bypass codes” that we removed from the bypass list for purposes of calculating the proposed multiple imaging composite APC geometric mean costs, pursuant to our establis hed methodology as stated in the CY 2014

OPPS/ASC final rule with co mment period (78 FR 74918), are identified by asterisks in Addendum N to this proposed rule (which is available via the Internet on the CMS Web site) and are discussed in more detail in section II.A.1.b. of this proposed rule. For this CY 2015 OPPS/ASC proposed ru le, we were able to identify approximately 636,000 “single session” claims out of an estimated 1.6 million potential composite APC cases from our ratesetting clai ms data, approximately 40 percent of all eligible claims, to calculate the proposed CY 2015 geometric mean costs for the multiple imaging composite APCs.CMS-1613-P 180 Table 8 below lists the proposed HCPCS codes that would be subject to the multiple imaging composite APC policy and their respective families and approximate composite APC geometric mean costs for CY 2015.CMS-1613-P 181

TABLE 8.—PROPOSED OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCs Family 1 – Ultrasound CY 2015 APC 8004 (Ultrasound Composite) CY 2015 Approximate APC Geometric Mean Cost = $299 76604 Us exam, chest 76700 Us exam, abdom, complete 76705 Echo exam of abdomen 76770 Us exam abdo back wall, comp 76775 Us exam abdo back wall, lim 76776 Us exam k transpl w/Doppler 76831 Echo exam, uterus 76856 Us exam, pelvic, complete 76870 Us exam, scrotum 76857 Us exam, pelvic, limited Family 2 - CT and CTA wi th and without Contrast CY 2015 APC 8005 (CT and CTA without Contrast Composite)* CY 2015 Approximate APC Geometric Mean Cost = $335 70450 Ct head/brain w/o dye 70480 Ct orbit/ear/fossa w/o dye 70486 Ct maxillofacial w/o dye 70490 Ct soft tissue neck w/o dye 71250 Ct thorax w/o dye 72125 Ct neck spine w/o dye 72128 Ct chest spine w/o dye 72131 Ct lumbar spine w/o dye 72192 Ct pelvis w/o dye 73200 Ct upper extremity w/o dye 73700 Ct lower extremity w/o dye 74150 Ct abdomen w/o dye 74261 Ct colonography, w/o dye 74176 Ct angio abd & pelvis CY 2015 APC 8006 (CT and CTA with Contrast Composite) CY 2015 Approximate APC Geometric Mean Cost = $558 70487 Ct maxillofacial w/dyeCMS-1613-P 182 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+ regnsCMS-1613-P 183 * If a “without contrast” CT or CTA procedur e is performed during the same session as a “with contrast” CT or CTA procedure, th e I/OCE would assign APC 8006 rather than APC 8005. Family 3 - MRI and MRA with and without Contrast

CY 2015 APC 8007 (MRI and MRA without Contrast Composite)* CY 2015 Approximate APC Geometric Mean Cost = $640 70336 Magnetic image, jaw joint 70540 Mri orbit/face/neck w/o dye 70544 Mr angiography head w/o dye 70547 Mr angiography neck w/o dye 70551 Mri brain w/o dye 70554 Fmri brain by tech 71550 Mri chest w/o dye 72141 Mri neck spine w/o dye 72146 Mri chest spine w/o dye 72148 Mri lumbar spine w/o dye 72195 Mri pelvis w/o dye 73218 Mri upper extremity w/o dye 73221 Mri joint upr extrem w/o dye 73718 Mri lower extremity w/o dye 73721 Mri jnt of lwr extre w/o dye 74181 Mri abdomen w/o dye 75557 Cardiac mri for morph 75559 Cardiac mri w/stress img C8901 MRA w/o cont, abd C8904 MRI w/o cont, breast, uni C8907 MRI w/o cont, breast, bi C8910 MRA w/o cont, chest C8913 MRA w/o cont, lwr ext C8919 MRA w/o cont, pelvis C8932 MRA, w/o dye, spinal canal C8935 MRA, w/o dye, upper extr CY 2015 APC 8008 (MRI and MRA with Contrast Composite) CY 2015 Approximate APC Geometric Mean Cost = $958 70549 Mr angiograph neck w/o & w/dye 70542 Mri orbit/face/neck w/dye 70543 Mri orbt/fac/nck w/o & w/dyeCMS-1613-P 184 70545 Mr angiography head w/dye 70546 Mr angiograph head w/o & w/dye 70547 Mr angiography neck w/o dye 70548 Mr angiography neck w/dye 70552 Mri brain w/dye 70553 Mri brain w/o & w/dye 71551 Mri chest w/dye 71552 Mri chest w/o & w/dye 72142 Mri neck spine w/dye 72147 Mri chest spine w/dye 72149 Mri lumbar spine w/dye 72156 Mri neck spine w/o & w/dye 72157 Mri chest spine w/o & w/dye 72158 Mri lumbar spine w/o & w/dye 72196 Mri pelvis w/dye 72197 Mri pelvis w/o & w/dye 73219 Mri upper extremity w/dye 73220 Mri uppr extremity w/o & w/dye 73222 Mri joint upr extrem w/dye 73223 Mri joint upr extr w/o & w/dye 73719 Mri lower extremity w/dye 73720 Mri lwr extremity w/o & w/dye 73722 Mri joint of lwr extr w/dye 73723 Mri joint lwr extr w/o & w/dye 74182 Mri abdomen w/dye 74183 Mri abdomen w/o & w/dye 75561 Cardiac mri for morph w/dye 75563 Card mri w/stress img & dye C8900 MRA w/cont, abd C8902 MRA w/o fol w/cont, abd C8903 MRI w/cont, breast, uni C8905 MRI w/o fol w/cont, brst, un C8906 MRI w/cont, breast, bi C8908 MRI w/o fol w/cont, breast, C8909 MRA w/cont, chest C8911 MRA w/o fol w/cont, chest C8912 MRA w/cont, lwr extCMS-1613-P 185 C8914 MRA w/o fol w/cont, lwr ext C8918 MRA w/cont, pelvis C8920 MRA w/o fol w/cont, pelvis C8931 MRA, w/dye, spinal canal C8933 MRA, w/o&w/dye, spinal canal C8934 MRA, w/dye, upper extremity C8936 MRA, w/o&w/dye, upper extr * If a “without contrast” MRI or MRA procedure is performe d during the same session as a “with contrast” MRI or MRA procedure, th e I/OCE would assign APC 8008 rather than APC 8007.

3. Proposed Changes to Packaged Items and Services a. Background and Rationale for Packaging in the OPPS Like other prospective payment syst ems, the OPPS relies on the concept of averaging to establish a payment rate for se rvices. The payment may be more or less than the estimated cost of providing a specific service or bundle of specific services for a particular patient. The OPPS packages payment for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services most efficiently and to manage their resources with maximum flexibility. Our packaging policies support our strategic goal of using larger paym ent bundles in the OPPS to maximize hospitals’ incentives to provide ca re in the most efficient manner. For example, where there are a variety of devices , drugs, items, and supplies that could be used to furnish a service, some of which are more expensive than others, packaging encourages hospitals to use the most cost-effi cient item that meets the patient’s needs, rather than to routinely use a more expens ive item, which often results if separate payment is provided for the items.CMS-1613-P 186 Packaging also encourages hospitals to effectively negotiate with manufacturers and suppliers to reduce the purchase price of it ems and services or to explore alternative group purchasing arrangements, thereby encour aging the most economical health care delivery. Similarly, packaging encourages hospi tals to establish protocols that ensure that necessary services are furnished, while scrutinizing the services ordered by practitioners to maximize the efficient use of hospital resources. Packaging payments into larger payment bundles promotes the predictability and accura cy of payment for services over time. Finally, packagi ng may reduce the importance of refining service-specific payment because packaged payments include costs associated with higher cost cases requiring many ancillary items and serv ices and lower cost cases requiring fewer ancillary items and services. Because packaging encourages efficiency and is an essential component of a prosp ective payment system, packaging payment for items and services that are typically inte gral, ancillary, supportive, dependent, or adjunctive to a primary service has been a fundamental part of the OPPS since its implementation in August 2000. Over the last15 years, as we have refined our understanding of the OPPS as a prospectiv e payment system, we have packaged

numerous services that we or iginally paid as primary serv ices. As we continue to develop larger payment groups that more br oadly reflect services provided in an encounter or episode of care, we have expa nded the OPPS packaging policies. Most, but not necessarily all, items and services curre ntly packaged in the OPPS are listed in 42 CFR 419.2(b), including the five packaging policies th at were added in CY 2014 (78 FR 74925). Our overarching goal is to ma ke OPPS payments for all services paidCMS-1613-P 187 under the OPPS more consistent with those of a prospective payment system and less like those of a per service fee schedule, which pays separately for each coded item. As a part of this effort, we have continued to examin e the payment for items and services provided

in the OPPS to determine which OPPS services can be packaged to achieve the objective of advancing the OPPS as a prospective payment system.

We have examined the items and serv ices currently prov ided under the OPPS, reviewing categories of integral , ancillary, supportive, depend ent, or adjunctive items and services for which we believe payment would be appropriately packaged into payment of the primary service they suppor t. Specifically, we examined the HCPCS code definitions (including CPT code descriptors) to determine whether there were categories of codes for which packaging would be appropriate accord ing to existing OPPS packaging policies or a logical expansion of those existing OPPS p ackaging policies. In general, in this CY 2015 OPPS/ASC proposed rule, we are propos ing to package the costs of selected HCPCS codes into payment for services re ported with other HCPCS codes where we believe that one code reportedan item or service that was integral, ancillary, supportive, dependent, or adjunctive to the provision of care that was reported by another HCPCS code. Below we discuss categories and clas ses of items and services that we are proposing to package beginning in CY 2015. Fo r an extensive discus sion of the history and background of the OPPS packaging polic y, we refer readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/ ASC final rule with comment period (72 FR 66580), and the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925).CMS-1613-P 188 b. Proposed Revisions of a Packaging Po licy Established in CY 2014--Procedures Described by Add-On Codes In the CY 2014 OPPS/ASC final rule with comment period, we packaged add-on codes in the OPPS, with th e exception of add-on codes de scribing drug administration services (78 FR 74943; 42 CFR 419.2(b)(18)). With regard to the packaging of add-on procedures that use expensive medical de vices, we stated in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74943) that the most expensive medical devices used in procedures to insert or implant devices in the hospital outpatient setting are included in procedures that are assigned to comprehensive APCs. Comprehensive APCs

are discussed in section II.A.2.e. of this proposed rule. In th e CY 2014 OPPS/ASC final rule with comment period, we discusse d the comprehensive APC policy, which we adopted, with modification, but delaye d the implementation of, until CY 2015 (78 FR 74864). We stated that for CY 2014, we would continue to pay separately for only those add-on codes (except for drug administ ration add-on codes) that were assigned to device-dependent APCs in CY 2014, butthat, after CY 2014, these device-dependent add-on codes would be paid under the comp rehensive APC policy. According to the proposed changes to the comprehensive APC po licy described in section II.A.2.e. of this proposed rule, we are proposing to package all of the procedures described by add-on codes that are currently assigned to device -dependent APCs, which will be replaced by comprehensive APCs. The device-dependent add-on codes that are separately paid in CY 2014 that we are proposing to package in CY 2015 are listed below in Table 9.CMS-1613-P 189

TABLE 9.—ADD-ON CODES ASSIGNED TO DEVICE-DEPENDENT APCS FOR CY 2014 THAT ARE PROPOSED TO BE PACKAG ED IN CY 2015 CY 2014 Add-on Code Short Descriptor CY 2014 APC 19297 Place breast cath for rad 0648 33225 L ventric pacing lead add-on 0655 37222 Iliac revasc add-on 0083 37223 Iliac revasc w/stent add-on 0083 37232 Tib/per revasc add-on 0083 37233 Tibper revasc w/ather add-on 0229 37234 Revsc opn/prq tib/pero stent 0083 37235 Tib/per revasc stnt & ather 0083 37237 Open/perq place stent ea add 0083 37239 Open/perq place stent ea add 0083 49435 Insert subq exten to ip cath 0427 92921 Prq cardiac angio addl art 0083 92925 Prq card angio/athrect addl 0082 92929 Prq card stent w/angio addl 0104 92934 Prq card stent/ath/angio 0104 92938 Prq revasc byp graft addl 0104 92944 Prq card revasc chronic addl 0104 92998 Pul art balloon repr precut 0083 C9601 Perc drug-el cor stent bran 0656 C9603 Perc d-e cor stent ather br 0656 C9605 Perc d-e cor revasc t cabg b 0656 C9608 Perc d-e cor revasc chro add 0656CMS-1613-P 190 c. Proposed Packaging Policies for CY 2015 (1) Ancillary Services Under the OPPS, we currently pay separate ly for certain ancillary services. Some of these ancillary services are currently assign ed to status indicator “X,” which is defined as “ancillary services,” but some other ancilla ry services are currently assigned to status

indicators other than “X.” This is because the current use of status indicator “X” in the OPPS is incomplete and imprecise. Some pro cedures and services that are ancillary, for example, a chest X-ray, are assigned to an AP C with services assi gned status indicator

“S.” We reviewed all of the covered HOPD services provided in the HOPD and identified those that are commonly performe d when provided with other HOPD services, and also provided as ancillary to a primary se rvice in the HOPD. These ancillary services that we have identified are primarily minor diagnostic tests and pro cedures that are often performed with a primary serv ice, although there are instan ces where hospitals provide

such services alone and without another primary service during the same encounter.

As discussed in section II.A.3.a. of this proposed rule, our inte nt is that the OPPS be more of a prospective payment system w ith expanded packaging of items and services that are typically integral, ancillary, suppor tive, dependent, or ad junctive to a primary service. Given that the longstanding OPPS po licy is to package items and services that are integral, ancillary, supportiv e, dependent, or adjunctive to a primary service, we

stated in the CY 2014 OPPS/AS C final rule with comment period (78 FR 74945) that we believe that ancillary services should be packaged when th ey are performed with another service, but should continue to be separately paid when performed alone. We indicatedCMS-1613-P 191 that this packaging approach is most consis tent with a prospectiv e payment system and the regulation at 42 CFR 419.2(b) that packag es many ancillary services into primary services while preserving separate payment for those instances in which one of these ancillary services is providedalone (not with any other se rvice paid under the OPPS) to a hospital outpatient. We did not finalize the ancillary packag ing policy for CY 2014

because we believed that further ev aluation was necessary (78 FR 74946). In this proposed rule, we are proposing to conditionally packag e certain ancillary services for CY 2015. Specificall y, we are proposing to limit th e initial set of APCs that contain conditionally packaged services to t hose ancillary service APCs with a proposed geometric mean cost of less than or equal to $100 (prior to applica tion of the conditional packaging status indicator). We are limiting th is initial set of packaged ancillary service APCs to those with a proposed geometric m ean cost of less than or equal to $100 in response to public comments on the CY 2014 an cillary service packaging proposal in which commenters expressed concern that certain low volume but relatively costly ancillary services would have been packaged into high volume but re latively inexpensive primary services (for example, a visit) ( 74 FR 74945). We note that the proposed $100 geometric mean cost limit for selecting th is initial group of conditionally packaged ancillary service APCs is less than the geom etric mean cost of APC 0634, which contains the single clinic visit code G0463, which is a single payment rate for clinic visits beginning in CY 2014, and has a CY 2015 OPPS /ASC proposed rule geometric mean cost of $102.68. This proposed $100 geometric mean cost limit is part of the methodology of selecting the initi al set of conditionally packag ed ancillary service APCsCMS-1613-P 192 under this proposed packaging policy. It is not meant to repres ent a threshold above which ancillary services will not be packaged, but as a basis for selecting this initial set of APCs, which will likely be updated and expanded in future years. In future years, we may package ancillary services assigned to APCs with geometric mean costs higher than $100. In addition, geometric mean costs can change over time. A change in the geometric mean cost of any of the proposed APCs above $100 in future years would not change the conditionally packaged status of services assigned to the APCs selected in 2015 in a future year. We will continue to consider these APCs to be conditionally packaged. However, we will review the c onditionally packaged status of ancillary services annually. We are proposing to exclude certain se rvices from this packaging policy even though they are assigned to APCs with a geometric mean cost of ≤ $100. Preventive

services will continue to be paid separately, and includes th e following services listed in

Table 10 below that would otherwis e be packaged under this policy.

TABLE 10.—PREVENTIVE SERVICES EXEMPTED FROM THE ANCILLARY SERVICE PACKAGING POLICY

HCPCS

Code Short Descriptor APC 76977 Us bone density measure 0340 77078 Ct bone density axial 0260 77080 Dxa bone density axial 0261 77081 Dxa bone density/peripheral 0260 G0117 Glaucoma scrn hgh risk direc 0260 G0118 Glaucoma scrn hgh risk direc 0230 G0130 Single energy x-ray study 0230 G0389 Ultrasound exam aaa screen 0265 G0404 Ekg tracing for initial prev 0450 Q0091 Obtaining screen pap smear 0450CMS-1613-P 193 In addition, we are not proposing to p ackage certain psychiatry and counselingrelated services as we see sim ilarities to a visit a nd, at this time, do not consider them to be ancillary services. We also are not proposing to p ackage certain low cost drug administration services as we are examining various alternative payment policies for drug administration services, incl uding the associated drug ad ministration add-on codes. Finally, we are proposing to delete st atus indicator “X” (Ancillary Services) because the majority of the se rvices assigned to status indi cator “X” are proposed to be assigned to status indicator “Q1” (STV-Pack aged Codes). For the services that are currently assigned status indicator “X” that are not proposed to be conditionally packaged under this policy, we will assign those servi ces status indicator “S” (Procedure or Service, Not Discounted When Multiple), i ndicating separate payment and that the services are not subject to the multiple pr ocedure reduction. The APCs that we are proposing for conditional packaging as ancillary services in CY 2015 are listed below in

Table 11.CMS-1613-P 194

TABLE 11.--APCs FOR PROPOSED CONDITIONALLY PACKAGED ANCILLARY SERVICES FOR CY 2015

APC Proposed CY 2015 OPPS Geometric Mean Cost Proposed CY 2015 OPPS SI Group Title

0012 $76.29 Q1 Level I Debridement & Destruction 0060 $20.64 Q1 Manipulation Therapy 0077 $52.08 Q1 Level I Pulmonary Treatment 0099 $81.27 Q1 Electrocardiograms/Cardiography 0215 $104.63 Q1 Level I Nerve and Muscle Services 0230 $55.00 Q1 Level I Eye Tests & Treatments 0260 $62.43 Q1 Level I Plain Film Including Bone Density Measurement 0261 $99.85 Q1 Level II Plain Film Including Bone Density Measurement

0265 $96.51 Q1 Level I Diagnostic and Screening Ultrasound 0340 $64.78 Q1 Level II Minor Procedures 0342 $56.99 Q1 Level I Pathology 0345 $78.83 Q1 Level I Transfusion Laboratory Procedures 0364 $42.69 Q1 Level I Audiometry 0365 $123.21 Q1 Level II Audiometry 0367 $166.31 Q1 Level I Pulmonary Tests 0420 $130.93 Q1 Level III Minor Procedures 0433 $190.21 Q1 Level II Pathology 0450 $29.91 Q1 Level I Minor Procedures 0624 $83.61 Q1 Phlebotomy and Minor Vascular Access Device Procedures 0690 $37.25 Q1 Level I Electronic Analysis of Devices 0698 $106.17 Q1 Level II Eye Tests & Treatments

The HCPCS codes that we are proposing to conditionally package as ancillary services for CY 2015 are displayed in Addendum B to this CY 2015 OPPS/ASC proposed rule. The supporting documents for th e proposed rule are available at the CMS

Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

.CMS-1613-P 195 We also are proposing to revise the regulations at 42 CFR 419.2(b)(7) to replace the phrase “Incidental services such as veni puncture” with “Ancillary services” to more accurately reflect the proposed p ackaging policy discussed above. We are inviting public co mments on these proposals. (2) Prosthetic Supplies We have a longstanding policy of providing payment under the OPPS for implantable DME, implantable prosthetics, and medical and surgical supplies, as provided at sections 1833(t)(1 )(B)(i) and (t)(1)(B)(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). In the CY 2014 OPPS/ ASC final rule with comment period, we clarified that medical and surgical supp lies under § 419.2(b)(4) in clude (but are not limited to) all supplies on the DMEPOS F ee Schedule except prosthetic supplies (78 FR 74947). Under 42 CFR 419.22(j), prosth etic supplies are currently excluded from payment under the OPPS and are paid under the DMEPOS Fee Schedule, even when provided in the HOPD. However, under secti on 1833(t)(1)(B)(i) of the Act, the Secretary has the authority to designate prosthetic supplies provide d in the hospital outpatient setting as covered OPD serv ices payable under the OPPS. As mentioned above, implantable prosthet ic devices are pack aged in the OPPS under 42 CFR 419.2(b)(11). It is common for implantable prosthetic devices to be provided as a part of a device system. Such device systems include the implantable part or parts of the overall device system and also certain nonimplantable prosthetic supplies that are integral to the overall function of th e medical device, part of which is implanted and part of which is external to the patient. These prosthetic supplies are integral to theCMS-1613-P 196 implantable prosthetic because typically shortly after the surgical procedure to implant the implantable prosthetic device in the hospita l, the surgeon and/or his or her colleagues will have to attach, f it, and program certain prosthetic supplies that are not surgically implanted into the patient but are a part of a system and that are essential to the overall function of an implanted device. Because these supplies are integral to the overall function of the implanted prosthetic, and becau se, as mentioned above, we package in the OPPS items and services that are typically integral, ancillary, s upportive, dependent, or adjunctive to a primary service, we believe th at it is most consistent with a prospective payment system to package the payment of prosthetic suppl ies (along with the implantable prosthetic device) into the surgical procedure that implants the prosthetic device, as all of the component s are typically necessary for th e performance of the system and the hospital typically purchases the syst em as a single unit. Patients requiring replacement supplies at a time later than the in itial surgical procedur e and outside of the hospital would obtain them as they typically do from a DMEPOS supplier with payment for such supplies made under the DMEPOS Fee Schedule. In addition to prosthetic supplies that ar e components of device systems, part of which are implanted, many other prosthetic supplies on the DMEPOS fee schedule are typical medical and surgical s upplies and of the type that are packaged in the OPPS under § 419.2(b)(4). Consistent with our change from status indicator “A” to “N” for all nonprosthetic DMEPOS supplies in the CY 2014 OPPS final rule with comment period (78 FR 74947), we are proposing to package and change the status indicator from “A” toCMS-1613-P 197 “N” for all DMEPOS prosthetic supplies. With this proposed change, all medical and surgical supplies would be packaged in the OPPS. Therefore, we are proposing to delete “prosthetic supplies” from the regulations at § 419.22(j) because we are proposing that pros thetic supplies be packaged covered OPD

services in the OPPS for CY 2015. Prosthetic supplies provided in the HOPD would be included in “medical and surgical supplies” (as are all other supp lies currently provided in the HOPD) under § 419.2(b)(4). The HCPCS codes for prosthetic supplies that we are proposing to package for CY 2015 are displayed in Addendum B to this CY 2015 OPPS/ASC proposed rule. The supporting docu ments for the proposed rule, including but not limited to these Addenda, are available at the CMS Web site at:http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. We are inviting public co mments on these proposals. 4. Proposed Calculation of OPPS Scaled Payment Weights For CY 2015, we are proposing to calculat e the relative payment weights for each APC shown in Addenda A and B to this pr oposed rule (which are available via the Internet on the CMS Web site) using the AP C costs discussed in sections II.A.1. and II.A.2. of this proposed rule. 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 forCMS-1613-P 198 each APC by the median cost for APC 0601 to derive the relative payment weight for

each APC. Beginning with the CY 2007 OPPS (71 FR 67990), we standard ized all of the relative payment weights to APC 0606 (Level 3 Clinic Visits) because we deleted APC 0601 as part of the reconfiguration of th e clinic visit APCs. We selected APC 0606

as the base because it was the mid-level clinic visit APC (that is, Level 3 of five levels). For the CY 2013 OPPS (77 FR 68283), we esta blished a policy of using geometric

mean-based APC costs rather than median-bas ed APC costs to calculate relative payment weights. For CY 2015, we are prop osing to continue this policy. For the CY 2014 OPPS, we standardized all of the relative payment weights to

clinic visit APC 0634 as discussed in section V II. of this proposed rule. For CY 2015, we are proposing to continue this policy to ma intain consistency in calculating unscaled weights that represent the cost of some of the most frequen tly provided services. We are proposing to assign APC 0634 a relative paym ent weight of 1.00 and to divide the geometric mean cost of each APC by the pr oposed geometric mean cost for APC 0634 to derive the proposed unscaled relative payment weight for each APC. The choice of the APC on which to base the proposed relative payment weights does not affect payments

made under the OPPS because we scal e the weights for budget neutrality. Section 1833(t)(9)(B) of the Act requ ires that APC reclassification and recalibration changes, wage index changes, and other adjustments be made in a budget neutral manner. Budget neutrality ensures th at the estimated aggregate weight under the OPPS for CY 2015 is neither greater than nor less than the estimated aggregate weightCMS-1613-P 199

that would have been made without the cha nges. To comply with this requirement concerning the APC changes, we are propos ing to compare the estimated aggregate weight using the CY 2014 scaled relative pa yment weights to the estimated aggregate weight using the proposed CY 2015 uns caled relative payment weights. For CY 2014, we multiplied the CY 2014 scaled APC relative payment weight applicable to a service paid under the OPPS by the volume of that service from CY 2013 claims to calculate the total relative payment weight for each service. We then added together the total relative paym ent weight for each of these se rvices in order to calculate an estimated aggregate weight for the year . For CY 2015, we are proposing to apply the same process using the proposed CY 2015 unscal ed relative payment weights rather than scaled relative payment weights. We are proposing to calculate the weight scaler by dividing the CY 2014 estimated aggregate we ight by the proposed CY 2015 estimated aggregate weight. The service-mix is the same in the current and prospective years

because we use the same set of claims fo r service volume in calculating the aggregate weight for each year. We note that the CY 2014 OPPS scaled relative weights incorporate the estimated payment weight from packaged laboratory tests previously paid

at CLFS rates. For a detailed discussion of the weight sc aler calculation, we refer readers to the OPPS claims accounting document available on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html.CMS-1613-P 200 We are proposing to include estimated payments to CMHCs in our comparison of the estimated unscaled relative payment weights in CY 2015 to the estimated total relative payment weights in CY 2014 using CY 2013 claims data, holding all other components of the payment system constant to isolate changes in to tal weight. Based on this comparison, we adjusted the proposed CY 2015 unscaled relative payment weights for purposes of budget neutrality. The pr oposed CY 2015 unscaled relative payment weights were adjusted by multiplying them by a weight scaler of 1.3220 to ensure that the proposed CY 2015 relative payment weights are budget neutral. Section 1833(t)(14) of the Act provide s the payment rates for certain SCODs. Section 1833(t)(14)(H) of the Act states that “Additional expenditures resulting from this paragraph shall not be taken into account in establishing the convers ion factor, weighting, and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken into account for subsequent years.” Therefor e, the cost of those SCODs (as discussed in section V.B.3. of this proposed rule) is incl uded in the budget neutra lity calculations for

the CY 2015 OPPS. The proposed CY 2015 unscaled relative pa yment weights listed in Addenda A and B to this proposed rule (which are avai lable via the Internet on the CMS Web site) incorporate the proposed recalibration adjust ments 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 the Secret ary to update the conversion factor used to determine the pa yment rates under the OPPS on an annual basisCMS-1613-P 201 by applying the OPD fee schedule increas e factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, s ubject to sections 1833(t)(17) and 1833(t) (3)(F) of the Act, the OPD fee schedule increase factor is equa l to the hospital inpatient market basket percentage increase applicable to hospital discharges under section 1886(b)(3 )(B)(iii) of the Act. In the FY 2015 IPPS/LTCH PPS propos ed rule (79 FR 28087), consistent with current law, based on IHS Global Insight, In c.’s first quarter 2014 forecast of the

FY 2015 market basket increas e, the proposed FY 2015 IPPS market basket update is 2.7 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iv) of the Act, as added by section 3401(i) of the Patien t Protection and Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 10319(g) of that law and further amended by section 1105(e) of the Health Care and Educati on Reconciliation Act of 2010 (Pub. L. 111-152), provide adjustments to the OPD fee schedule increase factor for CY 2015. Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and subsequent years, the OPD fee schedule incr ease factor under subpa ragraph (C)(iv) be reduced by the productivity adjustment descri bed in section 1886(b )(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi )(II) of the Act defines the productivity adjustment as equal to the 10-year moving average of changes in annual economy-wide, private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost repo rting period, or other annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 51692), we finalized our methodology for calculating and applying the MFP adjustment. In th e FY 2015 IPPS/LTCH PPS proposed ruleCMS-1613-P 202 (79 FR 28087), we discussed the calculati on of the proposed MFP adjustment for FY 2015, which is 0.4 percentage point. We are proposing that if more recent data become subsequently available after the publication of this proposed ru le (for example, a more r ecent estimate of the market basket increase and the MFP adjustment), we would use such data , if appropriate, to determine the CY 2015 market basket update and the MFP adjustment, components in calculating the OPD fee schedule increase fa ctor under sections 1833(t)(3)(C)(iv) and 1833(t)(3)(F) of the Act, in the CY 2015 O PPS/ASC final rule with comment period. In addition, section 1833(t)( 3)(F)(ii) of the Act require s that, for each of years 2010 through 2019, the OPD fee sche dule increase factor unde r section 1833(t)(3)(C)(iv) of the Act be reduced by the adjustment desc ribed in section 1833(t)(3 )(G) of the Act. For CY 2015, section 1833(t)(3)(G)(iv) of the Act provides a 0.2 percentage point

reduction to the OPD fee schedule increase f actor under section 1833(t) (3)(C)(iv) of the Act. Therefore, in accordance with sectio ns 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of the Act, we are proposing to apply a 0.2 percenta ge point reduction to the OPD fee schedule

increase factor for CY 2015. We note that section 1833(t)(3)(F) of the Act provides that application of this subparagraph may result in the OPD fee schedule increase fa ctor under section 1833(t)(3)(C)(iv) of the Act being less than 0.0 percent for a year, and may result in OPPS payment rates being less th an rates for the preceding year . As described in further detail below, we are proposing to apply an OPD fee schedule increase factor of 2.1 percent for the CY 2015 OPPS (which is 2.7 pe rcent, the proposed estimate of theCMS-1613-P 203 hospital inpatient market basket percentage increase, less the proposed 0.4 percentage point MFP adjustment, and less the 0.2 pe rcentage point additional adjustment). Hospitals that fail to meet the Hospit al OQR Program reporting requirements are subject to an additional reduc tion of 2.0 percentage points from the OPD fee schedule increase factor adjustment to the conversion factor that would be used to calculate the OPPS payment rates for their serv ices, as required by section 1833(t)(17) of the Act. For further discussion of the Hospital OQR Program, we refer readers to section XIII. of this proposed rule. In this proposed rule, we are propos ing to amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph ( 6 ) to reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, for CY 2015, we reduce the OPD f ee schedule increase factor by the MFP adjustment as determined by CMS, and to reflect the requirement in section 1833(t)(3)(G)(iv) of the Act, as required by section 1833(t)(3)(F )(ii) of the Act, that we

reduce the OPD fee schedule increase factor by an additional 0.2 percentage point for

CY 2015.

To set the OPPS conversion factor for CY 2015, we are proposing to increase the CY 2014 conversion factor of $72.672 by 2.1 per cent. In accordance with section 1833(t)(9)(B) of the Act, we are proposing to further adjust the conversion factor for CY 2015 to ensure that any revisions made to the wage index and rural adjustment are made on a budget neutral basis. We are proposing to calculate an overall proposed budget neutrality factor of 0.9998 for wage index changes by comparing proposed total estimated payments from our simulation m odel using the proposed FY 2015 IPPS wageCMS-1613-P 204 indexes to those payments using the FY 2014 IPPS wage indexes, as adopted on a calendar year basis for the OPPS. For CY 2015, we are proposing to maintain the current rural adjustment policy, as

discussed in section II.E. of this proposed rule. Therefore, the proposed budget neutrality factor for the rural adjustment is 1.0000. For CY 2015, we are proposing to conti nue previously established policies for implementing the cancer hospital payment adjust ment described in section 1833(t)(18) of the Act, as discussed in section II.F. of this proposed rule. We are proposing to calculate a CY 2015 budget neutrality adjustment f actor for the cancer hospital payment adjustment by comparing estimated total CY 2015 payments under section 1833(t) of the Act, including the proposed CY 2015 cancer ho spital payment adjustment, to estimated CY 2015 total payments using the CY 2014 fina l cancer hospital payment adjustment as required under section 18 33(t)(18)(B) of the Act. The CY 2015 estimated payments applying the proposed CY 2015 cancer hospital payment adjustment are identical to estimated payments applying the CY 2014 final cancer hospital payment adjustment. Therefore, we are proposing to apply a budge t neutrality adjustme nt factor of 1.0000 to the conversion factor for the cancer hospital payment adjustment. For this proposed rule, we estimat e that pass-through spending for drugs, biologicals, and devices fo r CY 2015 would equal approximately $15.5 million, which represents 0.03 percent of total projec ted CY 2015 OPPS spending. Therefore, the proposed conversion factor would be adjust ed by the difference between the 0.02 percent estimate of pass-through spending for CY 2014 and the 0.03 percent estimate ofCMS-1613-P 205 pass-through spending for CY 2015, resulting in a proposed adjustment for CY 2015 of 0.01 percent. Finally, estimated payments fo r outliers would remain at 1.0 percent of total OPPS payments for CY 2015. The proposed OPD fee schedule increase f actor of 2.1 percent for CY 2015 (that is, the estimate of the hospita l inpatient market basket per centage increase of 2.7 percent less the proposed 0.4 percentage point MFP adjustment and less the 0.2 percentage point required under section 1833(t) (3)(F)(ii) of the Act), the required proposed wage index budget neutrality adjustment of approxi mately 0.9998, the proposed cancer hospital payment adjustment of 1.0000, and the proposed adjustment of 0.01 percent of projected OPPS spending for the difference in the pass-through spending result in a proposed conversion factor for CY 2015 of $74.176. Hospitals that fail to meet the re porting requirements of the Hospital OQR Program would continue to be subject to a further reduction of 2.0 percentage points to

the OPD fee schedule increase fact or. For hospitals that fail to meet the requirements of the Hospital OQR Program, we are proposing to make all other adjustments discussed above, but using a reduced OPD fee schedule up date factor of 0.1 percent (that is, the proposed OPD fee schedule increase factor of 2.1 percent further reduced by 2.0 percentage points). This results in a pr oposed reduced conversion factor for CY 2015 of $72.692 for hospitals that fail to meet the Hospital OQR requirements (a difference of -$1.484 in the conversion factor relative to hospitals that met the requirements). In summary, for CY 2015, we are propos ing to use a conversion factor of $74.176 in the calculation of the national unadjusted payment rates for those items and servicesCMS-1613-P 206 for which payment rates are calculated using geometric mean costs. We are proposing to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph ( 6 ) to reflect the reductions to

the OPD fee schedule increase factor that are required for CY 2015 to satisfy the statutory requirements of sections 1833(t)(3 )(F) and (t)(3)(G)(iv) of the Act. We are proposing to use a reduced c onversion factor of $72.692 in th e calculation of payments for hospitals that fail to meet th e Hospital OQR Program requirements. C. Proposed Wage Index Changes Section 1833(t)(2)(D) of the Act requires the Secretary to “determine a wage adjustment factor to adjust the portion of payment and coinsurance attributable to

labor-related costs for relative differences in labor and labor-related costs across geographic regions in a budget neutral manner” (codified at 42 CFR 419.43(a)). This portion of the OPPS payment rate is calle d the OPPS labor-related share. Budget neutrality is discussed in secti on II.B. of this proposed rule. The OPPS labor-related share is 60 percen t of the national OPPS payment. This labor-related share is based on a regression anal ysis that determined that, for all hospitals, approximately 60 percent of the costs of serv ices paid under the OPPS were attributable to wage costs. We confirmed that this labor-related share for outpatient services is appropriate during our re gression analysis for the payment adjustment for rural hospitals

in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we are proposing to continue this policy for th e CY 2015 OPPS. We refer readers to section II.H. of this proposed rule for a de scription and example of how the wage index for a particular hospital is used to determine payment for the hospital.CMS-1613-P 207

As discussed in section II.A.2.c. of this proposed rule, for estimating APC costs, we standardize 60 percent of estimated claims costs for geographic area wage variation using the same proposed FY 2015 pre-reclassi fied wage index that the IPPS uses to

standardize costs. This standa rdization process removes the e ffects of differences in area wage levels from the determination of a national unadjusted OPPS payment rate and copayment amount. Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 18545)), the OPPS adopted the final fiscal year IPPS wage i ndex as the calendar year wage index for adjusting the OPPS standard payment amounts for labor market differences. Thus, the wage index that applies to a particular acu te care short-stay hosp ital under the IPPS also applies to that hospital under the OPPS. As initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576) , we believe that using th e IPPS wage index as the source of an adjustment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospi tal overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage index is updated annually.

The Affordable Care Act contained seve ral provisions affecting the wage index. These provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74191). As discussed in that final rule with comment period, section

10324 of the Affordable Care Act added sect ion 1886(d)(3)(E)(iii)(II) to the Act, which defines a “frontier State,” and amended section 1833(t) of the Act to add new paragraph (19), which requires a “frontie r State” wage index floor of 1.00 in certain cases, andCMS-1613-P 208

states that the frontier State floor shall not be applied in a budget neutral manner. We codified these requirements in § 419.43(c)(2 ) and (c)(3) of our regulations. For the CY 2015 OPPS, we are proposing to implement this provision in the same manner as we have since CY 2011. That is, frontier State hospitals would receive a wage index of 1.00 if the otherwise applicable wage index (including recla ssification, rural and imputed floor, and rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs that are affiliated with multi-campus hospital systems, the HOPD would receive a wage index based on the geographic location of the specific inpatient hospital with which it is associated. Therefore, if the asso ciated hospital is located in a frontier State, the wage index adjustment applicable for the hospital would also appl y for the affiliated

HOPD. We refer readers to the followi ng sections in the FY 2011 through FY 2014

IPPS/LTCH PPS final rules for discussions re garding this provision, including our methodology for identifying which areas meet the de finition of frontier States as provided for in section 1886(d)(3)(E)(iii)(II) of the Act: for FY 2011, 75 FR 50160 through 50161; for FY 2012, 76 FR 51793, 51795, and 51825; for FY 2013, 77 FR 53369 through 53370; and for FY 2014, 78 FR 50590 through 50 591. We also refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28069) for discussion regarding this provision. In addition to the changes required by th e Affordable Care Act, we note that the proposed FY 2015 IPPS wage indexes continue to reflect a number of adjustments implemented over the past few years, includi ng, but not limited t o, reclassification of hospitals to different geographic areas, the rural and imputed floor provisions, anCMS-1613-P 209 adjustment for occupational mix, and an adjustment to the wage index based on commuting patterns of employees (the out-migra tion adjustment). We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28084) for a detailed discussion of all proposed changes to the FY 2015 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.

As discussed in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28054 through 28055), the Office of Management a nd Budget (OMB) issued revisions to the

current labor market area delineations on Fe bruary 28, 2013, that included a number of significant changes such as new Core Based Statistical Areas (CBS As), urban counties that become rural, rural counties that beco me urban, and existing CBSAs that are split apart (OMB Bulletin 13-01). Th is bulletin can be found at: http://www.whitehouse.gov/sites/defaul t/files/omb/bulle tins/2013/b13-01.pdf . As we

stated in the FY 2014 IPPS/LTCH PPS final ru le (78 FR 50586), in order to allow for

sufficient time to assess the new revisions and their ramifications, we intended to propose changes to the IPPS wage index based on th e newest CBSA delineations in the FY 2015 IPPS/LTCH PPS proposed rule. Similarly, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74951), we stated that we intended to propose changes in the OPPS, which uses the IPPS wage index, base d on the new OMB delineations in this CY 2015 OPPS/ASC proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH PPS proposed rule. We refer read ers to proposed changes based on the newCMS-1613-P 210

OMB delineations in the FY 2015 IPPS/LTC H proposed rule at 79 FR 28054 through

28084. In this proposed rule, we are propos ing to use the proposed FY 2015 hospital IPPS wage index for urban and rural areas as the wage inde x for the OPPS hospital to determine the wage adjustments for th e OPPS payment rate and the copayment

standardized amount for CY 2015. (We refer readers to the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054) and the proposedFY 2015 hospital wage index files posted on the CMS Web site.) We note that the proposed FY 2015 IPPS wage indexes reflect a number of proposed changes as a result of the new OMB delineations as well as a proposed 1-year extension of the imputed rural floor. The CY 2015 OPPS wage index (for hospitals paid under the IPPS and O PPS) would be the final FY 2015 IPPS wage index. Thus, any proposed adjustments, incl uding the adjustments related to the new OMB delineations, that are finalized for the IPPS wage index would be reflected in the OPPS wage index. As stated earlier in this se ction, we continue to believe that using the IPPS wage index as the source of an adjust ment factor for the OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD within the hospital overall. Therefore, we are not proposing to change our current regula tions, which require that we use the FY 2015 IPPS wage indexes for calculating OPPS payments in CY 2015. Hospitals that are paid under the OPPS but not under the IPPS do not have a hospital wage index under the IPPS. Theref ore, for non-IPPS hospitals paid under the OPPS, we assign the wage index that would be applicable if the hospi tal were paid under the IPPS, based on its geographic location and any applicable wage index adjustments.CMS-1613-P 211 We are proposing to adopt the proposed wage index changes from the FY 2015 IPPS/LTCH PPS proposed rule for these hospitals . The following is a brief summary of the major proposed changes in the FY 2015 I PPS wage indexes and any adjustments that we are proposing to apply to these hospitals under the OPPS for CY 2015. We refer the reader to the FY 2015 IPPS/LTCH PPS propos ed rule (79 FR 28054 through 28084) for a detailed discussion of the proposed changes to the wage indexes. For CY 2015, we are proposing to con tinue our policy of allowing non-IPPS hospitals paid under the OPPS to qualify for th e out-migration adjustment if they are

located in a section 505 out-m igration county (section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). Applying this adjustment is consistent with our proposed policy of adopting IPPS wage index policies for hospitals paid under th e OPPS. We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the out-migration wage adjustment if they are located in a section 505 out-migration county. This is the same proposed outmigration adjustment policy that would apply if the hospital were paid under the IPPS. Table 4J from the FY 2015 IPPS/LTCH PPS propos ed rule (available via the Internet on

the CMS Web site at: http://www.cms.gov/Medicare/Me dicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html ) identifies counties eligib le for the out-migration adjustment and IPPS hospitals that would receive the adjustment for FY 2015. As we have done in prior years, we are including Table 4J from the FY 2015 IPPS/LTCH PPS proposed rule as Addendum L to this proposed rule with the addition ofCMS-1613-P 212 non-IPPS hospitals that would receive the se ction 505 out-migration adjustment under the

CY 2015 OPPS. Addendum L is available via the Internet on the CMS Web site. In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to adopt the new

OMB labor market area delineations issu ed by OMB in OMB Bulletin No. 13-01 on February 28, 2013, based on standards pub lished on June 28, 2010 (75 FR 37246 through 37252) and the 2010 Census data to delineate la bor market areas for purposes of the IPPS wage index. For IPPS wage index purposes, for hospitals that would be designated as rural under the new OMB labor market area delineations that currently are located in urban CBSAs, we generally proposed to assign them the urban wage index value of the CBSA in which they are physically located fo r FY 2014 for a period of 3 fiscal years (79 FR 28060 through 28061). To be consistent, we are proposing to apply the same policy to hospitals paid under the OPPS but not unde r the IPPS so that su ch hospitals would maintain the wage index of the CBSA in wh ich they are physically located for FY 2014 for the next 3 calendar years. This propos ed policy would impact six hospitals for purposes of OPPS payment. We believe that adopting the new OM B labor market area delineations would create a more accurate wage index system, but we also recognize that implementing the new OMB delineations may cause some short- term instability in hospital payments. Therefore, similar to the policy we ad opted in the FY 2005 IPPS final rule (69 FR 49033), in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28062), we proposed a 1-year blended wage index for all hospitals that would experience any decrease in their actual payment wage index exclusively due to the proposedCMS-1613-P 213 implementation of the new OMB delineations. We proposed that a post-reclassified wage index with the rural and imputed floor s applied would be computed based on the hospital’s FY 2014 CBSA (that is, using all of its FY 2014 constituent county/ies), and another post-reclassified wage index with the rural and im puted floors applied would be computed based on the hospital’s new FY 2015 CBSA (that is, the FY 2015 constituent county/ies). We proposed to compare these tw o wage indexes. If the proposed FY 2015 wage index with FY 2015 CBSAs would be lower than the proposed FY 2015 wage index with FY 2014 CBSAs, we proposed that a blended wage index would be computed, consisting of 50 percent of each of the two wage indexes added together. We proposed that this blended wage index would be the hospital’s wage index for FY 2015. For purposes of the OPPS, we also are proposing to apply this 50-percent transition blend to hospitals paid under the OPPS but not under the IPPS. We believe a 1-year, 50/50 blended wage index would mitigate the shor t-term instability and negative payment impacts due to the proposed implementation of the new OMB delineations, providing hospitals with a transition period during whic h they may adjust to their new geographic CBSA. We believe that a longer transition period would reduce the accuracy of the overall labor market area wage index system , and generally would not be warranted for hospitals moving from one urban geographic labor market area to another. In addition, for the FY 2015 IPPS, we propos ed to continue the extension of the imputed floor policy (both the original methodology and alternative methodology) for another year, through September 30, 2015 ( 79 FR 28068 through 28069). For purposesCMS-1613-P 214 of the CY 2015 OPPS, we are also proposi ng to apply the imputed floor policy to hospitals paid under the O PPS but not under the IPPS. For CMHCs, we are proposing to continue to calculate the wage index by using the post-reclassification IPPS wage inde x based on the CBSA where the CMHC is located. As with OPPS hospita ls and for the same reasons, we are proposing to apply a 1-year, 50/50 blended wage i ndex to CMHCs that would recei ve a lower wage index due to the new CBSA delineations. In addition, as with OPPS hospitals and for the same reasons, for CMHCs currently located in urba n CBSAs that would be designated as rural

under the new OMB labor market area delineat ions, we are proposing to maintain the urban wage index value of th e CBSA in which they are physically located for CY 2014 for the next 3 calendar years. Consistent with our current policy, the wage index that applies to CMHCs includes both the imputed floor adjustment and the rural floor adjustment, but does not include the out-migra tion adjustment because that adjustment only applies to hospitals. With the exception of the proposed out-migration wage adjustment table (Addendum L to this proposed rule, which is available via the Inte rnet on the CMS Web site), which includes non-IPPS hos pitals paid under the OPPS, we are not reprinting the proposed FY 2015 IPPS wage indexes referenced in this discussion of the wage index.

We refer readers to the CMS Web site for the OPPS at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . At this link, readers will find a link to the proposed FY 2015 IPPS wage index tables.CMS-1613-P 215 D. Proposed Statewide Average Default CCRs In addition to using CCRs to estimate cost s from charges on claims for ratesetting, CMS uses overall hospital-specific CCRs calcu lated from the hospital’s most recent cost report to determine outlier payments, paym ents for pass-through devices, and monthly interim transitional corridor payments under the OPPS during the PPS year. MACs 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 MAC is ab le to calculate the hospital’s actual CCR from its most recently submitted Medicare costreport. 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 de fault CCRs to determine payments for hospitals that appear to have a biased CCR (that is, the CCR falls outsi de the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most recent cost report refl ects an all-inclusive rate status (Medicare Claims Pro cessing Manual (Pub. 100-04), Chapter 4, Section 10.11). In this proposed rule, we ar e proposing to update the default ratios for CY 2015 using the most recent cost report data . We discuss our policy for using default CCRs, including setting the ceiling thres hold for a valid CCR, in the CY 2009 OPPS/ASC final rule with comment peri od (73 FR 68594 through 68599) in the context of our adoption of an outlier reconciliation po licy for cost reports beginning on or after January 1, 2009.CMS-1613-P 216 For CY 2015, we are proposing to conti nue 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 clai ms data for setting the proposed CY 2015 OPPS relative payment weights. Table 12 below lists the proposed CY 2015 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 tota l 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 pr oposing to adjust ratios from submitted cost reports to reflect the final settled status by applying the differential between settled to

submitted overall CCRs for the cost centers releva nt to outpatient services from the most recent pair of final settled and submitted cost reports. We then are proposing to weight each hospital’s CCR by the volume of separate ly 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 O PPS/ASC final rule with comment period (72 FR 66680 through 66682) and prior OPPS rule s for a more detailed discussion of our established methodology for calculating the st atewide average default CCRs, including the hospitals used in our calcula tions and our trimming criteria. For Maryland, we used an overall wei ghted average CCR for all hospitals in the

Nation as a substitute for Ma ryland CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which limits th e data available to calculate an accurate and representative CCR. The weighted CCR is used for Maryland be cause it takes into account each hospital’s volume, rather than treating each hospital equally. We referCMS-1613-P 217

readers to the CY 2005 OPPS final rule with comment period (69 FR 65822 ) for further discussion and the rationale for our longsta nding policy of using the national average CCR for Maryland. In general, observed cha nges in the statewide average default CCRs between CY 2014 and CY 2015 are modest and the few significant changes are associated with areas that have a small number of hospitals. Table 12 below lists the proposed stat ewide average default CCRs for OPPS services furnished on or after January 1, 2015.CMS-1613-P 218

TABLE 12.–PROPOSED CY 2015 STATEWIDE AVERAGE CCRs

State Urban/Rural Proposed CY 2015 Default

CCR Previous Default CCR

(CY 2014 OPPS Final Rule) ALASKA RURAL 0.463 0.473 ALASKA URBAN 0.301 0.302 ALABAMA RURAL 0.246 0.229 ALABAMA URBAN 0.189 0.188 ARKANSAS RURAL 0.233 0.244 ARKANSAS URBAN 0.237 0.220 ARIZONA RURAL 0.232 0.254 ARIZONA URBAN 0.186 0.182 CALIFORNIA RURAL 0.192 0.190 CALIFORNIA URBAN 0.203 0.206 COLORADO RURAL 0.426 0.393 COLORADO URBAN 0.223 0.221 CONNECTICUT RURAL 0.356 0.343 CONNECTICUT URBAN 0.277 0.276 DISTRICT OF COLUMBIA URBAN 0.295 0.279 DELAWARE URBAN 0.314 0.356 FLORIDA RURAL 0.185 0.160 FLORIDA URBAN 0.160 0.160 GEORGIA RURAL 0.254 0.260 GEORGIA URBAN 0.211 0.205 HAWAII RURAL 0.341 0.345 HAWAII URBAN 0.300 0.298 IOWA RURAL 0.323 0.308 IOWA URBAN 0.270 0.266 IDAHO RURAL 0.361 0.359 IDAHO URBAN 0.488 0.478 ILLINOIS RURAL 0.259 0.252 ILLINOIS URBAN 0.218 0.222 INDIANA RURAL 0.348 0.326 INDIANA URBAN 0.284 0.288 KANSAS RURAL 0.308 0.313 KANSAS URBAN 0.233 0.239 KENTUCKY RURAL 0.231 0.221CMS-1613-P 219

State Urban/Rural Proposed CY 2015 Default

CCR Previous Default CCR

(CY 2014 OPPS Final Rule) KENTUCKY URBAN 0.220 0.225 LOUISIANA RURAL 0.271 0.257 LOUISIANA URBAN 0.212 0.222 MARYLAND RURAL 0.292 0.283 MARYLAND URBAN 0.249 0.248 MASSACHUSETTS RURAL 0.300 0.395 MASSACHUSETTS URBAN 0.330 0.336 MAINE RURAL 0.434 0.452 MAINE URBAN 0.426 0.438 MICHIGAN RURAL 0.339 0.341 MICHIGAN URBAN 0.322 0.322 MINNESOTA RURAL 0.469 0.462 MINNESOTA URBAN 0.357 0.349 MISSOURI RURAL 0.277 0.263 MISSOURI URBAN 0.274 0.280 MISSISSIPPI RURAL 0.237 0.233 MISSISSIPPI URBAN 0.188 0.200 MONTANA RURAL 0.520 0.481 MONTANA URBAN 0.379 0.384 NORTH CAROLINA RURAL 0.255 0.258 NORTH CAROLINA URBAN 0.256 0.256 NORTH DAKOTA RURAL 0.660 0.661 NORTH DAKOTA URBAN 0.400 0.400 NEBRASKA RURAL 0.308 0.323 NEBRASKA URBAN 0.257 0.243 NEW HAMPSHIRE RURAL 0.272 0.326 NEW HAMPSHIRE URBAN 0.288 0.287 NEW JERSEY URBAN 0.207 0.213 NEW MEXICO RURAL 0.307 0.291 NEW MEXICO URBAN 0.300 0.304 NEVADA RURAL 0.244 0.220 NEVADA URBAN 0.172 0.154 NEW YORK RURAL 0.332 0.345 NEW YORK URBAN 0.348 0.351 OHIO RURAL 0.317 0.327CMS-1613-P 220

State Urban/Rural Proposed CY 2015 Default

CCR Previous Default CCR

(CY 2014 OPPS Final Rule) OHIO URBAN 0.227 0.232 OKLAHOMA RURAL 0.281 0.258 OKLAHOMA URBAN 0.210 0.205 OREGON RURAL 0.299 0.311 OREGON URBAN 0.358 0.357 PENNSYLVANIA RURAL 0.285 0.257 PENNSYLVANIA URBAN 0.198 0.198 PUERTO RICO URBAN 0.583 0.614 RHODE ISLAND URBAN 0.292 0.295 SOUTH CAROLINA RURAL 0.195 0.190 SOUTH CAROLINA URBAN 0.199 0.203 SOUTH DAKOTA RURAL 0.288 0.287 SOUTH DAKOTA URBAN 0.214 0.219 TENNESSEE RURAL 0.207 0.207 TENNESSEE URBAN 0.189 0.190 TEXAS RURAL 0.247 0.235 TEXAS URBAN 0.206 0.197 UTAH RURAL 0.474 0.474 UTAH URBAN 0.340 0.334 VIRGINIA RURAL 0.216 0.226 VIRGINIA URBAN 0.241 0.238 VERMONT RURAL 0.446 0.456 VERMONT URBAN 0.401 0.397 WASHINGTON RURAL 0.300 0.330 WASHINGTON URBAN 0.365 0.360 WISCONSIN RURAL 0.335 0.344 WISCONSIN URBAN 0.298 0.291 WEST VIRGINIA RURAL 0.320 0.283 WEST VIRGINIA URBAN 0.319 0.319 WYOMING RURAL 0.403 0.400 WYOMING URBAN 0.262 0.269CMS-1613-P 221 E. Proposed Adjustment for Rural SCHs and EACHs under Section 1833(t)(13)(B) of

the Act

In the CY 2006 OPPS final rule w ith comment period (70 FR 68556), we finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures paid under the OPPS, excluding drugs, biologi cals, brachytherapy sources, and devices paid under the pass-through payment policy in a ccordance with section 1833(t)(13)(B) of the Act, as added by section 411 of the Me dicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). Section 1833(t)(13) of the Act provided the Secretary the author ity to make an adjustment to OPPS payments for rural hospitals, effective January 1, 2006, if justified by a study of the difference in costs by APC between hospitals in rural areas and hospita ls in urban areas. Our analysis showed a

difference in costs for rural SCHs. Theref ore, for the CY 2006 OPPS, we finalized a payment adjustment for rural SCHs of 7.1 perc ent for all services and procedures paid under the OPPS, excluding separately paya ble drugs and biologicals, brachytherapy sources, and devices paid under the pass-th rough payment policy, in accordance with section 1833(t)(13)(B) of the Act. In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) of the regulations to clarify that EA CHs also are eligible to receive the rural SCH adjustment, assuming these entities otherwise meet the rural adjustment criteria. Currently, two hospitals are classified as EACHs, an d as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no longer become newly classified as an EACH.CMS-1613-P 222 This adjustment for rural SCHs is budge t neutral and applied before calculating outlier payments and copayments. We st ated in the CY 2006 OPPS final rule with comment period (70 FR 68560) th at we would not reestablis h the adjustment amount on an annual basis, but we may review the adju stment in the future and, if appropriate, would revise the adjustment. We provided the same 7.1 percent adjustment to rural SCHs, including EACHs, again in CYs 2008 through 2014. Further, in the CY 2009

OPPS/ASC final rule with co mment period (73 FR 68590), we updated the regulations at § 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by application of a hospital-specific CCR are excluded from the 7.1 percent payment adjustment. For the CY 2015 OPPS, we are proposing to continue our pol icy of a 7.1 percent payment adjustment that is done in a budge t neutral manner for rural SCHs, including EACHs, for all services and procedures paid under the OPPS, excluding separately payable drugs and biologicals, devices pa id under the pass-through payment policy, and items paid at charges reduced to costs. F. Proposed OPPS Payment to Certain Cancer Hospitals Described by Section 1886(d)(1)(B )(v) of the Act 1. Background Since the inception of the OPPS, which was authorized by the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33), Medicare ha s paid the 11 hospita ls that meet the criteria for cancer hospitals identified in section 1886(d)(1)(B)(v ) of the Act under the OPPS for covered outpatient hospital services. These cancer hospitals are exempted fromCMS-1613-P 223 payment under the IPPS. With the Medicare, Medicaid and SCHI P Balanced Budget Refinement Act of 1999 (Pub. L. 106-113), C ongress established s ection 1833(t)(7) of the Act, “Transitional Adjustment to Limit Decline in Payment,” to determine cancer and children’s hospitals OPPS payments based on their pre-BBA payment amount (often referred to as “held harmless”). As required under section 1833( t)(7)(D)(ii) of the Act, a cancer hospita l receives the full amount of the difference between paym ents for covered outpatient services under the OPPS and a “pre-BBA amount.” That is , cancer hospitals ar e permanently held harmless to their “pre-BBA amount,” and they receive transitional outpatient payments (TOPs) or hold harmless payments to ensure that they do not receive a payment that is lower under the OPPS than the payment they wo uld have received before implementation of the OPPS, as set forth in section 1833(t) (7)(F) of the Act. The “pre-BBA amount” is the product of the hospital’s reas onable costs for covered outpa tient services occurring in the current year and the base payment-to-c ost ratio (PCR) for the hospital defined in section 1833(t)(7)(F)(ii) of th e Act. The “pre-BBA amount,” including the determination of the base PCR, are defined at 42 CFR 419.70 (f). TOPs are calculated on Worksheet E, Part B, of the Hospital Cost Report or the Hospital Health Care Complex Cost Report (Form CMS-2552-96 and Form CMS-2552-10, respect ively) as applicable each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality calculations.

Section 3138 of the Affordable Care Ac t amended section 1833(t) of the Act by adding a new paragraph (18), which instru cts the Secretary to conduct a study to determine if, under the OPPS, outpatient costs incurred by cancer hospi tals described inCMS-1613-P 224 section 1886(d)(1)(B)(v) of the Act with respec t to APC groups exceed outpatient costs incurred by other hospitals furnishing serv ices under section 1833( t) of the Act, as determined appropriate by the Secretary. Se ction 1833(t)(18 )(A) of the Act requires the Secretary to take into consideration the co st of drugs and biologi cals incurred by cancer and other hospitals. Section 1833(t)(18)(B) of the Act provides that if the Secretary determines that cancer hospitals’ costs are greater than other hospitals’ costs, the Secretary shall provide an appropriate adju stment under section 1833(t)(2)(E) of the Act to reflect these higher costs. In 2011 , after conducting th e study required by section 1833(t)(18)(A) of the Act, we determ ined that outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs incu rred by other OPPS hospitals. For a complete discussion regard ing the cancer hospital cost study, we refer

readers to the CY 2012 OPPS/ ASC final rule with comm ent period (76 FR 74200 through 74201). Based on these findings, we finalized a po licy to provide a payment adjustment to the 11 specified cancer hospitals that reflects their higher outpatient costs as discussed in

the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 through 74206). Specifically, we adopted a polic y to provide additional paymen ts to the cancer hospitals so that each cancer hospital’s final PCR for se rvices provided in a given calendar year is equal to the weighted average PCR (which we refer to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in advance of the calendar year and is calculated using the most recent submitted or settled cost report data that are available at the time of final rulemaking for the cal endar year. The amount of the paymentCMS-1613-P 225 adjustment is made on an aggregate basis at cost report settlement. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory provisions that provide for TOPs for cancer ho spitals. The TOPs are assessed as usual after all payments, including the cancer hospita l payment adjustment, have been made for a cost reporting period. For CYs 2012 and 2013, the target PCR for purposes of the cancer hospital payment adjustment was 0.91. For CY 2014, the target PCR for purposes of the cancer hospital payment adjustment was 0.89. 2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2015 For CY 2015, we are proposing to con tinue our policy to provide additional payments to cancer hospitals so that each cancer hospital’s final PCR is equal to the weighted average PCR (or “target PCR”) fo r the other OPPS hospitals using the most recent submitted or settled cost report da ta that are available at the time of the development of this proposed rule. To cal culate the proposed CY 2015 target PCR, we used the same extract of cost report data from HCRIS, as discussed in section II.A. of this proposed rule, used to estimate costs for th e CY 2015 OPPS. Using these cost report data, we included data from Work sheet 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 datase t to the hospitals with CY 2013 claims data that we used to model the impact of the proposed CY 2015 APC relative payment weights (3,881 hospitals) because it is appropria te to use the same set of hospitals that we are using to

calibrate the modeled CY 2015 OPPS. The cost report data for the hospitals in this dataset were from cost report periods with fiscal year e nds ranging from 2012 to 2013.CMS-1613-P 226 We then removed the cost report data of the 47 hospitals located in Puerto Rico from our

dataset because we do not believe that their cost structure reflects the costs of most hospitals paid under the OPPS and, therefore, th eir inclusion may bias the calculation of hospital-weighted statistics. We also rem oved the cost report data of 27 hospitals because these hospitals had cost report datathat were not complete (missing aggregate OPPS payments, missing aggregate cost data, or missing both), so that all cost reports in the study would have both the payment and cost data necessary to calculate a PCR for each hospital, leading to a proposed analytic f ile of 3,807 hospitals with cost report data. Using this smaller dataset of cost report data, we estimated that, on average, the OPPS payments to other hospitals furnishi ng services under the OPPS are approximately 89 percent of reasonable cost (weighted average PCR of 0.89). Therefore, we are proposing that the payment amount associ ated with the cancer hospital payment adjustment to be determined at cost repor t settlement would be the additional payment needed to result in a proposed target PCR equal to 0.89 for each cancer hospital. Table 13 below indicates the estimated pe rcentage increase in OPPS payments to each cancer hospital for CY 2015 due to the cancer hospital payment adjustment policy. The actual amount of the CY 2015 cancer hospi tal payment adjustment for each cancer hospital will be determined at cost report se ttlement and will de pend on each hospital’s CY 2015 payments and costs. We note that the changes made by section 1833(t)(18) of the Act do not affect the existing statutory pr ovisions that provide for TOPs for cancer hospitals. The TOPs will be assessed as usual after all payments, including the cancer hospital payment adjustment, have been made for a cost reporting period.CMS-1613-P 227

TABLE 13.—ESTIMATED CY 2015 HOSPITAL-SPECIFIC PAYMENT ADJUSTMENT FOR CANCER HOSPITALS TO BE PROVIDED AT COST REPORT SETTLEMENT

Provider Number Hospital Name Estimated Percentage Increase in OPPS Payments

for CY

2015 050146 City of Hope Comprehensive Cancer Center 15.5 050660 USC Norris Cancer Hospital 22.0 100079 Sylvester Comprehensive Cancer Center 15.8 100271 H. Lee Moffitt Cancer Cent er & Research Institute 19.9 220162 Dana-Farber Cancer Institute 47.6 330154 Memorial Sloan-Kettering Cancer Center 45.7 330354 Roswell Park Cancer Institute 16.6 360242 James Cancer Hospital & Solove Research Institute 35.1 390196 Fox Chase Cancer Center 18.5 450076 M.D. Anderson Cancer Center 60.1 500138 Seattle Cancer Care Alliance 53.3

G. Proposed Hospital Outpatient Outlier Payments 1. Background The OPPS provides outlier payments to hospitals to help mitigate the financial risk associated with high-cos t and complex procedures, where a very costly service could present a hospital with signi ficant financial loss. As explained in the CY 2014 OPPS/ASC final rule with comment pe riod (78 FR 74958 through 74960), we set our projected target for aggregate outlier payments at 1.0 percent of the estimated aggregate total payments under the OPPS for the prospect ive year. Outlier payments are providedCMS-1613-P 228 on a service-by-service basis when the cost of a service exceeds the APC payment amount multiplier threshold (the APC pa yment amount multiplied by a certain amount) as well as the APC payment amount plus a fixed-dollar amount threshold (the APC payment plus a certain amount of dollars). In CY 2014, the outlier threshold was met when the hospital’s cost of furnishing a service exceeded 1.75 times (the multiplier threshold) the APC payment amount and exceeded the APC payment amount plus $2,900 (the fixed-dollar amount threshold). If th e cost of a service exceeds both the multiplier threshold and the fixed-dollar threshold, the ou tlier payment is calcula ted as 50 percent of the amount by which the cost of furnishi ng the service exceeds 1.75 times the APC payment amount. Beginning with CY 2009 payments, outlier payments are subject to a reconciliation process similar to the IPPS ou tlier reconciliation pro cess for cost reports,

as discussed in the CY 2009 OPPS/ASC fina l rule with comment period (73 FR 68594 through 68599). It has been our policy to report the actua l 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 pe rcent of total CY 2013 OPPS payment, using available CY 2013 claims and the revised OPPS expenditure estimate for the FY 2015 President’s Budget, is approximately 1.2 percen t of the total aggregated OPPS payments. Therefore, for CY 2013, we estimate that we paid 0.2 percent above the CY 2013 outlier target of 1.0 percent of total aggregated OPPS payments. Using CY 2013 claims data and CY 2014 payment rates, we currently estimate that the aggregate outlier payments for CY 2014 will be approximately 0.9 percent of theCMS-1613-P 229 total CY 2014 OPPS payments. The differen ce between 0.9 percent and the 1.0 percent target is reflected in the regul atory impact analysis in section XXII. of this proposed rule. We provide estimated CY 2015 outlier paymen ts for hospitals and CMHCs with claims

included in the claims data that we used to model impacts in the Hospital–Specific Impacts - Provider-Specific Data file on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. 2. Proposed Outlier Calculation For CY 2015, we are proposing to con tinue our policy of estimating outlier payments to be 1.0 percent of the estimated aggregate total payments under the OPPS. We are proposing that a portion of that 1.0 pe rcent, an amount equa l to 0.47 percent of outlier payments (or 0.0047 pe rcent of total OPPS payments) would be allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier payments that would result from the proposed CMHC outlie r threshold as a proportion of total estimated OPPS outlier payments. As discussed in section VIII.D. of this proposed rule, for CMHCs, we are proposing to continue our longstanding policy that if a CMHC’s cost for partial hospitalization services, paid under either APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partia l Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier payments, we refer readers to sect ion VIII.D. of this proposed rule.CMS-1613-P 230

To ensure that the estimated CY 2015 aggregate outlier payments would equal 1.0 percent of estimated aggregate total paym ents under the OPPS, we are proposing that the hospital outlier thre shold be set so that outlier paym ents would be triggered when a hospital’s cost of furnishi ng a service exceeds 1.75 times the APC payment amount and exceeds the APC payment amount plus $3,100. We calculated the proposed fixed-dolla r threshold of $3,100 using the standard methodology most recently used for CY 2014 (78 FR 74959 through 74960). For purposes of estimating outlier payments for this proposed rule, we used the hospital-specific overall ancillary CCRs available in the April 2014 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains provider-specific data, such as the most current CCRs, which are ma intained by the Medica re contractors and used by the OPPS Pricer to pay claims. The claims that we use to model each OPPS update lag by 2 years. In order to estimate the CY 2015 hospital outlier payments for this proposed rule, we inflated the charges on the CY 2013 clai ms using the same inflation factor of 1.1146

that we used to estimate the IPPS fixe d-dollar outlier thre shold for the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). We used an inflation factor of 1.0557 to estimate CY 2014 charges from the CY 2013 ch arges reported on CY 2013 claims. The methodology for determining this charge infl ation factor is disc ussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). 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 inpatientCMS-1613-P 231 routine service cost centers, hos pitals 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 c ould systematically ove restimate the OPPS hospital outlier threshold if we did not a pply a CCR inflation adjustment factor. Therefore, we are proposing to apply the sa me CCR inflation adjustment factor that we are proposing to apply for the FY 2015 IPPS ou tlier calculation to the CCRs used to simulate the proposed CY 2015 OPPS outlier payments to determine the fixed-dollar threshold. Specifically, for CY 2015, we are prop osing to apply an adjustment factor of 0.9813 to the CCRs that were in the Apr il 2014 OPSF to trend them forward from CY 2014 to CY 2015. The methodology for calcu lating this proposed adjustment was

discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). To model hospital outlier payments for th is proposed rule, we applied the overall CCRs from the April 2014 OPSF file after adjustment (using the proposed CCR inflation adjustment factor of 0.9813 to approx imate CY 2015 CCRs) to charges on CY 2013 claims that were adjusted (using the pr oposed charge inflatio n factor of 1.1146 to approximate CY 2015 charges). We simu lated aggregated CY 2015 hospital outlier payments using these costs for several diffe rent fixed-dollar thresholds, holding the 1.75 multiple threshold constant and assuming th at outlier payments would continue to be made at 50 percent of the amount by which the cost of furnishing the service would exceed 1.75 times the APC payment amount, un til the total outlier payments equaled 1.0 percent of aggregated estimated total CY 2015 OPPS payments. We estimated that aCMS-1613-P 232 proposed fixed-dollar threshold of $3,100, combined with the proposed multiple threshold of 1.75 times the APC payment rate , would allocate 1.0 per cent of aggregated total OPPS payments to outlier payments. For CMHCs, we are proposing that, if a CMHC’s cost for partial hospitalization se rvices, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 0173 payment rate. Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required for the quality measures selected by the Secretary, in the form and manner required by the Secretary under 1833(t)(17)(B ) of the Act, incur a 2.0 per centage point reduction to their OPD fee schedule increase factor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that will apply to certain outpatient items and services furnished by hospitals that are required to report outpatient qu ality data and that fail to meet the Hospital OQR Program requirements. For hospitals that fail to meet the Hospital OQR Program requirements, we are pr oposing to continue the policy that we implemented in CY 2010 that the hospitals’ costs will be compared to the reduced payments for purposes of outlier eligibility and payment calculation. For more information on the Hospital OQR Program, we refer readers to section XIII. of this proposed rule.CMS-1613-P 233 H. Proposed Calculation of an Adjust ed Medicare Payment from the National Unadjusted Medicare Payment The basic methodology for determining prospective payment rates for HOPD

services under the OPPS is set forth in ex isting regulations at 42 CFR Part 419, Subparts C and D. For this CY 2015 OPPS/ASC proposed rule, the payment rate for most services and procedures for which payment is ma de under the OPPS is the product of the

conversion factor calculated in accordance with section II.B. of this proposed rule and the relative payment weight determined under sectio n II.A. of this proposed rule. Therefore, the proposed national unadjusted payment rate for most APCs contained in Addendum A to this proposed rule (which is available via the Internet on the CMS Web site) and for most HCPCS codes to which separate payment under the OPPS has been assigned in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) was calculated by multiplying the propos ed CY 2015 scaled weight for the APC by the proposed CY 2015 conversion factor. We note that section 1833(t)(17) of the Ac t, which applies to hospitals as defined under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data required to be submitted on quality measures selected by the Secretary, in the form and manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage points to their OPD fee schedule increase f actor, that is, the annual payment update factor. The application of a reduced OPD fee schedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are re quired to report outpatient qual ity data and that fail toCMS-1613-P 234 meet the Hospital OQR Program (formerly referr ed to as the Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) requir ements. For further discussion of the payment reduction for hospitals that fail to meet the requirements of the Hospital OQR Program, we refer readers to sec tion XIII. of this proposed rule. We demonstrate in the steps below how to determine the APC payments that will be made in a calendar year under the OPPS to a hospital th at fulfills the Hospital OQR Program requirements and to a hospital that fails to meet the Hospital OQR Program requirements for a service that has any of the following status indicator assignments: “J1,” “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” or “V,” (as defi ned 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 condi tionally packaged serv ices (status indicator of “Q1” and “Q2”) qualify for separate paym ent. 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 re quirements. We note that we are also proposing to create new status indicator “J1” to reflect the proposed comprehensive

APCs discussed in section II.A.2.e. of this proposed rule. We also note that we are proposing to delete status i ndicator “X” as part of the CY 2015 packaging proposal for ancillary services, discussed in se ction II.A.3. of this proposed rule. Individual providers intere sted in calculating the paym ent amount that they would receive for a specific service from the natio nal unadjusted payment rates presented in Addenda A and B to this proposed rule (which are available via th e Internet on the CMSCMS-1613-P 235 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 requirement s of the Hospital OQR Pr ogram as the “full” national unadjusted payment rate. We refer to the proposed national unadjusted payment rate for hospitals that fail to meet the requirements of the Hospital OQR Program as the “reduced” national unadjusted payment rate. The reduced national unadjusted payment rate is calculated by multiplying the proposed reporting ratio of 0.980 times the “full” national unadjusted payment rate. The natio nal unadjusted payment rate used in the

calculations below is either the full nati onal 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 proposed full CY 2015 OPPS fee schedule increase factor of 2.1 percent. Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted payment rate. Since the initial implementati on of the OPPS, we have used 60 percent to represent our estimate of that portion of cost s attributable, on average, to labor. We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 18497) for a detailed discussion of how we derived this percentage. During our regression analysis for the payment adjustme nt for rural hospitals in the CY 2006 OPPS final rule with comment period (70 FR 68553), we confirmed that this labor-related share for hospital outpatient services is appropriate. The formula below is a mathematical representation of Step 1 and identifies the labor-related portion of a specific payment rate for a specific service.CMS-1613-P 236 X is the labor-related portion of the national unadjusted payment rate.

X

= .60 * (national unadjusted payment rate). Step 2. Determine the wage index ar ea in which the hospital is located and identify the wage index level that applies to the specific hospital. We note that under the proposed CY 2015 OPPS policy for transitioning wage indexes into the new OMB labor market area delineations, a hold harmless pol icy for the wage index may apply, as

discussed in section II.C. of th is proposed rule. The wage index values assigned to each area reflect the geographic stat istical areas (which are ba sed upon OMB standards) to which hospitals are assigned for FY 2015 unde r the IPPS, reclassifications through the MGCRB, section 1886(d)(8)(B) “Lugar” hospi tals, reclassifications under section 1886(d)(8)(E) of the Act, as defined in§ 412.103 of the regulations, and hospitals designated as urban under section 601(g) of P ub. L. 98-21. (For further discussion of the proposed changes to the FY 2015 IPPS wage indices, as applied to the CY 2015 OPPS, we refer readers to section II.C. of this propos ed rule.) We are proposing to continue to apply a wage index floor of 1.00 to frontie r States, in accordance with section 10324 of

the Affordable Care Act of 2010. Step 3. Adjust the wage index of hosp itals located in certain qualifying counties that have a relatively high percentage of hos pital employees who reside in the county, but who work in a different county with a higher wage index, in accordance with section 505 of Pub. L. 108-173. Addendum L to this pr oposed rule (which is available via the Internet on the CMS Web site) contains the qualifying counties and the proposed associated wage index increase developed fo r the FY 2015 IPPS and listed as Table 4J inCMS-1613-P 237 the FY 2015 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS

Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html . This step is to be followed only if the hospital is not reclassified or redesignated under secti on 1886(d)(8) or secti on 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 re presents the labor-related portion of the national unadjusted payment rate. The formula below is a mathematical representation of Step 4 and adjusts the labor-related portion of the na tional unadjusted payment rate for the specific service by the wage index.

X

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

X

a = .60 * (national unadjusted payment rate) * applicable wage index. Step 5. Calculate 40 percent (the no nlabor-related portion) of the national unadjusted payment rate and add that amount to the resulting product of Step 4. The result is the wage index adjusted paymen t rate for the relevant wage index area.

The formula below is a mathematical re presentation of Step 5 and calculates the remaining portion of the national payment rate , the amount not attrib utable to labor, and the adjusted payment for the specific service. Y is the nonlabor-related portion of the national unadjusted payment rate.

Y

= .40 * (national unadjusted payment rate). Adjusted Medicare Payment = Y + X a.CMS-1613-P 238 Step 6. If a provider is an SCH, set forth in the regulations at § 412.92, or an EACH, which is considered to be an SC H under section 1886(d)(5 )(D)(iii)(III ) of the Act, and located in a rural area, as defined in§ 412.64(b), or is treatedas being located in a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to calculate the total payment.

The formula below is a mathematical re presentation of Step 6 and applies the rural adjustment for rural SCHs. Adjusted Medicare Payment (SCH or EA CH) = Adjusted Medicare Payment * 1.071. We have provided examples below of the calculation of both the proposed full and reduced national unadjusted payment rate s that would apply to certain outpatient items and services performed by hospitals that meet and that fail to meet the Hospital OQR Program requirements, using the steps outlined above. For purposes of this example, we used a provider that is locat ed in Brooklyn, New York that is assigned to CBSA 35614. This provider bills one servi ce that is assigned to APC 0019 (Level I Excision/Biopsy). The proposed CY 2015 fu ll national unadjusted payment rate for APC 0019 is approximately $380.32. The proposed reduced national unadjusted payment rate for APC 0019 for a hospital that fails to meet the Hospital OQR Program requirements is approximately $372.71. This proposed reduced rate is calculated by multiplying the proposed reporting ratio of 0.980 by the full unadjusted payment rate for

APC 0019. The proposed FY 2015 wage index for a provider located in CBSA 35614 in New York is 1.3014. This is based on the proposed 1-year 50/50 transition blend between theCMS-1613-P 239 wage index under the old CBSA 35644 (1.3147) and the wage index under the new CBSA 35614 (1.2881). The labor-related portion of the proposed full national unadjusted payment is approximately $296.97 (.60 * $380.32 * 1.3014). The labor-related portion of the proposed reduced national unadjusted payment is approximately $291.03 (.60 * $372.71 * 1.3014). The nonlabor-related portion of the proposed full national unadjusted payment is approximately $152.13 (.40 * $380.32). The nonlabor-related portion of the proposed reduced national unadjusted paym ent is approximately $149.08 (40 * $372.71).

The sum of the labor-related and nonlabor-related portions of the proposed full national adjusted payment is approximately $449.10 ($296.97 + $152.13). The sum of the proposed reduced national adjusted payment is approximately $440.11 ($291.03 + $149.08). 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 th e effective copayment rate (determined on a national unadjusted basis) fo r that service in the year does not exceed a specified percentage. As specified in section 1833(t)(8)(C )(ii)(V) of the Act, the effective copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in calendar years thereafter, shall not exce ed 40 percent of the APC payment rate.CMS-1613-P 240 Section 1833(t)(3)(B)(ii) of the Act provi des that, for a covered OPD service (or group of such services) furnished in a y ear, the national unadjusted copayment amount cannot be less than 20 percent of the OP D fee schedule amount. However, section 1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a y ear to the amount of the inpatient hospital deductible for that year.

Section 4104 of the Affordable Care Ac t eliminated the Part B coinsurance for preventive services furnished on and after January 1, 2011, that meet certain requirements, including flex ible sigmoidoscopies and sc reening colonoscopies, and waived the Part B deductible for screening colonoscopies that b ecome diagnostic during the procedure. Our discussi on of the changes made by the Affordable Care Act with regard to copayments for pr eventive services furnished on and after January 1, 2011, may

be found in section XII.B. of the CY 2011 O PPS/ASC final rule with comment period (75 FR 72013). 2. Proposed OPPS Copayment Policy For CY 2015, we are proposing to determine copayment amounts for new and revised APCs using the same methodology th at we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule with comment period (68 FR 63458).) In addition, we are propos ing to use the same standard rounding principles that we have hist orically used in instances where the appli cation of our standard copayment methodology would result in a copayment amount that is less than 20 percent and cannot be rounded, under standa rd rounding principles, to 20 percent.CMS-1613-P 241 (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 r ounding principles.) The proposed national unadjusted copaymen t amounts for services payable under the OPPS that would be effective January 1, 2015, are shown in Addenda A and B to this proposed rule (which are available via the In ternet on the CMS Web site). As discussed in section XII.G. of this proposed rule, for CY 2015, the proposed Medicare beneficiary’s minimum unadjusted copayment and national unadjusted copayment for a service to which a reduced national unadjusted payment ra te applies will equal the product of the reporting ratio and the national unadjusted c opayment, or the product of the reporting ratio and the minimum unadjusted copa yment, respectively, for the service. We note that OPPS copayments may incr ease or decrease each year based on changes in the calculated APC payment rates du e to updated cost report and claims data, and any changes to the OPPS cost modeling pr ocess. However, as described in the

CY 2004 OPPS/ASC final rule with comment period, the development of the copayment methodology generally moves bene ficiary copayments closer to 20 percent of OPPS APC payments (68 FR 63458 through 63459). 3. Proposed Calculation of an Adjust ed Copayment Amount for an APC Group Individuals interested in calculating the national copayment liability for a Medicare beneficiary for a give n service provided by a hospital that met or failed to meet its Hospital OQR Program requirements shoul d follow the formulas presented in the following steps.CMS-1613-P 242 Step 1. Calculate the beneficiary paym ent percentage for the APC by dividing the APC’s national unadjusted copayment by its payment rate. For example, using APC 0019, approximately $76.07 is 20 percent of the proposed full national unadjusted payment rate of approximately $380.32. For APCs with only a minimum unadjusted copayment in Addenda A and B to this proposed rule (which are availa ble via the Internet on the CMS Web site), the beneficiary payment percentage is 20 percent. The formula below is a mathematical repr esentation of Step 1 and calculates the national copayment as a percentage of national payment for a given service. B is the beneficiary payment percentage.

B = National unadjusted copayment for APC/na tional unadjusted payment rate for APC. Step 2. Calculate the appropriate wage-a djusted payment rate for the APC for the provider in question, as indicated in Step s 2 through 4 under sect ion II.H. of this proposed rule. Calculate the rural adjustment fo r eligible providers as indicated in Step 6 under section II.H. of this proposed rule. Step 3. Multiply the percentage cal culated in Step 1 by the payment rate calculated in Step 2. The result is the wage-adjusted copayment amount for the APC.

The formula below is a mathematical re presentation of Step 3 and applies the beneficiary payment percentage to the adju sted payment rate for a service calculated under section II.H. of this proposed rule, w ith and without the ru ral adjustment, to calculate the adjusted beneficiar y copayment for a given service. Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment * B.CMS-1613-P 243 Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted Medicare Payment * 1.071) * B. Step 4. For a hospital that failed to m eet its Hospital OQR Program requirements, multiply the copayment calculated in Step 3 by the proposed reporting ratio of 0.980. The proposed unadjusted copayments for services payable under the OPPS that would be effective January 1, 2015, are shown in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). We note that the proposed national unadjusted payment rates and copaym ent rates shown in Addenda A and B to this proposed rule reflect the proposed fu ll CY 2015 OPD fee sche dule increase factor

discussed in section II.B. of this proposed rule. In addition, as noted above, section 1 833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be collected for a procedure performed in a year to the amount of the inpatient hospital deductible for that year. III. Proposed OPPS Ambulatory Paymen t Classification (APC) Group Policies

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

CPT and Level II HCPCS codes are used to report procedures, services, items, and supplies under the hospital OPPS. Speci fically, CMS recognizes the following codes

on OPPS claims:

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

● Category III CPT codes, which desc ribe new and emerging technologies, services, and procedures; andCMS-1613-P 244

● Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and servic es not described by CPT codes. CPT codes are established by the Americ an Medical Associat ion (AMA) and the Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are updated and changed throughout the year. CPT and HCPCS code changes that affect the OPPS are published both thr ough the annual rulemaking cy cle and through the OPPS quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes can be reported on Medicare claims) outside of the formal rulemaking process via OPPS quarter ly update CRs. Based on our review, we assign the new CPT and Level II HCPCS codes to interim status indicator (SI) and APC assignments. These interim assignments are fi nalized in the OPPS/ASC final rules. This quarterly process offers hospitals access to co des that may more accurately describe items or services furnished and provides payment or more accurate payment for these items or

services in a timelier manner than if we wa ited for the annual rulemaking process. We solicit public comments on thes e new codes and finalize our proposals related to these codes through our annual rulemaking process. We note that, under the OPPS, the APC a ssignment determines the payment rate for an item, procedure, or service. For those items, procedures, or services not paid separately under the hospital O PPS, they are assigned to appr opriate status indicators. Section XI. of this proposed rule provides a discussion of the various status indicatorsCMS-1613-P 245 used under the OPPS. Certain payment indicat ors provide separate payment while others

do not. In Table 14 below, we summarize our current process for updating codes through our OPPS quarterly update CRs, seeking public comments, and finalizing the treatment of these new codes under the OPPS. We note that because the payment rates associated with codes that are effective July 1 are not av ailable to us in time for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2014 O PPS quarterly update CR could not be

included in Addendum B to this proposed rule (which is ava ilable via the Internet on the CMS Web site). New and revised codes th at were implemented through the April 2014 OPPS quarterly update are included in Addendum B. Nevertheless, we are requesting public comments on the codes included in the July 2014 OPPS quarterly update and including these codes in the pr eamble of this proposed rule (we refer readers to Table 16 for the July 2014 HCPCS codes).CMS-1613-P 246

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, 2014 Level II HCPCS Codes April 1, 2014 CY 2015 OPPS/ASC proposed rule CY 2015 OPPS/ASC final rule with comment period

July 1, 2014 Level II HCPCS Codes July 1, 2014 CY 2015 OPPS/ASC proposed rule CY 2015 OPPS/ASC final rule with comment period Category I (certain vaccine codes) and III CPT codes July 1, 2014 CY 2015 OPPS/ASC proposed rule CY 2015 OPPS/ASC final rule with comment period

October 1, 2014 Level II HCPCS Codes October 1, 2014 CY 2015 OPPS/ASC final rule with comment period CY 2016 OPPS/ASC final rule with comment period

January 1, 2015 Level II HCPCS Codes January 1, 2015 CY 2015 OPPS/ASC final rule with comment period CY 2016 OPPS/ASC final rule with comment period Category I and III CPT Codes January 1, 2015 CY 2015 OPPS/ASC final rule with comment period CY 2016 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 so liciting public comments in this CY 2015 OPPS/ASC proposed rule or whether we will be soliciting public comments in the

CY 2015 OPPS/ASC final rule with comment period. We note that we sought publicCMS-1613-P 247 comments in the CY 2014 OPPS/ASC final rule with comment period on the interim APC and status assignments for new CPT and Level II HCPCS codes that were effective January 1, 2014. We also sought public comm ents in the CY 2014 OPPS/ASC final rule with comment period on the interim APC a nd status assignments for new Level II

HCPCS codes that became effective October 1, 2013. These new and revised codes, with

an effective date of Octo ber 1, 2013, or January 1, 2014, we re flagged with comment indicator “NI” (New code, interim APC a ssignment; comments will be accepted on the interim APC assignment for the new code) in Addendum B to the CY 2014 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, and we re subject to public comment following publication of the CY 2014 OPPS/ASC final rule with comment period. We will respond to public comments and finalize our interim OPPS treatment of these codes in the CY 2015 OPPS/ASC final rule with comment period. 1. Proposed Treatment of New CY 2014 Level II HCPCS and CPT Codes Effective April 1, 2014 and July 1, 2014 for Which We Are Soliciting Public Comments in This CY 2015 OPPS/ASC Proposed Rule Through the April 2014 OPPS quarterly update CR (Transmittal 2903, Change Request 8653, dated March 11, 2014), and th e July 2014 OPPS quarterly update CR (Transmittal 2971, Change Request 8776, date d May 23, 2014), we recognized several new HCPCS codes for separa te payment under the OPPS. Effective April 1, 2014, we made effec tive four new Level II HCPCS codes and also assigned them to appropriate interim OP PS status indicators and APCs. Through theCMS-1613-P 248 April 2014 OPPS quarterly update CR, we allowed separate payment for three of the four new Level II HCPCS codes. Specifically, as displayed in Table 15 below, we provided separate payment for HCPCS codes C 9021, C9739, and C9740. HCPCS code Q2052 was assigned to status indicator “N” to indi cate that this service is packaged under the

OPPS.

TABLE 15.—NEW LEVEL II HCPCS CODES IMPLEMENTED IN APRIL 2014

CY 2014 HCPCS Code CY 2014 Long Descriptor Proposed CY 2015 Status Indicator Proposed CY 2015 APC C9021* Injection, obinutuzumab, 10 mg G 1476

C9739 Cystourethroscopy, with insertion of transprostatic implant; 1 to 3 implants T 0162

C9740 Cystourethroscopy, with insertion of transprostatic implant; 4 or more implants T 1564

Q2052 Services, supplies and accessories used in the home under the Medicare intravenous immune globulin (ivig) demonstration N N/A

*The proposed payment rate for HCPCS code C9021 is based on published wholesale acquisition cost (PWAC) +6 percent. In this CY 2015 OPPS/ASC proposed rule, we are soliciting public comments on the proposed APC and status indicator assignm ents, where applicable, for the Level II HCPCS codes listed in Table 15 of this propo sed rule. The proposed payment rates for these codes, where applicable, can be found inAddendum B to this proposed rule (which is available via the Internet on the CMS Web site). Effective July 1, 2014, we made effectiv e several new CPT and Level II HCPCS codes and also assigned them to appropriate interim OPPS status indicators and APCs.CMS-1613-P 249 Through the July 2014 OPPS quarterly update CR, we allowed separate payment under the OPPS for four new Level II HCPCS codes and 17 new Category III CPT codes effective July 1, 2014. Specifically, as displaye d in Table 16 below, we allowed separate payment for HCPCS codes C2644, C9022, C 9134, and Q9970. We note that HCPCS code Q9970 replaced HCPCS code C9441 (In jection, ferric carboxymaltose, 1 mg), beginning July 1, 2014. HCPCS code C9441 wa s made effective January 1, 2014, but the code was deleted June 30, 2014, because it was replaced with HCPCS code Q9970. HCPCS code C9441 was granted pass-through payment status when the code was implemented on January 1, 2014. Because HCPCS code Q9970 describes the same drug as HCPCS code C9441, we are proposing to co ntinue the pass-through payment status for HCPCS code Q9970, and assign the HCPCS Q- code to the same APC and status indicator as its predecessor HCPCS C-code, as shown in Ta ble 16. Specifically, we are proposing to assign HCPCS code Q9970 to APC 9441 (Inj, Ferric Ca rboxymaltose) and

status indicator “G.” In addition, the HCPCS Workgroup esta blished HCPCS code Q9974, effective July 1, 2014, to replace HCPCS codes J2271 (Injection, morphine sulfate, 100mg) and J2275 (Injection, morphine sulfat e (preservative-free sterile solution), per 10 mg). Both of these HCPCS J-codes were assigned to stat us indicator “N” (Packaged Services). As a

result of the establishment of new HC PCS code Q9974 as a replacement for HCPCS codes J2271 and J2275, the payment indicator for HCPCS codes J2271 and J2275 was changed to “E” (Not Payable by Medicare), effective July 1, 2014. Also, because HCPCS code Q9974 describes the same servi ces that were described by HCPCS codesCMS-1613-P 250 J2271 and J2275, we are proposing to continue to assign HCPCS code Q9974 to the same status indicator as its predecessor HCPCS J- codes. Specifically, we are proposing to assign HCPCS code Q9974 to status i ndicator “N,” effective July 1, 2014. We are proposing to assign the Level II HCPCS codes listed in Table 16 to the specified proposed APCs and stat us indicators set forth in Ta ble 16 of this proposed rule. This table, presented below, includes a complete list of the Level II HCPCS codes that were made effective July 1, 2014. The code s that were made effective July 1, 2014, do not appear in Addendum B to this proposed rule, and as a result, the proposed payment rates along with the proposed status indi cators and proposed APC assignments, where applicable, for CY 2015 are provided in Table 16.

TABLE 16.—NEW LEVEL II HCPCS CODES IMPLEMENTED IN JULY 2014

CY 2014 HCPCS Code CY 2014 Long Descriptor Proposed CY 2015 Status Indicator Proposed CY 2015 APC Proposed CY 2015 Payment Rate C2644 Brachytherapy source, cesium-131 chloride solution, per millicurie U 2644 $18.97 C9022* Injection, elosulfase alfa, 1mg G 1480 $226.42

C9134* Factor XIII (antihemophilic factor, recombinant), Tretten, per 10 i.u. G 1481 $14.10 Q9970** Injection, ferric car boxymaltose, 1mg G 9441 $1.06 Q9974*** Injection, morphine sulfate, preservative-free for epidural or intrathecal use, 10 mg N N/A N/A

*The proposed payment rates for HCPCS code C9022 and C9134 are based on ASP+6 percent. **HCPCS code C9441 (Injection, ferric carboxymaltose, 1 mg) was deleted June 30, 2014, and replaced with HCPCS code Q9970, effective July 1, 2014. ***HCPCS codes J2271 (Injection, morphine sulfate, 100mg) and J2275 (Injection, morphine sulfate (preservative-free sterile solution), per 10 mg) were replaced with HCPCS code Q9974, effectiveCMS-1613-P 251 July 1, 2014. Consequently, the payment indicator assignment for HCPCS codes J2271 and J2275 was changed to” E” (Not Payable by Medicare), effectiv e July 1, 2014.

For CY 2015, we are proposing to conti nue our established policy of recognizing Category I CPT vaccine codes for which F DA approval is imminent and Category III CPT codes that the AMA releases in January of each year for implementation in July through the OPPS quarterly update process. Under the OPPS, Category I CPT vaccine codes and Category III CPT codes that are re leased on the AMA Web site in January are made effective in July of the same year th rough the July quarterly update CR, consistent with the AMA’s implementation date for the codes. For the July 2014 update, there were no new Category I CPT vaccine codes. Through the July 2014 OPPS quarterly update CR (Transmittal 2971, Change Request 8776, dated May 23, 2014), we assigne d interim OPPS status indicators and APCs for 17 of 27 new Categor y III CPT codes that were made effective July 1, 2014. Specifically, as displayed in Table 17 below, we made interim OPPS status indicators and APC assignments for Category III CPT codes 0347T, 0348T, 0349T, 0350T, 0355T, 0356T, 0358T, 0359T, 0360T, 0362T, 0364T, 0366T, 0368T, 0370T, 0371T, 0372T, and 0373T. Table 17 below lists the Category III CPT codes that were implemented on July 1, 2014, along with the proposed status indicators, proposed APC assignments, and proposed payment rates, where applicable, for CY 2015.CMS-1613-P 252

TABLE 17.—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 2014

CY 2014 CPT Code CY 2014 Long Descriptor Proposed CY 2015 Status Indicator Proposed CY 2015 APC Proposed CY 2015 Payment Rate 0347T Placement of interstitial device(s) in bone for radiostereometric analysis (RSA) Q2 0420 $125.05

0348T Radiologic examination, radiostereometric analysis (RSA); spine, (includes, cervical, thoracic and lumbosacral, when performed) S 0261 $95.36

0349T Radiologic examination, radiostereometric analysis (RSA); upper ex tremity(ies), (includes shoulder, elbow and wrist, when performed) S 0261 $95.36

0350T Radiologic examination, radiostereometric analysis (RSA); lower extremity(ies), (includes hip, proximal femur, knee and ankle, when performed) S 0261 $95.36

0351T Optical coherence tomography of breast or axillary lymph node, excised tissue, each specimen; real time intraoperative N N/A N/A

0352T Optical coherence tomography of breast or axillary lymph node, excised tissue, each specimen; interpretation and report, real time or referred B N/A N/A

0353T Optical coherence tomography of breast, surgical cavity; real time intraoperative N N/A N/A

0354T Optical coherence tomography of breast, surgical cavity; interpre tation and report, real time or referred B N/A N/A

0355T Gastrointestinal tract imaging, intraluminal (eg, capsule endoscopy), colon, with interpretation and report T 0142 $857.73

0356T Insertion of drug-eluting implant (including punctal dilation and implant removal when performed) into lacrimal canaliculus, each Q1 0698 $101.41CMS-1613-P 253

0358T Bioelectrical impedance analysis whole body composition assessment, supine position, with interpretation and report Q1 0340 $61.88

0359T Behavior identification assessment, by the physician or other qualified health care professional, face-to-face with patient and caregiver(s), include s administration of standardized and non-st andardized tests, detailed behavioral hist ory, patient observation and caregiver interview, interpretation of test results, discussion of findings and recommendations with the primary guardian(s)/caregiver(s), and preparation of report V 0632 $107.98

0360T Observational behavioral follow-up assessment, includes physician or other qualified health care professional direction with interpretation and report, administered by one technician; first 30 minutes of technician time, face-to-face with the patient V 0632 $107.98

0361T Observational behavioral follow-up assessment, includes physician or other qualified health care professional direction with interpretation and report, administered by one technician; each additional 30 minutes of technician time, face-to -face with the patient (List separately in addition to code for primary service) N N/A N/A

0362T Exposure behavioral follow-up assessment, includes physician or other qualified health care professional direction with interpretation and report, administered by physician or other qualified health care professional with the assistance of one or more technicians; first 30 minutes of technician(s) time, face-to-face with the patient V 0632 $107.98CMS-1613-P 254

0363T Exposure behavioral follow-up assessment, includes physician or other qualified health care professional direction with interpretation and report, administered by physician or other qualified health care professional with the assistance of one or more technicians; each additional 30 minutes of technician(s) time, face-to-face with th e patient (List separately in addition to code for primary procedure) N N/A N/A

0364T Adaptive behavior treatment by protocol, administered by technician, face-to-face with one patient; first 30 minutes of technician time S 0322 $92.61

0365T Adaptive behavior treatment by protocol, administered by technician, face-to-face with one patient; each additional 30 minutes of technician time (List se parately in addition to code for primary procedure) N N/A N/A

0366T Group adaptive behavior treatment byprotocol, administered by technician, face-toface with two or more patients; first 30 minutes of technician time S 0325 $65.91

0367T Group adaptive behavior treatment byprotocol, administered by technician, face-toface with two or more patients; each additional 30 minutes of technician time (List separately in addition to code for primary procedure) N N/A N/A

0368T Adaptive behavior treatment with protocol modification administered by physician or other qualified health car e professional withone patient; first 30 minutes of patient face-toface time S 0322 $92.61

0369T Adaptive behavior treatment with protocol modification administered by physician or other qualified health car e professional with one patient; each additional 30 minutes of patient face-to-face time (List separately in addition to code for primary procedure) N N/A N/ACMS-1613-P 255

We are soliciting public comments on th e proposed CY 2015 status indicators, APC assignments, and payment rates for the Level II HCPCS codes and the Category III CPT codes that were made effective April 1, 2014, and July 1, 2014. These codes are listed in Tables 15, 16, and 17 of this proposed rule. We also are proposing to finalize the status indicator and APC assignments and payment rates for these codes, if applicable, in the CY 2015 OPPS/ASC final ru le with comment period. Because the new Category III CPT and Level II HCPCS codes th at become effective for July are not available to us in time for incorporation in to the Addenda to th is proposed rule, our 0370T Family adaptive behavior treatment guidance, administered by physician or other qualified health care professiona l (without the patient present) S 0324 $130.28

0371T Multiple-family group adaptive behavior treatment guidance, administered by physician or other qualified h ealth care professional (without the patient present) S 0324 $130.28

0372T Adaptive behavior treatment social skills group, administered by physician or other qualified health care pr ofessional face-to-face with multiple patients S 0325 $65.91

0373T Exposure adaptive behavior treatment with protocol modification requiring two or more technicians for severe maladaptive behavior(s);first 60 minutes of technicians' time, face-toface with patient S 0323 $117.36

0374T Exposure adaptive behavior treatment with protocol modification requiring two or more technicians for severe maladaptive behavior(s); each additional 30 minutes of technicians' time face-to-face with patient (List separately in addition to code for primary procedure) N N/A N/ACMS-1613-P 256 policy is to include the code s, the proposed status indica tors, proposed APCs (where applicable), and proposed payment rates (whe re applicable) in the preamble of the proposed rule, but not in the Addenda to this proposed rule. These codes are listed in Tables 16 and 17, respectively, of this propos ed rule. We are proposing to incorporate

these codes into Addendum B to the CY 2015 OPPS/ASC final rule with comment period, which is consistent with our a nnual OPPS update policy. The Level II HCPCS codes implemented or modified through the April 2014 OPPS update CR and displayed

in Table 15 are included in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site), where th e proposed CY 2015 payment rates for these

codes are also shown. 2. Proposed Process for New Level II HCPCS Codes That Will Be Effective October 1, 2014 and New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2015 for Which We Will Be Soliciting Public Comments in the CY 2015

OPPS/ASC Final Rule w ith 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 Le vel 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 peri od updating the OPPS for the following calendarCMS-1613-P 257 year. For CY 2015, these codes will be fl agged with comment indicator “NI” in

Addendum B to the OPPS/ASC final rule with comment period to indi cate that we are assigning them an interim payment status which is subject to public comment. In addition, the CPT and Level II HCPCS codes th at will be effective January 1, 2015, will be flagged with comment indicator “NI” in Addendum B to the CY 2015 OPPS/ASC final rule with comment period. Specifi cally, the status i ndicator 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 public 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 2015. Specifically, for CY 2015, we are proposing to include in Addendum B to

the CY 2015 OPPS/ASC final rule with comment period the following new HCPCS

codes:

● New Level II HCPCS codes effect ive October 1, 2014 that would be incorporated in the Octobe r 2014 OPPS quarterly update CR;

● New Category I and III CPT codes e ffective January 1, 2015 that would be incorporated in the January 2015 OPPS quarterly update CR; and

● New Level II HCPCS codes effect ive January 1, 2015 that would be incorporated in the January 2015 OPPS quarterly update CR. As stated above, the October 1, 2014 a nd January 1, 2015 codes would be flagged

with comment indicator “NI” in Addendum B to the CY 2015 OPPS/ASC final rule with comment period to indicate th at we have assigned the c odes an interim OPPS paymentCMS-1613-P 258 status for CY 2015. We will be inviting public comments on the proposed status indicator and APC assignments and payment ra tes for these codes, if applicable, that

would be finalized in the CY 2016 OPPS/ ASC final rule with comment period. 3. Proposed Process for Soliciting Public Comments for New and Revised CPT Codes That Would Be Released by AMA Befo re the January 1 Effective Date We generally incorporate the new CPT codes that are effective January 1 in the OPPS/ASC final rule with comment period. We establish interim APC and status indicator assignments for the coming y ear, and request comments on the interim assignments. Similarly, in the OPPS/ASC fina l rule with comment period, we establish interim APC and status indicator assign ments for existing CPT codes that have substantial revision to their code descriptor s, which may include grammatical changes to the code descriptors that nece ssitate a change in the curren t APC assignments. In both cases, we assign these new and revised code s to OPPS comment indicator “NI” (New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calenda r year as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code.) in the OPPS/AS C final rule with comment period. We respond to comments and

finalize the APC and status i ndicator assignments for these CPT codes in the following year’s OPPS/ASC final rule with comment period.CMS-1613-P 259 a. Current Process for Accepting Comment s on New and Revised CPT Codes That Are Effective January 1 Currently, under the hospita l OPPS, new CPT codes that are effective January 1 are flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period to indicate that the c odes are new for the calendar year and have been assigned interim APCs and status i ndicators, and that we are accepting public

comments on the treatment of these new codes. We address public comments in the next year’s OPPS/ASC final rule with comment period and finalize the APC and status indicator assignments for the codes. For exam ple, the new CPT codes that were effective January 1, 2013, were assigned to comment indicator “NI” in Addendum B to the

CY 2013 OPPS/ASC final rule with comment period. We responded to public comments

received on the CY 2013 OPPS/ASC final rule with comment period and finalized the APC and status indicator assignments for these codes in the CY 2014 OPPS/ASC final rule with comment period; and we incl uded the final APC and status indicator assignments in Addendum B to that rule. Similarly, existing CPT codes with substa ntial revisions to th e code descriptors are flagged with comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment period to indicate that thes e codes are assigned interim APC and status indicators on which we are accepting public comments. Public comments regarding these revised CPT codes are also addressed, and APC and status indicator assignments finalized, in the next ye ar’s OPPS/ASC final rule with comment period.CMS-1613-P 260 Several stakeholders, including cons ultants, device manufacturers, drug manufacturers, as well as specialty societie s and hospitals, have expressed concern with the process we use to recognize new and revi sed CPT codes. They believe that CMS should publish proposed APCs a nd status indicators for the new and revised CPT codes that will be effective January 1 in the OPPS/ASC proposed rule , and request public comments prior to finalizing them for the Ja nuary 1 implementation date. Further, the stakeholders believe that seeking public input on the APC a nd status indicator assignments for these new and revised code s would assist CMS in assigning the CPT codes to appropriate APCs. We have been informed of similar concerns regarding our process for assigning interim payment values for revalued, and new and revised codes, under the Medicare Physician Fee Schedule (MPFS), and include proposed policies to address those concerns in the CY 2015 MPFS proposed rule. Like the MPFS, the OPPS and the ASC payment system rely principally upon the Current Procedural Terminology (CPT ® ) coding system maintained by the AMA for billing. CPT ® is the standard code set adopted unde r the Health Insura nce Portability and Accountability Act of 1996 (HIPAA) for outpa tient services. The AMA CPT Editorial Panel’s coding cycle occurs concurrently withour calendar year rulemaking cycle for the OPPS and the ASC payment system. The O PPS/ASC proposed rules are published prior to the publication of the CPT c odes that are generally made public in the Fall, with a January 1 effective date, and we are curren tly unable to include these codes in the OPPS/ASC proposed rules. Cons equently, we establish inter im APC and status indicatorCMS-1613-P 261 assignments for new and revised CPT codes that have an effective date of January 1, and we make payment based on those in terim designations for one year. b. Proposal to Modify the Current Pr ocess for Accepting Comments on New and Revised CPT Codes That Are Effective January 1 In this CY 2015 OPPS/ASC proposed rule, we are proposing to make changes in the process we use to establish APC assi gnments and status indicators for new and revised codes. We are proposing to make similar revisions under the MPFS to our current process for establishing values (work and malpractice rela tive value units and practice expense inputs) for new and revised CP T codes that take effect each January 1. For instance, we are proposing that, for new and revised CPT codes that we receive from the AMA CPT Editorial Panel too late for inclusion in the proposed rule for a year, we would delay adoption of the new a nd revised codes for that year, and instead, adopt coding policies and payment rates that conform, to the extent possible, to the policies and payment rates in place for the pr evious year. We are proposing to adopt these conforming coding and payment policies on an interim basis pending the result of our specific proposals for status indicato r and APC assignments for these new and revised codes through notice and comment ru lemaking in the OPPS/ASC proposed rule for the following year. Because the changes in CPT codes are effective on January 1 of each year, and CMS would not have establishe d status indicator or APC assignments for these new or revised codes, it would not be practicable for Medicare to use those CPT codes. In this circumstance, we are proposi ng to create HCPCS G-codes to describe the predecessor codes for any codes that were revi sed or deleted as part of the annual CPTCMS-1613-P 262 coding changes. However, if certain CPT c odes are revised in a manner that would not affect the cost of inputs (for example, a gram matical change to CPT code descriptors), we

would use these revised codes a nd continue to assign those co des to their current APC. For example, under this proposed process, if a single CPT code was separated into two

codes and we did not receive those codes unt il May 2015, we would assign each of those

codes to status indicator “B” in the final ru le with comment period, to indicate that an alternate code is recognized under the OPPS. Hospitals coul d not use those two new CPT codes to bill Medicare for outpa tient services the first year af ter the effective date of the codes. Instead, we would create a HCPCS G-c ode with the same description as the single predecessor CPT code, and continue to use th e same APC and status indicator assignment for that code during the year. We would propose status indicator and APC assignments for the two new CPT codes during rulema king in CY 2016 for payment beginning in

CY 2017. For new codes that describe wholly ne w services, as opposed to new or revised

codes that describe services for which APC and status indicator assignments are already established, we would make ev ery effort to work with the AMA CPT Editorial Panel to

ensure that we received the codes in time to propose payment rates in the proposed rule. However, if we do not receive the code fo r a wholly new service in time to include proposed APC and status indicator assignments in the proposed rule for a year, we would need to establish interim APC and status indicator assignments for the initial year. We are proposing to establish th e initial APC and status i ndicator assignments for new services as interim final assignments, and to follow our current process to solicit andCMS-1613-P 263 respond to public comments and finalize the AP C and status indicator assignments in the subsequent year. We recognize that the use of HCPCS G-codes may place an administrative burden on those providers that bill for services under the OPPS and the ASC payment system. We are hopeful that the AMA CPT Editorial Pa nel ultimately will be able to adjust its timelines and processes so that most, if not all, of the annual coding changes can be addressed in the proposed rule. We are pr oposing to implement the revised CMS process for establishing APC and status indicator assignments fo r new and revised codes for CY 2016. However, we will consider alterna tive implementation dates to allow time for the AMA CPT Editorial Panel to adjust its sche dule in order to avoid the necessity to use

numerous HCPCS G-codes. In summary, in conjunction with th e proposals presented in the CY 2015 MPFS proposed rule to revise the process used to address new, revised, and potentially misvalued codes under the MPFS, we are proposing to include in the OPPS/ASC proposed rule for a year proposed APC and st atus indicator assignments for the new and revised CPT codes that are effective January1. We would follow this revised process except in the case of a code that descri bes a wholly new service (such as a new technology or new surgical pro cedure) that has not previously been addressed under the

OPPS. For codes that describe new services , we would establish in terim APC and status indicator assignments in the OPPS/ASC final rules with comment period, as is our current process. The proposed revised pro cess would eliminate our current practice of assigning interim APC and status indicators for the new and re vised CPT codes that takeCMS-1613-P 264 effect on January 1 each year. Instead, when we do not receive new and revised codes early enough in our ratesetti ng process to propose APC and status indicator assignments in the OPPS/ASC proposed rule for a year, we would create and use HCPCS G-codes that mirror the predecessor CPT codes and retain the current APC and status indicator assignments for a year until we could include proposed assignments in the following year’s proposed rule. After proposing APC a nd status indicator assignments for the new and revised codes in a proposed rule, we would accept comments on the proposed assignments, and respond to the comments and assign the final APC and status indicator assignments in the OPPS/ASC final rules wi th comment period. We are inviting public comments on this proposal. We are specificallyinterested in receiving public comments on the following topics:

● Is this proposal preferab le to the present process? Are there other alternatives?

● If we were to implemen t this proposal, is it better to move forward with the changes or is more time needed to make the transition and, ther efore, implementation should be delayed beyond CY 2016?

● Are there alternatives other than the use of HCPC S G-codes that would allow us to address the annual CPT code change s through notice and comment rather than interim final rulemaking?

● Is the process we have proposed for wholly new services appropriate? How

should we define new services?

● Are there any classes of services, othe r than new services, that should remain

on an interim final schedule?CMS-1613-P 265 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 departme nt services. Secti on 1833(t)(2)(B) of the Act provides that the Secretary may establish groups of covered OPD services within this classification system, so that services cl assified within each group are comparable clinically and with respect to the use of resources. In accordance with these provisions, we developed a grouping classification sy stem, referred to as Ambulatory Payment Classifications (APCs), as se t forth in § 419.31 of the regula tions. We use Level I and Level II HCPCS codes to identify and group the services within each APC. The APCs are organized such that each group is hom ogeneous both clinically and in terms of resource use. Using this classification syst em, we have establishe d distinct groups of similar services. We also have develope d separate APC groups for certain medical devices, drugs, biologicals, therapeutic ra diopharmaceuticals, and brachytherapy devices that are not packaged into the payment for the procedure. We have packaged into the payment for each procedure or service within an APC group the costs associated with those items a nd services that are ty pically ancillary and supportive to a primary diagnostic or therapeutic modality and, in those cases, are an integral part of the primary service they support. Therefor e, we do not make separate payment for these packaged items or services. In general, packaged items and services include, but are not limited to the items and services listed in 419.2(b) of the regulations.CMS-1613-P 266 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 ty pically performed together duri ng a single clini cal encounter and that result in the provision of a comp lete service (72 FR 66650 through 66652). For CY 2014, we provided composite APC paymen ts for nine categories of services:

● Mental Health Services Composite (APC 0034)

● Cardiac Electrophysiologic Evaluati on and Ablation Composite (APC 8000)

● Low Dose Rate (LDR) Prostate Brachytherapy Composite (APC 8001)

● Ultrasound Composite (APC 8004)

● CT and CTA without Contrast Composite (APC 8005)

● CT and CTA with Contrast Composite (APC 8006)

● MRI and MRA without Cont rast Composite (APC 8007)

● MRI and MRA with Cont rast Composite (APC 8008)

● Extended Assessment & Mana gement Composite (APC 8009) A further discussion of composite APCs is included in section II.A.2.f. of this proposed rule. Under the OPPS, we generally pay for hospital outpatient services on a rate-per-service basis, where the service may be reported with one or more HCPCS codes. Payment varies according to the APC group to which the independent service or combination of services is assigned. Each APC relative payment we ight represents the hospital cost of the services included in that APC, relative to the hospital cost of theCMS-1613-P 267

services included in APC 0634 (Hospital Clinic Visits). The APC relative payment weights are scaled to APC 0634 because it is the hospital clinic visit APC and clinic visits are among the most frequently furnished serv ices 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 accountchanges in medical practice, changes in technology, the addition of new services , new cost data, and other

relevant information and factors. Secti on 1833(t)(9)(A) of the Act also requires the Secretary to consult with an expert outside advisory panel composed of an appropriate selection of representa tives of providers to review (and advise the Secretary concerning) the clinical integrity of the APC groups a nd the relative payment weights (the Panel recommendations for specific services for th e CY 2015 OPPS and our responses to them

are discussed in the releva nt specific sections thr oughout this proposed rule). Finally, section 1833(t)(2) of the Act provi des that, subject to certain exceptions, the items and services within an APC gr oup cannot be considered comparable with respect to the use of resources if the highest cost for an item or servic e in the group is more than 2 times greater than the lowest co st for an item or service within the same group (referred to as the “2 times rule”). Th e statute authorizes the Secretary to make exceptions to the 2 times rule in unusual cases, such as low-volume items and services (but the Secretary may not make such an excepti on in the case of a drug or biological that has been designated as an orphan drug unde r section 526 of the Federal Food, Drug, and Cosmetic Act).CMS-1613-P 268 2. Application of the 2 Times Rule In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, we annually review the items and services within an APC group to determine, with respect to comparability of the use of resources, if the cost of the highest cost item or service within an APC group is more than 2 time s greater than the cost of the lowest cost item or service within that same group. In making this determination, we consider only

those HCPCS codes that are si gnificant based on the number of claims. We note that, for purposes of identifying significant procedur e codes for examination under the 2 times rule, we consider procedure codes that ha ve more than 1,000 single major claims or procedure codes that have both greater than 99 single major clai ms and contribute at least 2 percent of the single major claims used to establish the APC cost to be significant (75 FR 71832). This longstanding definition of when a procedure code is significant for purposes of the 2 times rule was selected beca use we believe that a subset of 1,000 claims (or less than 1,000 claims) is negligible w ithin the set of approximately 100 million single procedure or single sessi on claims we use for establishing costs. Similarly, a procedure code for which there are fewer than 99 single bills and which comprises less than 2 percent of the single major claims w ithin an APC will have a negligible impact on the APC cost. In this proposed rule, for CY 2015, we are proposing to make exceptions

to this limit on the variation of costs within each APC gr oup in unusual cases, such as

low-volume items and services.

We have identified the APCs with 2 times rule violations for CY 2015. Therefore, we are proposing changes to th e procedure codes assigned to these APCsCMS-1613-P 269 assignments in Addendum B to this proposed rule. We note that Addendum B does not appear in the printed version of the Federal Register as part of the CY 2015 OPPS/ASC proposed rule. Rather, it is published and made available via the Internet on the CMS

Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . In these cases, to eliminate a 2 times rule violation or to improve clinical and res ource homogeneity, we are proposing to reassign these procedure codes to new APCs that contai n services that are similar with regard to

both their clinical and resour ce characteristics. In many cases, the proposed procedure code reassignments and associ ated APC reconfigurations for CY 2015 included in this proposed rule are related to changes in cost s of services that were observed in the CY 2013 claims data newly available for CY 2015 ratesetting. We also are proposing changes to the status indicator s for some procedure codes th at are not specifically and separately discussed in this proposed rule. In these cases, we are proposing to change the status indicators for these procedure code s because we believe that another status indicator would more accurately describe thei r payment status from an OPPS perspective based on the policies that we are proposi ng for CY 2015. In addition, we are proposing to rename existing APCs or create new c linical APCs to complement the proposed procedure code reassignments. Addendum B to this CY 2015 OPPS/ASC proposed rule

identifies with a comment indicator “CH” those procedure codes for which we are proposing a change to the APC a ssignment or status indicator, or both, that were initially assigned in the April 2014 Addendum B Update (available via the Internet on the CMSCMS-1613-P 270

Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html ). 3. Proposed Exceptions to the 2 Times Rule As discussed earlier, we may make excep tions to the 2 times rule limit on the

variation of costs within each APC group in unusual cases such as low-volume items and services. Taking into account the APC ch anges that we are proposing for CY 2015, we

reviewed all of the APCs to determine whic h APCs would not meet the requirements of the 2 times rule. We used the following cr iteria to evaluate whether to propose exceptions to the 2 times rule for affected APCs:

● Resource homogeneity;

● Clinical homogeneity;

● Hospital outpatien t setting utilization;

● Frequency of service (volume); and

● Opportunity for upcoding and code fragments. Based on the CY 2013 claims data available for this proposed rule, we found 9 APCs with 2 times rule violations. We applie d the criteria as described above to identify the APCs that we are proposing to make exceptions for under the 2 times rule for CY 2015, and identified 9 APCs that met the cr iteria for an exception to the 2 times rule

based on the CY 2013 claims data available for this proposed rule. We have not included

in this determination those APCs where a 2 times rule violation was not a relevant concept, such as APC 0375 (Ancillary Outpa tient Services when Patient Expires), which has an APC cost set based on multiple pro cedure claims. Therefore, we have onlyCMS-1613-P 271 identified those APCs, including those w ith criteria-based costs, such as device-dependent APCs, with 2 times rule viol ations. For a detailed discussion of these criteria, we refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18457 and 18458). We note that, for cases in which a reco mmendation by the Panel appears to result

in or allow a violation of the 2 time s rule, we generally accept the Panel’s

recommendation because those recommendati ons are based on explicit consideration (that is, a review of the late st OPPS claims data and group discussion of the issue) of resource use, clinical homogene ity, site of service, and the qu ality of the claims data used to determine the APC payment rates. Table 18 of this proposed rule lists the 9 APCs that we are proposing to make exceptions for under the 2 times rule for CY 2015 based on the criteria cited above and claims data processed from January 1, 2013, through December 31, 2013. For the final rule with comment period, we intend to us e claims data for dates of service between January 1, 2013, and December 31, 2013, that were processed on or before June 30, 2014, and updated CCRs, if available.CMS-1613-P 272

TABLE 18.—PROPOSED APC EXCEPTIONS TO THE 2 TIMES RULE FOR CY 2015 Proposed CY 2015 APC Proposed CY 2015 APC Title

0012 Level I Debridement & Destruction 0015 Level II Debridement & Destruction 0057 Bunion Procedures 0066 Level V Radiation Therapy 0330 Dental Procedures 0433 Level II Pathology 0450 Level I Minor Procedures 0634 Hospital Clinic Visits 0661 Level III Pathology

The proposed costs for hospital outpatient services for these and all other APCs that were used in the development of th is proposed rule can be found on the CMS Web

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

. C. Proposed OPPS APC-Specific Policies Section 1833(t)(9) of the Act requires that we annua lly review and revise, if necessary, the APCs and the procedure code assignments. Therefore, every year we evaluate and revise, if necessary, the AP C assignments for procedure codes based on evaluation of the latest hospital outpatient cl aims data. Although we do not discuss every APC revision and procedure code reassignment in the pr oposed and final rules with comment period, these revisions and/or reassignments are listed in the OPPS Addendum B to the proposed and final rules with co mment period. Specifically, procedure codes proposed for reassignment to new APCs and/or status indicators are assigned to commentCMS-1613-P 273 indicator “CH” (Active HCPCS code in curr ent year and next calendar year, status indicator and/or APC assignment has changed) in the OPPS Addendum B to the proposed and final rules with comment period. In accordance with section 1833(t)(2) of the Act, we annually review all APC assignments to determine if any 2 times rule violations exist. That is, we review the items and services within an APC group to de termine, with respect to comparability of the use of resources, if the cost of the highest cost item or service within an APC group is

more than 2 times the cost of the lowest costitem or service with in that same group. In making this determination, we consider onl y those HCPCS codes that are significant

based on the number of claims.

As stated in section III.B. of this proposed rule, for pur poses of identifying significant procedure codes for examination of possible 2 times rule vi olations within an APC, we consider procedure codes that have either more than 1,000 single major claims, or (if less than 1,000 single major claims) pr ocedure codes that have more than 99 single major claims and contribute at least 2 per cent of the single major claims. This longstanding criterion to determine when a pr ocedure code is signifi cant for purposes of evaluation of a possible 2 times rule violati on was established because we believe that a subset of 1,000 claims is negligible within the set of approximately 100 million single procedure or single session claims we use for establishing costs. Similarly, a procedure

code for which there are fewer than 99 si ngle bills and which comprises less than 2 percent of the single major claims within an APC will have a negligible impact on the

APC cost.CMS-1613-P 274 1. Ophthalmic Procedures and Services For the CY 2015 OPPS update, based on our evaluation of the latest hospital outpatient claims data available for this propos ed rule, we are proposi ng to restructure all of the ophthalmic-related APCs to better reflec t the costs and clinical characteristics of the procedures within each APC. This pr oposed restructuring results in the use of 13 APCs for the ophthalmology-related proce dures for the CY 2015 OPPS update, as compared to the 24 APCs used for the CY 2014 OPPS update. We believe this major restructuring and consolidation of APCs mo re appropriately cate gorizes all of the ophthalmology-related procedures and servic es within an APC group, such that the services within each newly-configured APC are more comparable clinically and with respect to resource use. Ta bles 19 and 20 below show the current CY 2014 and proposed CY 2015 ophthalmology-related APCs. Speci fically, Table 19 shows the ophthalmologyrelated APCs and status indicator assignmen ts used for CY 2014, while Table 20 shows the proposed ophthalmology-related APCs and their status indicator assignments for CY 2015. The proposed payment rates for th e ophthalmology-related procedure codes can be found in Addendum B to this proposed ru le (which is availabl e via the Internet on the CMS Web site).

TABLE 19.—CY 2014 OPHTHALMOLOGY-RELATED APCs

CY 2014 APC APC Title Description CY 2014 Status Indicator 0035 Vascular Puncture and Mi nor Diagnostic Procedures X 0230 Level I Eye Tests & Treatments S 0231 Level III Eye Tests & Treatments SCMS-1613-P 275

CY 2014 APC APC Title Description CY 2014 Status Indicator 0232 Level I Anterior Segment Eye Procedures T 0233 Level III Anterior Segment Eye Procedures T 0234 Level IV Anterior Segment Eye Procedures T 0235 Level I Posterior Segment Eye Procedures T 0237 Level II Posterior Segment Eye Procedures T 0238 Level I Repair and Plastic Eye Procedures T 0239 Level II Repair and Plastic Eye Procedures T 0240 Level III Repair and Plastic Eye Procedures T 0241 Level IV Repair and Plastic Eye Procedures T 0242 Level V Repair and Plastic Eye Procedures T 0243 Strabismus/Muscle Procedures T 0244 Corneal and Amniotic Membrane Transplant T 0246 Cataract Procedures with IOL Insert T 0247 Laser Eye Procedures T 0249 Cataract Procedures without IOL Insert T 0255 Level II Anterior Segment Eye Procedures T 0293 Level VI Anterior Segment Eye Procedures T 0672 Level III Posterior Se gment Eye Procedures T 0673 Level V Anterior Segment Eye Procedures T 0698 Level II Eye Tests & Treatments S 0699 Level IV Eye Tests & Treatments TCMS-1613-P 276

TABLE 20.—PROPOSED CY 2015 OPHTHALMOLOGY-RELATED APCs

Proposed CY 2015 APC APC Title Description Proposed CY 2015 Status Indicator 0230 Level I Eye Tests & Treatments S 0231 Level III Eye Tests & Treatments S 0233 Level II Intraocular Procedures T 0238 Level I Extraocular, Repair, and Plastic Eye Procedures T 0239 Level II Extraocular, Repair, and Plastic Eye Procedures T 0240 Level III Extraocular, Repair , and Plastic Eye Procedures T 0242 Level IV Extraocular, Repair , and Plastic Eye Procedures T 0247 Laser Eye Procedures T 0255 Level I Intraocular Procedures T 0293 Level IV Intraocular Procedures J1 0351 Level V Intraocular Procedures J1 0673 Level III Intraocular Procedures T 0698 Level II Eye Tests & Treatments S

We intend to propose similar major restru ctures of the APC and procedure code assignments for other clinical areas in fu ture rulemakings. We are inviting public comments on this proposal.

2. Female Reproductive Procedur es (APCs 0188, 0189, 0192, 0193, and 0202) At the Panel’s March 10, 2014 meeting, a presenter expressed concern regarding the reassignment of the fe male reproductive procedures within existing APCs 0192 (Level IV Female Reproductive Procedures ), 0193 (Level V Female Reproductive Procedures), and 0195 (Level VI Female Reproductive Procedures) that were made effective for the CY 2014 OPPS update, and st ated that the changes would compromise beneficiary access to pelvic fl oor repair procedures. The commenter urged the Panel toCMS-1613-P 277 request that CMS revisit its packagin g policy for APCs 0193 and 0195 and allow stakeholders the opportunity to work w ith CMS to appropriately reassign these procedures in a manner that better accounts for clinical complexity. In addition, this presenter requested that CMS postpone conve rting existing APC 0202 (Level VII Female Reproductive Procedures) into a comprehensiv e APC to allow for further study of the complexity of pelvic floor repair procedures . After review of the information provided by the presenter and examination of the latest hospital outpatient claims data available for this proposed rule, the Panel made no recomm endation for any of the female reproductive

APCs. For the CY 2014 OPPS update, we made several APC changes, which included changes to the female reproductive AP Cs 0192, 0193, and 0195. These changes were listed in Addendum B to the CY 2014 OPPS/ASC proposed rule. Of these three APCs, only APC 0193 showed a 2 times rule viola tion. We note that, under the OPPS, we may make exceptions to the 2 times rule based on the variation of co sts within each APC group in unusual cases such as low-volume items and services . In the case of APC 0193, we believed that it was necessary to make an exception to the 2 times rule for APC 0193 for the CY 2014 OPPS update because this AP C sufficiently reflectedthe clinical and

resource coherence of the Level V female reproductive procedures. For the CY 2015 OPPS update, based on our review of the latest hospital outpatient claims data available for this propos ed rule, there are no 2 times rule violations for any of the female reproductive APCs. In addition, based on our evaluation of the latest hospital outpatient claims data, we are proposing to restructure the femaleCMS-1613-P 278 reproductive APCs to more appropriately reflec t the resource and clinical characteristics of the procedures within each APC. This propos ed restructuring results in the use of five APCs for the CY 2015 OPPS update, as compared to the seven APCs used for the CY 2014 OPPS update. We believe that this proposed five-level APC structure will provide more accurate payments for the fema le reproductive procedures furnished to

Medicare beneficiaries. In summary, we are proposing to restru cture the female reproductive APCs based on a review of our latest hosp ital outpatient claims data ava ilable for this proposed rule,

which results in the use of five levels of APCs for CY 2015, as compared to the seven

APCs used in CY 2014. Tables 21 and 22 below show the current CY 2014 and proposed CY 2015 female reproductive APCs. Specifically, Table 21 shows the female reproductive APCs, APC titles, and their stat us indicator assignments for CY 2014, while Table 22 shows the proposed female reproductive APCs, APC titles, and their status indicator assignments for CY 2015. The proposed payment rates for the female reproductive procedure codes can be found in Addendum B to this proposed rule (which

is available via the Internet on the CMS Web site ). We note that one of the five levels of the female reproductive APCs, APC 0202, is a co mprehensive APC. We refer readers to section II.A.2.e. of this proposed rule for further discussion of our comprehensive APC policy.CMS-1613-P 279

TABLE 21.—CY 2014 FEMALE REPRODUCTIVE APCs

CY 2014 APC APC Title Description CY 2014 Status Indicator 0188 Level II Female Reproductive Proc T 0189 Level III Female Reproductive Proc T 0191 Level I Female Reproductive Proc T 0192 Level IV Female Reproductive Proc T 0193 Level V Female Reproductive Proc T 0195 Level VI Female Reproductive Procedures T 0202 Level VII Female Reproductive Procedures T

TABLE 22.—PROPOSED CY 2015 FEMALE REPRODUCTIVE APCs

Proposed CY 2015 APC APC Title Description Proposed CY 2015 Status Indicator 0188 Level I Female Reproductive Procedures T 0189 Level II Female Reproductive Procedures T 0192 Level III Female Reproductive Procedures T 0193 Level IV Female Reproductive Procedures T 0202 Level V Female Reproductive Procedures J1CMS-1613-P 280 3. Image-Guided Breast Biopsy Procedures (APC 0005) For the CY 2014 OPPS update, the AMA CPT Editorial Panel deleted the image-guided breast biopsy CPT codes 19102 and 19103 and replaced these specific procedure codes with six new CPT codes th at “bundled” associated imaging services, effective January 1, 2014. As shown inTable 23 below, CPT codes 19102 and 19103 described percutaneous image-guided breas t biopsies using specific devices. Specifically, CPT code 19102 described a breastbiopsy performed using a core needle, and CPT code 19103 described a breast biopsy performed using either a vacuum-assisted or rotating device. In CY 2013, to appropriately report th e procedure code for an image-guided breast biopsy using a core need le, an automated vacuum-assisted device, or a rotating biopsy device, multiple procedure codes were required to identify the service performed. That is, a procedure code describing the device-related breast biopsy procedure was required to be reported in combination with the procedure code describing the

localization device used duri ng the procedures, as well as the specific image-guidance procedure codes describing the imaging se rvice. Table 23 below shows how imageguided breast biopsy procedures were reporte d prior to CY 2014. Table 23 also shows the CY 2013 OPPS status indicators, APC assi gnments, and payment rates for the breast biopsy procedure codes, the localization de vices used during the procedures and the specific image-guidance procedure code s describing the imaging service.CMS-1613-P 281

TABLE 23.—HOW IMAGE-GUIDED BREAST BIOPSY PROCEDURES WERE REPORTED IN CY 2013

CY 2013 CPT Code Long Descriptor CY 2013 SI CY 2013 APC CY 2013 Payment Device-Related Breast Biopsy CPT Codes

19102 Biopsy of breast; percutaneous, needle core, using imaging guidance T 0005 $625.24

19103 Biopsy of breast; percutaneous, automated vacuum assisted or rotating biopsy device, using imaging guidance T 0037 $1,118.54

Localization Device CPT Codes Reported with CPT Codes 19102 and 19103

19290 Preoperative placement of needle localization wire, breast; Q1 0340 $49.64

19291 Preoperative placement of needle localization wire, breast; each additional lesion (List separately in addition to code for primary procedure) N N/A N/A

19295 Image guided placement, metallic localization clip, perc utaneous, during breast biopsy/aspiration (List separately in addition to code for primary procedure) Q1 0340 $49.64

Image Guidance CPT Codes Report ed with CPT Codes 19102 and 19103

76942 Ultrasonic guidance for needle placement (eg, biopsy, aspiration, injection, localization device), imaging supervision and interpretation N N/A N/A

77021 Magnetic resonance guidance for needle placement (eg, for biopsy, needle aspiration, injection, or placemen t of localization device) radiological supervision and interpretation N N/A N/ACMS-1613-P 282

CY 2013 CPT Code Long Descriptor CY 2013 SI CY 2013 APC CY 2013 Payment

77031 Stereotactic localization guidance for breast biopsy or needle placement (eg, for wire localization or for in jection), each lesion, radiological supervision and interpretation N N/A N/A

77032 Mammographic guidance for needle placement, breast (eg, for wire localization or for injection), each lesion, radiological supervision and interpretation N N/A N/A

For the CY 2014 OPPS update, the AMA CPT Editorial Panel grouped these multiple procedures that describe these im aging services into single comprehensive service codes; specifically, CPT codes 19081, 19082, 19083, 19084, 19085, and 19086.

Table 24 below shows the six new CPT code s that replaced obsolete CPT codes 19102 and 19103. These comprehensive breast biopsy procedure codes are differentiated based on the use of specific imaging-guidance devices-- specifically imaging services performed using stereotactic guidance, ultrasound guidance, or magnetic-resonance guidance. As has been our practice since the implementation of the OPPS in 2000, we review all new procedure codes before assi gning the codes to an APC. Based on our understanding of the resources required to fu rnish the service as defined in the code descriptor, as well as input from our medical advisors, we assigned replacement CPT codes 19081, 19083, and 19085 to APC 0005 (Level II Needle Biopsy/Aspiration Except Bone Marrow) for the CY 2014 OPPS update . We note that, for the CY 2014 OPPS update, we finalized our policy to packag e all add-on codes (except those for drugCMS-1613-P 283 administration), effective January 1, 2014. Consequently, payment for replacement CPT codes 19082, 19084, and 19086, which describe a dd-on procedures, were packaged for

CY 2014. In addition, consistent with our longs tanding policy for the treatment of new codes, we assigned these new replacement CPT codes to interim APCs for CY 2014. Specifically, we assigned new CPT code s 19081, 19083, and 19085 to comment indicator

“NI” in Addendum B to the CY 2014 OPPS/ASC final rule with comment period (which is available via the CMS Web site) to indicate that the codes were new with an interim APC assignment that was subject to public comment. At the Panel’s March 10, 2014 meeting, a pr esenter requested th e reassignment of comprehensive CPT codes 19081, 19083, and 19085 from APC 0005 (Level II Needle Biopsy/Aspiration Except Bone Marrow), wh ich has a CY 2014 OPPS payment rate of $702.08, to APC 0037 (Level IV Needle Biopsy/ Aspiration Except Bone Marrow), which has a CY 2014 OPPS payment rate of $1,223.25. The presenter indicated that it is inappropriate to combine all of the new replacement CPT codes into one APC without regard for the imaging modalityor device used to perform the procedure. This same presenter also requested that CMS maintain the historic assignme nt of the predecessor

CPT codes cost data.

The Panel recommended that CMS rea ssign the APC assignments for the new replacement CPT codes. Specifically, the Pa nel recommended the reassignment of CPT codes 19081, 19083, and 19085 from APC 0005 to APC 0037.CMS-1613-P 284 In light of the public presentation and the Panel’s recommendation, and our longstanding policy of reviewing, on an a nnual basis, the APC assignments for all services and items paid under the OPPS, we evaluated the geometric mean costs associated with all of the pr ocedures assigned to the exis ting four needle biopsy APCs, specifically, APCs 0004 (Level I Needle Biopsy/Aspirati on Except Bone Marrow), 0005, 0685 (Level III Needle Biopsy/Aspiration Ex cept Bone Marrow), and 0037. For this CY 2015 OPPS/ASC proposed rule, based on our re view of the latest hospital outpatient claims data available for the proposed rule , we are proposing to reassign all of the procedures assigned to APCs 0685 and 0037 to either APC 0004 or APC 0005 based on

clinical and resource hom ogeneity. With this proposed revision, there would be no procedures assigned to APCs 0685 or 0037. Ther efore, we are proposing to delete APCs 0685 and 0037 for CY 2015. Consequently, for the CY 2015 OPPS update, we are proposing to use only two needle biopsy APCs, specifically, APCs 0004 and 0005. The proposed reassignment of the procedures assigned to APCs 0685 and 0037 would result in increased payment rates for both AP Cs 0004 and 0005. For CY 2015, the proposed payment rate for APC 0004 is approximatel y $494, which is 20 percent higher than the CY 2014 OPPS payment rate of approximately$411. Similarly, the proposed payment rate for APC 0005 is approximately $ 1,062, which is 51 percent higher than the CY 2014 OPPS payment rate of approximately $702. W ith this proposed reassignment, CPT codes 19081, 19083, and 19085 will continue to be assigned to APC 0005. In summary, we are proposing to continue to assign CPT codes 19081, 19083, and 19085 to APC 0005, which has a proposed paym ent rate of approximately $1,062. InCMS-1613-P 285 addition, we are proposing to continue to package payment for add-on CPT codes 19082, 19084, and 19086 under the OPPS for CY 2015, consistent with our packaging policy for add-on codes that was implemented on Janua ry 1, 2014. Because we are proposing to delete APC 0037 as obsolete for CY 2015, we believe that the proposed increased payment rate for APC 0005 is consistent wi th the Panel’s recomm endation to reassign CPT codes 19081, 19083, and 19085 to an appropri ate APC based on resource utilization

and clinical coherence. Table 24 below shows the propos ed status indicators, APC assignments, and payment rates for the image-guided breast biopsy CPT codes 19081 through 19086 for the CY 2015 OPPS update.CMS-1613-P 286

TABLE 24.—PROPOSED APCs TO WHICH IMAGE-GUID ED BREAST BIOPSY PROCEDURE CODES WOULD BE ASSIGNED FOR CY 2015

CY 2014 CPT Code Long Descriptor CY 2014 SI CY 2014 APC CY 2014 Paymen t Rate Propose d CY 2015 SI Propose d CY 2015 APC Propose d CY 2015 Payment Rate

19081 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; first lesion, including stereotactic guidance T 0005 $702.08 T 0005 $1,062.2 8

19082 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; each additional lesion, including stereotactic guidance (List separately in addition to code for primary procedure) N N/A N/A N N/A N/ACMS-1613-P 287

CY 2014 CPT Code Long Descriptor CY 2014 SI CY 2014 APC CY 2014 Paymen t Rate Propose d CY 2015 SI Propose d CY 2015 APC Propose d CY 2015 Payment Rate

19083 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; first lesion, including ultrasound guidance T 0005 $702.08 T 0005 $1,062.2 8

19084 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; each additional lesion, including ultrasound guidance (List separately in addition to code for primary procedure) N N/A N/A N N/A N/A

19085 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; first lesion, including magnetic resonance guidance T 0005 $702.08 T 0005 $ 1,062.28CMS-1613-P 288

CY 2014 CPT Code Long Descriptor CY 2014 SI CY 2014 APC CY 2014 Paymen t Rate Propose d CY 2015 SI Propose d CY 2015 APC Propose d CY 2015 Payment Rate

19086 Biopsy, breast, with placement of breast localization device(s) (eg, clip, metallic pellet), when performed, and imaging of the biopsy specimen, when performed, percutaneous; each additional lesion, including magnetic resonance guidance (List separately in addition to code for primary procedure) N N/A N/A N N/A N/ACMS-1613-P 289 4. Image-Guided Abscess Draina ge Procedures (APCs 0005 and 0007) For the CY 2014 OPPS update, the AMA CP T Editorial Panel established CPT code 10030 to report the bundled service of im age-guided fluid coll ection drainage by catheter for percutaneous soft tissue, and CPT code 49407 to report the bu ndled service of image-guided fluid collection drainage by catheter for peritoneal, retroperitoneal, transvaginal or transrectal collections, eff ective January 1, 2014. As shown in Table 25, which shows the long descriptors for CP T codes 10030 and 49407, and as listed in

Addendum B to the CY 2014 OPPS/ASC final rule with comment period, we assigned CPT code 10030 to APC 0006 (Level I Incision & Drainage), with a payment rate of $159.66, and assigned CPT code 49407 to APC 0685 (Level III Needle Biopsy/Aspiration Except Bone Marrow), with a payment rate of $757.76. In addition, as

listed in Addendum B to the CY 2014 OPPS/AS C final rule with comment period, both procedure codes were assigned to comment indicator “NI” to i ndicate that the codes were new codes and assigned interim APC and status indicator assignments that were subject

to comment. At the Panel’s March 10, 2014 meeting, a pr esenter requested th e reassignment of both CPT codes 10030 and 49407 to APC 0037 (Level IV Needle Biopsy/Aspiration Except Bone Marrow), which has a CY 2014 OPPS payment rate of $1,223.25 and where similar procedures are assigned. Specifica lly, the presenter indicated that all the image-guided fluid collection drainage proced ures should be treate d as one clinically cohesive group and should be assigned to APC 0037.CMS-1613-P 290 Based on the request, the Panel agreed with the presenter and recommended that CMS reassign CPT code 49407 to APC 0037. Howe ver, the Panel did not agree with the reassignment of CPT code 10030 to APC 0037. Rather, the Panel believed that CPT code 10030 would be more appropriately assi gned to APC 0007 (Level II Incision and Drainage). We agree with the Panel’s recomm endation to reassign CPT code 10030 to APC 0007. Therefore, we are proposing to reassign CPT code 10030 from APC 0006 to APC 0007 for the CY 2015 OPPS update. In light of the Panel’s recommendation to reassign CPT code 49407 and the image-guide d breast biopsy procedures to APC 0037, and our longstanding policy of reviewing, on an annual basis, the APC assignments for all services and items paid under the OPPS, we evaluated the geometric mean costs associated with the procedures assigned to the existing four needle biopsy APCs, specifically, APCs 0004 (Level I Needle Biopsy/ Aspirati on Except Bone Marrow), 0005, 0685 (Level III Needle Biopsy/Aspiration Except Bone Marrow), and 0037. Based on our review of the latest hospital outpatient cl aims data available for the proposed rule, we are proposing to reassign th e procedures assigned to APCs 0685 and 0037 to either

APC 0004 or APC 0005 based on clinical and re source homogeneity. With this proposed revision, there would be no pro cedures assigned to APCs 0685 or 0037. Therefore, we are proposing to delete APCs 0685 and 0037 for CY 2015. Consequently, for the CY 2015 OPPS update, we are proposing to use only two levels of needle biopsy APCs, specifically, APCs 0004 and 0005. Based on the proposal to reassign all of the procedures assigned to APCs 0685 and 0037 to either APC 0004 or APC 0005, we areCMS-1613-P 291 proposing to reassign CPT code 49407 from APC 0685 to APC 0005 for CY 2015. Table 25 below shows the long descriptors for CPT codes 10030 and 49407, and their proposed status indicator and APC assignments fo r the CY 2015 OPPS update. The proposed CY 2015 payment rate for CPT codes 10030 and 49407 can be found in Addendum B to this CY 2015 OPPS/ASC proposed rule (which is available via the Internet on the CMS Web site).

TABLE 25.—PROPOSED CY 2015 APC ASSIGNMENTS FOR CPT CODES 10030 and 49407

CPT Code Long Descriptor CY 2014 OPPS SI CY 2014 OPPS APC Proposed CY 2015 OPPS SI Proposed CY 2015 OPPS APC

10030 Image-guided fluid collection drainage by catheter (eg, abscess, hematoma, seroma, lymphocele, cyst), soft tissue (eg, extremity, abdominal wall, neck), percutaneous T 0006 T 0007

49407 Image-guided fluid collection drainage by catheter (eg, abscess, hematoma, seroma, lymphocele, cyst); peritoneal or retroperitoneal, transvaginal or transrectal T 0685 T 0005

5. Cystourethroscopy and Other Genitour inary Procedures (APCs 0160, 0161, 0162, and 0163) Every year we revise, if necessary, the APC assignments for procedure codes based on our analysis of the latest hospital outpatient claims data. Although we do not discuss every APC change in the proposed and final rules with comment period, these changes are listed in Addendum B to the propos ed and final rules with comment period.CMS-1613-P 292 Specifically, procedure codes with proposed revi sions to the APC and/ or status indicator assignments are assigned to comment indicat or “CH” (Active HCPCS code in current year and next calendar year, status indicator and/or APC assignment has changed) in Addendum B to this proposed rule. For the CY 2014 OPPS update, there are fi ve levels of APCs that contain cystourethroscopy and genitour inary procedures. These APCs are listed in Table 26, along with their status indicat or assignments for CY 2014.

TABLE 26.—CY 2014 AP Cs CONTAINING CYSTOURETHROSCOPY AND GENI TOURINARY PROCEDURES

CY 2014 APC APC Title Description CY 2014 Status Indicator 0160 Level I Cystourethroscopy and ot her Genitourinary Procedures T 0161 Level II Cystourethroscopy and ot her Genitourinary Procedures T 0162 Level III Cystourethroscopy and ot her Genitourinary Procedures T 0163 Level IV Cystourethroscopy and ot her Genitourinary Procedures T 0429 Level V Cystourethroscopy and ot her Genitourinary Procedures T

For the CY 2015 OPPS update, based on our review of the latest hospital outpatient claims data available for this propos ed rule, we are proposing to restructure the APCs containing cystourethroscopy and other ge nitourinary procedures to better reflect

the resource costs and clinical characteristics of the procedures within each APC. This proposed restructuring results in the use of four APCs for the CY 2015 OPPS update, as compared to the five APCs used for th e CY 2014 OPPS update. Specifically, based on

our review and evaluation of the procedures assigned to these APCs and the latest hospital outpatient claims data, we ar e proposing to delete APC 0429 (Level VCMS-1613-P 293 Cystourethroscopy and Other Ge nitourinary Procedures). We are proposing to reassign the procedures that were previously assi gned to APC 0429 to either APC 0161 (Level I Cystourethroscopy and Other Genitourinar y Procedures) or APC 0163 (Level IV Cystourethroscopy and other Genitourinar y Procedures) for the CY 2015 OPPS update because we believe that these procedures woul d be more appropriately assigned to either APC based on their geometric mean costs. Further, we believe this proposed restructuring appropriately categorizes all of the cystourethroscopy and other genitourinary procedures that are comparable clinically and with respect to resource use within an APC group. In addition, we are proposing to delete APC 0169 (Lithotripsy) because the one procedure, specifically the procedur e described by CPT code 50590 (Lithotripsy, extracorporeal shock wave) that was assigned to this APC is proposed for reassignment to APC 0163. In summary, we are proposing to restructure the APCs containing cystourethroscopy and other genitourinary pr ocedures, and to us e a four-level APC grouping to classify the procedur es based on our analysis of the latest hospital outpatient claims data available for this proposed rule . In addition, we ar e proposing to delete APC 0169 and reassign CPT code 50590 to APC 0163 where it is more appropriately assigned based on resource costs and the simila rity to the other procedures assigned to APC 0163. Table 27 shows the proposed APCs that contain cystour ethroscopy and other genitourinary procedures, the APC titles, and the status indicator assignments for CY 2015. The proposed payment rates for the specific APCs listed in Table 27 can be found in Addendum A to this proposed rule, while the proposed payment rates for theCMS-1613-P 294 specific cystourethroscopy and other genito urinary procedure codes can be found in Addendum B to this proposed rule (which ar e available via the Internet on the CMS Web site).

TABLE 27.—PROPOSED CY 2015 APCs CONTAINING CYSTOURETHROSCOPY AND GENI TOURINARY PROCEDURES

Proposed CY 2015 APC APC Title Description Proposed CY 2015 Status Indicator

0160 Level I Cystourethroscopy and other Genitourinary Procedures T

0161 Level II Cystourethroscopy and other Genitourinary Procedures T

0162 Level III Cystourethroscopy and other Genitourinary Procedures T

0163 Level IV Cystourethroscopy and other Genitourinary Procedures T

6. Wound Treatments and Se rvices (APCs 0015 and 0327) a. Epidermal Autograft (APC 0327)

In the CY 2014 OPPS/ASC final rule with comment period, we assigned CPT code 15110 to APC 0329 (Level IV Skin Repai r), with a payment rate of approximately $2,260. This payment rate was derived from the latest hospital outpatient claims data used for CY 2014 ratesetting, which showed a geometric mean cost of approximately $2,174 based on 10 single claims (out of 29 total claims) for CPT code 15110. As stated in section III.B. of this prop osed rule, we review, on an annual basis, the APC assignments for all services and items paid under the OPPS. Analysis of the latest hospital outpatient claims data available for this CY 2015 proposed rule showed aCMS-1613-P 295 geometric mean cost of approximately $774 ba sed on 90 single claims (out of 122 total claims) for CPT code 15110. Based on these recent data, we are proposing to reassign CPT code 15110 from APC 0329 to APC 0327 (Lev el II Skin Procedures), which has a geometric mean cost of approximately $451. We believe that APC 0327 is the most appropriate assignment for CPT code 15110 when considering its similarity to the other procedures in this APC. In addition, we are proposing to revise the APC titles for the four skin repair APCs. Specifically, we are proposing to re name APC 0326 from “Level I Skin Repair” to “Level I Skin Procedures,” APC 0327 from “L evel II Skin Repair” to “Level II Skin Procedures,” APC 0328 from “Level III Skin Re pair” to “Level III Skin Procedures,” and APC 0329 from “Level IV Skin Repair” to “Level IV Skin Procedures.” Table 28 below shows the long descriptor , as well as the proposed CY 2015 APC

and status indicator assi gnment, for CPT code 15110. The proposed CY 2015 payment

rate for CPT code 15110 can be found in Adde ndum B to this proposed rule (which is available via the Internet on the CMS Web site).

TABLE 28.–PROPOSED CY 2015 APC AND STATUS INDICATOR FOR CPT CODE 15110

Procedure Code Long Descriptor CY 2014 SI CY 2014 APC Proposed CY 2015 SI Proposed CY 2015 APC

15110 Epidermal autograft, trunk, arms, legs; first 100 sq cm or less, or 1% of body area of infants and children T 0329 T 0327CMS-1613-P 296 b. Negative Pressure Wound Therapy (NPWT) (APC 0015)

We stated in the CY 2014 OPPS/AS C final rule with comment period (78 FR 75001) that some commenters request ed the reassignment of HCPCS codes G0456 and G0457 to a higher paying APC, sp ecifically within th e range of $450 to $500 because this range in amounts would adequate ly pay for the cost of providing negative pressure wound therapy (NPWT). We further stat ed in that same final rule with comment period that because HCPCS codes G0456 and G0457 were new codes for the CY 2013 OPPS update, we expected to have claims data available for these codes during the CY 2015 rulemaking cycle, and at which time we would reevaluate the APC assignments for these services in preparati on for the CY 2015 rulemaking cycle.

We established HCPCS code G 0456 and HCPCS code G0457 effective January 1, 2013, to provide a payment mechan ism for NPWT services furnished through a disposable device. For the CY 2013 OPPS update, we assigned these services to APC 0016 (Level IV Debridement & Destructio n), which had a CY 2013 payment rate of approximately $210. For the CY 2014 OPPS update, we continued to assign HCPCS codes G0456 and G0457 to APC 0016, which has a payment rate of approximately $275. For the CY 2015 OPPS update, our analysis of the latest hospital outpatient claims data available for this proposed rule, which is based on claims submitted from January 1, 2013 through December 31, 2013, indicat es that the geometric mean cost of APC 0013 is close to the geometric mean cost of APC 0015. Therefore, we are proposing to combine these APCs by dele ting APC 0013 and reassigning all of the procedures from APC 0013 to APC 0 015, thereby retaining APC 0015. We areCMS-1613-P 297 proposing to retitle the Debridement and Dest ruction APC series (excluding the title of APC 0012) as follows: APC 0015 (Level II Debridement and Destruction), APC 0016 (Level III Debridement and Destruction), and APC 0017 (Level IV Debridement and Destruction). The CY 2013 claims data availabl e for this proposed rule also indicate that the resource costs for the services described by HCPCS codes G0456 and G0457 range between $152 and $193. Specifically, the geom etric mean cost for HCPCS code G0456 is approximately $152 based on 4,509 single cl aims (out of 5,772 total claims), and approximately $193 for HCPCS code G0457 based on 386 single claims (out of 591 total claims). Based on our most recent claims data , we believe that a reassignment of HCPCS

codes G0456 and G0457 from APC 0016 to APC 0015 (Level III Debridement & Destruction), which has a geometric meancost of approximately $148, is most appropriate. Therefore, we are proposing to reassi gn HCPCS codes G0456 and G0457 from APC 0016 to APC 0015 for the CY 2015 OPPS update. Table 29 below shows the long descriptors as well as the proposed CY 2015 APC and status indicator assignments for HCPCS codes G0456 and G0457. The pr oposed CY 2015 payment rates for HCPCS

codes G0456 and G0457 can be found in Addendu m B to this proposed rule (which is available via the Internet on the CMS Web site).CMS-1613-P 298

TABLE 29.--PROPOSED CY 2015 APCs AND STATUS INDICATOR FOR HCPCS CODES G0456 AND G0457

HCPCS Code Long Descriptor CY 2014 SI CY 2014 APC Proposed CY 2015 SI Proposed CY 2015 APC

G0456 Negative pressure wound therapy, (eg, vacuum assisted drainage collection) using a mechanically-powered device, not durable medical equipment, including provision of cartridge and dressing(s), topical application(s), wound assessment, and instructions for ongoing care, per session; total wounds(s) surface area less than or equal to 50 square centimeters T 0016 T 0015

G0457 Negative pressure wound therapy, (eg, vacuum assisted drainage collection) using a mechanically-powered device, not durable medical equipment, including provision of cartridge and dressing(s), topical application(s), wound assessment, and instructions for ongoing care, per session; total wounds(s) surface area greater than 50 square centimeters T 0016 T 0015

7. Endoscopic Retrograde Cholangiopanc reatography (ERCP) with Stent (APC 0384) For the CY 2014 OPPS update, the AMA CP T Editorial Panel deleted CPT codes 43268 and 43269 describing an endoscopic retr ograde cholangiopancreatography (ERCP) with stent placement into th e biliary or pancreatic duct. New CPT codes 43274 and 43276 replaced deleted CPT codes 43268 a nd 43269, effective January 1, 2014. New CPT codes 43274 and 43276 describe an ERCP with stent placement into the biliary or pancreatic duct including dilation, guide wire passage, and sphincterotomy, when performed. As shown in Table 30, and as listed in Addendum B to the CY 2014CMS-1613-P 299 OPPS/ASC final rule with comment peri od, we assigned CPT codes 43274 and 43276 to APC 0151 (Endoscopic Retrograde Cholangi o-Pancreatography (ERCP)), with a payment rate of $1,933.69 for CY 2014. In addition, as listed in Addendum B, both procedure codes were assigned to comment indicator “NI” to indicate that these codes were assigned interim APC and status indi cator assignments that were subject to

comment. At the Panel’s March 10, 2014 meeti ng, the Panel recommended that CMS reassign CPT codes 43274 and 43276 to APC 0384 (GI Procedures with Stents) at the earliest opportunity. We ag ree with the Panel’s recommendation that CPT codes 43274 and 43276 should be reassigned to APC 0384. Th erefore, we are proposing to reassign

CPT codes 43274 and 43276 from APC 0151 to APC 0384 for the CY 2015 OPPS update. Table 30 below shows the long de scriptors for CPT codes 43274 and 43276, and their proposed APC and status indicator assignments for the CY 2015 OPPS update. We note that APC 0384 is proposed as a comprehe nsive APC for CY 2015. We refer readers to section II.A.2.e. of this proposed rule fo r additional information on our comprehensive APC policy. The proposed CY 2015 payment rate for CPT codes 43274 and 43276 can

be found in Addendum B to this CY 2015 OPPS /ASC proposed rule (which is available via the Internet on the CMS Web site).CMS-1613-P 300

TABLE 30.—PROPOSED CY 2015 APC AND STATUS INDICATOR ASSIGNMENTS FOR CPT CODES 43274 AND 43276

CPT Code Long Descriptor CY 2014 OPPS SI CY 2014 OPPS APC Proposed CY 2015 OPPS SI Proposed CY 2015 OPPS APC

43274 Endoscopic retrograde cholangiopancreatography (ERCP); with placement of endoscopic stent into biliary or pancreatic duct, including preand post-dilation and guide wire passage, when performed, including sphincterotomy, when performed, each stent T 0151 J1 0384

43276 Endoscopic retrograde cholangiopancreatography (ERCP); with removal and exchange of stent(s), biliary or pancreatic duct, including preand post-dilation and guide wire passage, when performed, including sphincterotomy, when performed, each stent exchanged T 0151 J1 0384

8. Radiation Therapy (APCs 0066, 0067, 0412, 0446, 0648, and 0667) We are proposing several ch anges to the radiation ther apy APCs for CY 2015. To

correct a violation of the 2 times rule w ithin APC 0664 (Level I Proton Beam Radiation Therapy), we are proposing to reassign CPT code 77520 from APC 0664 to APC 0412 (Level III Radiation Therapy). We believe th at CPT code 77520 is both clinically similar and comparable in geometric mean cost to the other services a ssigned to APC 0412. We also are proposing to reassign CPT c ode 77522 from APC 0664 to proposed newly renamed APC 0667 (Level IV Radiation Therapy) because we believe that the procedure described by CPT code 77522 is both clinical ly similar and comparable in geometricCMS-1613-P 301 mean cost to the other services assigned to APC 0667. Because there would be no other codes assigned to APC 0664 if these proposed reassignments are finalized, we also are proposing to delete APC 0664 for CY 2015. In addition, we are proposing to rename existing APC 0667 to “Level IV Radiation Thera py” (instead of using the existing title of “Level II Proton Beam Radiation Therapy”), to make the title consistent with other APCs in the radiation therapy series. In conj unction with this proposed change, we are proposing to reassign the following three serv ices to proposed ne wly renamed APC 0667 for CY 2015: CPT codes 77522, 77523, and 77525. We also are proposing to delete AP C 0065 (IORT, MRgFUS, and MEG) because we are proposing to reassign th e services assigned to this AP C to more appropriate APCs based on clinical similarities and comparable geometric mean cost. Specifically, we are proposing to reassign the Magnetoencephalography (MEG) CPT codes 95965 and 95966 from APC 0065 to APC 0446 (Level IV Nerve and Muscle Services), which would only

contain MEG services. We ar e proposing to reassign Intrao perative Radiation Therapy (IORT) CPT codes 77424 and 77425 to compre hensive APC 0648 (Level IV Breast and Skin Surgery). We refer readers to section II. A.2.e. of this proposed rule for a discussion of comprehensive APCs and the APC assignmen t of IORT services. In addition, we are proposing to reassign the Magnetic Resona nce-Guided Focused Ultrasound Surgery (MRgFUS) HCPCS codes C9734, 0071T, and 0072T, and CPT code 0301T from APC 0065 to APC 0066, which we are proposing to re name “Level V Radiation Therapy.” We understand that the MRgFUS services ar e not the same as radiation therapy, but assigning these services to APC 0066 aligns with the assignme nt of certain stereotacticCMS-1613-P 302 radiosurgery services (namely the pro cedure described by HCPCS code G0339 and successor CPT code 77373) that were grouped with MRgFUS services prior to CY 2014. Finally, we are proposing to rename AP C 0067 from “Level II Stereotactic Radiosurgery” to “Single Session Cranial St ereotactic Radiosurgery”, which we are proposing as a comprehensive APC. For a further discussion regarding the services assigned to APC 0067, we refer readers to section II.A.2.e. of this proposed rule. 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 Section 1833(t)(6)(B)(iii) of the Act requires that, unde r the OPPS, a category of devices be eligible for transi tional pass-through payments for at least 2, but not more than 3 years. This pass-through pa yment eligibility period begins with the first date on which transitional pass-through payments may be made for any medical device that is described by the category. We may establish a new device category for pass-through payment in any quarter. Under our established policy, we base the pass-through status expiration date for a device category on the date on whic h pass-through payment is effective for the category, which is the first date on which pass-through payment may be made for any medical device that is described by such cat egory. We propose and finalize the dates for expiration of pass-through status for device ca tegories as part of the OPPS annual update. We also have an established policy to p ackage the costs of the devices that are no longer eligible for pass-through payments into the costs of the procedures with which theCMS-1613-P 303 devices are reported in the cl aims data used to set the payment rates (67 FR 66763). Brachytherapy sources, which are now separa tely paid in accordance with section 1833(t)(2)(H) of the Act, are an exce ption to this established policy. There currently is one device category eligible for pass-through payment. This device category is described by HCPCS code C1841 (Retinal prosthesis, includes all

internal and external components), which we made effe ctive for pass-through payment as of October 1, 2013. b. Proposed CY 2015 Policy As indicated earlier, a category of de vices may be eligible for transitional pass-through payments for at least 2 years, but not more than 3 years. There is one device category eligible for pass-through paymen t at this time, described by HCPCS code C1841, which we made effective for pass-thr ough payment as of October 1, 2013. At the end of CY 2015, the device category descri bed by HCPCS code C1841 will have been eligible for pass-through paymen t for more than 2 years. Th erefore, we are proposing an expiration date for pass-through payment fo r HCPCS code C1841 of December 31, 2015. We are proposing that, effective January 1, 2016, HCPCS code C1841 will no longer be eligible for pass-through paym ent status. In accordance w ith our established policy, we are proposing to package the cost of HCPCS code C1841 after December 31, 2015, into the costs related to the procedures with which it is reported in our claims data. If we create new device categories fo r pass-through payment status during the remainder of CY 2014 or during CY 2015, we will propose future expiration dates in accordance with the statutory requirement that they be eligible for pass-through paymentsCMS-1613-P 304 for at least 2 years, but not more than 3 years, from the date on which pass-through payment for any medical device describe d by the category may first be made.CMS-1613-P 305 2. Proposed Provisions for Reducing Transi tional Pass-Through Payments to Offset Costs Packaged into APC Groups a. Background Section 1833(t)(6)(D)(ii) of the Act se ts the amount of additional pass-through payment for an eligible device as the am ount by which the hospital’s charges for a device, adjusted to cost (the cost of th e device) exceeds the portion of the otherwise applicable Medicare outpat ient department fee schedule amount (the APC payment amount) associated with the device. We ha ve an established policy to estimate the portion of each APC payment rate that could reasonably be attr ibuted to the cost of the

associated devices that ar e eligible for pass-through payments (66 FR 59904) for purposes of estimating the portion of the otherwise applicable APC payment amount associated with pass-through devices. For eligible device categories, we deduct an amount that reflects the portion of the AP C payment amount that we determine is associated with the cost of the device, defi ned as the device APC offset amount, from the charges adjusted to cost for the device, as provided by section 1833( t)(6)(D)(ii) of the Act, to determine the eligible device’s pass-through payment amount. We have consistently used an established met hodology to estimate the portion of each APC payment rate that could reasonably be attrib uted to the cost of an associated device eligible for pass-through paymen t, using claims data from the period used for the most recent recalibration of the APC rates (72 FR 66751 through 66752). We establish and update the applicable device APC offset am ounts for newly eligible pass-through device categories through the transmittals that implement the quarterly OPPS updates.CMS-1613-P 306 Currently, we have published a list of all procedural APCs with the CY 2014 portions (both percentages and dollar amounts) of the APC payment amounts that we

determine are associated w ith the cost of devices on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The dollar amounts are used as the device APC offset amounts. In addition, in accordan ce with our establishe d practice, the device

APC offset amounts in related APCs are used inorder to evaluate whether the cost of a device in an application for a new devi ce category for pass-th rough payment is not insignificant in relation to the APC payment amount for the service related to the category of devices, as specified in our regulations at § 419.66(d). Beginning in CY 2010, we include pack aged costs related to implantable biologicals in the device offset calculations in accordance with our policy that the pass-through evaluation process and paymen t methodology for implantable biologicals that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) and that are newly approved for pass -through status beginning on or after January 1, 2010, be the device pass-thr ough process and payment methodology only (74 FR 60476). b. Proposed CY 2015 Policy We are proposing to continue, fo r CY 2015, our established methodology to estimate the portion of each APC payment rate th at could reasonably be attributed to (that is, reflect) the cost of an associated device eligible for pass-through payment, using claims data from the period used for the most recent recalibration of the APC paymentCMS-1613-P 307 rates. We are proposing to continue our policy, for CY 2015, that the pass-through evaluation process and pass-through payment methodology for implantable biologicals that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) and that are newly approved for pass -through status beginning on or after January 1, 2010, be the device pass-through 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 calcu lating and setting the device APC offset amounts for each device category eligible for pass-through payment. In addition, we are proposing to continue our established policy to review each new device category on a case-by-case

basis to determine whether device costs asso ciated with the new category are already packaged into the existing APC structure. If device costs packaged into the existing APC

structure are associated with the new category, we are prop osing to deduct the device APC offset amount from the pass-through paym ent 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 fo r 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 2015, 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 co ntinue to calculate and set any device APC offset amount for any new device pass-thr ough category that include s a newly eligibleCMS-1613-P 308 implantable biological beginning in CY 2015 using the same methodology we have historically used to calcul ate and set device APC offset amounts for device categories eligible for pass-through paymen t, and to include the costs of implantable biologicals in the calculation of the device APC offset amounts (78 FR 43596). In addition, we are proposing to update th e list of all procedural APCs with the final CY 2015 portions of the APC payment am ounts that we determine are associated

with the cost of devices on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html so that this information is available for use by the public in developing potential CY 2015 device pass-through payment applications and by CMS in reviewing those applications. B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit and Partial Credit

Devices 1. Background To ensure equitable payment when the hospital receives a device without cost or with full credit, in CY 2007, we implem ented a policy to reduce the payment for specified device-dependent APCs by the estimated portion of the APC payment attributable to device costs (that is, the device offset) when the hospital receives a specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals are instructed to report no cost/full credit ca ses using the “FB” modifier on the line with the procedure code in which the no cost/full credit device is used. In cases in which the

device is furnished without cost or with full credit, the hospital is instructed to report aCMS-1613-P 309 token device charge of less than $1.01. In cas es in which the device being inserted is an upgrade (either of the same type of device or to a different type of device) with a full credit for the device being replaced, the hospi tal is instructed to report as the device charge the difference between its usual char ge for the device being implanted and its usual charge for the device for which it r eceived full credit. In CY 2008, we expanded this payment adjustment policy to include ca ses in which hospitals receive partial credit of 50 percent or more of the co st of a specified device. Hosp itals are instructed to append the “FC” modifier to the procedure code thatreports the service provided to furnish the device when they receive a part ial credit of 50 percent or mo re of the cost of the new

device. We refer readers to the CY 2008 O PPS/ASC final rule with comment period for more background information on the “FB” and “FC” payment adjustment policies (72 FR 66743 through 66749). In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 through 75007), beginning in CY 2014, we modified our policy of reducing OPPS payment for specified APCs when a hospital furnishes a speci fied device without cost or with a full or partial credit. For CY 2013 and prior years, our policy had been to reduce OPPS payment by 100 percent of the device offset am ount when a hospital furnishes a specified

device without cost or with a full credit a nd by 50 percent of the device offset amount when the hospital receives partia l credit in the amount of 50 percent or more of the cost for the specified device. For CY 2014, we reduce OPPS payment, for the applicable APCs, by the full or partial credit a hospital receives for a replaced device. Specifically, under this modified policy, hospitals are require d to report the amount of the credit in theCMS-1613-P 310 amount portion for value code “FD” (Credi t Received from the Manufacturer for a Replaced Medical Device) when th e hospital receives a credit fo r a replaced device that is 50 percent or greater than the cost of the device. For CY 2014, we also limit the OPPS payment deduction for the applicable APCs to the total amount of the device offset when the “FD” value code appears on a claim. 2. Proposed Policy for CY 2015 For CY 2015, we are proposing to conti nue our existing policy of reducing OPPS payment for specified APCs when a hospital fu rnishes a specified de vice without cost or with a full or partial credit. Specifically, for CY 2015, we are proposing to continue to reduce the OPPS payment, for the applicable APCs listed below in Table 31, by the full or partial credit a provider receives for a replaced device. Under this proposed policy, hospitals would continue to be required to report the amount of the credit in the amount portion for “FD” when the hospital receive s a credit for a replaced device listed in Table 32 that is 50 percent or grea ter than the cost of the device. For CY 2015, we also are proposing to continue using the three criteria

established in the CY 2007 OPPS/ASC final ru le with comment period for determining the APCs to which our proposed CY 2015 policy would apply (71 FR 68072 through 68077). Specifically: (1) all procedures assi gned to the selected APCs must involve implantable devices that would be reporte d if device insertion procedures were performed; (2) the required devices must be su rgically inserted or implanted devices that remain in the patient’s body af ter the conclusion of the proc edure (at least temporarily); and (3) the device offset amount must be signif icant, which, for purposes of this policy, isCMS-1613-P 311 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 adjustmentwould not be triggere d by the implantation of an inexpensive device whose cost would not constitute a significant proportion of the total payment rate for an APC. We continue to believe these criteria are appropriate

because no cost devices and device credits are likely to be associated with particular cases only when the device must be reported on the claim and is of a type that is implanted and remains in the body when the bene ficiary leaves the hospital. We believe that the reduction in payment is appropria te 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 reas onable definition of a significant cost. We examined the offset amounts calculated from the CY 2015 proposed rule data and the clinical characteristics of the pr oposed CY 2015 APCs to determine which APCs meet the criteria for CY 2015. Table 31 below lists the proposed APCs to which the proposed payment adjustment policy for no co st/full credit and partial credit devices would apply in CY 2015. Table 32 below lis ts the proposed devices to which the proposed payment adjustment policy for no co st/full credit and partial credit devices would apply in CY 2015. We are proposing to updat e the lists of APCs and de vices to which the proposed no cost/full credit and partial credit devi ce adjustment policy would apply for CY 2015,

consistent with the three crit eria discussed earlier in this section, based on the finalCMS-1613-P 312

CY 2013 claims data available for the CY 2015 OPPS/ASC final rule with comment period.

TABLE 31.—PROPOSED APCs TO WHICH THE PROP OSED NO COST/FULL CREDIT AND PARTIAL CREDIT DEVI CE PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 2015 Proposed CY 2015

APC Proposed CY 2015 APC Title

0039 Level III Neurostimulator & Related Procedures 0061 Level II Neurostimulator & Related Procedures 0064 Level III Treatment Fracture/Dislocation 0089 Level III Pacemaker and Similar Procedures 0090 Level II Pacemaker and Similar Procedures 0107 Level I ICD and Similar Procedures 0108 Level II ICD and Similar Procedures 0227 Implantation of Drug Infusion Device 0229 Level II Endovascular Procedures 0259 Level VII ENT Procedures 0293 Level IV Intraocular Procedures 0318 Level IV Neurostimulator & Related Procedures 0319 Level III Endovascular Procedures 0351 Level V Intraocular Procedures 0385 Level I Urogenital Procedures 0386 Level II Urogenital Procedures 0425 Level V Musculoskeletal Procedures Except Hand and Foot 0434 Cardiac Defect Repair 0655 Level IV Pacemaker and Similar ProceduresCMS-1613-P 313

TABLE 32.—PROPOSED DEVICES TO WHICH THE PROPOSED NO

COST/FULL CREDIT AND PARTIAL CREDIT DEVICE PAYMENT ADJUSTMENT POLICY WOULD APPLY IN CY 2015 Proposed CY 2015 Device

HCPCS Code Proposed CY 2015 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 C1818 Integrated keratoprosthesis C1820 Generator, neuro rechg bat sys C1840 Lens, intraocular (telescopic) 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/dualCMS-1613-P 314 Proposed CY 2015 Device

HCPCS Code Proposed CY 2015 Short Descriptor C2622 Prosthesis, penile, non-inf C2626 Infusion pump, non-prog, temp C2631 Rep dev, urinary, w/o sling V. Proposed OPPS Payment Changes for Drugs, Biologicals, and Radiopharmaceuticals A. Proposed OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals 1. Background Section 1833(t)(6) of the Act provides for temporary additional payments or “transitional pass-through payments” for certa in drugs and biologicals. Throughout this proposed rule, the term “biological” is used because this is the term that appears in section 1861(t) of the Act. “Biological ” as used in this proposed rule includes “biological product” or “biolo gic” as defined in the Public Health Service Act. As enacted by the Medicare, Medicaid, and SC HIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113), this provision re quires the Secretary to make additional payments to hospitals for: current orpha n drugs, as designated under section 526 of the Federal Food, Drug, and Cosmetic Act; currentdrugs and biologica ls and brachytherapy sources used in cancer therapy; and current radiopharmaceutical drugs and biologicals. “Current” refers to drugs or biologicals that are outpatient hospita l services under Part B for which payment was made on the first date the hospital OPPS was implemented.CMS-1613-P 315 Transitional pass-through pa yments also are provided for certain “new” drugs and biologicals that were not being paid for as an HOPD service as of December 31, 1996 and whose cost is “not insigni ficant” in relation to the OPPS payments for the procedures

or services associated with the new dr ug or biological. For pass-through payment purposes, radiopharmaceuticals are included as “drugs.” As required by statute, transitional pass-through payments fo r a drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a peri od of at least 2 years, but not more than 3 years, after the payment wa s first made for the product as a hospital outpatient service under Medi care Part B. Proposed CY 2015 pass-through drugs and biologicals and their designated APCs are as signed status indicator“G” in Addenda A and B to this proposed rule, which are avai lable via the Internet on the CMS Web site. Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment amount, in the case of a drug or biologi cal, is the amount by which the amount determined under section 1842(o) of the Act for the drug or biological exceeds the portion of the otherwise app licable Medicare OPD fee sc hedule that the Secretary determines is associated with the drug or biol ogical. If the drug or biological is covered under a competitive acquisition contract under section 1847B of the Act, the pass-through payment amount is determined by the Secretary to be equal to the average price for the drug or biological for all competitive acquis ition areas and the year established under such section as calculated and adjusted by the Secretary. However, we note that the Part B drug competitive acquisition program (CAP) has been postponed since CY 2009, and such a program has not been reinstated for CY 2015.CMS-1613-P 316 This methodology for determining the pa ss-through payment amount is set forth in regulations at 42 CFR 419.64. These re gulations specify that the pass-through payment equals the amount determined under section 1842(o) of the Act minus the portion of the APC payment that CMS determ ines is associated with the drug or biological. Section 1847A of the Act establishes the average sales price (ASP) methodology, which is used for payment for drugs and biologicals described in section 1842(o)(1)(C) of the Act furnishe d on or after January 1, 2005. The ASP methodology, as applied under the OPPS, uses se veral sources of data as a basis for payment, including the ASP, the wholesale acquisition cost (WAC), and the average wholesale price (AWP). In this propo sed rule, the term “ASP methodology” and

“ASP-based” are inclusive of all data s ources and methodologies described therein. Additional information on the ASP methodology can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medi care-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html

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

. 2. Proposed Drugs and Biologicals with Expiring Pass-Through Status in CY 2014 We are proposing that the pass-through status of 9 drugs and biologicals would expire on December 31, 2014, as listed in Tabl e 33 below. All of these drugs and biologicals will have received OPPS pass-throu gh payment for at least 2 years and no more than 3 years by December 31, 2014. Thes e drugs and biologicals were approvedCMS-1613-P 317 for pass-through status on or before January 1, 2013. With the excep tion of those groups of drugs and biologicals that are always p ackaged when they do not have pass-through status (specifically, diagnostic radiopharmaceu ticals; contrast agents; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals th at function as supplies when used in a diagnostic test or procedure; and drugs and biologicals th at function as supplies when used in a surgical procedure), our standa rd methodology for providing payment for drugs and biologicals with expiring pass-through status in an upc oming calendar year is to determine the product’s estimated per day cost and compare it with the OPPS drug packaging threshold for that calendar year (which is proposed at $90 for CY 2015), as

discussed further in section V.B .2. of this proposed rule. If the estimated per day cost for the drug or biological is le ss than or equal to the a pplicable OPPS drug packaging threshold, we would package payment for the dr ug or biological into the payment for the associated procedure in the upcoming calendar y ear. If the estimated per day cost of the drug or biological is greater than the OPPS drug packaging threshold, we would provide separate payment at the applicable rela tive ASP-based payment amount (which is proposed at ASP+6 percent for CY 2015, as disc ussed further in section V.B.3. of this proposed rule).CMS-1613-P 318

TABLE 33.—PROPOSED DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH STATUS WILL EXPIRE DECEMBER 31, 2014

Proposed CY 2015 HCPCS

Code Proposed CY 2015 Long Descriptor Proposed CY 2015 SI Proposed CY 2015

APC C9290 Injection, bupivicaine liposome, 1 mg N N/A C9293 Injection, glucarpidase, 10 units K 9293 J0178 Injection, aflibercept, 1 mg vial K 1420 J0716 Injection, centruroides (scorpion) immune f(ab)2, up to 120 milligrams K 1431 J9019 Injection, asparaginase (erwinaze), 1,000 iu K 9289 J9306 Injection, pertuzumab, 1 mg K 1471 Q4131 EpiFix, per square centimeter N N/A Q4132 Grafix core, per square centimeter N N/A Q4133 Grafix prime, pe r square centimeter N N/A

3. Proposed Drugs, Biologicals, and Radi opharmaceuticals with New or Continuing Pass-Through Status in CY 2015 We are proposing to continue pass-th rough status in CY 2015 for 22 drugs and biologicals. None of these drugs and bi ologicals will have received OPPS pass-through payment for at least 2 years and no more than 3 years by December 31, 2014. These drugs and biologicals, which were ap proved for pass-through status between January 1, 2013 and July 1, 2014, are listed in Table 34 below. The APCs and HCPCS codes for these drugs and biologicals approved for pass-through status through April 1, 2014 are assigned status indicator “G” in Addenda A and B to this proposed rule. Addenda A and B to this proposed rule are available via the Inte rnet on the CMS Web

site.CMS-1613-P 319 Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for pass-through drugs and biologi cals (the pass-through payment amount) as the difference

between the amount authorized under section 1842(o) of th e Act and the portion of the otherwise applicable OPD fee schedule that th e Secretary determines is associated with the drug or biological. Payment for drugs a nd biologicals with pass-through status under the OPPS is currently made at the physician’s office payment rate of ASP+6 percent. We

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 2015, which is the amount that drugs and biologica ls receive under section 1842(o) of the Act. Therefore, for CY 2015, we are propos ing to pay for pass-through drugs and biologicals at ASP+6 percent, equivalent to the rate thes e drugs and biologicals would receive in the physician’s office setting in CY 2015. We are proposing that a $0.00 pass-through payment amount would be paid for most pass-through drugs and biologicals

under the CY 2015 OPPS because the differen ce between the amount authorized under section 1842(o) of the Act, which is ASP+6 percent, and the porti on of the otherwise applicable OPD fee schedule that the Secret ary determines is appropriate, proposed at ASP+6 percent, is $0. In the case of policy-packaged drugs (which include the following: contrast agents; diagnostic radiopharmaceuticals; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure and drugs; and biologi cals that function as supplies when used in a surgical procedure), we are proposing that their pa ss-through payment amount would be equal toCMS-1613-P 320 ASP+6 percent for CY 2015 because, if not on pass-through status, payment for these products would be packaged into the associated procedure. In addition, we are proposing to conti nue to update pass-thr ough payment rates on a quarterly basis on the CMS Web site duri ng CY 2015 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 68632 through 68635). In CY 2015, as is consistent with our CY 2014 policy for diagnostic and therapeutic radiopharmaceuticals, we are proposing to provide payment for both diagnostic and therapeutic radiopharmaceutical s that are granted pass-through status based on the ASP methodology. As stated a bove, for purposes of pass-through payment, we consider radiopharmaceuticals to be drugs un der the OPPS. Therefore, if a diagnostic or therapeutic radiopharmaceutical receive s pass-through status during CY 2015, we are proposing to follow the standard ASP me thodology to determine the pass-through payment rate that drugs receive under sect ion 1842(o) of the Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, we are proposing to provide pass-through payment at WAC+6 percen t, the equivalent payment provided to pass-through drugs and biologi cals without ASP information. If WAC information is also not available, we are proposing to provide payment for the pass-through radiopharmaceutical at 95 percen t of its most recent AWP.CMS-1613-P 321

As discussed in more detail in se ction II.A.3. of this proposed rule, we implemented a policy whereby payment for the following nonpass-through items is packaged into payment for the associated pr ocedure: diagnostic radiopharmaceuticals; contrast agents; anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a dia gnostic test or proced ure; and drugs and biologicals that function as s upplies when used in a surg ical procedure. We are proposing to continue the packag ing of these items, regardless of their per day cost, in CY 2015. As stated earlier, pass-through pa yment is the difference between the amount authorized under section 1842(o) of the Act and the portion of the otherwise applicable OPD fee schedule that the Secretary determines is associated with the drug or biological. Because payment for a drug that is policy-pack aged would otherwise be packaged if the product did not have pass-thr ough status, we believe the otherwise applicable OPPS payment amount would be equal to the policy- packaged drug APC offset amount for the associated clinical APC in which the drug or biological is utilized. The proposed calculation of the policy-packaged drug APC o ffset amounts is described in more detail in section V.A.4. of this proposed rule. It follows that the copayment for the nonpass-through payment portion (the otherwise a pplicable fee schedule amount that we would also offset from payment for the drug or biological if a paymen t offset applies) of the total OPPS payment for those drugs and biologicals would, therefore, be accounted for in the copayment for the associated clin ical APC in which the drug or biological is

used.CMS-1613-P 322 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 2014, we are proposing to con tinue to set the associated copayment amount to zero for CY 2015 for pass-through drugs and biologicals th at would otherwise be packaged if the item did not have pass-through status. The 22 drugs and biologicals that we are proposing to continue to have pass-through status for CY 2015 or have beengranted pass-through status as of July 2014

are shown in Table 34 below.CMS-1613-P 323

TABLE 34.—PROPOSED DRUG S AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2015 Proposed CY 2015 HCPCS

Code CY 2015 Long Descriptor Proposed CY 2015 SI Proposed CY 2015

APC

A9520 Technetium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries G 1463 C9021 Injection, obinutuzumab, 10 mg G 1476 C9022 Injection, elosulfase alfa, 1mg G 1480 C9132 Prothrombin complex concentrate (human), Kcentra, per i.u. of Factor IX activity G 9132

C9133 Factor ix (antihemophilic factor, recombinant), Rixubus, per i.u. G 1467

C9134 Injection, Factor XIII A-subunit, (recombinant), per 10 i.u. G 1481 C9441 Injection, ferric carboxymaltose, 1 mg G 9441 C9497 Loxapine, inhalation powder, 10 mg G 9497 J1446 Injection, tbo-filgrastim, 5 micrograms G 1447 J1556 Injection, immune globul in (Bivigam), 500 mg G 9130 J3060 Injection, taliglucerase alfa, 10 units G 9294 J7315 Mitomycin, ophthalmic, 0.2 mg G 1448 J7316 Injection, Ocriplasmin, 0.125mg G 9298 J7508 Tacrolimus, Extended Release, Oral, 0.1 mg G 1465 J9047 Injection, carfilzomib, 1 mg G 9295 J9262 Injection, omacetaxine mepesuccinate, 0.01 mg G 9297 J9354 Injection, ado-trastuzumab emtansine, 1 mg G 9131 J9371 Injection, Vincristine Su lfate Liposome, 1 mg G 1466 J9400 Injection, Ziv-Aflibercept, 1 mg G 9296 Q4121 Theraskin, per square centimeter G 1479 Q4122 Dermacell, per square centimeter G 1419 Q4127 Talymed, per square centimeter G 1449 Note: Because the payment rates associated with these codes effective July 1, 2014, are not available to us in time for incorporation into the Addenda to th is proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented through the July 2014 OPPS quarterly update CR could not be included in Addendum B to this proposed rule.CMS-1613-P 324 4. Proposed Provisions for Reducing Transitional Pass-Through Payments for Policy-Packaged Drugs and Biologicals to Offset Costs Packaged into APC Groups a. Background Prior to CY 2008, diagnostic radiopharmaceu ticals and contrast agents were paid separately under the OPPS if their mean per day costs were greater than the applicable year’s drug packaging threshold. In CY 2008 (72 FR 66768), we began a policy of packaging payment for all nonpass-through diag nostic radiopharmaceuticals and contrast agents as ancillary and suppor tive items and services into their associated nuclear medicine procedures. Therefore, be ginning in CY 2008, nonpass-through diagnostic radiopharmaceuticals and contra st agents were not subject to the annual OPPS drug packaging threshold to determine their packag ed or separately payable payment status, and instead all nonpass-through diagnostic radio pharmaceuticals and contrast agents were packaged as a matter of policy. For CY 2014, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 74925), we continued to package payment for all nonpass-through diagnostic radiopharmaceuticals, contrast agents, and anesthesia drugs and we began packaging all nonpass-through drugs, biologicals, and radioph armaceuticals that function as supplies when used in a diagnostic test or procedur e and drugs and biologica ls that function as supplies when used in a surgical procedure. These packaging policies were codified at 42 CFR 419.2(b) in CY 2014.CMS-1613-P 325 b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals As previously noted, radiopharmaceuticals are considered to be drugs for OPPS pass-through payment purposes. As describe d above, section 1833(t)(6 )(D)(i) of the Act specifies that the transiti onal pass-through payment amount for pass-through drugs and biologicals is the difference between the amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee schedule amount. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for di agnostic 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 attribut ed to the cost of predecessor diagnostic radiopharmaceuticals when considering a new diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 thr ough 68641). Specifically, we use the policy-packaged drug offset fraction for APCs containing nuclear me dicine procedures, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy-packaged drugs divided by the cost from single procedure claims in the APC. To dete rmine the actual APC offset amount for pass-through diagnostic radiopharm aceuticals 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 theCMS-1613-P 326 pass-through diagnostic radi opharmaceutical is used and, accordingly, reduce the separate OPPS payment for the pass-through diagnostic radiopharm aceutical by this amount. For CY 2015, as we did in CY 2014, we are proposing to continue to apply the diagnostic radiopharmaceutical offset policy to payment for pass-through diagnostic radiopharmaceuticals. There is currently one diagnostic ra diopharmaceutical with pass-through status under the OPPS. HCPCS code A9520 (Techne tium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries) was granted pass-thr ough status beginning October 1, 2013. We currently apply the established radiopharmaceutical payment offset policy to pass-through payment for this product. Table 35 below displays the proposed APCs to which nuclear medicine procedures would be assigned in CY 2015 and for which we expect that an APC offset could be applicable in th e case of diagnostic radiopharm aceuticals with pass-through

status.

TABLE 35.—PROPOSED APCs TO WHICH A DIAGNOSTIC RADIOPHARMACEUTICAL OFFSET MA Y BE APPLICABLE IN CY 2015 Proposed CY 2015

APC Proposed CY 2015 APC Title 0308 Positron Emission Tomography (PET) Imaging 0377 Level II Cardiac Imaging 0378 Level II Pulmonary Imaging 0389 Level I Non-imaging Nuclear Medicine 0390 Level I Endocrine Imaging 0391 Level II Endocrine Imaging 0392 Level II Non-imaging Nuclear Medicine 0393 Hematologic Processing & Studies 0394 Hepatobiliary Imaging 0395 GI Tract ImagingCMS-1613-P 327 Proposed CY 2015

APC Proposed CY 2015 APC Title 0396 Bone Imaging 0398 Level I Cardiac Imaging 0400 Hematopoietic Imaging 0401 Level I Pulmonary Imaging 0402 Level II Nervous System Imaging 0403 Level I Nervous System Imaging 0404 Renal and Genitourinary Studies 0406 Level I Tumor/Infection Imaging 0408 Level III Tumor/Infection Imaging 0414 Level II Tumor/Infection Imaging

c. Proposed Payment Offset Policy for Contrast Agents Section 1833(t)(6)(D)(i) of the Act sp ecifies that the tr ansitional pass-through payment amount for pass-through drugs and bi ologicals is the diffe rence between the amount paid under section 1842(o) of the Ac t and the otherwise applicable OPD fee schedule amount. Because a payment offset is necessary in order to provide an appropriate transitional pass-through payment, we deduct from the pass-through payment for contrast agents an amount reflecting the portion of the APC payment associated with predecessor contrast agents in order to en sure no duplicate contrast agent payment is

made. In CY 2010, we established a policy to es timate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor contrast agents when considering new contrast agents for pa ss-through payment (74 FR 60482 through 60484). Specifically, we use the policy-packaged dr ug offset fraction for procedural APCs, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy packaged drugs divided by the cost from singleCMS-1613-P 328 procedure claims in the APC. To dete rmine the actual APC offset amount for pass-through contrast agents that takes into consideration the otherwise applicable OPPS payment amount, we are proposing to multiply the policy packaged drug offset fraction by the APC payment amount for the procedur e with which the pa ss-through contrast agent is used and, accordingly, reduce the separate OPPS payment for the pass-through contrast agent by this amount. For CY 2015, as we did in CY 2014, we are proposing to continue to apply our standard contrast agents offset policy to payment for pass-through contrast agents (78 FR 75017). Although there are currently no contrast ag ents with pass-thro ugh status under the OPPS, we believe that a payment offset is necessary in the event that a new contrast agent is approved for pass-through status during CY 2015 in order to provide an appropriate transitional pass-th rough payment for new contrast agents. We are proposing to identify procedural APCs for which we expect a contrast offset could be applicable in the case of a pass-through contrast agent as any procedural APC with a policy-packaged drug amount greater than $20 that is not a nuclear medicine APC identified in Table 35 above, and these APCs are displayed in Table 36 below. The methodology used to determine a proposed threshold cost for appli cation of a contrast ag ent offset policy is

described in detail in the CY 2010 O PPS/ASC final rule with comment period (74 FR 60483 through 60484). For CY 2015, we ar e proposing to continue to recognize that when a contrast agent with pass-through status is billed with any procedural APC listed in Table 36 of this proposed rule, a sp ecific offset based on the procedural APCCMS-1613-P 329 would be applied to payment for the contrast agent to ensure that duplicate payment is not made for the contrast agent.

TABLE 36.—PROPOSED AP Cs TO WHICH A CONTRAST AGENT OFFSET MAY BE APPLICABLE FOR CY 2015

Proposed CY 2015

APC Proposed CY 2015 APC Title 0080 Diagnostic Cardiac Catheterization 0082 Coronary or Non-Coronary Atherectomy 0083 Coronary Angioplasty, Valvulopl asty, and Level I Endovascular Revascularization 0093 Vascular Reconstruc tion/Fistula Repair 0104 Transcatheter Placement of Intracoronary Stents 0152 Level I Percutaneous Abdomi nal and Biliary Procedures 0177 Level I Echocardiogram With Contrast 0178 Level II Echocardiogram With Contrast 0229 Level II Endovascular Revascular ization of the Lower Extremity 0278 Diagnostic Urography 0279 Level II Angiography and Venography 0280 Level III Angiography and Venography 0283 Computed Tomography with Contrast 0284 Magnetic Resonance Imaging and Magnetic Resonance Angiography with Contrast 0333 Computed Tomography without Contrast followed by Contrast 0334 Combined Abdomen and Pelvis CT with Contrast 0337 Magnetic Resonance Imaging and Magnetic Resonance Angiography without Contrast followed by Contrast 0375 Ancillary Outpatient Services When Patient Expires 0383 Cardiac Computed Tomographic Imaging 0388 Discography 0442 Dosimetric Drug Administration 0653 Vascular Reconstruction/Fi stula Repair with Device 0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents 0662 CT Angiography 0668 Level I Angiography and Venography 8006 CT and CTA with Contrast Composite 8008 MRI and MRA with Contrast CompositeCMS-1613-P 330

d. Proposed Payment Offset Policy for Dr ugs, Biologicals, and Radiopharmaceuticals That Function as Supplies When Used in a Diagnostic Test or Procedure and Drugs and Biologicals That Function as Supplies When Used in a Su rgical Procedure Section 1833(t)(6)(D)(i) of the Act sp ecifies that the tr ansitional pass-through payment amount for pass-through drugs and bi ologicals is the diffe rence between the amount paid under section 1842(o) of the Ac t and the otherwise applicable OPD fee

schedule amount. In the CY 2014 OPPS/AS C final rule with comment period (78 FR 74925), we finalized our policy to package drugs, biologicals, and radiopharmaceuticals that func tion as supplies when used in a diagnostic test or procedure and drugs and biologi cals that function as supplies when used in a surgical procedure. As a part of this policy, we sp ecifically finalized that skin substitutes and stress agents used in myocardial perfus ion imaging (MPI) be policy packaged in CY 2014, in addition to diagnostic radiopharmaceu ticals, contrast agents, and anesthesia drugs (78 FR 75019). Because a payment offset is necessary in order to provide an appropriate transitional pass-through paymen t, we finalized a policy for CY 2014 to deduct from the pass-through payment for skin substitutes and stress agents an amount reflecting the portion of the APC payment asso ciated with predecessor skin substitutes and stress agents in order to ensure no duplicat e skin substitute or stress agent payment is made (78 FR 75019). In CY 2014, we established a policy to estimate the portion of each APC payment rate that could reasonably be attributed to the cost of predecessor skin substitutes or stressCMS-1613-P 331 agents when considering a new skin substitu te or stress agent for pass-through payment (78 FR 75019). Specifically, in the case of pass-through skin substitutes, we use the policy-packaged drug offset fraction for skin substitute procedural APCs, calculated as 1 minus the following: the cost from single procedure claims in the APC after removing the cost for policy-packaged drugs divided by the cost from single procedure claims in the APC. Because policy packaged radiopha rmaceuticals also would be included in the drug offset fraction for the APC to which MP I procedures are assigned, in the case of pass-through stress agents, we use the policy-packaged drug offset fraction for the procedural APC, calculated as 1 minus the fo llowing: the cost from single procedure claims in the APC after removing the cost for policy-packaged drugs excluding policy-packaged diagnostic radiopharmaceuticals divided by the cost from single procedure claims in the APC. To determ ine the actual APC offset amount for passthrough skin substitutes and pa ss-through stress agents 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 procedure with which the pass-through skin substitute or pass-through stress agent is used and, accordingly, reduce the separate OPPS payment for the pass-thr ough skin substitute or pass-through stress agent by this amount (78 FR 75019). For CY 2015, as we did in CY 2014, we are proposing to continue to apply the skin s ubstitute and stress ag ent offset policy to payment for pass-through skin substitutes and stress agents. There are currently six skin subs titutes (HCPCS c odes Q4121, Q4122, Q4127, Q4131, Q4132, and Q4133) with pass-through st atus under the OPPS. We currentlyCMS-1613-P 332 apply the established skin substitute paymen t offset policy to pa ss-through payment for these products. Table 37 below displays th e proposed APCs to which skin substitute procedures would be assigned in CY 2015 and for which we expect that an APC offset could be applicable in th e case of skin substitutes with pass-through status. Although there are currently no stress agen ts with pass-through status under the OPPS, we believe that a payment offset is neces sary in the event that a new stress agent is approved for pass-through status during CY 2015 in order to provide an appropriate transitional pass through payment for new st ress agents. Table 38 below displays the proposed APCs to which MPI procedures w ould be assigned in CY 2015 and for which we expect that an APC offset could be appl icable in the case of a stress agent with pass-through status. We are proposing to continue to post annually on the CMS Web site athttp://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html a file that contains the APC offset amounts that will be used for that year for purpos es of both evaluating cost significance for candidate pass-through device categories and drugs and biologicals and establishing any appropriate APC offset amounts. Specifically, the file will continue to provide the amounts and percentages of APC payment associ ated with packaged implantable devices, policy-packaged drugs, and threshold packag ed drugs and biologicals for every OPPS

clinical APC.CMS-1613-P 333

TABLE 37.—PROPOSED AP Cs TO WHICH A SKIN SUBSTITUTE OFFSET MAY BE APPLICABLE FOR CY 2015

Proposed CY 2015

APC Proposed CY 2015 APC Title 0328 Level III Skin Repair 0329 Level IV Skin Repair

TABLE 38.—PROPOSED APCs TO WHICH A STRESS AGENT OFFSET MAY BE APPLICABLE FOR CY 2015

Proposed CY 2015

APC Proposed CY 2015 APC Title 0100 Cardiac Stress Tests 0377 Level II Cardiac Imaging

B. Proposed OPPS Payment for Drugs, Bi ologicals, and Radiopha rmaceuticals without Pass-Through Status 1. Background Under the CY 2013 OPPS, we currentlypay for drugs, biologicals, and radiopharmaceuticals that do not have pass-thro ugh status in one of two ways: as a packaged payment included in the payment for the associated service, or as a separate payment (individual APCs). We explained in the April 7, 2000 OPPS final rule with comment period (65 FR 18450) that we generally package the cost of drugs and radiopharmaceuticals into the APC payment ra te for the procedure or treatment with which the products are usually furnished. Ho spitals do not receive separate payment for packaged items and supplies, and hospitals ma y not bill beneficiaries separately for anyCMS-1613-P 334 packaged items and supplies whose costs are recognized and paid within the national OPPS payment rate for the associ ated procedure or service. Packaging costs into a single aggregate payment for a service, procedure, or episode-of-care is a fundamental principle that distinguishes a prospective payment system from a fee schedule. In general, pack aging the costs of items and services into the payment for the primary procedur e or service with which they are associated encourages hospital efficiencies and also enables hospita ls to manage their resources with maximum flexibility. 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 thresh old 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 (Presc ription) to trend the $50 threshold forward from the third quarter of CY 2005 (when th e Pub. L. 108-173 mandated threshold became effective) to the third quart er of CY 2007. We then rounde d the resulting dollar amount to the nearest $5 increment in order to de termine 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 throughCMS-1613-P 335 68086)), we set the packaging threshold for establishing se parate APCs for drugs and biologicals at $90 for CY 2014. Following the CY 2007 methodology, for this CY 2015 OPPS/ASC proposed rule, we used the most recently available four quarter moving average PPI levels to trend the $50 threshold forward from the third qua rter of CY 2005 to th e third quarter of CY 2015 and rounded the resulting dollar amount ($91.46) to the nearest $5 increment, which yielded a figure of $90. In performing this calculation, we used the most recent forecast of the quarterly index levels fo r the PPI for Pharmaceuticals for Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS’ Office of the Actuary (OACT). We refer belo w to this series generally as the PPI for Prescription Drugs.

Based on the calculations described above, we are proposing a packaging threshold for CY 2015 of $90. (For a more detailed discussion of the OPPS drug packaging threshold and the use of the PPI fo r Prescription Drugs, we refer readers to the

CY 2007 OPPS/ASC final rule with comme nt period (71 FR 68085 through 68086).) b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes That Describe Certain Drugs, Certain Biologicals, and Therapeutic Radiopharmaceuticals (“Threshold-Packaged Drugs”) To determine the proposed CY 2015 p ackaging status fo r all nonpass-through drugs and biologicals that are not po licy packaged, we calculated, on a HCPCS code-specific basis, the per day cost of all drugs, biologicals, and therapeutic radiopharmaceuticals (collectiv ely called “threshold-packaged ” drugs) that had a HCPCSCMS-1613-P 336 code in CY 2013 and were paid (via packaged or separate payment) under the OPPS. We used data from CY 2013 claims processed be fore January 1, 2014 for this calculation. However, we did not perform this calcula tion for those drugs a nd biologicals with multiple HCPCS codes that include different dos ages, as described in section V.B.2.c. of this proposed rule, or for the following polic y-packaged items that we are proposing to continue to package in CY 2015: diagnos tic radiopharmaceuticals; contrast agents; anesthesia drugs; drugs, biologicals, and ra diopharmaceuticals that function as supplies when used in a diagnostic test or procedure; and drugs and biologica ls that function as supplies when used in a surgical procedure. In order to calculate the per day cost s for drugs, biologicals, and therapeutic radiopharmaceuticals to determ ine their proposed packaging status in CY 2015, we used the methodology that was described in de tail in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final rule with comment period (70 FR 68636 through 70 FR 68638). For each drug and biological HCPCS code, we used an estimated paymen t rate of ASP+6 per cent (which is the payment rate we are proposing for separate ly payable drugs and biologicals for CY 2015,

as discussed in more detail in section V.B .3.b. of this proposed ru le) to calculate the CY 2015 proposed rule per day costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2013 (data th at were used for payment purposes in the physician’s office setting, effective April 1, 2014) to determine the proposed rule per day

cost.CMS-1613-P 337 As is our standard methodology, for CY 2015, we are proposing to use payment

rates based on the ASP data from the fourth quarter of CY 2013 for budget neutrality estimates, packaging determinations, impact analyses, and completion of Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site)

because these are the most recent data availabl e for use at the time of development of this proposed rule. These data also were the basi s for drug payments in the physician’s office setting, effective April 1, 2014. 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 2013 hospital claims data to determine their per day cost. We are proposing to package items with a per day cost less than or equal to $90, and identify items with a per day cost greater than $90 as separately payable. Consistent with our past practice, we crosswalked hi storical OPPS claims data from the CY 2013 HCPCS codes that were repor ted to the CY 2014 HCPCS codes that we display in Addendum B to this proposed rule (which is available via the Internet on the CMS Web site) for payment in CY 2015. Our policy during previous cycles of the OPPS has been to use updated ASP and

claims data to make final determinations of the packaging status of HCPCS codes for drugs, biologicals, and therapeutic radiopha rmaceuticals for the OPPS/ASC final 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/AS C final rule with comment period for the update year. Only HCPC S codes that are identified as separately payable in the final rule with comment peri od are subject to quarterly updates. For ourCMS-1613-P 338 calculation of per day costs of HCPCS code s for drugs and biologicals in the CY 2015

OPPS/ASC final rule with co mment period, we are proposing to use ASP data from the first quarter of CY 2014, whic h is the basis for calculating payment rates for drugs and biologicals in the physician’s office sett ing using the ASP methodology, effective July 1, 2014, along with updated hospital claims data from CY 2013. We note that we also are proposing to use these data for budge t neutrality estimates and impact analyses for the CY 2015 OPPS/ASC final rule with comment period. Payment rates for HCPCS codes for sepa rately payable drugs and biologicals

included in Addenda A and B to the final ru le with comment period will be based on ASP data from the second quarter of CY 2014. Th ese data will be the basis for calculating payment rates for drugs and biologicals in the physician’s office setting using the ASP methodology, effective October 1, 2014. These payment rates would then be updated in the January 2015 OPPS update, based on the most recent ASP data to be used for physician’s office and OPPS payment as of January 1, 2015. 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 2013 claims data and updated cost report information

available for the CY 2015 final rule with comm ent period to determine their final per day

cost. Consequently, the packaging status of some HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals in th is CY 2015 OPPS/ASC proposed rule may be different from the same drug HCPCS code’s packaging status determined based on the

data used for the CY 2015 OPPS/ASC final rule with comment period. Under suchCMS-1613-P 339 circumstances, we are proposing to continue to follow the established policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those drugs whose cost fluctuates relative to the proposed CY 2015 OPPS drug packaging threshold and the drug’s payment status (pack aged or separately payable) in CY 2014. Specifically, for CY 2015, consistent with our historical practice, we are proposing to apply the following policies to these HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals whose relationship to th e drug packaging threshold changes based on the updated drug packaging threshol d and on the final updated data:

● HCPCS codes for drugs and biologicals that were paid separately in CY 2014 and that are proposed for separate payment in CY 2015, and that then have per day costs equal to or less than the CY 2015 final ru le drug packaging threshold, based on the updated ASPs and hospital claims data used fo r the CY 2015 final rule, would continue to receive separate payment in CY 2015.

● HCPCS codes for drugs and biologicals that were packaged in CY 2014 and that are proposed for separate payment in CY 2015, and that then have per day costs equal to or less than the CY 2015 final ru le drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2015 final rule, would remain packaged in CY 2015.

● HCPCS codes for drugs and biological s for which we are proposing packaged payment in CY 2015 but then have per day co sts greater than the CY 2015 final rule drug packaging threshold, based on the updated ASPs and hospital claims data used for the CY 2015 final rule, would receiv e separate payment in CY 2015.CMS-1613-P 340 c. Proposed High/Low Cost Threshold for Packaged Skin Substitutes In the CY 2014 OPPS/ASC final rule, we unconditionally packaged skin substitute products into their as sociated surgical procedures as part of a broader policy to package drugs and biologicals that function as supplies when used in a surgical procedure (78 FR 74938). We also finali zed a methodology that divides the skin substitutes into a high cost group and a low cost group, for packag ing purposes, in order to ensure adequate resource homogeneity among APC assignments for the skin substitute application procedures (78 FR 74933). For CY 2014, assign ment to the high cost or low cost skin substitute group depended upon a comparison of the July 2013 ASP + 6 percent payment amount for each skin substitute to the weighted average payment per unit for all skin substitutes (weighted average was calculated using the skin substitute utilization from the CY 2012 claims data and the July 2013 A SP + 6 percent payment amounts, which are also the payment amounts in Addendum B to the CY 2014 OPPS/ASC final rule with comment period). The high/low cost skin s ubstitute threshold for CY 2014 is $32 per

cm 2 . Skin substitutes that had a July 2013 ASP + 6 percent amount above $32 per cm 2 were classified in the high cost group and those with a July 2013 ASP + 6 percent amount at or below $32 per cm 2 were classified in the low costgroup. Any new skin substitutes without pricing information are assigned to the low cost category until pricing information is available to compare to the $32 per cm 2 threshold for CY 2014. Skin substitutes with pass-th rough status are assigned to the hi gh cost category, with an offset applied as described in section II.C.6. of this proposed rule.CMS-1613-P 341 After the effective date of the CY 2014 packaging policy, some skin substitute manufacturers brought the follo wing issues to our atten tion regarding the current methodology for determining the high cost/low cost threshold:

● Using ASP to determine a product’s plac ement in the high or low cost category may unfairly disadvantage the limited number of skin substitute products that are sold in large sizes (that is, above 150 cm 2 ). Large size skin substitute products are primarily

used for burns that are treated on an inpatient basis. Th ese manufacturers contend that non-linear pricing for skin subst itute products sold in both larg e and small sizes results in lower per cm 2 prices for large sizes. Therefore, the use of ASP data to categorize products into high and low cost categories can result in placement of products that have significant inpatient use of the large, lower-priced (per cm 2 ) sizes into the low cost category, even though these large size produc ts are not often us ed in the hospital outpatient department.

● Using a weighted average ASP to es tablish the high/low cost categories, combined with the drug pass-th rough policy, will lead to unstable high/low cost skin substitute categories in the future. Acco rding to one manufact urer, under our current policy manufacturers with products on pass-thro ugh have an incentive to set a very high price because hospitals are price-insens itive to products paid with pass-through payments. As these new high priced pass-through skin substitutes capture more market share, the weighted average ASP high/low costthreshold could escala te rapidly resulting in a shift in the assignment of many skin s ubstitutes from the high cost category to the low cost category.CMS-1613-P 342 We agree with stakeholder concerns re garding the potential instability of the high/low cost categories associated with the drug pass-through policy, as well as

stakeholder concerns about the inclusion of large-sized products that are primarily used for inpatients in the ASP calculation, when ASP is used to establish the high/low cost categories. As an alternative to using ASP data, we believe that establishing the high/low cost threshold using the weighted average m ean unit cost (MUC) for all skin substitute products from claims data may provide more stable high/low cost categories and will

resolve the issue associated with large sized products because the MUC will be derived from outpatient claims only. The threshold would be based on costs from outpatient claims data instead of manufacturer reported sales prices that woul d not include larger sizes primarily used for inpatient burn cases. Therefore, we are proposing to maintain the high/low cost APC structure for skin substitute procedures in CY 2015 but we ar e proposing to revise the current methodology used to establish the high/low cost threshol d. For CY 2015, we are proposing to establish the high/low cost threshold based on the wei ghted average MUC for all skin substitutes using CY 2013 claims (which is proposed to be $27 per cm 2 ). Skin substitutes with a MUC above $27 per cm 2 using CY 2013 claims are proposed to be classified in the high cost group and those with a MUC at or below $27 per cm 2 are proposed to be classified in the low cost group. Table 39 below shows the current high/low cost status for each skin substitute product and the proposed 2015 high /low cost status based on the weighted average MUC threshold of $27. We are proposing to continue the current policy that skin substitutes with pass-through status will be assigned to the high cost category forCMS-1613-P 343 CY 2015. Skin substitutes with pricing informa tion but without claims data to calculate a MUC will be assigned to either the high or low cost category based on the product’s ASP + 6 percent payment rate. If ASP is not available then we will use WAC + 6 percent or 95 percent of AWP to assign a product to either the high or low cost category. We are also proposing that any new skin substitute wi thout pricing information be assigned to the low cost category until pricing information is available to compare to the proposed $27

per cm 2 threshold for CY 2015.CMS-1613-P 344

TABLE 39.—PROPOSED SKIN SUBSTITU TE ASSIGNMENTS TO HIGH COST AND LOW COST GROUPS

CY 2014 HCPCS

Code CY 2014 Short Descriptor Proposed CY 2015 SI CY 2014 High/Low Status Based on Weighted ASP Proposed CY 2015 High/Low Status Based on Weighted MUC C9358 SurgiMend, fetal N Low Low C9360 SurgiMend, neonatal N Low Low C9363 Integra Meshed Bil Wound Mat N Low High Q4101 Apligraf N High High Q4102 Oasis wound matrix N Low Low Q4103 Oasis burn matrix N Low Low Q4104 Integra BMWD N Low High Q4105 Integra DRT N Low High Q4106 Dermagraft N High High Q4107 Graftjacket N High High Q4108 Integra matrix N Low High Q4110 Primatrix N High High Q4111 Gammagraft N Low Low Q4115 Alloskin N Low Low Q4116 Alloderm N High High Q4117 Hyalomatrix N Low Low Q4119 Matristem wound matrix N Low Low Q4120 Matristem burn matrix N Low Low Q4121 Theraskin G High High Q4122 Dermacell G High High Q4123 Alloskin N Low Low Q4124 Oasis tri-layer wound matrix N Low Low Q4125 Arthroflex N High High Q4126 Memoderm/derma/tranz/integup N High High Q4127 Talymed G High High Q4128 Flexhd/Allopatchhd/matrixhd N Low High Q4129 Unite biomatrix N Low Low Q4131 Epifix N High High Q4132 Grafix core N High HighCMS-1613-P 345

CY 2014 HCPCS

Code CY 2014 Short Descriptor Proposed CY 2015 SI CY 2014 High/Low Status Based on Weighted ASP Proposed CY 2015 High/Low Status Based on Weighted MUC Q4133 Grafix prime N High High Q4134 hMatrix N High High Q4135 Mediskin N Low High Q4136 EZderm N Low Low Q4137 Amnioexcel or biodexcel, 1cm N Low Low Q4138 BioDfence DryFlex, 1cm N Low Low Q4140 Biodfence 1cm N Low Low Q4141 Alloskin ac, 1 cm N Low Low Q4142 Xcm biologic tiss matrix 1cm N Low Low Q4143 Repriza, 1cm N Low Low Q4146 Tensix, 1cm N Low Low Q4147 Architect ecm, 1cm N High High Q4148 Neox 1k, 1cm N High High

d. Proposed Pass-Through Evaluation Process for Skin Substitutes At the beginning of the OPPS, skin s ubstitutes were origin ally evaluated for pass-through status using the medical devi ce pass-through process. Since 2001, skin substitutes have been evaluated for pass-through status through th e drug, biological, and radiopharmaceutical pass-through process. There are curren tly 50 distinct HCPCS codes describing skin substitutes, and of these 50 products 17 products that are listed in Table 40 have had or currently have pass-through status.CMS-1613-P 346

TABLE 40.—SKIN SUBSTITUTES THAT HAVE HAD OR CURRENTLY HAVE PASS-THROUGH STATUS

CY 2014 HCPCS CY 2014 Short Descriptor PassThrough Expiration Date C9358 SurgiMend, fetal 12/31/2010 C9360 SurgiMend, neonatal 12/31/2011 C9363 Integra Meshed Bil Wound Mat 12/31/2011 Q4101 Apligraf 12/31/2002 Q4104 Integra BMWD 12/31/2006 Q4105 Integra DRT 12/31/2006 Q4106 Dermagraft 03/31/2005 Q4107 Graftjacket 12/31/2006 Q4108 Integra matrix 12/31/2010 Q4110 Primatrix 12/31/2008 Q4121 Theraskin 12/31/2016 Q4122 Dermacell 12/31/2015 Q4124 Oasis tri-layer wound matrix 12/31/2013 Q4127 Talymed 12/31/2015 Q4131 Epifix 12/31/2014 Q4132 Grafix core 12/31/2014 Q4133 Grafix prime 12/31/2014

As discussed above, in CY 2014 we packag ed all skin substitutes under the policy that packages all drugs and biologicals that function as supplies when used in a surgical procedure (78 FR 74938). Therefore, we consider skin substitutes to be a type of surgical supply in the HOPD. This packaging policy was partly based on a comparison to implantable biologicals, which are similar in composition and clinical use to skin substitutes (78 FR 74931). In CY 2009, we finalized a policy to package payment for implantable biologicals into the payment for the associated surgical procedure (73 FR 68635). In CY 2010, we finalized a pol icy to evaluate implantable biologicalsCMS-1613-P 347 that are surgically inserted or implanted (thr ough a surgical incision or a natural orifice) for pass-through payment through the medical de vice pass-through evaluation process, as implantable biologicals function as implant able devices (74 FR 60473). Implantable devices are considered supp lies in the OPPS (65 FR 18443), and as noted above, we finalized a packaging policy in the CY 2014 OP PS/ASC final rule with comment period that considers skin substitutes a type of surgical supply. Many skin substitutes are FDA-approved or cleared as devices. The si milarities between im plantable biologicals and skin substitutes were a key factor in packaging (like we did beginning in 2009 with implantable biologicals) skin substitutes into the associated surgical procedure (78 FR 74932). These similarities between thes e classes of products also support similar treatment under the OPPS device pass-through pr ocess, which has been the evaluation methodology for implantable biologicals since 2010. In view of these considerations, we are proposing that applications for pass-through payment for skin substitute s be evaluated using the medical device pass-through process and paym ent methodology. As a result of this proposal, we are proposing that the last skin s ubstitute pass-throug h applications evaluated using the drug and biological pass-through evaluation process would be those with an application deadline of September 1, 2014, and an earlie st effective date of January 1, 2015. Therefore, in light of this proposal, we would change the December 1, 2014 pass-through application deadline (for an earliest effective date of April 1, 2015) for both drugs and biologicals and devices to January 15, 2015, in order to provide sufficient time for applicants to adjust to the new policies and procedures in effect as of January 1, 2015.CMS-1613-P 348 We believe that this approach is more appropriate because, although skin substitutes have characteristics of both surgical supplies and biologicals, we believe that, for pass-through purposes, skin substitutes are be st characterized as surgical supplies or devices because of their required surgical application and because they share significant clinical similarity with other surgical supplies, including implantable biologicals . Thus, if this proposal is finalized, beginning on and after January 1, 2015, new skin substitutes would no longer be eligible to submit biological pass-through ap plications; rather, su ch applications for pass-through payment would be evaluate d using the medical device pass-through evaluation process, for which payment is base d on charges reduced to cost from claims.

We refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/ to view the device pa ss-through application requirements and review criteriathat would apply to the eval uation of all skin substitute product applications for pass- through status beginning on or after January 1, 2015. Those skin substitutes that are approved for pass-through status as biol ogicals effective on or before January 1, 2015, would continue to be considered pass-through biologicals for the duration of their period of pass-through payment. We also are proposing to revise our regulations at §§ 419.64 and 419.66 to reflect this proposed new policy. Specifically, we are proposing to revise § 419.64 by deleting the existing paragraph (a)(4)(iv) text because it is currently outdated and adding new text at paragraph (a)(4)(iv) to ex clude skin substitutes from consideration for drug and biological pass-through payment unless pa ss-through payment for a product as a biological is made on or before January 1, 2015, to allow these products to complete theirCMS-1613-P 349 period of pass-through payment as biologica ls. We are proposing to modify the regulation at § 419.66(b)(3) to add that a pass-through device may be applied in or on a wound or other skin lesion, and we are simplif ying the language that “whether or not it remains with the patient when the patient is released from the hospital” to read “either permanently or temporarily.” We also are proposing to delete th e current example in § 419.66(b)(4)(iii) of the regulati ons regarding the exclusion of materials, for example, biological or synthetic materials, that may be used to replace human skin from device pass-through payment eligibility. We invite public comment on these proposals. e. 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 pur poses, multiple HCPCS codes reporting different dosages for the same covered Part B drugs or biologicals in order to reduce hospitals’ administrative burden by permitting them to report all HCPCS codes for drugs and biologicals. In genera l, prior to CY 2008, the OPPS recognized for payment only the HCPCS code that described the lowest dosag e of a drug or biological. During CYs 2008 and 2009, we applied a policy that assigned th e status indicator of the previously recognized HCPCS code to the associated newly recognized code(s), reflecting the packaged or separately payabl e status of the new code(s). 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, ratherCMS-1613-P 350 than an individual HCPCS code, when a drug has multiple HCPCS codes describing different dosages because we believed that adopting the standard HCPCS code-specific packaging determinations for these codes coul d lead to inappropriate payment incentives for hospitals to report certain HCPCS codes in stead of others. We continue to believe that making packaging determinations on a drug-specific basis eliminates payment incentives for hospitals to report certain HC PCS codes for drugs and allows hospitals flexibility in choosing to re port all HCPCS codes for different dosages of the same drug or only the lowest dosage HCPCS code. Ther efore, we are proposing to continue our policy to make packaging determinations on a drug-specific basis, rather than a HCPCS code-specific basis, for those HCPCS codes thatdescribe the same drug or biological but different dosages in CY 2015. For CY 2015, in order to propose a packag ing determination that is consistent

across all HCPCS codes that describe different dosages of the same drug or biological, we aggregated both our CY 2013 claims data and our pricing information at ASP+6 percent across all of the HCPCS codes that de scribe each distinct drug or biological in order to determine the mean units per day of the drug or biological in terms of the HCPCS code with the lowest dosage descri ptor. The following drugs did not have pricing information available for the ASP methodology for th is CY 2015 OPPS/ASC proposed rule and, as is our current policy fo r determining the packaging status of other drugs, we used the mean unit cost available from the CY 2013 claims data to make the packaging determinations for these drugs: HCPCS code J3471 (Injection, hyaluronidase,CMS-1613-P 351 ovine, preservative free, per 1 usp unit ( up to 999 usp units)) and HCPCS code J3472 (Injection, hyaluronidase, ovine, pres ervative free, per 1000 usp units). For all other drugs and biologicals that have HCPCS codes describing different doses, we then multiplied the weighted aver age ASP+6 percent per unit payment amount across all dosage levels of a specific drug or biological by the estima ted units per day for all HCPCS codes that describe each drug or bi ological from our claims data to determine the estimated per day cost of each drug or biol ogical at less than or equal to $90 (so that all HCPCS codes for the same drug or biologic al would be packaged) or greater than $90 (so that all HCPCS codes for the same drug or biological would be separately payable). The proposed packaging status of each drug and biological HCPCS code to which this methodology would apply is displayed in Table 41 below.

TABLE 41.—PROPOSED HCPCS CO DES TO WHICH THE CY 2015 DRUG-SPECIFIC PACKAGING DE TERMINATION METHODOLOGY WOULD APPLY

Proposed CY 2015 HCPCS

Code Proposed CY 2015 Long Descriptor Proposed CY 2015 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 J1460 Injection, gamma globulin, intramuscular, 1 cc N J1560 Injection, gamma globuli n, intramuscular over 10 cc N J1642 Injection, heparin sodium, (hep arin lock flush), per 10 units N J1644 Injection, heparin sodium, per 1000 units N J1850 Injection, kanamycin sulfate, up to 75 mg N J1840 Injection, kanamycin su lfate, up to 500 mg NCMS-1613-P 352 Proposed CY 2015 HCPCS

Code Proposed CY 2015 Long Descriptor Proposed CY 2015 SI J2270 Injection, morphine su lfate, up to 10 mg N J2271 Injection, morphine sulfate, 100mg N J2788 Injection, rho d immune gl obulin, human, minidose, 50 micrograms (250 i.u.) N

J2790 Injection, rho d immune gl obulin, human, full dose, 300 micrograms (1500 i.u.) N J2920 Injection, methylprednisolone sodium succinate, up to 40 mg N J2930 Injection, methylprednisolone sodium succinate, up to 125 mg N J3120 Injection, testosterone enanthate, up to 100 mg N J3130 Injection, testosterone enanthate, up to 200 mg N J3471 Injection, hyaluronidase, ovine, preservative free, per 1 usp unit (up to 999 usp units) N

J3472 Injection, hyaluronidase, ovine, preservative free, per 1000 usp units N J7050 Infusion, normal saline solution , 250 cc 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

3. Proposed Payment for Drugs and Biologica ls without Pass-Through Status That Are Not Packaged a. Proposed Payment for Specified Cove red Outpatient Drugs (SCODs) and Other Separately Payable and Packaged Drugs and Biologicals Section 1833(t)(14) of the Act de fines certain separately payable radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these items. Under section 1833(t)(14 )(B)(i) of the Act, a “specified covered outpatient drug”CMS-1613-P 353 (known as a SCOD) is defined as a co vered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a se parate 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 include d in the definition of SCODs. These exceptions are—

● A drug or biological for which payment is first made on or after January 1, 2003, under the transitional pass-through payment provision in section 1833(t)(6) of the Act.

● A drug or biological for which a temporary HCPCS code has not been assigned.

● During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). Section 1833(t)(14)(A)(iii) of the Ac t requires that payment for SCODs in CY 2006 and subsequent years be equal to th e average acquisition cost for the drug for that year as determined by the Secretary, su bject to any adjustment for overhead costs and taking into account the hospital acquis ition cost survey data collected by the Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost data are not available, the law requires that payment be equal to payment rates established under the methodology described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. MostCMS-1613-P 354 physician Part B drugs are paid at ASP+ 6 percent pursuant to section 1842(o) and

section 1847A of the Act. Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in OPPS payment

rates for SCODs to take into account overh ead and related expenses, such as pharmacy services and handling costs. Section 1833(t) (14)(E)(i) of the Act required MedPAC to study pharmacy overhead and related expenses and to make recommendations to the Secretary regarding whether, and if so how , a payment adjustment should be made to compensate hospitals for overhead and relate d expenses. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adju st the weights for am bulatory procedure

classifications for SCODs to take into account the fi ndings of the MedPAC study. It has been our longstanding policy to a pply the same treatment to all separately payable drugs and biologicals, which include SCODs, and drugs and biologicals that are not SCODs. Therefore, we apply the paymen t methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, as required by statute, but we also apply it to separately payable drugs and biologicals that are not SCODs, whic h is a policy determination rather than a statutory requirement. In this CY 2015 OPPS/ASC proposed rule, we are proposing to apply section 1833(t)(14)(A)(iii )(II) of the Act to all separately payable drugs and biologicals, including SCODs. Although we do not distinguish SCODs in this discussion, we note that we are required to apply section 1833( t)(14)(A)(iii)(II ) of the Act to SCODs, but we also are applying this provi sion to other separately payable drugs and biologicals, consistent with our history of using the same payment methodology for all separately payable dr ugs and biologicals.CMS-1613-P 355 Since CY 2006, we have attempted to establish a drug payment methodology that reflects hospitals’ acquisition costs for drugs and biologicals while ta king into account relevant pharmacy overhead and related hand ling expenses. We have attempted to collect more data on hospital overhead ch arges for drugs and biologicals by making several proposals that would re quire hospitals to change the way they report the cost and charges for drugs. None of these proposals we re adopted due to si gnificant stakeholder concern, including that hospitals stated that it would be administratively burdensome to report hospital overhead charges. We established a payment policy for separately payable drugs and biologicals, authorized by section 1833(t)(14)(A)( iii)(I) of the Act,

based on an ASP+X amount that is calculate d by comparing the estimated aggregate cost of separately payable drugs and biologicals in our claims data to the estimated aggregate ASP dollars for separately payable drugs a nd biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642 through 68643). We referred to this methodology as our standard drug payment methodology. Taking into consideration comments made by the pharmacy stakeholders and acknowledging the limitations of the reported data due to charge compression and hospitals’ repor ting practices, we added an “overhead adjustment” in CY 2010 (an internal adjustment of the data) by redistributing cost from coded and uncoded packaged drugs and biologica ls to separately payable drugs in order to provide more appropriate payments for drugs and biologicals in the HOPD. We continued this methodology, and we further refined it in CY 2012 by finalizing a policy to update the redistribution amount for inflat ion and to keep the redistribution ration constant between the proposed rule and the fi nal rule. For a detailed discussion of ourCMS-1613-P 356 OPPS drug payment policies from CY 2006 to CY 2012, we refer readers to the CY 2013

OPPS/ASC final rule with comm ent period (77 FR 68383 through 68385). Because of continuing uncertainty about the full cost of pharmacy overhead and acquisition cost, based in large part on the limitations of the submitted hospital charge and claims data for drugs, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68386) we indicated our concern that the continued use of the standard drug payment methodology (including the overhead ad justment) still may not appropriately account for average acquisition and pharmacy ove rhead cost and, therefore, may result in payment rates that are not as predictable, accurate, or appropriat e as they could be. Section 1833(t)(14)(A)(iii) (II) of the Act requires an alternative methodology for determining payment rates for SCODS wherein, if hospital acquisition cost data are not available, payment shall be equal (subject to any adjustment for overhead costs) to payment rates established under the methodology described in section 1842(o), 1847A, or

1847B of the Act. We refer to this alternat ive methodology as the “sta tutory default.” In

the CY 2013 OPPS/ASC final rule with comm ent period (77 FR 68386), we noted that section 1833(t)(14)(A)(iii)(II) of the Act authorizes the Secretary to calculate and adjust, as necessary, the average price for a drug in the year established under section 1842(o), 1847A, or 1847B of the Act, as the case may be, in determining payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, Part B drugs are paid at ASP+6 percent when furnished in physicians’ offices . We indicated that we believe that establishing the payment rates based on the statutory default of ASP+6 percent is appropriate as it yields increased predictabil ity in payment for separately payable drugsCMS-1613-P 357 and biologicals under the OPPS and, therefore, we finalized our proposal for CY 2013 to pay for separately payable drugs and biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of th e Act, referred to as the statutory default. We also finalized our proposal that th e ASP+6 percent payment amount for separately payable drugs and biologicals requires no further ad justment and represents the combined acquisition and pharmacy overhead payment for drugs and biologicals, that payments for separately payable drugs and biologicals are included in the budget ne utrality adjustments under the requirements in secti on 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in determining payments for these separately paid drugs and biologicals for CY 2013 (77 FR 68389). b. Proposed CY 2015 Payment Policy For CY 2015, we are proposing to c ontinue our CY 2014 policy and pay for separately payable drugs and biologi cals at ASP+6 percent pursuant to section 1833(t)(14)(A)(iii)(II) of th e Act, referred to as the “statutory default.” We are proposing that the ASP+6 per cent payment amount for sepa rately payable drugs and biologicals requires no further adjustment a nd represents the combined acquisition and pharmacy overhead payment for drugs and biol ogicals. We also are proposing that payments for separately payable drugs and biologicals are included in the budget neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, and that the budget neutral weight scaler is not applied in de termining payments for these separately paid drugs and biologicals.CMS-1613-P 358 4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals Beginning in CY 2010 and continuing fo r CY 2014, we established a policy to pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology adopted for separately payable drugs and biol ogicals. If ASP information is unavailable for a therapeutic radiopharmaceutical, we ba se therapeutic radiopharmaceutical payment on mean unit cost data derived from hospita l claims. We believe that the rationale

outlined in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60524 through 60525) for applying the principles of separately payable drug pricing to therapeutic radiopharmaceuticals continue s to be appropriate for nonpass-through separately payable therapeutic radiopharm aceuticals in CY 2015. Therefore, we are proposing for CY 2015 to pay all nonpass-th rough, separately pa yable therapeutic radiopharmaceuticals at ASP+6 percent, base d on the statutory default described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full discussion of ASP-based payment for therapeutic radiopharmaceuticals, we refer r eaders to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521) . We also are proposing to rely on

CY 2013 mean unit cost data derived from hos pital claims data for payment rates for therapeutic radiopharmaceuticals for which A SP data are unavailable and to update the payment rates for separately payable therap eutic radiopharmaceuticals, according to our usual process for updating the payment rates for separately payable dr ugs and biologicals, on a quarterly basis if updated ASP information is available. For a complete history of the OPPS payment policy for therapeutic radi opharmaceuticals, we refer readers to the CY 2005 OPPS final rule with comment pe riod (69 FR 65811), the CY 2006 OPPS finalCMS-1613-P 359 rule with comment period (70 FR 68655), and the CY 2010 OPPS/AS C final rule with comment period (74 FR 60524). The proposed CY 2015 payment rates for nonpass-through separately payable therapeutic radiopharmaceuticals are included in Addenda A and B to this proposed rule (which are available via the Internet on the CMS Web site). 5. Proposed Payment for Blood Clotting Factors For CY 2014, we provided payment fo r blood clotting factors under the same methodology as other nonpass-th rough separately payable dr ugs and biologicals under the OPPS and continued paying an updated fu rnishing fee. That is, for CY 2014, we provided payment for blood clotting factors unde r the OPPS at ASP+6 percent, plus an additional payment for the furnishing fee. We note that when blood clotting factors are provided in physicians’ offices under Medicare Part B and in other Medicare settings, a furnishing fee is also applied to the paym ent. The CY 2014 updated furnishing fee was $0.192 per unit. For CY 2015, we are proposing to pay for blood clotting factors at ASP+6 percent, consistent with our propos ed payment policy fo r other nonpass-through separately payable drugs and biologicals, a nd to continue our policy for payment of the furnishing fee using an updated amount. Our policy to pay for a furnishing fee for blood clotting factors under the O PPS is consistent with the methodology applied in the physician office and inpatient hospital setting, and first articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and later discu ssed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). The proposed furnishing feeCMS-1613-P 360 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 releas es the applicable CPI dataafter 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 acco rdance with our policy, as finalized in the

CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we are proposing to announce the actual figure for th e percent change in the ap plicable CPI and the updated furnishing fee calculated based on that figur e through applicable pr ogram instructions and posting on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Part-B-Drugs/McrPart BDrugAvgSalesPrice/index.html

. 6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital Claims Data The Medicare Prescription Drug, Impr ovement, and Modernization Act of 2003 (Pub. L. 108-173) did not address the OPPS pa yment in CY 2005 and subsequent years for drugs, biologicals, and radiopharmaceutical s that have assigned HCPCS codes, but that do not have a reference AWP or appr oval for payment as pass-through drugs or biologicals. Because there was no statutory provision that dictated payment for such drugs, biologicals, and radiopharmaceuticals in CY 2005, and because we had no hospital

claims data to use in esta blishing a payment rate for th em, we investigated several payment options for CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 through 65799).CMS-1613-P 361 For CYs 2005 to 2007, we implemented a policy to provide separate payment for new drugs, biologicals, and radiopharmaceutical s with HCPCS codes (specifically those new drug, biological, and radiopharmaceutical HC PCS codes in each of those calendar years that did not crosswalk to predece ssor HCPCS codes) but which did not have pass-through status, at a rate that was equivalent to the payment they received in the physician’s office setting, established in accordance with the ASP methodology for drugs and biologicals, and based on charges adju sted to cost for radiopharmaceuticals. Beginning in CY 2008 and continuing through CY 2014, we implemented a policy to provide payment for new drugs and biologicals with HCPCS codes (except those that are policy-packaged), but which did not have pass-through status a nd were without OPPS hospital claims data, at an amount consis tent with the final OPPS payment methodology for other separately payable nonpass-through dr ugs and biologicals for the given year. For CY 2015, we are proposing to conti nue this policy and provide payment for new drugs, biologicals, and therapeutic radiopharmaceuticals that do not have pass-through status at ASP+6 percent, cons istent with the proposed CY 2015 payment methodology for other separately payabl e nonpass-through drugs, biologicals, and therapeutic radiopharmaceuticals, which is proposed to be ASP+6 percent. We believe this proposed policy would ensure that new nonpass-through drugs, biologicals, and therapeutic radiopharmaceuticals would be tr eated like other drugs, biologicals, and therapeutic radiopharmaceu ticals under the OPPS. For CY 2015, we also are proposing to package payment for all new nonpass-through policy-packaged products (dia gnostic radiopharmaceuticals, contrastCMS-1613-P 362 agents, anesthesia drugs, drugs, biological s, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure) with HCPCS codes but without claims data (those new CY 2015 HCPCS code s that do not crosswalk to predecessor HCPCS codes). This is cons istent with the proposed polic y packaging of all existing nonpass-through diagnostic radiopharmaceuticals, contrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals th at function as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure, as discussed in more detail in section II.A.3. of this proposed rule.

In accordance with the OPPS ASP methodology, in the absence of ASP data, for CY 2015, we are proposing to continue our pol icy of using the WAC for the product to establish the initial paymen t rate for new nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS clai ms data. However, we note that if the WAC is also unavailable, we would make pa yment at 95 percent of the product’s most recent AWP. We also are proposing to assi gn status indicator “K” (Separately paid nonpass-through drugs and biologicals, includi ng therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and biologicals wi thout OPPS claims data and for which we have not granted pass-through status. With respect to new nonpass-through drugs and biologicals for which we do not have ASP da ta, we are proposing that once their ASP data become available in later quarterly s ubmissions, their payment rates under the OPPS would be adjusted so that the rates woul d be based on the ASP methodology and set toCMS-1613-P 363 the proposed ASP-based amount (proposed for CY 2015 at ASP+6 percent) for items that have not been granted pass-through status. This proposed policy, wh ich utilizes the ASP methodology for new nonpass-through drugs and biol ogicals with an ASP, is consistent with prior years’ po licies for these items and woul d ensure that new nonpass-through drugs and biologicals would be treated like other drugs and biologicals under the OPPS, unless they are grante d pass-through status. Similarly, we are proposing to continue to base the initial payment for new therapeutic radiopharmaceuticals with HCPCS codes, but which do not have pass-through status and are w ithout 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 paym ent for new therapeutic radiopharmaceuticals at 95 percent of the products’ most recent AWP because we would not have mean costs from hospital claims data upon which to base payment. As we are proposing with new drugs and biologicals, we are proposing to continue our policy of assigning status

indicator “K” to HCPCS codes for new th erapeutic radiopharmaceuticals without OPPS

claims data for which we have not granted pass-through status. Consistent with other ASP-based pa yment, for CY 2015, we are proposing to announce any changes to the payment amounts for new drugs and bi ologicals in the CY 2015 OPPS/ASC final rule with comment pe riod and also on a quarterly basis on the CMS Web site during CY 2015 if later quarter ASP submissions (or more recent WACs or AWPs) indicate that changes to the paym ent rates for these dr ugs and biologicals are necessary. The payment rates for new ther apeutic radiopharmaceuticals also would beCMS-1613-P 364 changed accordingly based on later quarter ASP submissions. We note that the new CY 2015 HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals were

not available at the time of de velopment of this proposed rule. However, these agents

will be included in Addendum B to the CY 2015 OPPS/ASC final rule with comment period (which will be available via the Internet on the CMS Web site), where they will be assigned comment indicator “NI.” This commen t indicator reflects that their interim final OPPS treatment will be open to public comm ent in the CY 2015 OPPS/ASC final rule with comment period. There are several nonpass-through drugs and biologicals that were payable in

CY 2013 and/or CY 2014 for which we did not have CY 2013 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, butwhich have pricing information available for the ASP methodology. In order to determin e the packaging status of these products for CY 2015, we are proposing to continue our policy to calculate an estimate of the per day cost of each of these items by multiply ing the payment rate of each product based on ASP+6 percent, similar to other nonpass-thr ough drugs and biologicals paid separately under the OPPS, by an estimated average num ber of units of each product that would typically be furnished to a patient during one day in the hospital outpatient setting. This rationale was first adopted in the CY 2006 O PPS/ASC final rule with comment period (70 FR 68666 through 68667). We are proposing to package items for which we estimated the per day administration cost to be less than or equal to $90 and to pay separately for items forCMS-1613-P 365 which we estimated the per day administrati on cost to be greater than $90 (with the exception of diagnostic radiopharmaceuticals, co ntrast agents, anesthesia drugs, drugs, biologicals, and radiopharmaceuticals that functi on as supplies when used in a diagnostic test or procedure, and drugs and biologicals that function as supplies when used in a surgical procedure, which we are proposing to continue to package regardless of cost) in CY 2015. We also are proposing that the CY 2015 payment for separately payable items

without CY 2013 claims data would be ASP+ 6 percent, similar to payment for other separately payable nonpass-through drugs and biologicals under the OPPS. In accordance with the ASP methodology paid in the physician’s office setting, in the absence of ASP data, we are proposing to us e the WAC for the produc t to establish the initial payment rate and, if the WAC is also unavailable, we would make payment at 95 percent of the most recent AWP available. The proposed estimated units per day and status indicators for these items are disp layed in Table 42 of this proposed rule. Finally, there are 35 drugs and biologicals, shown in Table 43 of this proposed rule that were payable in CY 2013 but for which we lacked CY 2013 claims data and any other pricing information fo r the ASP methodology for this proposed rule. For CY 2010, we finalized a policy to a ssign status indicator “E” (N ot paid by Medicare when submitted on outpatient claims (any outpatient bi ll type)) whenever we lacked claims data and pricing information and were unable to determine the per day cost of a drug or biological. In addition, we noted that we would provide separate payment for these drugs and biologicals if pricing information refl ecting recent sales becam e available mid-year for the ASP methodology.CMS-1613-P 366 For CY 2015, as we finalized in CY 2014 (78 FR 75031), we are proposing to continue to assign status indi cator “E” to drugs and biologica ls that lack CY 2013 claims data and pricing information for the A SP methodology. All drugs and biologicals without CY 2013 hospital claims data or data based on the ASP methodology that are assigned status indicator “E” on this basis at the time of th is proposed rule for CY 2015 are displayed in Table 43 of this proposed rule. We also are pr oposing to continue our policy to assign the products status indicator “K” and pay for them separately for the remainder of CY 2015 if pricing information becomes available.CMS-1613-P 367

TABLE 42.—DRUGS AND BIOLOGICALS WITHOUT CY 2013 CLAIMS DATA

CY 2015 HCPCS

Code CY 2015 Long Descriptor Estimated Average Number of Units Per Day Proposed CY 2015 SI Proposed CY 2015

APC 90581 Anthrax vaccine, for subcutaneous or intramuscular use 1 K 1422 J0215 Injection, alefacept, 0. 5 mg 29 K 1633 J0364 Injection, apomorphine hydrochloride, 1 mg 1 N N/A

J0630 Injection, calcitonin salmon, up to 400 units 2 K 1433 J0638 Injection, canakinumab, 1mg 180 K 1311 J3355 Injection, urofollitropin, 75 iu 2 K 1741 J7196 Injection, antithrombin recombinant, 50 i. U. 268 K 1332 J8650 Nabilone, oral, 1 mg 4 K 1424 J9151 Injection, daunorubicin citrate, liposomal formulation, 10 mg 10 K 0821

J9215 Injection, interferon, alfa-n3, (human leukocyte derived), 250,000 iu 1 N N/A

J9300 Injection, gemtuzumab ozogamicin, 5 mg 1 K 9004CMS-1613-P 368

TABLE 43.—DRUGS AND BIOLOGICALS WITHOUT CY 2013 CLAIMS DATA AND WITHOUT PRICING INFORMATION FOR THE ASP METHODOLOGY

CY 2015 HCPCS

Code CY 2015 Long Descriptor Proposed CY 2015 SI 90296 Diphtheria antitoxin, equine, any route E 90393 Vaccina immune globulin, human, for intramuscular use E 90477 Adenovirus vaccine, type 7, live, for oral use E

90644 Meningococcal conjugate vaccine, serogroups c & y and hemophilus influenza b vaccine (hib-mency), 4 dose schedule, when administered to children 2-15 months of age, for intramuscular use E

90681 Rotavirus vaccine, human, attenuated, 2 dose schedule, live, for oral use E 90727 Plague vaccine, for intramuscular use E J0190 Injection, biperiden lactate, per 5 mg E J0205 Injection, alglucerase, per 10 units E J0350 Injection, anistrep lase, per 30 units E J0365 Injection, aprotonin, 10,000 kiu E J0395 Injection, arbutamine hcl, 1 mg E J0710 Injection, cephapirin sodium, up to 1 gm E J1180 Injection, dyphylline, up to 500 mg E J1435 Injection estrone per 1 MG E J1562 Injection, immune globul in (vivaglobin), 100 mg E J1620 Injection, gonadorelin hydrochloride, per 100 mcg E J1655 Injection, tinzapar in sodium, 1000 iu E J1730 Injection, diazoxide, up to 300 mg E J1835 Injection, itraconazole, 50 mg E J2460 Injection, oxytetracyc line hcl, up to 50 mg E J2513 Injection, pentastarch, 10% solution, 100 ml E J2670 Injection, tolazoline hcl, up to 25 mg E J2725 Injection, protirelin, per 250 mcg E J2940 Injection, somatrem, 1 mg E J3305 Injection, trimetrexate glucuronate, per 25 mg E J3365 Injection, iv, uroki nase, 250,000 i.u. vial E J3400 Injection, triflupromazi ne hcl, up to 20 mg E J7505 Muromonab-cd3, parenteral, 5 mg E J7513 Daclizumab, parenteral, 25 mg E J8562 Fludarabine phosphate, oral, 10 mg ECMS-1613-P 369

CY 2015 HCPCS

Code CY 2015 Long Descriptor Proposed CY 2015 SI J9165 Injection, diethylstilbestrol diphosphate, 250 mg E J9212 Injection, interferon alfacon-1, recombinant, 1 microgram E J9219 Leuprolide acetate implant, 65 mg E

Q0174 Thiethylperazine maleate, 10 mg, oral, fda approved prescription anti-emetic, for us e as a complete therapeutic substitute for an iv anti-eme tic at the time of chemotherapy treatment, not to exceed a 48 hour dosage regimen E

Q0515 Injection, sermorelin acetate, 1 microgram E

VI. Proposed Estimate of OPPS Transi tional Pass-Through Spending for Drugs, Biologicals, Radiopharmaceuticals, and Devices A. Background Section 1833(t)(6)(E) of the Act limits the total projected am ount of transitional pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of devices for a given year to an “applicable pe rcentage,” currently not to exceed 2.0 percent of total program payments estimated to be ma de for all covered services under the OPPS furnished for that year. If we estimate befo re the beginning of the calendar year that the total amount of pass-through payments in th at year would exceed the applicable percentage, section 1833(t)(6)(E )(iii) of the Act requires a uniform prospective reduction in the amount of each of the transitional pa ss-through payments made in that year to ensure that the limit is not exceeded. We estimate the pass-through spending to determine whether payments exceed the a pplicable percentage and the appropriate prorata reduction to the conversion factor fo r the projected level of pass-through spending in the following year to ensure that total estimated pass-through spending for theCMS-1613-P 370 prospective payment year is budget neutral, as required by section 1833(t)(6)(E) of the

Act. For devices, developing an estimate of pass-through spending in CY 2015 entails estimating spending for two groups of items. Th e first group of items consists of device categories that were recently made elig ible for pass-through payment and that will continue to be eligible for pass-through payment in CY 2015. The CY 2008 OPPS/ASC final rule with comment period (72 FR 66778) describes the methodology we have used in previous years to develop the pass -through spending estimate for known device categories continuing into the applicable update year. The second group of items consists of items that we know are newly eligible, or project may be newly eligible, for device pass-through payment in the remaining quart ers of CY 2014 or beginning in CY 2015. The sum of the CY 2015 pass-thr ough estimates for these two groups of device categories equals the total CY 2015 pass- through spending estimate for device categories with pass-through status. We base the device pass-through estimated payments for each device category on the amount of payment as established in secti on 1833(t)(6)(D )(ii) of the Act, and as outlined in previous rule s, including the CY 2014 OPPS/ASC final rule with comment period (78 FR 75034 through 75036). We note that, beginning in CY 2010, the pass-through evaluation process and pass-through paym ent for implantable biologicals newly approved for pass-t hrough payment beginning on or after January 1, 2010, that are surgically inserted or implanted (through a su rgical incision or a natural orifice) is th e device pass-through process and payment methodology (74 FR 60476). As has been our past pr actice (76 FR 74335), for CY 2015, we areCMS-1613-P 371 proposing to include an estimate of any impl antable biologicals eligible for pass-through payment in our estimate of pass-through spe nding for devices. We also are proposing that, beginning in CY 2015, applications for pass-through payment for skin substitutes and similar products be evaluated using the medical device pass-through process and payment methodology. As a result of this proposal, we are proposing that the last skin substitute pass-through app lications evaluated using the drugs and biologicals pass-through evaluation process would be those with an appl ication deadline of September 1, 2014, and an earliest effectiv e date of January 1, 2015. Therefore, in light of this proposal, we would chang e the December 1, 2014, pass-through application deadline (for an earliest e ffective date of April 1, 2015) for both drugs and biologicals and devices to January 15, 2015 in order to prov ide sufficient time for applicants to adjust to the new policies and procedures in effect as of January 1, 2015. We refer readers to section V.B.2.d of this proposed rule for furt her discussion of our proposal to change the pass-through evaluation process for skin subs titutes. If we finalize this proposal, beginning in CY 2015 and in future years we would include an estimate of any skin substitutes eligible for pass- through payment in our estimate of pass-through spending for

devices. We refer readers to section V.B.2.d of this proposed rule for details of the proposal to apply the devi ce pass-through evaluation pro cess and payment methodology to skin substitutes and similar products for applications submitted on or after January 1. For drugs and biologicals eligible for pass-through payment, section 1833(t)(6)(D)(i) of the Act es tablishes the pass-through payment amount as the amount by which the amount authorized under section 1842(o) of the Act (o r, if the drug orCMS-1613-P 372 biological is covered under a competitive acquisition contra ct under section 1847B of the Act, an amount determined by the Secretary equal to the average price for the drug or biological for all competitive acquisition areas and year established under such section as calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable fee schedule amount that the Secretary dete rmines is associated with the drug or biological. We note that the Part B dr ug CAP program has been postponed since CY 2009, and such a program has not been proposed to be reinstated for CY 2015. Because we are proposing to pay for most nonpass-through separately payable drugs and biologicals under the CY 2015 OPPS at ASP+6 percent, as we discussed in section V.B.3. of this proposed rule, which represen ts the otherwise app licable fee schedule amount associated with most pass-through dr ugs and biologicals, and because we are proposing to pay for CY 2015 pass-through drugs and biologicals at ASP+6 percent, as we discussed in section V.A. of this propos ed rule, our estimate of drug and biological pass-through payment for CY 2015 for this gr oup of items is $0, as discussed below. Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals and contrast agents, without pass-throu gh status will always be packaged into payment for the associated procedures and these products will not be separately paid. In addition, we policy- package all nonpass-through drugs, biologicals, and radiopharmaceuticals that function as suppl ies when used in a diagnostic test or procedure and drugs and biologi cals that function as supplies when used in a surgical procedure, as discussed in section II.A.3. of this proposed rule. We are proposing that all of these policy-packaged drugs and biologicals with pass-through status would be paid atCMS-1613-P 373 ASP+6 percent, like other pass-through drugs and biologicals, for CY 2015. Therefore, our estimate of pass-through payment for po licy-packaged drugs and biologicals with pass-through status approved prior to CY 2015 is not $0. In section V.A.4. of this proposed rule, we discuss our policy to determ ine if the costs of cer tain policy-packaged drugs or biologicals are already packaged in to the existing APC structure. If we determine that a policy-packaged drug or biological approved for pass-through payment resembles predecessor drugs or biologicals alr eady included in the costs of the APCs that are associated with the drug receiving pass-th rough payment, we are proposing to offset the amount of pass-through payment for the policy-packaged drug or biological. For these drugs or biologicals, the APC offset amount is the portion of the APC payment for the specific procedure performed with the pass-through drug or biological, which we refer to as the policy-packaged drug APC offset amount. If we determine that an offset is appropriate for a specific policy-packaged drug or biological receiving pass-through payment, we are proposing to reduce our estimate of pass-through payments for these drugs or biologicals by this amount. Similar to pass-through estimates for de vices, the first group of drugs and biologicals requiring a pass-thr ough payment estimate consists of those products that were recently made eligible for pass-thr ough payment and that will continue to be eligible for pass-through pa yment in CY 2015. The second group contains drugs and biologicals that we know are newly eligible, or project will be newly eligible, in the remaining quarters of CY 2014 or beginni ng in CY 2015. The sum of the CY 2015 pass-through estimates for these two groups of drugs and biologicals equals the totalCMS-1613-P 374 CY 2015 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 projec ted OPPS payments for CY 2015, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, and ou r OPPS policy from CY 2004 through CY 2014 (78 FR 75034 through 75036). For the first group of devices for pass -through payment estima tion purposes, there is one device category, HCPCS code C1841 (Retinal prosthesis , includes all internal and external components), elig ible for pass-through payment as of October 1, 2013, continuing to be eligible for CY 2014, and that will continue to be eligible for pass-through payment for CY 2015. We estimate that CY 2015 pass-through expenditures for the first group of pass-thr ough device categories to be $0.5 million. In estimating our CY 2015 pass-through spending fo r device categories in the second group, we include: device categories that we knew at the time of the development of this proposed rule will be newly eligible for pass-through payment in CY 2015 (of which there are none); additional device categorie s that we estimate could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2015; and contingent projections for new device categories established in the second through fourth quarters of CY 2015. 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 newCMS-1613-P 375 pass-through device categories. For this proposed rule, the estimate of CY 2015 pass-through spending for this second group of device categories is $10.0 million. To estimate CY 2015 pass-through spending fo r drugs and biologicals in the first group, specifically those drugs and biologicals recently made eligible for pass-through payment and continuing on pass-through status for CY 2015, we are proposing to utilize the most recent Medicare physician’s office da ta regarding their u tilization, information provided in the respective pass- through applications, histor ical hospital claims data, pharmaceutical industry information, and clinical information regarding those drugs or biologicals to project the CY 2015 OPPS utilization of the products. For the known drugs and biologicals (e xcluding policy-packaged diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a dia gnostic test or procedure, and drugs and biologicals that function as suppl ies when used in a surgical procedure) that will be continuing on pass-through st atus in CY 2015, we estimate the pass-through payment

amount as the difference between ASP+ 6 percent and the payment rate for nonpass-through drugs and biological s that will be separately paid at ASP+6 percent, which is zero for this group of drugs. Because payment for policy-packaged drugs and biologicals is packaged if the product was not paid separately due to its pass-through status, we are proposing to include in th e CY 2015 pass-through estimate the difference between payment for the policy-packaged drug or biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) and the policy-packaged drug APC offset amount, if we determine that theCMS-1613-P 376 policy-packaged drug or biological approve d for pass-through payment resembles a predecessor drug or biological already included in the cost s of the APCs that are associated with the drug rece iving pass-through payment. Fo r this proposed rule, using the proposed methodology described above, we calculated a CY 2015 proposed spending estimate for this first group of drugs a nd biologicals of approximately $2.8 million. To estimate proposed CY 2015 pass-thr ough spending for drugs and biologicals in the second group (that is, drugs and bi ologicals that we knew at the time of development of this proposed rule are newly eligible for pass-through payment in CY 2015, additional drugs and biologicals th at we estimate could be approved for pass-through status subsequent to the development of the proposed rule and before January 1, 2015, and projections for new drugs and biologicals that could be initially eligible for pass-through paym ent in the second through fourth quarters of CY 2015), we are proposing to use utilization estimates fr om pass-through applican ts, pharmaceutical industry data, clinical information, recent trends in the per un it ASPs of hospital outpatient drugs, and projected annual change s in service volume and intensity as our basis for making the CY 2015 pass-through payment estimate. We also are proposing to consider the most recent OPPS experience in approving new pass-through drugs and biologicals. Using our proposed met hodology for estimating CY 2015 pass-through payments for this second group of drugs, we calculated a proposed spending estimate for this second group of drugs and biolog icals of approximately $2.2 million.

As discussed in section V.A. of th is proposed rule, radiopharmaceuticals are considered drugs for pass-through paymen t purposes. Therefore, we includeCMS-1613-P 377 radiopharmaceuticals in our proposed CY 2015 pass-through spending estimate for drugs and biologicals. Our proposed CY 2015 estimate for total pass-through spending for drugs and biologicals (spending for the first gr oup of drugs and biologicals ($2.8 million) plus spending for the second group of drugs and biologicals ($2.2 million)) equals $5.0

million. In summary, in accordance with the me thodology described above in this section, for this proposed rule, we estimate th at total pass-through sp ending for the device categories and the drugs and biologicals that are continuing to receive pass-through payment in CY 2015 and those device categories, drugs, and biologicals that first become eligible for pass-through payment during CY 2015 would be approximately $15.5 million (approximately $10.5 million for device categories and approximately $5.0 million for drugs and biologicals), which represents 0.03 percent of total projected OPPS payments for CY 2015. Therefore, we estimate that pass-through spending in CY 2015 would not amount to 2.0 percent of total proj ected OPPS CY 2015 program spending. VII. Proposed OPPS Payment fo r Hospital Outpatient Visits A. Proposed Payment for Hospital Outpatient Clinic and Emergency Department Visits Since April 7, 2000, we have instructed hos pitals to report facility resources for clinic and ED hospital outpatient visits usi ng the CPT E/M codes and to develop internal hospital guidelines for reporting the appropria te visit level (65 FR 18451). Because a national set of hospital-specifi c codes and guidelines do not currently exist, we have advised hospitals that each hospital’s internal guidelines that determine the levels of clinic and ED visits to be reported should fo llow the intent of the CPT code descriptors,CMS-1613-P 378 in that the guidelines should be designed to reasonably relate the intensity of hospital

resources to the different levels of effort represented by the codes. While many hospitals have advocated fo r hospital-specific na tional guidelines for visit billing since the OPPS st arted in 2000, and we have signaled in past rulemaking our intent to develop guidelines, this comple x undertaking has proven challenging. Our work with interested stakeholders, such as hosp ital associations, along w ith a contractor, has confirmed that no single approach could cons istently and accurately capture hospitals’

relative costs. Public comment s received on this issue, as well as our own knowledge of how clinics operate, have led us to conclude that it is not feasible to adopt a set of national guidelines for reporting hospital clinic visits that can accommodate the enormous variety of patient populations and service-mix provided by hospitals of all types and sizes throughout the country. More over, no single approach has been broadly endorsed by the stakeholder community. After consideration of public comments we received on the CY 2014 OPPS/ASC proposed rule, in the CY 2014 OPPS/ASC fina l rule with comment period (78 FR 75036 through 75045), we finalized a new policy wh ich created an alphanumeric HCPCS code, G0463 (Hospital outpatient clinic visit for assessment and management of a patient), for hospital use only representing any and all clinic visits under the OPPS and assigned

HCPCS code G0463 to new APC 0634. We also finalized a policy to use CY 2012 claims data to develop the CY 2014 OPPS payment rates for HCPCS code G0463 based on the total geometric mean cost of the leve ls one through five CPT E/M codes for clinic visits previously recognized under the OPPS (CPT codes 99201 through 99205 andCMS-1613-P 379 99211 through 99215). In addition, we fina lized a policy to no longer recognize a distinction between new and established patient clinic visits.

In the CY 2014 OPPS/ASC final rule with comment period, we also stated our policy that we would continue to use our existing methodolog y to recognize the existing CPT codes for Type A ED visits as well as the five HCPCS codes that apply to Type B ED visits, and to establish the OPPS paymen t under our established standard process (78 FR 75036 through 75043). We refer readers to the CY 2014 OPPS/ASC final rule with comment period for a detailed discussion of the public comments and our rationale for the CY 2014 policies. For CY 2015, we are proposing to con tinue the current policy, adopted in CY 2014, for clinic and ED visits. HC PCS code G0463 for hospital use only will represent any and all clinic visits under the OPPS. We are proposing to continue to assign HCPCS code G0463 to APC 0634. We ar e proposing to use CY 2013 claims data to develop the proposed CY 2015 OPPS paym ent rates for HCPCS code G0463 based on the total geometric mean cost of the levels one through five CPT E/M codes for clinic visits currently recognized under the OPPS (CPT codes 99201 through 99205 and 99211 through 99215). Finally, as we establishe d in the CY 2014 OPPS/ASC final rule with comment period, there is no l onger a policy to recognize a distinction between new and established patient clinic visits. At the time of publication of the CY 2014 OPPS/ASC final rule with comment period, we stated that additional study was needed to fully assess the most suitable payment structure for ED visits, including the particular number of visit levels that wouldCMS-1613-P 380 not underrepresent resources requi red to treat the most comple x patients, such as trauma patients and that we believed it was best to de lay any change in ED visit coding while we reevaluate the most appropriate payment st ructure for Type A and Type B ED visits (78 FR 75040). At this time, we continue to believe that additional study is needed to assess the most suitable payment structure for ED visits. We are not proposing any change in ED visit coding, but rather, for CY 2015, we are proposing to continue to use our existing methodology to rec ognize the existing CPT codes for Type A ED visits as well as the five HCPCS codes that apply to Type B ED visits, and to establish the CY 2015 proposed OPPS payment rates using ou r established standard process. We intend to further explore the issues descri bed above related to ED visits, including concerns about excessively costly patients, such as trauma patients. We may propose changes to the coding and APC assignments for ED visits in future rulemaking.CMS-1613-P 381 B. Proposed Payment for Critical Care Services For the history of the payment policy for critical care services, we refer readers to

the CY 2014 OPPS/ASC final rule with comm ent period (78 FR 75043). In the CY 2014 OPPS/ASC final rule with comment peri od, we continued to use the methodology

established in the CY 2011 OPPS/ASC final ru le with comment period for calculating a payment rate for critical care services that includes packaged payment of ancillary services, for example electrocardiograms, ches t X-rays, and pulse oximetry. Critical care services are described by CPT codes 99291 (Cri tical care, evaluation and management of the critically ill or cr itically injured patient; first 30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill or criti cally injured patient; each additional 30 minutes (List separately in addition to code for primary service)). Compared to the CY 2012 hospital claims data used for the CY 2014 OPPS ratesetting, the CY 2013 hospital claims data used for the CY 2015 OPPS ratesetting again show increases in the geometric mean line item costs as well as the geometric mean line item charges for CPT code 99291, which con tinue to suggest that hospitals’ billing practices for CPT code 99291 have remained the same. Because the CY 2013 claims data do not support any significant change in hos pital billing practices for critical care services, we continue to believe that it w ould be inappropriate to pay separately the ancillary services that hospitals typically report in addition to CPT codes for critical care services. Therefore, for CY 2015, we are propos ing to continue our policy (that has been in place since CY 2011) to recognize the existin g CPT codes for critical care services and establish a payment rate based on historical claims data. We also are proposing toCMS-1613-P 382 continue to implement claims processing edit s that conditionally package payment for the ancillary services that are reported on the same date of service as critical care services in order to avoid overpayment. We will continue to monitor the hospital claims data for

CPT code 99291 in order to determine whethe r revisions to this policy are warranted based on changes in hosp itals’ billing practices. VIII. Proposed Payment for Pa rtial Hospitalization Services A. Background Partial hospitalization is an intensive out patient program of psychiatric services provided to patients as an alternative to i npatient psychiatric care for individuals who

have an acute mental illness. Sectio n 1861(ff)(1) of the Act defines partial hospitalization services as “the items and services described in paragraph (2) prescribed by a physician and provided under a program described in paragraph (3) under the supervision of a physician pursu ant to an individualized, written plan of treatment established and periodically reviewed by a physician (in consultation with appropriate staff participating in such pr ogram), which sets forth the phy sician’s diagnosis, the type, amount, frequency, and duration of the items and services provided under the plan, and the goals for treatment under the plan.” Section 1861(ff)(2) of the Act describes the items and services included in partial hospi talization services. S ection 1861(ff)(3)(A) of the Act specifies that a partial hospitalization program (PHP) is a program furnished by a hospital to its outpatients or by a community mental health center (C MHC) (as defined in subparagraph (B)), and “which is a distinct and organized intensiv e ambulatory treatment service offering less than 24-hour-d aily care other than in an individual’s home or in anCMS-1613-P 383 inpatient or residential sett ing.” Section 1861(ff)(3)(B) of the Act defines a community mental health center for purposes of this benefit. Section 1833(t)(1)(B)(i) of the Act provi des the Secretary with the authority to designate the OPD services to be covered under the OPPS. The Me dicare regulations that implement this provision specify, under 42 CFR 419.21, that payments under the OPPS will be made for partial hospitalizati on services furnished by CMHCs as well as

Medicare Part B services fu rnished to hospital outpatient s designated by the Secretary, which include partial hospitalizatio n services (65 FR 18444 through 18445). Section 1833(t)(2)(C) of the Act, in pe rtinent part, requires the Secretary to “establish relative payment we ights for covered OPD servic es (and any groups of such services described in subparagraph (B)) base d on median (or, atthe election of the Secretary, mean) hospital costs” using data on claims from 1996 and data from the most recent available cost reports. In pertin ent part, subparagraph (B) provides that the Secretary may establish groups of covered OP D services, within a classification system developed by the Secretary for covered OPD serv ices, so that services classified within each group are comparable clinic ally and with respect to the use of resources. In accordance with these provisions, we ha ve developed the PHP APCs. Section 1833(t)(9)(A) of the Act requir es the Secretary to “review not less often than annually and revise the groups, the rela tive payment weights, and the wage and other adjustments described in paragraph (2) to take into account changes in medical practice, changes in technology, the addition of new services, new co st data, and other relevant information

and factors.”CMS-1613-P 384 Because a day of care is the unit that defines the structure and scheduling of partial hospitalization services, we establ ished a per diem payment methodology for the PHP APCs, effective for services furnis hed on or after July 1, 2000 (65 FR 18452 through 18455). Under this methodology, the medi an per diem costs have been used to calculate the relative payment weights for PHP APCs. From CY 2003 through CY 2006, the me dian per diem costs for CMHCs fluctuated significantly from year to y ear, while the median per diem costs for hospital-based PHPs remained relatively cons tant. We were concerned that CMHCs may have increased and decreased their charges in response to Medicare payment policies. Therefore, we began efforts to strengthen th e PHP benefit through extensive data analysis and policy and payment changes finalized in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). We made two refinements to the methodology for computing the PHP median: th e first remapped 10 revenue codes that are common among hospital-based PHP claims to the most appropriate cost centers; and the second refined our methodology for compu ting the PHP median per diem cost by computing a separate per diem cost for each day rather than for each bill. We refer readers to a complete discussion of these refinements in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). In CY 2009, we implemented several re gulatory, policy, and payment changes, including a two-tiered payment approach fo r PHP services under which we paid one amount for days with 3 services (APC 0172 Le vel I Partial Hospitalization) and a higher amount for days with 4 or more services (APC 0173 Level II Partial Hospitalization).CMS-1613-P 385

We refer readers to section X.B. of th e CY 2009 OPPS/ASC final rule with comment period (73 FR 68688 through 68693) for a full discussion of the two-tiered payment system. In addition, for CY 2009, we finaliz ed our policy to deny payment for any PHP claims submitted for days when fewer than 3 units of therapeutic services are provided (73 FR 68694). Furthermore, for CY 2009, we revised the regulations at 42 CFR 410.43 to codify existing basic PHP patient eligibility criteriaand to add a reference to current physician certification requirements under 42 CFR 424.24 to conform our regulations to our longstanding policy (73 FR 68694 through 68695) . These changes have helped to strengthen the PHP benefit. We also revise d the partial hospitalization benefit to include several coding updates. We refer readers to section X.C.3. of the CY 2009 OPPS/ASC final rule with comment period (73 FR 68695 through 68697) for a full discussion of these requirements. For CY 2010, we retained the two-tiered payment appr oach for PHP services and used only hospital-based PHP data in compu ting the APC per diem payment rates. We used only hospital-based PHP data because we were concerned about further reducing both PHP APC per diem payment rates wit hout knowing the impact of the policy and payment changes we made in CY 2009. B ecause of the 2-year lag between data collection and rulemaking, the ch anges we made in CY 2009 were reflected for the first time in the claims data that we used to determine payment rates for the CY 2011 rulemaking (74 FR 60556 through 60559).CMS-1613-P 386 In CY 2011, in accordance with section 1301( b) of the Health Care and Education Reconciliation Act of 2010 (HCERA 2010), we am ended the description of a PHP in our regulations to specify that a PHP must be a distinct and organized intensive ambulatory treatment program offering less than 24-hour da ily care “other than in an individual’s home or in an inpatient or residential sett ing.” In addition, in accordance with section 1301(a) of HCERA 2010, we revised the defini tion of a CMHC in the regulations to

conform to the revised definition now set forth under section 1861(ff)(3 )(B) of the Act. We discussed our finalized policies for th ese two provisions of HCERA 2010 in section

X.C. of the CY 2011 OPPS/ASC final ru le with comment period (75 FR 71990). In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we also established four separate PHP APC pe r diem payment rates, two for CMHCs (for Level I and Level II services) and two for hos pital-based PHPs (for Level I and Level II services), based on each provider’s own uni que data. As stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46300) and the final rule with comment period (75 FR 71991), for CY 2011, using CY 2009 clai ms data, CMHC costs had significantly decreased again. We attributed the decrea se to the lower cost structure of CMHCs compared to hospital-based PHP providers, a nd not the impact of the CY 2009 policies.

CMHCs have a lower cost structure than hos pital-based PHP providers, in part, because the data showed that CMHCs generally provide fewer PHP services in a day and use less costly staff than hospital-based PHPs. Therefor e, it was inappropriate to continue to treat CMHCs and hospital-based providers in the same manner regarding payment, particularly in light of such disparate differences in costs. We also were concerned thatCMS-1613-P 387 paying hospital-based PHPs at a lo wer rate than their cost stru cture reflects could lead to hospital-based PHP closures and possible access problems for Medicare beneficiaries because hospital-based PHPs ar e located throughout the country and, therefore, offer the widest access to PHP services. Creating the four payment rates (two for CMHCs and two for hospital-based PHPs) based on each provide r’s data supported continued access to the PHP benefit, while also providing appropr iate payment based on the unique cost structures of CMHCs and hospital-based PH Ps. In addition, separation of data by provider type was supported by several hosp ital-based PHP commenters who responded to the CY 2011 OPPS/ASC proposed rule (75 FR 71992). For CY 2011, we instituted a 2-year transition period for CMHCs to the CMHC APC per diem payment rates based solely on CMHC data. For CY 2011, under the transition methodology, CMHC PHP APCs Leve l I and Level II per diem costs were calculated by taking 50 percent of th e difference between the CY 2010 final hospital-based PHP median costs and the CY 2011 final CMHC median and then adding

that number to the CY 2011 final CMHC me dian. A 2-year transition under this methodology moved us in the direction of our goa l, which is to pay appropriately for PHP services based on each provider type’s data, while at the same time allowing providers time to adjust their business operations and pr otect access to care for beneficiaries. We

also stated that we would review and an alyze the data during the CY 2012 rulemaking cycle and, based on these analyses, we might fu rther refine the payment mechanism. 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.CMS-1613-P 388 After publication of the CY 2011 OPPS/AS C final rule with comment period, a CMHC and one of its patients filed an application for a preliminary injunction, challenging the OPPS payment rates for PHP services provided by CMHCs in CY 2011 as adopted in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71995). We refer readers to the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius , 2011 WL 3102049 (W.D.Tex. 2011), aff’d , 684 F.3d 527 (5th Cir. 2012) ( Paladin ). The plaintiffs in the Paladin case challenged the agency’s use of cost data derived from both hospitals and CMHCs in determining the rela tive payment weights for the OPPS payment rates for PHP services furnished by CMHCs, alleging that section 1833(t)(2)(C) of the Act requires that such relative payment weight s be based on cost data derived solely from hospitals. As discussed above, section 1833(t)(2)(C) of the Ac t requires CMS to “establish relative payment we ights for covered OPD servic es (and any groups of such services . . .) . . . based on . . . hospital co sts.” Numerous courts have held that “based on” does not mean “based exclusively on.” On July 25, 2011, the District Court dismissed the plaintiffs’ complaint and applicat ion for a preliminary injunction for lack of subject-matter jurisdiction, which the plaintiffs appealed to the United States Court of Appeals for the Fifth Circuit. On June 15, 2012, the Court of Appeals affirmed the

District Court’s dismissal for lack of s ubject-matter jurisdiction and found that the Secretary’s payment rate determinations for PH P services are not a facial violation of a clear statutory mandate ( Paladin , 684 F.3d at 533). For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74348 through 74352), we determined the relative payment weights forCMS-1613-P 389 PHP services provided by CMHCs based on da ta derived solely from CMHCs and the relative payment weights for hospital-based PHP services based exclusively on hospital

data. The statute is reasonabl y interpreted to allow the relative payment weights for the OPPS payment rates for PHP services provide d by CMHCs to be based solely on CMHC data and relative payment weights for hos pital-based PHP services to be based exclusively on hospital data. Section 1833(t)(2)(C) of the Act requires the Secretary to “establish relative payment we ights for covered OPD servic es (and any groups of such services described in subparagraph (B)) based on . . . hospital costs.” In pertinent part, subparagraph (B) provides that “the Secret ary may establish groups of covered OPD

services . . . so that services classified w ithin each group are comp arable clinically and with respect to the use of resources.” In accordance with subparagraph (B), we developed the PHP APCs, as set forth in § 419.31 of the regulations (65 FR 18446 and 18447; 63 FR 47559 through 47562 and 47567 through 47569). As discussed above, PHP services are grouped into APCs. Based on section 1833(t)(2)(C) of the Act, we believe that the word “establish” can be interpreted as applying to APCs at the inception of the OPPS in 2000 or whenever

a new APC is added to the OPPS. In cr eating the original AP C for PHP services (APC 0033), we did “establish” the initial relative payment weight for PHP services, provided in both hospital-based and CMHC-based settings, only on the basis of hospital data. Subsequently, from CY 2003 through CY 2008, the relative payment weights for PHP services were based on a combination of hospital and CMHC data. For CY 2009,

we established new APCs for PHP servi ces based exclusively on hospital data.CMS-1613-P 390 Specifically, we adopted a tw o-tiered APC methodology (in lieu of the original APC 0033) under which CMS paid one rate for da ys with 3 services (APC 0172) and a different payment rate for days with 4 or more services (APC 0173). These two new APCs were established using only hospital da ta. For CY 2011, we added two new APCs (APCs 0175 and 0176) for PHP services provi ded by hospitals and based the relative payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were designated for PHP services provided by CMHCs and were based on a mixture of hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, the relative payment weights for the two AP Cs for PHP services provided by CMHCs in CY 2011 were “based on” hospital data, no less than the relative payment weights for the two APCs for hospital-based PHP services. Although we used hospital data to establish the relative payment weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services , we believe that we have the authority to discontinue the use of hosp ital data in determining the OPPS relative payment weights for PHP services provide d by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make plain that the data source for the re lative payment weights is subject to change from one period to another. S ection 1833(t)(2)(C) of the Act provides that, in establishing th e relative payment weights, “t he Secretary shall [ ] us[e]

data on claims from 1996 and us [e] data from the most recent available cost reports.” We used 1996 data (in addition to 1997 data) in determining only the original relativeCMS-1613-P 391 payment weights for 2000. In the ensuing ca lendar year updates, we continually used more recent cost report data. Moreover, section 1833(t)(9)(A ) of the Act requires the Secretary to “review not less often than annually and revise the groups, the relativ e payment weights, and the wage and other adjustments described in para graph (2) to take into account changes in medical practice, changes in technology, the ad dition of new services, new cost data, and

other relevant information and factors.” For purposes of the CY 2012 update, we exercised our authority under se ction 1833(t)(9)(A) of the Act to change the data source for the relative payment weights for PHP se rvices provided by CMHCs based on “new cost data, and other relevant information and factors.”

In the CY 2014 OPPS/ASC final rule w ith comment period, we finalized our proposal to base the relative payment wei ghts that underpin the OPPS APCs, including the four PHP APCs, on geometric means rath er than on the medians. For CY 2014, we established the four PHP APC per diem pa yment rates based on geometric mean cost levels calculated using the most recent claims data for each provider type. We refer

readers to the CY 2014 OPPS/AS C final rule with comment period for a more detailed discussion (78 FR 75047 through 75050). B. Proposed PHP APC Update for CY 2015 For CY 2015, we are proposing to apply our established policie s to calculate the four PHP APC per diem payment rates based on geometric mean per diem costs using the most recent claims data for each provider type. We computed proposed CMHC PHP APC geometric mean per diem costs for Level I (3 services per day) and Level II (4 orCMS-1613-P 392 more services per day) PHP services using only CY 2013 CMHC claims data, and proposed hospital-based PHP AP C geometric mean per diem costs for Level I and Level II PHP services using only CY 2013 hospital- based PHP claims data. These proposed geometric mean per diem costs are shown in Table 44 below.CMS-1613-P 393

TABLE 44.—PROPOSED CY 2015 GEOM ETRIC MEAN PER DIEM COSTS FOR CMHC AND HOSPITAL-BASED PH P SERVICES, BASED ON CY 2013 CLAIMS DATA

APC Group Title Proposed Geometric Mean Per Diem Costs 0172 Level I Partial Hospital ization (3 services) for CMHCs $97.43 0173 Level II Partial Hospit alization (4 or more services) for CMHCs $114.93 0175 Level I Partial Hospital ization (3 services) for hospital-based PHPs $177.32 0176 Level II Partial Hospit alization (4 or more services) for hospital-based PHPs $190.21

For CY 2015, the proposed geometric mean per diem costs for days with 3 services (Level I) is approximately $97 for CMHCs and approximately $177 for hospital-based PHPs. The proposed geometric mean per diem costs for days with 4 or more services (Level II) is approximat ely $115 for CMHCs and approximately $190 for hospital-based PHPs. The CY 2015 proposed geometric mean per diem costs for CMHCs calculated under the proposed CY 2015 methodology using CY 2013 claims data have remained relatively constant when compared to the CY 2014 final geometric mean per diem costs

for CMHCs established in the CY 2014 O PPS/ASC final rule with comment period (78 FR 75050), with geometric mean per diemcosts for Level I CMHC PHP services decreasing from approximately $99 to approximately $97 for CY 2015, and geometric mean per diem costs for Level II CMHC PH P services increasing from approximately $112 to approximately $115 for CY 2015.CMS-1613-P 394 The CY 2015 proposed geometric mean pe r diem costs for hospital-based PHPs calculated under the propos ed CY 2015 methodology using CY 2013 claims data show more variation when compared to the CY 2014 final geometric mean per diem costs for hospital-based PHPs, with geometric mean pe r diem costs for Level I hospital-based PHP services decreasing from approximately $191 to approximately $177 for CY 2015, and geometric mean per diem costs for Level II hospital-based PHP services decreasing from approximately $214 to approximately $190 for CY 2015. We understand that having little variati on in the PHP per diem payment amounts from one year to the next allows providers to more easily plan their fiscal needs. However, we believe that it is important to base the PHP payment rates on the claims and cost reports submitted by each provider type so these rates accurately reflect the cost information for these providers. We r ecognize that several factors may cause a fluctuation in the per diem payment amounts, including direct changes to the PHP APC per diem payment rate (for example, establishi ng separate APCs and associated per diem payment rates for CMHCs and hospital-based providers based on the provider type’s costs), changes to the OPPS (for example, basing the relative payment weights on geometric mean costs), and provider-driven ch anges (for example, a provider’s decision to change its mix of services or to change its charges a nd clinical practice for some services). We refer readers to a more comp lete discussion of this issue in the CY 2014

OPPS/ASC final rule with co mment period (78 FR 75049). W e are inviting public comments on what causes PHP costs to fluctuate from year to year.CMS-1613-P 395 The proposed CY 2015 geometric mean per diem costs for the CMHC and hospital-based PHP APCs are shown in Table 44 of this proposed rule. We are inviting public comments on these proposals. C. Proposed Separate Threshold for Outlier Payments to CMHCs

As discussed in the CY 2004 OPPS fina l rule with comment period (68 FR 63469 through 63470), after examining the costs, char ges, and outlier payments for CMHCs, we believed that establishing a separate OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific outlier pol icy would direct OPPS outlier payments towards genuine cost of outlier cases, and address situations where charges were being artificially increased to enhance outlier paym ents. We created a separate outlier policy that would be specific to the estimated cost s and OPPS payments provided to CMHCs. We note that, in the CY 2009 OPPS/ASC final rule with comment period, we established an outlier reconciliation policy to comprehe nsively address charging aberrations related to OPPS outlier payments (73 FR 68594 through 68599). Therefore, beginning in CY 2004, we designated a portion of the estimated OPPS outlier target amount specifically for CMHCs, consistent with the percentage of projected payments to CMHCs under the OPPS each year, excluding outlier paym ents, and established a separate outlier

threshold for CMHCs. The separate outlier threshold for CMHCs resulted in $1.8 million in outlier payments to CMHCs in CY 2004, and $0.5 million in outlier payments to CMHCs in CY 2005. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier payments. We believe that this difference in outlier payments indicates that the separateCMS-1613-P 396

outlier threshold for CMHCs has been successf ul in keeping outlier payments to CMHCs in line with the percentage of OPPS payments made to CMHCs. We are proposing to continue designa ting a portion of the estimated 1.0 percent outlier target amount specifically for CMHCs, co nsistent with the percentage of projected payments to CMHCs under the OPPS in CY 2015, excluding outlier payments. CMHCs are projected to receive 0.03 percent of total OPPS payments in CY 2015, excluding outlier payments. Therefore, we are proposi ng to designate 0.47 per cent of the estimated 1.0 percent outlier target amount for CMHCs, and establish a threshold to achieve that level of outlier payments. Based on our si mulations of CMHC payments for CY 2015, we are proposing to continue to set the th reshold for CY 2015 at 3.40 times the highest CMHC PHP APC payment rate (that is, APC 0173 (Level II Partial Hospitalization)). We continue to believe that this approach would neutralize the imp act of inflated CMHC charges on outlier payments and better ta rget outlier paymen ts to those truly exceptionally high-cost cases that might othe rwise limit beneficiary access. In addition, we are proposing to continue to apply the same outlier payment percentage that applies to hospitals. Therefore, for CY 2015, we are pr oposing to continue to pay 50 percent of CMHC per diem costs over the threshold. In section II.G. of this proposed rule, for the hospital outpatient outlier payment policy, we are proposing to set a dollar threshold in addition to an APC multiplier threshold. B ecause the PHP APCs are the only APCs for which CMHCs may receive payment under the O PPS, we would not e xpect to redirect outlier payments by imposing a dollar threshold. Therefore, we are not proposing to set a dollar threshold for CMHC outlier payments.CMS-1613-P 397 In summary, we are proposing to estab lish that if a CMHC’s cost for partial hospitalization services, pa id under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate for APC 0173, the outlier paym ent would be calculate d as 50 percent of the amount by which the cost exceeds 3.40 tim es the APC 0173 payment rate. We are inviting public comments on these proposals. IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures A. Background

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74352 through 74353) for a full historic al discussion of our longstanding policies on how we identify procedures that are typical ly provided only in an inpatient setting (referred to as the inpatient list) and, ther efore, will not be paid by Medicare under the OPPS; and on the criteria that we use to review the inpatient list each year to determine whether or not any procedures should be removed from the list. B. Proposed Changes to the Inpatient List For the CY 2015 OPPS, we are proposing to use the same methodology (described in the November 15, 2004 final ru le with comment period (69 FR 65835)) of reviewing the current li st of procedures on the inpatient list to identify any procedures that may be removed from the list. The esta blished criteria upon which we make such a

determination are as follows: 1. Most outpatient departments are e quipped to provide the services to the Medicare population.CMS-1613-P 398 2. The simplest procedure described by the code may be performed in most outpatient departments. 3. The procedure is related to codes that we have already removed from the inpatient list. 4. A determination is made that the pr ocedure is being performed in numerous hospitals on an outpatient basis. 5. A determination is made that the pr ocedure can be appropriately and safely performed in an ASC, and is on the list of approved ASC procedures or has been proposed by us for addition to the ASC list. Using this methodology, we did not identif y any procedures that potentially could be removed from the inpatient list for CY 2015. Therefore, we are proposing to not remove any procedures from th e inpatient list for CY 2015.

After our annual review of APCs and code assignments as required by section 1833(t)(9) of the Act and further clinical re view performed by CMS medical officers, we are proposing to add CPT code 22222 (Osteotomy of spine, including discectomy, anterior approach, single ve rtebral segment; thoracic) to the CY 2015 inpatient list. The complete list of codes that we ar e proposing to be paid by Medicare in CY 2015 only as inpatient procedures is in cluded as Addendum E to this proposed rule (which is available via the Internet on the CMS Web site). X. Proposed Nonrecurring Policy Changes: Collecting Data on Services Furnished in Off-Campus Provider-Based DepartmentsCMS-1613-P 399

As we discussed in the CY 2014 OPPS/AS C proposed rule and final rule with comment period (78 FR 43626 and 78 FR 75061, respectively) and in the CY 2014 Medicare Physician Fee Schedule (M PFS) proposed rule (78 FR 43301 and 78 FR 74427), in recent years, the research literature and popular press have documented the increased trend toward hospital acquisition of physician practices, integration of those practices as a department of the hospital, and the resultant increase in the delivery of physicians’ services in a hos pital setting. When a Medi care beneficiary receives outpatient services in a hospital, the total payment amount for outpatient services made by Medicare is generally higher than the to tal payment amount made by Medicare when a physician furnishes those same services in a fr eestanding clinic or in a physician’s office.

We continue to seek a better understa nding of how the growing trend toward hospital acquisition of physician offices and s ubsequent treatment of those locations as off-campus provider-based out patient departments affects payments under the MPFS and OPPS, as well as beneficiary cost-sharing ob ligations. MedPAC continues to question the appropriateness of increased Medicare payment and beneficiary cost-sharing when physician offices become hospital outpatie nt departments and to recommend that Medicare pay selected hospital outpatient services at MPFS rates (MedPAC March 2012

and June 2013 Report to Congress ). In order to understand how this trend is affecting Medicare, we need information on the extent to which this shift is occurring. To that end, during the CY 2014 OPPS/ASC rulemaking cycl e, we sought public comment regarding the best method for collecting information and data that would allow us to analyze the frequency, type, and payment for physicians’ an d outpatient hospital se rvices furnished inCMS-1613-P 400 off-campus provider-based hospital outpat ient departments (7 8 FR 75061 through 75062 and 78 FR 74427 through 74428). In response to our solicitation, we received many detailed public comments. However, the commenters did not present a consensus opinion regarding the options we presented inlast year’s propose d rule. Based on our analysis of the public comments we received, we believe the most efficient and equitable means of gathering this important inform ation across two different payment systems

would be to create a HCPCS modifier to be reported with ever y code for physicians’ services and outpatient hospital services furnished in an off-campus provider-based department of a hospital on both the CMS-1500 claim form for physicians’ services and the UB-04 form (CMS Form 1450) for hospital outpatient services. We note that a main provider may treat an off-campus facility as provider-based if certain requirements in 42 CFR 413.65 are satisfied, and we define a “campus” at 42 CFR 413.65(a)(2) to be the physical area immediately adjacent to the pr ovider’s main buildings, other areas and structures that are not strictly contiguous to the main build ings but are located within 250 yards of the main buildings, and any other ar eas determined on an individual case basis, by the CMS regional office, to be part of the provider’s campus. Section 220(a) of the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93) added a new subparagraph (M) under section 18 48(c)(2) of the Act that granted CMS the authority to engage in data collection to support valuation of services paid under the MPFS. We are seeking more information on th e frequency and type of services furnished in provider-based departments under this au thority to improve the accuracy of MPFS practice expense payments for services furnished in off-campus provider-basedCMS-1613-P 401 departments. We discuss this issue in mo re detail in the CY 2015 MPFS proposed rule (CMS-1612-P). In that discussion, we note our concerns that our current MPFS practice expense methodology primarily distinguishes between the resources involved in furnishing services in two sites of service: the nonfacility setting and the facility setting. As more physician practices become hosp ital-based and are treated as off-campus provider-based departments, we believe it is important to develop an understanding of which practice expense costs ty pically are incurred by the phy sicians and practitioners in the setting, which are incurred by the hospital, and whether the facility and nonfacility

site of service differentials adequately account for the typica l resource costs given these new ownership arrangements.

To understand how this trend is affec ting Medicare, including the accuracy of payments made through the MPFS, we need to develop data to assess the extent to which this shift toward hospital-ba sed physician practices is occurring. Therefore, we are proposing to collect information on the type and frequency of physicians’ services and outpatient hospital services furnished in off-campus provider-based departments beginning January 1, 2015, in accordance with our authority under section 1834(c)(2)(M) of the Act (as added by sec tion 220(a) of Pub. L. 113-93). As noted above, we would

create a HCPCS modifier that is to be reported with every code for physicians’ services and outpatient hospital services furnished in an off-campus provider-based department of a hospital. The modifier would be re ported on both the CMS-1500 claim form for physicians’ services and the UB-04 form (CMS Form 1450) for hospital outpatient services. We are seeking additional public comment on whether or not the use of aCMS-1613-P 402 modifier code is the best mechanism for collecting this service-level data in the hospital outpatient department. XI. Proposed CY 2015 OPPS Paymen t Status and Comment Indicators A. Proposed CY 2015 OPPS Payment Status Indicator Definitions Payment status indicators (SIs) that we assign to HCPCS codes and APCs serve an important role in determining payment fo r services under the OPPS. They indicate whether a service represented by a HCPCS c ode is payable under the OPPS or another payment system and also whether particul ar OPPS policies apply to the code. The complete list of the proposed CY 2015 payment status indicators and their definitions is displayed in Addendum D1 on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The proposed CY 2015 payment status indicator assignments for APCs and HC PCS codes are shown in Addendum A and Addendum B, respectively, on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html . The proposed changes to CY 2015 payment

status indicators and their definiti ons are discussed in detail below.

We note that in the CY 2014 OPPS/AS C final rule with comment period (78 FR 74869 through 74888), for CY 2014, we crea ted a new status indicator “J1” to identify HCPCS codes that are paid under a comprehensive APC. However, because we delayed implementation of the new compre hensive APC policy until CY 2015, we also delayed the effective date of payment status indicator “J1” to CY 2015. A claim withCMS-1613-P 403 payment status indicator “J1” will trigger a comprehensive APC payment for the claim.

We refer readers to section II.A.2.e. of this proposed rule for a discussion of implementation of the new comprehensive APC policy. For CY 2015, we are proposing to delete payment status indicator “X,” and assign ancillary services that are currently assigne d payment status indicator “X” to either payment status indicator “Q1” or “S.” We also are proposing to revise the definition payment status indicator “Q1” by removing payment status indicator “X” from the packaging criteria, so that codes assigned payment status indicator “Q1” would be designated as STV-packaged, rather than STVX-packaged because payment status indicator “X” is proposed for deletion. Thes e proposed changes are discussed in greater detail in section II.A.3.c.(1) of this proposed rule. In addition, for CY 2015, we are proposi ng to clarify the definition of payment

status indicator “E” to stat e that status indicator “E” applies to items, codes, and

services--

● For which pricing is not available;

● Not covered by any Medicare outpatient benefit category;

● Statutorily excluded by Medicare; and

● Not reasonable and necessary. Regarding items “for which pricing is not available,” this applies to drugs and biologicals assigned a HCPCS code but with no available pricing information, for example, WAC.CMS-1613-P 404 In reviewing the OPPS status indica tors and Addendum D1 for CY 2015, we noticed that there are a few drugs or biol ogicals that are currently assigned payment status indicator “A” indicating payment unde r a non-OPPS fee schedule . These drugs are administered infrequently in conjunction with emergency dialysis for patients with ESRD, but when administered in the HOPD, they would be paid under the standard OPPS drug payment methodology for drugs and bi ologicals, that is, at ASP+6 percent unless they are packaged. We refer readers to section V. of this proposed rule for additional discussion of these drugs and their status indicators. Based on this proposed change to the status indicat ors for these drugs, for CY 2015, we are proposing to remove the phrase “EPO for ESRD Patients” from the li st of examples for status indicator “A.” In addition, we are proposing to clarify the definition of payment status indicator “A” by adding the phrase “separately payable” to nonimp lantable prosthetic a nd orthotic devices. B. Proposed CY 2015 Commen t Indicator Definitions For the CY 2015 OPPS, we are proposing to use the same two comment

indicators that are in e ffect for the CY 2014 OPPS.

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

● “NI”—New code for the next calendar year or existing code with substantial revision to its code descriptor in the next calendar year as compared to current calendar year, interim APC assignment; comments will be accepted on the interim APC assignment for the new code.CMS-1613-P 405 We are proposing to use the “CH” comment indicator in this CY 2015 OPPS/ASC proposed rule to indi cate HCPCS codes for which th e status indicator or APC assignment, or both, are proposed for change in CY 2015 compared to their assignment as of June 30, 2014. We believe that using th e “CH” indicator in this proposed rule will facilitate the public’s review of the change s that we are proposing for CY 2015. Use of

the comment indicator “CH” in association with a composite APC indicates that the configuration of the composite APC is proposed to be changed in the CY 2015

OPPS/ASC final rule wi th comment period. We are proposing to use the “CH” co mment indicator in the CY 2015 OPPS/ASC final rule with comment period to indicate HC PCS codes for which the status indicator or APC assignment, or both, would change in CY 2015 compared to their assignment as of December 31, 2014. In addition, we are proposing that an y existing HCPCS codes with substantial

revisions to the code desc riptors for CY 2015 compared to the CY 2014 descriptors

would be labeled with comment indicat or “NI” in Addendum B to the CY 2015

OPPS/ASC final rule with comm ent period. However, in or der to receive the comment indicator “NI,” the CY 2015 revision to the code descriptor (compared to the CY 2014 descriptor) must be significan t such that the new code desc riptor describes a new service or procedure for which the OPPS treatment may change. We use comment indicator

“NI” to indicate that these HCPCS codes w ill be open for comment as part of this

CY 2015 OPPS/ASC final rule with comment period. Like all codes labeled withCMS-1613-P 406 comment indicator “NI,” we will respond to public comments and finalize their OPPS

treatment in the CY 2016 OPPS/ASC fi nal rule with comment period. In accordance with our usual practice, we are proposing that CPT and Level II

HCPCS codes that are new for CY 2015 also would be labeled with comment indicator

“NI” in Addendum B to the CY 2015 OPPS/ ASC final rule with comment period. Only HCPCS codes with comment i ndicator “NI” in the CY 2015 OPPS/ASC final rule with comment period are subject to comment. HCPCS codes that do not appear

with comment indicator “NI” in the CY 2015 OPPS/ASC fina l rule with comment period will not be open to public comment, unless we specifically request additional comments elsewhere in the final rule with comment period.

We believe that the CY 2014 defin itions of the OPPS comment indicators continue to be appropriate for CY 2015. Ther efore, we are proposing to continue to use

those definitions without m odification for CY 2015. The proposed definitions of the

OPPS comment indicators are listed in A ddendum D2 on the CMS Web site at:http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html

. XII. Proposed Updates to the Ambulat ory Surgical Center (ASC) Payment System A. Background 1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment System For a detailed discussion of the legisla tive history and statutory authority related to ASCs, we refer readers to the CY 2012 OPPS/ASC final rule with comment periodCMS-1613-P 407 (76 FR 74377 through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through 32292). For a discussion of prior rulemaking on the ASC payment system, we refer

readers to the CY 2012 OPPS/ ASC final rule with comm ent period (76 FR 74378 through 74379), the CY 2013 OPPS/ASC final rule w ith comment period (77 FR 68434 through 68467), and the CY 2014 OPPS/ASC final ru le with comment period (78 FR 75064 through 75090). 2. Policies Governing Changes to the Li sts of Codes and Payment Rates for ASC Covered Surgical Procedures a nd Covered Ancillary Services Under § 416.2 and § 416.166 of the regulati ons, subject to ce rtain exclusions, covered surgical procedures in an ASC are su rgical procedures that are separately 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 followi ng the procedure (“overnight stay”). We adopted this standard for defining which surg ical procedures are covered under the ASC payment system as an indicator of th e complexity of the procedure and its appropriateness for Medicare payment in ASCs. We use this standard only for purposes of evaluating procedures to determine whether or not they are appropriate to be furnished

to Medicare beneficiaries in AS Cs. We define surgical proc edures as those described by Category I CPT codes in the surgical ra nge from 10000 through 69999, as well as those Category III CPT codes and Level II HCPCS codes that directly crosswalk or are clinically similar to ASC covered surgical procedures (72 FR 42478).CMS-1613-P 408 In the August 2, 2007 final rule, we also established our policy to make separate ASC payments for the following ancillary items and services when they are provided integral to ASC covered surgical procedur es: (1) brachytherapy sources; (2) certain implantable items that have pass-through stat us under the OPPS; (3) certain items and services that we designate as contractor-p riced, including, but not limited to, procurement of corneal tissue; (4) certain drugs and biologi cals for which separate payment is allowed under the OPPS; and (5) certain radiology servic es for which separate payment is allowed under the OPPS. These covered ancillary serv ices are specified in § 416.164(b) and, as stated previously, are eligib le for separate ASC payment (72 FR 42495). Payment for ancillary items and services th at are not paid separately under the ASC payment system is packaged into the ASC payment for the covered surgical procedure. We update the lists of, and payment rate s for, covered surgic al procedures and covered ancillary services in ASCs in c onjunction with the annual proposed and final rulemaking process to update the OPPS and the ASC payment system (§ 416.173; 72 FR 42535). In addition, as discussed in deta il in section XII.B. of this proposed rule, because we base ASC payment policies fo r covered surgical procedures, drugs, biologicals, and certain other covered ancillary services on the OPPS payment policies, we also provide quarterly update change requests (CRs) for ASC covered surgical procedures and covered ancillar y services throughout the year (January, April, July, and October). CMS releases new Level II codes to the public or recognizes the release of new CPT codes by the AMA and makes these codes effective (that is, the codes are recognized on Medicare claims) via these ASC quarterly update CRs. Thus, theseCMS-1613-P 409 quarterly updates are to implement newly cr eated Level II HCPCS and Category III CPT codes for ASC payment and to update the paym ent rates for separately paid drugs and biologicals based on the most recently submitte d ASP data. New Category I CPT codes, except vaccine codes, are released only once a year and, therefore, are implemented only through the January quarterly update. New Ca tegory I CPT vaccine codes are released twice a year and, therefore, are implemented through the January and July quarterly updates. We refer readers to Table 41 in the CY 2012 OPPS/ASC proposed rule for the process used to update the HC PCS and CPT codes (76 FR 42291). In our annual updates to the ASC list of, and payment rates for, covered surgical procedures and covered ancillary services, we undertake a review of excluded surgical procedures (including all procedures ne wly proposed for removal from the OPPS inpatient list), new procedures , and procedures for which there is revised coding, to identify any that we believe meet the crit eria for designation as ASC covered surgical procedures or covered ancill ary services. Updating the li sts of ASC covered surgical procedures and covered ancillary services, as well as their payment rates, in association with the annual OPPS rulemaking cycle is particularly important because the OPPS relative payment weights and, in some cases, pa yment rates, are used as the basis for the payment of covered surgical procedures and covered ancillary servic es under the revised ASC payment system. This joint update pro cess ensures that the ASC updates occur in a regular, predictable, and timely manner.CMS-1613-P 410 B. Proposed Treatment of New Codes 1. Proposed Process for Recognizing New Category I and Category III CPT Codes and

Level II HCPCS Codes Category I CPT, Category III CPT, and Le vel II HCPCS codes are used to report procedures, services, items, and supplies und er the ASC payment system. Specifically, we recognize the following codes on ASC clai ms: (1) Category I CPT codes, which describe surgical procedures and vaccine codes; (2) Category III CPT codes, which describe new and emerging technologies, se rvices, and procedur es; and (3) Level II HCPCS codes, which are used primarily to identify products, supplies, temporary procedures, and services notdescribed by CPT codes. We finalized a policy in the August 2, 2007 final rule to evaluate each year all new Category I and Category III CPT codes a nd Level II HCPCS codes that describe surgical procedures, and to make pre liminary determinations during the annual OPPS/ASC rulemaking process re garding whether or not they meet the criteria for payment in the ASC setting as covered surgical procedures and, if so, whether or not they are office-based procedures (72 FR 42533 th rough 42535). In addition, we identify new codes as ASC covered ancillary services ba sed upon the final payment policies of the revised ASC payment system. We have separated our discussion below into two sections based on whether we are proposing to solicit pub lic comments in this CY 2015 OPPS/ASC proposed rule (and respond to those comments in the CY 2015 OP PS/ASC final rule with comment period) or whether we will be soliciting public comm ents in the CY 2015 OPPS/ASC final ruleCMS-1613-P 411 with comment period (and responding to those comments in the CY 2016 OPPS/ASC final rule with comment period). We note that we sought public comment in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75067) on the new Category I and Category III CPT and

Level II HCPCS codes that were effec tive January 1, 2014. We also sought public

comment in the CY 2014 OPPS/ASC final rule with comment period on the new Level II HCPCS codes effective October 1, 2013. These new codes, with an effective date of October 1, 2013, or January 1, 2014, were fla gged with comment indicator “NI” in

Addenda AA and BB to the CY 2014 OPPS/ASC final rule with comment period to

indicate that we were assi gning them an interim payment status and payment rate, if applicable, which were subjec t to public comment following publication of the CY 2014 OPPS/ASC final rule with comment period. We will respond to public comments and

finalize the treatment of these codes unde r the ASC payment system in the CY 2015

OPPS/ASC final rule wi th comment period. 2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT Codes Implemented in April 2014 and July 2014 for Which We Are Soliciting Public Comments in This Proposed Rule In the April 2014 and July 2014 CRs, we made effective for April 1, 2014 and July 1, 2014, respectively, a total of seven new Level II HCPCS codes and four new Category III CPT codes that describe ASC covered surgical procedures and covered ancillary services that were not addressed in the CY 2014 OPPS/ASC final rule with comment period.CMS-1613-P 412 In the April 2014 ASC quarterly update (Transmittal 2927, CR 8675, dated April 10, 2014), we added two new surgical Level II HCPCS codes and one new drug and biological Level II HCPCS code to the list of covered surgical procedures and covered ancillary services, re spectively. Table 45 below lists the new Level II HCPCS codes that were implemented April 1, 2014, al ong with their proposed payment indicators

for CY 2015. In the July 2014 quarterly update (Transmittal 2970, CR 8786, dated May 23, 2014), we added one new brachytherapy Level II HCPCS code and three new drug and biological Level II HCPCS codes to the list of covered ancillary services.

Table 46 below lists the new Level II HCPCS codes that were implemented July 1, 2014 along with their proposed payment indicat ors and proposed ASC payment rates for

CY 2015. Through the July 2014 quarterly update CR, we also implemented ASC payment for four new Category III CPT codes as one ASC covered surgical procedure and three covered ancillary services, e ffective July 1, 2014. These codes are listed in Table 47 below, along with their proposed payment indicators and proposed payment rates for

CY 2015.

The HCPCS codes listed in Table 45 ar e included in Addenda AA or BB to this proposed rule (which are available via the Internet on the CMS Web site). Because the payment rates associated with the new Le vel II HCPCS codes and Category III CPT codes that became effective July 1, 2014 (liste d in Table 46 and Table 47 of this proposed rule) are not available to us in time for inco rporation into the Addenda to this OPPS/ASCCMS-1613-P 413 proposed rule, our policy is to include thes e 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 2015 OPPS/ASC final rule with comment period. Thus, the codes implemen ted by the July 2014 ASC quarterly update CR and their proposed CY 2015 payment indicat ors and rates that are displayed in

Table 46 and Table 47 are not included in A ddenda AA or BB to this proposed rule (which are available via the Internet on th e CMS Web site). The final list of ASC covered surgical procedures and covered ancillary services and the associated payment weights and payment indicator s will be included in A ddenda AA or BB to the CY 2015

OPPS/ASC final rule with co mment period, consistent with our annual update policy. We invite public comment on these proposed payment indicators and the proposed payment rates for the new Category III CPT code and Le vel II HCPCS codes that were newly recognized as ASC covered surgical procedures or covered ancillary services in April 2014 and July 2014 through the quarterly update CRs, as listed in Tables 45, 46, and 47 below. We are proposi ng to finalize their pa yment indicators and their payment rates in th e CY 2015 OPPS/ASC final rule with comment period.

TABLE 45.—NEW LEVEL II HCPCS CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES IMPLEMENTED IN APRIL 2014

CY 2014 HCPCS

Code CY 2014 Long Descriptor Proposed CY 2015 Payment IndicatorCMS-1613-P 414

CY 2014 HCPCS

Code CY 2014 Long Descriptor Proposed CY 2015 Payment Indicator C9739 Cystourethroscopy, with inserti on of transprostatic implant; 1 to 3 implants G2

C9740 Cystourethroscopy, with inserti on of transprostatic implant; 4 or more implants G2 C9021 Injection, obinutuzumab, 10 mg K2 G2 = Non office-based surgical procedure added in CY 2008 or later; payment based on OPPS relative payment weight. K2 = Drugs and biologicals paid separately when prov ided integral to a surgical procedure on ASC list; payment based on OPPS rate.

TABLE 46.—NEW LEVEL II HCPCS CO DES FOR COVERED ANCILLARY SERVICES IMPLEMENTED IN JULY 2014

CY 2014 HCPCS

Code CY 2014 Long Descriptor Proposed CY 2015 Payment Indicator Proposed CY 2015 Payment Rate C2644 Brachytherapy source, cesium-131 chloride solution, per millicurie H2 $18.97 C9022 Injection, elosulfase alfa, 1mg K2 $226.42 C9134 Factor XIII (antihemophilic factor, recombinant), Tretten, per 10 i.u. K2 $14.10 Q9970* Injection, ferric carboxymaltose, 1 mg K2 $1.06 *HCPCS code Q9970 replaces HCPCS code C9441 effective July 1, 2014. H2 = Brachytherapy source paid sepa rately when provided integral to a surgical procedure on ASC list; payment based on OPPS rate. K2 = Drugs and biologicals paid separately when prov ided integral to a surgical procedure on ASC list; payment based on OPPS rate.CMS-1613-P 415

TABLE 47.—NEW CATEGORY III CPT CODES FOR COVERED SURGICAL PROCEDURES OR COVERED ANCILLARY SERVICES IMPLEMENTED IN JULY 2014

CY 2014 CPT Code CY 2014 Long Descriptor Proposed CY 2015 Payment Indicator Proposed CY 2015 Payment Rate

0348T Radiologic examination, radiostereometric analysis (RSA); spine, (includes, cervical, thoracic and lumbosacral, when performed) Z2 $50.21

0349T Radiologic examination, radiostereometric analysis (RSA); uppe r extremity(ies), (includes shoulder, elbow and wrist, when performed) Z2 $50.21

0350T Radiologic examination, radiostereometric analysis (RSA); lower extremity(ies), (includes hip, proximal femur, knee and ankle, when performed) Z2 $50.21

0356T Insertion of drug-eluting implant (including punctal dilation and implant removal when performed) into lacrimal canaliculus, each R2 $42.81

R2 = Office-based surgical procedure added to ASC list in CY 2008 or later without MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight. Z2 = Radiology service paid separately when provided integral to a surgical procedure on ASC list; payment based on MPFS nonfacility PE RVUs. 3. Proposed Process for New Level II HC PCS Codes and Categor y I and Category III

CPT Codes for Which We Will Be Solic iting Public Comments in the CY 2015

OPPS/ASC Final Rule W ith Comment Period As has been our practice in the past, we incorporate those new Category I and Category III CPT codes and new Level II HCPC S codes that are effective January 1 in the final rule with comment period updati ng the ASC payment system for the following calendar year. These codes are released to the public via the CM S HCPCS (for Level II HCPCS codes) and AMA Web sites (for CPT codes), and also through the January ASC quarterly update CRs. In the past, we also have released new Level II HCPCS codes thatCMS-1613-P 416 are effective October 1 through the October ASC quarterly update CRs and incorporated

these new codes in the final rule with co mment period updating the ASC payment system for the following calendar year. All of thes e codes are flagged with comment indicator

“NI” in Addenda AA and BB to the OPPS/AS C final rule with comment period to indicate that we are assigning them an interi m payment status which is subject to public comment. The payment indicator and payment rate, if applicable, for all such codes flagged with comment indicator “NI” are ope n to public comment in the OPPS/ASC 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 2015. Specifically, for CY 2015, we are proposing to include in Addenda AA and BB to the CY 2015 OPPS/ASC final rule with comment peri od the new Category I and III CPT codes effective January 1, 2015, that would be inco rporated in the January 2015 ASC quarterly update CR and the new Level II HCPCS codes, effective October 1, 2014 or January 1, 2015, that would be released by CMS in its October 2014 and January 2015 ASC quarterly update CRs. These codes woul d be flagged with comment indicator “NI”

in Addenda AA and BB to the CY 2015 OPPS/AS C final rule with comment period to indicate that we have assigned them an inte rim payment status. Their payment indicators and payment rates, if app licable, would be open to publ ic comment in the CY 2015 OPPS/ASC final rule with comment period and would be finalized in the CY 2016

OPPS/ASC final rule wi th comment period.CMS-1613-P 417 C. Proposed Update to the Lists of ASC Covered Surgical Procedures and Covered Ancillary Services 1. Covered Surgical Procedures a. Additions to the List of ASC Covered Surgical Procedures We are proposing to update the list of ASC covered surgical procedures by adding 10 procedures to the list for CY 2015. Thes e 10 procedures were among those excluded

from the ASC list for CY 2014 because we believ ed they did not meet the definition of a covered surgical procedure based on our expe ctation that they w ould pose a significant safety risk to Medicare benefi ciaries or would require an ov ernight stay if performed in

ASCs. We conducted a review of all HCPC S codes that currently are paid under the OPPS, but not included on the ASC list of cove red surgical procedures, to determine if changes in technology and/or medical practice affected the clinical appropriateness of these procedures for the ASC se tting. We determined that these 10 procedures could be safely performed in the ASC setting and would not require an overnight stay if performed in an ASC and, therefore, we are proposing to include them on the list of ASC covered surgical procedures for CY 2015. The 10 procedures that we are propos ing to add to the ASC list of covered surgical procedures, including their HCPCS code long descriptors and proposed CY 2015 payment indicators, are disp layed in Table 48 below.CMS-1613-P 418

TABLE 48.—PROPOSED ADDITIONS TO THE LIST OF ASC COVERED SURGICAL PROCEDURES FOR CY 2015

CY 2014 HCPCS

Code CY 2014 Long Descriptor Proposed CY 2015

ASC Payment Indicator

22551 Arthrodesis, anterior interbody, in cluding disc space preparation, discectomy, osteophytectomy and d ecompression of spinal cord and/or nerve roots; cervical below c2 G2

22554 Arthrodesis, anterior inter body technique, including minimal discectomy to prepare interspace (other than for decompression); cervical below c2 G2

22612 Arthrodesis, posterior or postero lateral technique, single level; lumbar (with lateral transverse technique, when performed) G2

22614 Arthrodesis, posterior or postero lateral technique, single level; each additional vertebral segment (list separately in addition to code for primary procedure) N1

63020 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated intervertebr al disc; 1 interspace, cervical G2

63030 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated intervertebr al disc; 1 interspace, lumbar G2

63042 Laminotomy (hemilaminectomy), with decompression of nerve root(s), including partial facetectomy, foraminotomy and/or excision of herniated interverte bral disc, reexploration, single interspace; lumbar G2

63045 Laminectomy, facetectomy and foraminotomy (unilateral or bilateral with decompression of spinal cord, cauda equina and/or nerve root[s], [eg, spinal or lateral recess stenosis]), single vertebral segment; cervical G2

63047 Laminectomy, facetectomy and foraminotomy (unilateral or bilateral with decompression of spinal cord, cauda equina and/or nerve root[s], [eg, spinal or lateral recess stenosis]), single vertebral segment; lumbar G2

63056 Transpedicular approach with decompression of spinal cord, equina and/or nerve root(s) (eg, herniated intervertebral disc), single segment; lumbar (incl uding transfacet, or lateral extraforaminal approach) (eg, far lateral herniated intervertebral disc) G2CMS-1613-P 419 b. Proposed Covered Surgical Proce dures Designated as Office-Based (1) Background In the August 2, 2007 ASC final rule, we finalized our policy to designate as “office-based” those procedures that are a dded to the ASC list of covered surgical procedures in CY 2008 or late r years that we determine are performed predominantly (more than 50 percent of the time) in physic ians’ offices based on consideration of the most recent available volume and utilization data for each individual procedure code and/or, if appropriate, th e clinical characteristic s, utilization, and volum e of related codes. In that rule, we also finalized our policy to exempt all procedures on the CY 2007 ASC list from application of the office-based cl assification (72 FR 42512) . The procedures

that were added to the ASC list of covered surgical procedures be ginning in CY 2008 that

we determined were office-based were id entified in Addendum AA to that rule by payment indicator “P2” (Office-based surgic al procedure added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight); “P3” (Office-based su rgical procedures added to ASC list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE RVUs); or “R2” (Office-based surgical procedure adde d to ASC list in CY 2008 or later without MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight), depending on whether we estimated it would be paid according to the standard ASC payment methodology based on its OPPS relati ve payment weight or at the MPFS nonfacility PE RVU-based amount.CMS-1613-P 420 Consistent with our final policy to annually review and update the list of surgical procedures eligible for payment in ASCs, each year we identify surgical procedures as either temporarily office-based (these are ne w procedure codes wit hout utilization data

which our Medical Officers have determined ar e clinically similar to other procedures that are permanently office-based), perman ently office-based, or non-office-based, after taking into account updated vol ume and utilization data. (2) Proposed Changes for CY 2015 to Cove red 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 office-based. We reviewed CY 2013 volume and utilization data and the clinical characteristics for all surgical pro cedures that are assigned payment indicator “G2” (Non-office-based surgical procedure ad ded in CY 2008 or later; payment based on OPPS relative payment weight) in CY 2014, as well as for those procedures assigned one of the temporary office-based payment indicat ors, specifically “P2*,” “P3*,” or “R2*” in

the CY 2014 OPPS/ASC final rule with comment period (78 FR 75071 through 75075).

Our review of the CY 2013 volume a nd utilization data resulted in our identification of two covered surgical procedur es that we believe meet the criteria for designation as office-based. The data indicate that these pr ocedures are performed more than 50 percent of the time in physicians’ offi ces and that our medical advisors believe the services are of a level of complexity consistent with other procedures performedCMS-1613-P 421 routinely in physicians’ offices. The two CPT codes we are proposing to permanently designate as office-based are listed in Table 49 below.

TABLE 49.—ASC COVERED SURGICAL PROCEDURES NEWLY PROPOSED FOR PERMANENT OFFICE-BAS ED DESIGNATION FOR CY 2015

* Proposed payment indicators are based on a comparis on of the proposed ra tes according to the ASC standard ratesetting method ology and the MPFS proposed rates. According to the statutory formula, current law requires a negative update to the MPFS paym ent rates for CY 2015. Fo r a discussion of those rates, we refer readers to the CY 2015 MPFS proposed rule. We invite public comment on this proposal.

We also reviewed CY 2013 volume and u tilization data and other information for the 8 procedures finalized for temporary offi ce-based status in Table 52 and Table 53 in

the CY 2014 OPPS/ASC final rule with comment period (78 FR 75074 through 75075). Among these 8 procedures, there were very fe w claims data or no claims data for six procedures: CPT code 0099T (Implantation of intrastromal corneal ring segments); CPT code 0299T (Extracorporeal shock wave fo r integumentary wound healing, high energy, including topical application and dressing care; initial w ound); CPT code C9800 (Dermal CY 2014 CPT Code CY 2014 Long Descriptor CY 2014 ASC Payment Indicator Proposed CY 2015

ASC Payment Indicator* 10022 Fine needle aspiration; with imaging guidance G2 P3

19296 Placement of radiotherapy afterloading expandable catheter (single or multichannel) into the breast for interstitial radioelement application following partial mastectomy, includes imaging guidance; on date separate from partial mastectomy G2 P2CMS-1613-P 422 injection procedure(s) for facial li podystrophy syndrome (LDS) and provision of Radiesse or Sculptra dermal filler, in cluding all items and supplies); CPT code 10030 (Image-guided fluid collection drainage by catheter (eg, abscess, hematoma, seroma, lymphocele, cyst), soft tissue (eg, extremity, abdominal wall, neck), percutaneous); CPT code 64617 (Chemodenervation of muscle(s); larynx, unilateral, percutaneous (eg, for spasmodic dysphonia), includes guidance by ne edle electromyography, when performed); and CPT code 67229 (Treatment of extensive or progressive reti nopathy, one or more sessions; preterm infant (less than 37 weeks gestation at birth), performed from birth up to 1 year of age (eg, retinopathy of premat urity), photocoagulation or cryotherapy). Consequently, we are proposing to maintain th eir temporary office-based designations for

CY 2015. We are proposing that one procedur e that has a temporary office-based designation for CY 2014, CPT code 0226T (Anoscopy, high resolu tion (HRA) (with magnification and chemical agent enhancemen t); diagnostic, incl uding collection of specimen(s) by brushing or wa shing when performed), be packaged under the OPPS for CY 2015. Our policy is to package covered surgical procedures under the ASC payment system if these procedures are packaged under the OPPS. Consequently, we are proposing to package, and assign payment i ndicator “N1” to, this covered surgical procedure code in CY 2015. HCPCS code 0124T (Conjunctival incision wi th posterior extrascleral placement of pharmacological agent (does not include supply of medication)) was finalized forCMS-1613-P 423 temporary office-based status in the CY 2014 OPPS/ASC final rule with comment period; however, this code was deleted effective December 31, 2013. The proposed CY 2015 payment indicator designations for the 7 remaining procedures that were temporarily designated as office-based in CY 2014 are displayed in Table 50 below. The procedures for whic h the proposed office-based designations for CY 2015 are temporary also are indicated by asterisks in Addendum AA to this proposed rule (which is available via th e Internet on the CMS Web site).

TABLE 50.—PROPOSED CY 2015 PAYMENT INDICATORS FOR ASC COVERED SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY OFFICE-BASED IN THE CY 2014 OPPS/ASC FINAL RULE WITH COMMENT PERIOD

CY 2014 CPT Code CY 2014 Long Descriptor CY 2014 ASC Payment Indicator Proposed CY 2015

ASC Payment Indicator** 0099T Implantation of intrastromal corneal ring segments R2* R2*

0226T Anoscopy, high resolution (HRA) (with magnification and chemical agent enhancement); diagnostic, including collection of specimen(s) by brushing or washing when performed R2* N1

0299T Extracorporeal shock wave for integumentary wound healing, high energy, including topical application and dressi ng care; initial wound 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*

10030 Image-guided fluid collection drainage by catheter (eg, abscess, hematoma, seroma, lymphocele, cyst), soft tissue (eg, extremity abdominal wall, neck), percutaneous P2* P2*CMS-1613-P 424

CY 2014 CPT Code CY 2014 Long Descriptor CY 2014 ASC Payment Indicator Proposed CY 2015

ASC Payment Indicator**

64617 Chemodenervation of muscle(s); larynx, unilateral, percutane ous (eg, for spasmodic dysphonia), includes guidance by needle electromyography, when performed P3* P3*

67229 Treatment of extensive or progressive retinopathy, one or more sessions; preterm infant (less than 37 weeks gestation at birth), performed from birth up to 1 year of age (eg, retinopathy of prematurit y), photocoagulation or cryotherapy R2* R2*

* If designation is temporary. ** Proposed payment indicators are based on a co mparison of the proposed ra tes according to the ASC standard ratesetting method ology and the MPFS proposed rates. According to the statutory formula, current law requires a negative update to the MPFS paym ent rates for CY 2015. Fo r a discussion of those rates, we refer readers to the CY 2015 MPFS proposed rule. We invite public comment on these proposals. c. Proposed ASC Covered Surgical Procedur es to be Designatedas Device-Intensive (1) Background As discussed in the August 2, 2007 final rule (72 FR 42503 through 42508), we adopted a modified payment methodology fo r calculating the ASC payment rates for covered surgical procedures that are assigned to the subs et of OPPS device-dependent APCs with a device offset percentage greater than 50 percent of the APC cost under the OPPS, in order to ensure that payment for th e procedure is adequate to provide packaged payment for the high-cost implantable devices used in those procedures.CMS-1613-P 425 (2) Proposed Changes to List of ASC C overed Surgical Procedures Designated as

Device-Intensive for CY 2015

As discussed in section II.A.2.e of this proposed rule, for CY 2015, we are proposing to create 28 comprehensive APCs to replace the current device dependent APCs and a few non-device dependent APCs under the OPPS; thus, there would be no device dependent APCs. We are proposi ng to define a comprehensive APC as a classification for the provision of a primary se rvice and all adjunctive services provided to support the delivery of th e primary service. Because a comprehensive APC would treat all individually reported codes as re presenting components of the comprehensive service, our OPPS proposal is to make a sing le prospective payment based on the cost of all individually reported code s that represent the provision of a primary service and all adjunctive services provided to suppor t the delivery of the primary service. Unlike the OPPS claims processing system that can be configured to make a single payment for the encounter-based comp rehensive service whenever a HCPCS code that is assigned to a comprehensive APC appears on the claim, the ASC claims-processing system does not allow for this type of conditional packaging. Therefore, we are proposing that all separate ly paid covered ancill ary services that are provided integral to covered su rgical procedures that woul d map to comprehensive APCs would continue to be separately paid unde r the ASC payment system instead of being packaged into the payment for the comprehensive APC as under the OPPS. The OPPS relative payment weights for the comprehensiv e APCs would include costs for ancillary services so we could duplicate payment if we based the ASC payment rate on the OPPSCMS-1613-P 426 relative payment weights for the comprehensive AP Cs. Therefore, to avoid this issue, we are proposing that the ASC payment rates for these comprehensive APCs would be based on the CY 2015 OPPS relative payments weight s that have been calculated using the standard APC ratesetting methodology for the primary service instead of the relative payment weights that are based on the comp rehensive bundled service. For the same reason, under the ASC payment system, we also are proposing to use the standard OPPS APC ratesetting methodology instead of the co mprehensive methodology to calculate the device offset percentage for comprehensiv e APCs for purposes of identifying deviceintensive procedures and to calculate payment rates for device-intensive procedures assigned to comprehensive APCs. Payment rates for ASC device-intensive procedures are based on a modified payment methodology to ensure that payment fo r the procedure is adequate to provide packaged payment for the high-cost implantab le devices used in those procedures. Device-intensive procedures are currently defi ned as those procedures that are assigned to device-dependent APCs with a device offset percentage greater than 50 percent of the APC cost under the OPPS. Because we are proposing to implement the comprehensive APC policy and, therefore, eliminate de vice-dependent APCs under the OPPS in CY 2015, we need to define ASC device-inte nsive procedures for CY 2015. We are proposing to define ASC device-intensive pr ocedures as those pr ocedures that are assigned to any APC (not onl y an APC formerly designate d device-dependent) with a device offset percentage greater than 40 percent based on the standard OPPS APC ratesetting methodology. We believe that our pr oposal to lower the offset threshold fromCMS-1613-P 427 greater than 50 percent to gr eater than 40 percent better al igns with the OPPS device credit policy finalized for CY 2014 (78 FR 75006 and 75007) that applies to procedures with a significant device offset amount, whic h is defined as exceeding 40 percent of the

APC cost. Because the ASC device-intensive methodology is applied to procedures with significant device costs, we believe that the definition of “significant” with regard to device-intensive procedures should matc h that used under the OPPS to determine “significant” device costs for the device cr edit policy. We are proposing changes to § 416.171(b)(2) to reflect this proposal. We also are proposing to update the ASC lis t of covered surgical procedures that are eligible for payment according to our device-intensive procedure payment methodology, consistent with our proposed mo dified definition of device-intensive procedures, reflecting the proposed APC assi gnments of procedur es and APC device offset percentages based on the CY 2013 OPPS cl aims and cost report data available for the proposed rule. The ASC covered surgical procedures that we are proposi ng to designate as

device-intensive and that w ould be subject to the device -intensive procedure payment methodology for CY 2015 are listed in Table 51 below. The CPT code, the CPT code short descriptor, the proposed CY 2015 AS C payment indicator (PI), the proposed CY 2015 OPPS APC assignment, the propos ed CY 2015 OPPS APC device offset percentage, and an indication if the full credit/partial credit (FB/FC) device adjustment policy would apply are also li sted in Table 51 below. A ll of these procedures areCMS-1613-P 428

included in Addendum AA to this proposed rule (which is av ailable via the Internet on the CMS Web site). We invite public comment on these proposals. d. Proposed Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit

Devices Our ASC policy with regard to payment fo r costly devices implanted in ASCs at no cost/full credit or partia l credit as set forth in § 416.179 is consistent with the OPPS policy that was in effect until CY 2014. Th e established ASC policy reduces payment to ASCs when a specified device is furnished withou t cost or with full credit or partial credit

for the cost of the device for those ASC covere d surgical procedures that are assigned to APCs under the OPPS to which this policy ap plies. 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 a nd partial credit devices (73 FR 68742 through 68744).

As discussed in section IV.B. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 through 75006), we finalized our proposal to modify our former policy of reducing OPPS payment for specifi ed APCs when a hospital furnishes a specified device without cost or with a full or partial credit. Formerly, under the OPPS, our policy was to reduce OPPS payment by 100 pe rcent of the device offset amount when a hospital furnishes a specified device without cost or with a full cr edit and by 50 percent of the device offset amount when the hospi tal receives partial cred it in the amount of 50 percent or more of the cost for the specified device. For CY 2014, we finalized ourCMS-1613-P 429 proposal to reduce OPPS payment for applicab le APCs by the full or partial credit a provider receives for a replaced device, capped at the device offset amount. Although we finalized our proposal to m odify the policy of reducing payments when a hospital furnishes a specified device wi thout cost or with full or partial credit under the OPPS, in that final rule with comment period (78 FR 75076 through 75080), we finalized our proposal to maintain our AS C policy for reducing payments to ASCs for specified device-intensive procedures when th e ASC furnishes a device without cost or with full or partial credit. Unlike the OPPS, there is currently no mechanism within the ASC claims processing system for ASCs to submit to CMS the actual amount received when furnishing a specified device at full or partial credit. Therefore, under the ASC payment system, we finalized our proposal to continue to reduce ASC payments by 100 percent or 50 percen t of the device offset amount when an ASC furnishes a device

without cost or with full or partial credit, respectively. We are proposing to update the list of ASC covered de vice-intensive procedures,

based on the revised device-intensive definition proposed above, that would be subject to the no cost/full credit and partial credit de vice adjustment policy for CY 2015. Table 51 below displays the ASC covered device-inte nsive procedures th at we are proposing would be subject to the no cost/full credit or partial credit device adjustment policy for CY 2015. Specifically, when a procedure that is listed in Table 51 is subject to the no cost/full credit or partial credit device adju stment policy and is performed to implant a

device that is furnished at no cost or with full credit fr om the manufacturer, the ASC would append the HCPCS “FB” modifier on th e line with the procedure to implant theCMS-1613-P 430 device. The contractor would reduce paymen t to the ASC by the device offset amount that we estimate represents the cost of the device when the necessary device is furnished

without cost to the ASC or with full credit. We continue to believe that the reduction of ASC payment in these circumstances is neces sary to pay appropriately for the covered surgical procedure bein g furnished by the ASC. For partial credit, we are proposing to reduce the payment for implantation procedures listed in Table 51 that are subject to the no cost/full credit or partial credit device adjustment policy by one-half of the device offset amount that would be applied if a device was provided at no cost or with full cr edit, 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 pro cedure listed in Table 51 that is subject to the no cost/full credit or partial credit device adjustment policy, when the facility receives a partial credit of 50 percent or more of the cost of a device. In order to report that they received a partial credit of 50 percent or mo re of the cost of a new device, ASCs would have the option of either: (1) submitting th e claim for the device replacement procedure to their Medicare contractor after the proce dure’s performance but prior to manufacturer acknowledgment of credit for the device, a nd subsequently contact ing the contractor regarding a claim adjustment once the credit determination is made; or (2) holding the claim for the device implantation procedur e until a determination is made by the manufacturer on the partial credit and submitting the claim with the “FC” modifier appended to the implantation procedure HCPCS c ode if the partial cred it is 50 percent orCMS-1613-P 431 more of the cost of the replacement device. Beneficiary coinsurance would continue to be based on the reduced payment amount. We currently apply the FB/FC policy to de vice-intensive proce dures that involve

devices that would be amenable to rem oval and replacement in a device recall or warranty situation. We are proposing to appl y the FB/FC policy to all device-intensive procedures beginning in CY 2015 because, in ad dition to receiving devices at no cost/full credit or partial credit due to a device reca ll or warranty situation, ASCs also may receive devices at no cost/full credit or partial credit due to being part of an investigational device trial. In order to ensure that our policy c overs any situation invol ving a device-intensive procedure where an ASC may receive a device at no cost/full credit or partial credit, we are proposing to apply our FB/FC policy to all device-intensive procedures.

TABLE 51.—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR DEVICE-INTENSIVE DESIGNAT ION FOR CY 2015, INCLUDING ASC COVERED SURGICAL PROCEDURES FOR WHICH WE ARE PROPOSING THAT THE NO COST/FULL CREDIT OR PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WOULD APPLY

HCPCS

Code Short Descriptor Proposed CY 2015 ASC PI Proposed CY 2015

OPPS APC Proposed CY 2015

Device Offset Percent Proposed FB/FC Policy Would Apply 19298 Place breast rad tube/caths J8 0648 0.4415 Yes 19325 Enlarge breast with implant J8 0648 0.4415 Yes 19342 Delayed breast prosthesis J8 0648 0.4415 Yes 19357 Breast reconstruction J8 0648 0.4415 Yes 23515 Treat clavicle fracture J8 0064 0.4308 Yes 23585 Treat scapula fracture J8 0064 0.4308 Yes 23615 Treat humerus fracture J8 0064 0.4308 Yes 23616 Treat humerus fracture J8 0064 0.4308 Yes 23630 Treat humerus fracture J8 0064 0.4308 Yes 23670 Treat dislocation/fracture J8 0064 0.4308 YesCMS-1613-P 432

HCPCS

Code Short Descriptor Proposed CY 2015 ASC PI Proposed CY 2015

OPPS APC Proposed CY 2015

Device Offset Percent Proposed FB/FC Policy Would Apply 24361 Reconstruct elbow joint J8 0425 0.5661 Yes 24363 Replace elbow joint J8 0425 0.5661 Yes 24365 Reconstruct head of radius J8 0425 0.5661 Yes 24366 Reconstruct head of radius J8 0425 0.5661 Yes 24370 Revise reconst elbow joint J8 0425 0.5661 Yes 24371 Revise reconst elbow joint J8 0425 0.5661 Yes 24435 Repair humerus with graft J8 0425 0.5661 Yes 24498 Reinforce humerus J8 0425 0.5661 Yes 24515 Treat humerus fracture J8 0064 0.4308 Yes 24516 Treat humerus fracture J8 0064 0.4308 Yes 24545 Treat humerus fracture J8 0064 0.4308 Yes 24546 Treat humerus fracture J8 0064 0.4308 Yes 24575 Treat humerus fracture J8 0064 0.4308 Yes 24579 Treat humerus fracture J8 0064 0.4308 Yes 24586 Treat elbow fracture J8 0064 0.4308 Yes 24587 Treat elbow fracture J8 0064 0.4308 Yes 24615 Treat elbow dislocation J8 0064 0.4308 Yes 24635 Treat elbow fracture J8 0064 0.4308 Yes 24666 Treat radius fracture J8 0064 0.4308 Yes 25441 Reconstruct wrist joint J8 0425 0.5661 Yes 25442 Reconstruct wrist joint J8 0425 0.5661 Yes 25444 Reconstruct wrist joint J8 0425 0.5661 Yes 25446 Wrist replacement J8 0425 0.5661 Yes 25574 Treat fracture radius & ulna J8 0064 0.4308 Yes 25575 Treat fracture radius/ulna J8 0064 0.4308 Yes 25607 Treat fx rad extra-articul J8 0064 0.4308 Yes 25608 Treat fx rad intra-articul J8 0064 0.4308 Yes 25609 Treat fx radial 3+ frag J8 0064 0.4308 Yes 26686 Treat hand dislocation J8 0064 0.4308 Yes

27415 Osteochondral knee allograft J8 0425 0.5661 Yes 27428 Reconstruction knee J8 0425 0.5661 Yes

27438 Revise kneecap with implant J8 0425 0.5661 Yes 27440 Revision of knee joint J8 0425 0.5661 YesCMS-1613-P 433

HCPCS

Code Short Descriptor Proposed CY 2015 ASC PI Proposed CY 2015

OPPS APC Proposed CY 2015

Device Offset Percent Proposed FB/FC Policy Would Apply 27442 Revision of knee joint J8 0425 0.5661 Yes 27443 Revision of knee joint J8 0425 0.5661 Yes 27446 Revision of knee joint J8 0425 0.5661 Yes 27745 Reinforce tibia J8 0425 0.5661 Yes 27759 Treatment of tibia fracture J8 0064 0.4308 Yes 27823 Treatment of ankle fracture J8 0064 0.4308 Yes 27827 Treat lower leg fracture J8 0064 0.4308 Yes 27828 Treat lower leg fracture J8 0064 0.4308 Yes 28415 Treat heel fracture J8 0064 0.4308 Yes 28715 Fusion of foot bones J8 0425 0.5661 Yes 33206 Insert heart pm atrial J8 0089 0.6940 Yes 33207 Insert heart pm ventricular J8 0089 0.6940 Yes 33208 Insrt heart pm atrial & vent J8 0089 0.6940 Yes 33210 Insert electrd/pm cath sngl J8 0090 0.6828 Yes 33211 Insert card electrodes dual J8 0090 0.6828 Yes 33212 Insert pulse gen sngl lead J8 0090 0.6828 Yes 33213 Insert pulse gen dual leads J8 0089 0.6940 Yes

33214 Upgrade of pacemaker system J8 0089 0.6940 Yes 33216 Insert 1 electrode pm-defib J8 0090 0.6828 Yes 33217 Insert 2 electrode pm-defib J8 0090 0.6828 Yes 33221 Insert pulse gen mult leads J8 0655 0.7504 Yes

33224 Insert pacing lead & connect J8 0089 0.6940 Yes

33227 Remove&replace pm gen singl J8 0090 0.6828 Yes

33228 Remv&replc pm gen dual lead J8 0089 0.6940 Yes

33229 Remv&replc pm gen mult leads J8 0655 0.7504 Yes 33230 Insrt pulse gen w/dual leads J8 0107 0.7807 Yes 33231 Insrt pulse gen w/mult leads J8 0108 0.8095 Yes 33233 Removal of pm generator J8 0090 0.6828 Yes 33240 Insrt pulse gen w/singl lead J8 0107 0.7807 Yes 33249 Nsert pace-defib w/lead J8 0108 0.8095 YesCMS-1613-P 434

HCPCS

Code Short Descriptor Proposed CY 2015 ASC PI Proposed CY 2015

OPPS APC Proposed CY 2015

Device Offset Percent Proposed FB/FC Policy Would Apply

33262 Remv&replc cvd gen sing lead J8 0107 0.7807 Yes

33263 Remv&replc cvd gen dual lead J8 0107 0.7807 Yes

33264 Remv&replc cvd gen mult lead J8 0108 0.8095 Yes 33282 Implant pat-active ht record J8 0090 0.6828 Yes 37221 Iliac revasc w/stent J8 0229 0.4981 Yes 37225 Fem/popl revas w/ather J8 0229 0.4981 Yes 37226 Fem/popl revasc w/stent J8 0229 0.4981 Yes

37227 Fem/popl revasc stnt & ather J8 0319 0.5796 Yes 37228 Tib/per revasc w/tla J8 0229 0.4981 Yes 37229 Tib/per revasc w/ather J8 0319 0.5796 Yes 37230 Tib/per revasc w/stent J8 0319 0.5796 Yes 37231 Tib/per revasc stent & ather J8 0319 0.5796 Yes 37236 Open/perq place stent 1st J8 0229 0.4981 Yes 37238 Open/perq place stent same J8 0229 0.4981 Yes 53440 Male sling procedure J8 0385 0.5944 Yes 53444 Insert tandem cuff J8 0385 0.5944 Yes 53445 Insert uro/ves nck sphincter J8 0386 0.6919 Yes

53447 Remove/replace ur sphincter J8 0386 0.6919 Yes 54400 Insert semi-rigid prosthesis J8 0385 0.5944 Yes 54401 Insert self-contd prosthesis J8 0386 0.6919 Yes

54405 Insert multi-comp penis pros J8 0386 0.6919 Yes

54410 Remove/replace penis prosth J8 0386 0.6919 Yes

54416 Remv/repl penis contain pros J8 0386 0.6919 Yes 55873 Cryoablate prostate J8 0385 0.5944 Yes 61885 Insrt/redo neurostim 1 array J8 0039 0.8612 Yes 61886 Implant neurostim arrays J8 0318 0.8658 Yes

61888 Revise/remove neuroreceiver J8 0061 0.5642 YesCMS-1613-P 435

HCPCS

Code Short Descriptor Proposed CY 2015 ASC PI Proposed CY 2015

OPPS APC Proposed CY 2015

Device Offset Percent Proposed FB/FC Policy Would Apply

62361 Implant spine infusion pump J8 0227 0.8060 Yes

62362 Implant spine infusion pump J8 0227 0.8060 Yes 63650 Implant neuroelectrodes J8 0061 0.5642 Yes 63655 Implant neuroelectrodes J8 0039 0.8612 Yes 63663 Revise spine eltrd perq aray J8 0061 0.5642 Yes 63664 Revise spine eltrd plate J8 0061 0.5642 Yes 63685 Insrt/redo spine n generator J8 0318 0.8658 Yes 64553 Implant neuroelectrodes J8 0061 0.5642 Yes 64555 Implant neuroelectrodes J8 0061 0.5642 Yes 64561 Implant neuroelectrodes J8 0061 0.5642 Yes 64565 Implant neuroelectrodes J8 0061 0.5642 Yes 64568 Inc for vagus n elect impl J8 0318 0.8658 Yes 64569 Revise/repl vagus n eltrd J8 0061 0.5642 Yes 64575 Implant neuroelectrodes J8 0061 0.5642 Yes 64580 Implant neuroelectrodes J8 0039 0.8612 Yes 64581 Implant neuroelectrodes J8 0061 0.5642 Yes 64590 Insrt/redo pn/gastr stimul J8 0039 0.8612 Yes 65770 Revise cornea with implant J8 0293 0.6588 Yes

69714 Implant temple bone w/stimul J8 0425 0.5661 Yes

69715 Temple bne implnt w/stimulat J8 0425 0.5661 Yes 69718 Revise temple bone implant J8 0425 0.5661 Yes 69930 Implant cochlear device J8 0259 0.8316 Yes 0238T Trluml perip athrc iliac art J8 0319 0.5796 Yes 0282T Periph field stimul trial J8 0061 0.5642 Yes 0283T Periph field stimul perm J8 0318 0.8658 Yes

0302T Icar ischm mntrng sys compl J8 0089 0.6940 Yes 0303T Icar ischm mntrng sys eltrd J8 0090 0.6828 Yes

0304T Icar ischm mntrng sys device J8 0090 0.6828 Yes 0308T Insj ocular telescope prosth J8 0351 0.9004 Yes 0316T Replc vagus nerve pls gen J8 0039 0.8612 YesCMS-1613-P 436

HCPCS

Code Short Descriptor Proposed CY 2015 ASC PI Proposed CY 2015

OPPS APC Proposed CY 2015

Device Offset Percent Proposed FB/FC Policy Would Apply 0319T Insert subq defib w/eltrd J8 0108 0.8095 Yes 0320T Insert subq defib electrode J8 0090 0.6828 Yes 0321T Insert subq defib pls gen J8 0107 0.7807 Yes 0323T Rmvl & replc subq pls gen J8 0107 0.7807 Yes 0334T Perq stablj sacroi liac joint J8 0425 0.5661 Yes

We invite public comment on these proposals. e. ASC Treatment of Surgical Proce dures Proposed for Removal from the OPPS Inpatient Only List for CY 2015

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 only lis t for possible inclusion on the ASC list of covered surgical procedures. There are no procedures proposed for removal from the OPPS inpatient only list for CY 2015, so we are not proposing any procedures for possible inclusion on the ASC list of covered surgical procedures under this section. 2. Covered Ancillary Services Consistent with the established ASC pa yment system policy, we are proposing to update the ASC list of covered ancillary servic es to reflect the proposed payment status

for the services under the CY 2015 OPPS. Maintaining consistency with the OPPS may result in proposed changes to ASC paym ent indicators for some covered ancillary services because of changes that are be ing proposed under the OPPS for CY 2015. ForCMS-1613-P 437 example, a covered ancillary service that was separately paid under the revised ASC payment system in CY 2014 may be proposed for packaged status under the CY 2015 OPPS and, therefore, also under the ASC payment system for CY 2015. To maintain consistency with the OPPS, we are proposing that these services also would be packaged under the ASC payment system for CY 2015. Comment indicator “CH,” discussed in section XII.F. of this pr oposed rule, is used in Addendum BB to this proposed rule (which is available via the Internet on the CMS We b site) to indicate covered ancillary services for which we ar e proposing a change in the ASC payment indicator to reflect a proposed change in the OPPS treatment of the service for CY 2015. Except for the Level II HCPCS codes a nd Level III CPT codes listed in Table 46 and Table 47 of this proposed rule, all ASC covered ancillary servic es and their proposed payment indicators for CY 2015 are included in Addendum BB to this proposed rule. We invite public comment on this proposal. D. Proposed ASC Payment for Covered Surg ical Procedures and Covered Ancillary

Services 1. Proposed ASC Payment for C overed Surgical Procedures a. Background Our ASC payment policies for covered su rgical procedures under the revised ASC payment system are fully described in the CY 2008 OPPS/AS C final rule with comment period (72 FR 66828 through 66831). Under our established policy for the revised ASC payment system, the ASC sta ndard ratesetting methodology of multiplying the ASC relative payment weight for the pro cedure by the ASC conversion factor for thatCMS-1613-P 438 same year is used to calcul ate the national unadjusted payment rates for procedures with payment indicators “G2” and “A2.” Payment indicator “A2” was developed to identify procedures that were included on the list of ASC covered surgical procedures in CY 2007 and were, therefore, subject to transiti onal payment prior to CY 2011. Although the 4-year transitional peri od has ended and payment indicator “A2” is no longer required to identify surgical procedures subject to transitional payment, we retained payment

indicator “A2” because it is used to id entify procedures that are exempted from application of the office-based designation.

The rate calculation established for de vice-intensive procedures (payment indicator “J8”) is structured so that the p ackaged device payment amount is the same as under the OPPS, and only the service portion of the rate is subject to the ASC standard ratesetting methodology. In the CY 2014 OPPS /ASC final rule with comment period (78 FR 75064 through 75090), we updated the CY 2013 ASC payment rates for ASC covered surgical procedures with payment indicators of “A2,” “G2,” and “J8” using CY 2012 data, consistent with the CY 2014 OPPS update. We also updated payment rates for device-intensive procedures to in corporate the CY 2014 OPPS device offset percentages. Payment rates for office-based procedures (payment indicators “P2,” “P3,” and “R2”) are the lower of the MPFS nonfacility PE RVU-base d amount (we refer readers to the CY 2015 MPFS proposed rule) or the amount calculated using the ASC standard ratesetting methodology for the procedure. In the CY 2014 OPPS/ASC final rule with comment period, we updated the payment amoun ts for office-based procedures (paymentCMS-1613-P 439 indicators “P2,” “P3,” and “R2”) using the most recent available MPFS and OPPS data. We compared the estimated CY 2014 rate fo r each of the office-based procedures, calculated according to the ASC standa rd ratesetting methodology, to the MPFS nonfacility PE RVU-based amount to determin e which was lower and, therefore, would be the CY 2014 payment rate for the proce dure according to the final policy of the revised ASC payment system (§ 416.171(d)). b. Proposed Update to ASC Covered Surgic al Procedure Payment Rates for CY 2015 We are proposing to update ASC paymen t rates for CY 2015 using the established rate calculation methodologi es under § 416.171 and using our proposed modified definition of device-intensive procedures, as discussed above. Because the proposed OPPS relative payment weights are based on geometric mean costs for CY 2015, the ASC system will use geometric means to determine proposed relative payment weights under the ASC standard methodology. We are proposing to continue to use the amount

calculated under the ASC standard ratese tting methodology for procedures assigned payment indicators “A2” and “G2.” We are proposing that payment rates for office-based procedures (payment indicators “P2,” “P3,” and “R2”) and device -intensive procedures (payment indicator “J8”) be calculated according to our estab lished policies and, for device-intensive procedures, using our proposed modified defi nition of device-inten sive procedures, as discussed above. Thus, we are proposing to update the payment am ount for the service portion of the device-intensive procedur es using the ASC standard ratesetting methodology and the payment amount for the device portion based on the proposedCMS-1613-P 440 CY 2015 OPPS device offset percen tages that have been calc ulated using the standard OPPS APC ratesetting methodology. Payment for office-based procedures is at the lesser of the proposed CY 2015 MPFS nonfacility PE RVU-based amount or the proposed CY 2015 ASC payment amount calculated accord ing to the ASC standard ratesetting methodology. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75081), we finalized our proposal to calcu late the CY 2014 payment rate s for ASC covered surgical procedures according to our established methodologies, with the exception of device removal procedures. For CY 2014, we finalized a policy to conditionally package device removal codes under the OPPS. Under the OPPS, a conditionally packaged code (status indicators “Q1” and “Q2”) describes a HC PCS code where the payment is packaged when it is provided with a significant procedur e but is separately paid when the service appears on the claim without a significant pr ocedure. Because ASC services always include a covered surgical procedure, HCPCS codes that are conditionally packaged under the OPPS are always packaged (payment indicator “N1”) under the ASC payment system. Thus, no Medicare payment would be made when a device removal procedures is performed in an ASC without another surg ical procedure included on the claim so no Medicare payment would be made if a device was removed but not replaced. To address this concern, for the 71 device removal proce dures that are conditionally packaged in the OPPS (status indicator “Q2”), we assigne d the current ASC payment indicators associated with these procedures and conti nued to provide separate payment in CY 2014.CMS-1613-P 441 For CY 2015, we are proposing to continue this policy for the 71 device removal procedures for these same reasons. We invite public comment on these proposals.

c. Waiver of Coinsurance and Deductible for Certain Preventive Services Section 1833(a)(1) and s ection 1833(b)(1) of the Act waive the coinsurance and the Part B deductible for those preventive services under section 1861(ddd)(3)(A) of the Act as described in section 1861(ww)(2) of th e Act (excluding electrocardiograms) that are recommended by the United States Preventi ve Services Task Force (USPSTF) with a grade of A or B for any indication or popul ation and that are appropriate for the individual. Section 1833(b) of the Act also waives the Part B deductible for colorectal cancer screening tests that become diagnostic. In the CY 2011 OPPS/ASC final rule with comment period, we finalized our policies with respect to these provi sions and identified categories of services and the ASC covered surgical procedures and covered ancillary services that are preventive services that are recommended by the USPSTF with a grade

of A or B for which the coinsurance and th e deductible are waived. For a complete discussion of our policies and categories of services, we refer readers to the CY 2011 OPPS/ASC final rule with comment peri od (75 FR 72047 through 72049). We are not proposing any changes to our policies or th e categories of services for CY 2015. We identify the specific services with a doubl e asterisk in Addenda AA and BB to this proposed rule.CMS-1613-P 442 d. Proposed Payment for Cardiac Re synchronization Therapy Services Cardiac resynchronization therapy (CRT) us es electronic devices to sequentially pace both sides of the heart to improve its output. CRT utilizes a pacing electrode implanted in combination with either a pacemaker or an implantable cardioverter defibrillator (ICD). CRT perf ormed by the implantation of an ICD along with a pacing

electrode is referred to as “CRT–D.” In the CY 2012 OPPS/ASC final rule with comment period, we finalized our proposal to establish the CY 2012 ASC payment rate for CRT-D services based on the OPPS payment rate applicable to APC 0108 when procedures described by CPT codes 33225 (Inser tion of pacing electrode, cardiac venous system, for left ventricular pacing, at time of insertion of pacing car dioverter-def ibrillator or pacemaker pulse generator (eg, for upgrade to dual chamber system) (list separately in addition to code for primary procedure )) and 33249 (Insertion or replacement of permanent pacing cardioverter-def ibrillator system with tran svenous lead(s), single or dual chamber) are performed on the same date of service in an AS C. ASCs use the corresponding HCPCS Level II G-code (G0448) for proper reporting when the procedures described by CPT codes 33225 a nd 33249 are performed on the same date of service. When not performed on the same day as the service described by CPT code 33225, ASC payment for the service desc ribed by CPT code 33249 is based on APC 0108 using the device-intensive methodol ogy. When not performed on the same day as the service described by CPT code 33249, ASC payment for the service described by CPT code 33225 is based on APC 0655 using the device-intensive methodology. For a complete discussion of our policy regarding payment for CRT-D services in ASCs, weCMS-1613-P 443

refer readers to the CY 2012 OPPS/ASC fina l rule with comment period (76 FR 74427 through 74428). For CY 2015, we are proposing that CPT code 33249, the primary code for CRT-D services, continue to be assigned to APC 0108, and that payment for CPT code 33225 be packaged under the OPPS. Consequent ly, we also are proposing that CPT code 33249 would continue to be assigned to APC 0108 and payment for CPT code 33225 would be packaged into the payment for th e primary covered surg ical procedure (for example, CPT code 33249) under the ASC pa yment system for CY 2015. Because we are proposing to package CPT code 33225 pack aged under the ASC payment system and, therefore, it would not receive separate payment, it would no longer be necessary that ASCs use the HCPCS Level II G-code (G0448) for proper reporting when the procedures described by CPT codes 33225 and 33249 are performed on the same date of service. We invite public comment on these proposals. e. Payment for Low Dose Rate (LDR ) Prostate Brachytherapy Composite LDR prostate brachytherapy is a treatm ent for prostate cancer in which hollow

needles or catheters are inserted into the prostate, followed by permanent implantation of

radioactive sources into the prostate through the needles/ca theters. At least two CPT codes are used to report the treatment serv ice because there are separate codes that describe placement of the needles/catheter s and the application of the brachytherapy sources: CPT code 55875 (Transperineal placemen t of needles or catheters into prostate for interstitial radioelement application, with or without cystoscopy); and CPT code 77778 (Interstitial radiation sour ce application; complex). Generally, the componentCMS-1613-P 444 services represented by both codes are provi ded in the same operative session on the

same date of service to the Medicare bene ficiary being treated with LDR brachytherapy for prostate cancer.

In the CY 2013 OPPS/ASC final rule w ith comment period, we finalized our proposal to establish the CY 2013 ASC paymen t rate for LDR prostate brachytherapy services based on the OPPS relative payment weight applicable to APC 8001 when CPT codes 55875 and 77778 are performed on the same da te of service in an ASC. ASCs use the corresponding HCPCS Level II G-code (G0458) for proper reporting when the procedures described by CPT codes 55875 a nd 77778 are performed on the same date of service, and therefore receive the appropriate LDR prostate brachytherapy composite payment. When not performed on the same day as the service described by CPT code 55875, the service described by CPT code 77778 will be assigned to APC 0651. When not performed on the same day as the serv ice described by CPT code 77778, the service described by CPT code 55875 will be assigned to APC 0162. For a complete discussion of our policy regarding payment for LDR pros tate brachytherapy services in ASCs, we

refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68457). We are not proposing any changes to our cu rrent policy regarding ASC payment for LDR prostate brachytherapy services for CY 2015. 2. Proposed Payment for Covered Ancillary Services a. Background Our final payment policie s under the revised ASC payment system for covered ancillary services vary according to the part icular type of servi ce and its payment policyCMS-1613-P 445 under the OPPS. Our overall policy provides se parate ASC payment for certain ancillary items and services integrally related to the provision of ASC covere d surgical procedures that are paid separately under the OPPS a nd provides packaged ASC payment for other ancillary items and services that are p ackaged or conditionally packaged (status indicators “N,” “Q1,” and “Q2”) under the OPPS. In the CY 2013 OPPS/ASC rulemaking (77 FR 45169; 77 FR 68457 through 68458), we further clarified our policy regarding the payment indicator assignment of codes that are conditionally packaged in the OPPS (status indicators “Q 1” and “Q2”). Under the O PPS, a conditionally packaged code describes a HCPCS code where the paymen t is packaged when it is provided with a significant procedure but is separately paid when the service appears on the claim without a significant procedure. Because ASC servi ces always include a surgical procedure, HCPCS codes that are conditionally packag ed under the OPPS are always packaged (payment indictor “N1”) under the ASC pa yment system. Thus, our final policy generally aligns ASC payment bundles with those under the OPPS (72 FR 42495). In all cases, in order for those ancillary services al so to be paid, ancill ary items and services must be provided integral to the performa nce of ASC covered surgical procedures for

which the ASC bills Medicare. Our ASC payment policies provide separa te payment for drugs and biologicals that are separately paid under the OPPS at the OPPS rates. We generally pay for separately payable radiology services at the lower of the MPFS nonfacility PE RVU-based (or technical component) amount or the rate calcula ted according to the ASC standard ratesetting methodology (72 FR 42497). However, as finalized in theCMS-1613-P 446

CY 2011 OPPS/ASC final rule with comment period (75 FR 72050), payment indicators for all nuclear medicine procedures (defined as CPT codes in the range of 78000 through 78999) that are designated as ra diology services that are pa id separately when provided integral to a surgical procedure on the ASC lis t are set to “Z2” so that payment is made based on the ASC standard ratesetting met hodology rather than the MPFS nonfacility PE RVU amount, regardless of which is lower. This modification to the ASC payment methodology for ancillary serv ices was finalized in response to a comment on the CY 2011 OPPS/ASC proposed rule that sugg ested it is inappropriate to use the MPFS-based payment methodology for nuclear medicine procedures because the associated diagnostic radiopharmaceutical, although packaged under the ASC payment system, is separately paid under the MPFS (42 CFR 416.171(d)(1)). We set the payment

indicator to “Z2” for these nuclear medici ne procedures in the ASC setting so that payment for these procedures would be ba sed on the OPPS relative payment weight rather than the MPFS nonfacility PE RVU-base d amount to ensure that the ASC will be compensated for the cost associated with the diagnostic radiopharmaceuticals. In addition, because the same issue ex ists for radiology procedures that use contrast agents (the contrast agent is packaged under th e ASC payment system but is separately paid under the MPFS), we finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74429 through 74430) to set the payment indicator to “Z2” for radiology services that use cont rast agents so that payment for these procedures will be based on the OPPS relative payment weight and will, therefore, include the cost for the contrast agent (42 CFR 416.171(d)(2)).CMS-1613-P 447 ASC payment policy for brachytherapy sources mirrors the payment policy under the OPPS. ASCs are paid for brachytherapy sources provided integral to ASC covered surgical procedures at prospective rates adopted under the OPPS or, if OPPS rates are unavailable, at contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs have been paid for brachytherapy sources pr ovided integral to ASC covered surgical procedures at prospective rates adopted under the OPPS. Our ASC policies also provide separate payment for: (1) certain items and services that CMS designates as contracto r-priced, including, butnot limited to, the procurement of corneal tissue; and (2) certa in implantable items that have pass-through status under the OPPS. These categories do not have prospectiv ely established ASC payment rates according to the final polic ies for the revised ASC payment system (72 FR 42502 and 42508 through 42509; 42 CFR 416.164(b)). Under the revised ASC payment system, we have designated corneal ti ssue acquisition and hepatitis B vaccines as contractor-priced. Corneal tissue acqui sition is contractor-priced based on the invoiced costs for acquiring the corneal tissue for transplantation. Hepatitis B vaccines are contractor-priced based on invoiced costs for the vaccine. Devices that are eligible for pass-through payment unde r the OPPS are separately paid under the ASC payment system and are co ntractor-priced. Currently, the one device that is eligible for pass-through payment in the OPPS is described by HCPCS code C1841 (Retinal prosthesis, incl udes all internal and external components). The payment amount for HCPCS code C1841 under the ASC pa yment system is contractor-priced. Under the revised ASC payment system (72 FR 42502), payment for the surgicalCMS-1613-P 448 procedure associated with the pass-through de vice is made according to our standard methodology for the ASC payment system, based on only the service (non-device) portion of the procedure’s OPPS relative pa yment weight if the APC weight for the procedure includes other packaged device cost s. (We note that the cost for the new pass-through device would not be included in the APC weight since historical claims are used to establish the OPPS relative weight s). We also refer to this methodology as applying a “device offset” to the ASC payment for the associated surgical procedure. This ensures that duplicate payment is not provided for any portion of an implanted device with OPPS pass-through status. There are no other device costs included in the APC for the surgical procedure associated with HCPCS code C1841. Therefore, payment for the associated surgical procedure is made according to the standard methodology and no device offset is applied. HCPCS code C1841 was approved for pass-through payment effective October 1, 2013, and will continue to be eligible for pass-through payment in

CY 2015. b. Proposed Payment for Covered Ancillary Services for CY 2015 For CY 2015, we are proposing to update the ASC payment rates and to make changes to ASC payment indicators as necessa ry to maintain consistency between the OPPS and ASC payment system regarding the pa ckaged or separately payable status of services and the proposed CY 2015 OPPS and ASC payment rates. We also are proposing to continue to set the CY 2015 AS C payment rates for brachytherapy sources and separately payable drugs and biologicals equal to the proposed OPPS payment rates

for CY 2015.CMS-1613-P 449

Consistent with established ASC payment policy (72 FR 42497), we are proposing that the proposed CY 2015 payment for separately payable covered radiology services be based on a comparison of the proposed CY 2015 MPFS nonfacility PE RVU-based amounts (we refer readers to the CY 2015 MPFS proposed rule) and the proposed CY 2015 ASC payment rates calculated according to the ASC standard ratesetting methodology and then set at the lo wer of the two amounts (except as discussed below for nuclear medicine procedures and radi ology services that use contrast agents). We are proposing that payment for a radi ology service would be packaged into the payment for the ASC covered surgical procedur e if the radiology service is packaged or conditionally packaged under the OPPS. Th e payment indicators in Addendum BB to this proposed rule indicate whether the proposed payment ra tes 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 i ndicator “N1”). Radiol ogy services that we are proposing to pay based on the ASC sta ndard ratesetting methodology are assigned payment indicator “Z2” (proposed revised definition, as discusse d below: Radiology or diagnostic service paid separately when provided integral to a surgic al procedure on ASC list; payment based on OPPS relative payment weight), and those for which the proposed payment is based on the MPFS nonfacility PE RVU-based amount be assigned payment indicator “Z3” (proposed revised defi nition, as discussed below: Radiology or diagnostic service paid separately when provided inte gral to a surgical procedure on ASC list; payment based on MPFS nonfacility PE RVUs).CMS-1613-P 450

As finalized in the CY 2011 OPPS/AS C final rule with comment period (75 FR 72050), payment indicators for all nucle ar medicine procedures (defined as CPT codes in the range of 78000 through 78999) that are designated as radi ology services that are paid separately when provided integral to a surgical procedure on the ASC list are set to “Z2” so that payment for these procedures will be based on the OPPS relative payment weight (rather than the MPFS nonfacility PE RVU-based amount, regardless of which is lower) and, therefore, will include the costfor the diagnostic radiopharmaceutical. We are proposing to continue this modificati on to the payment methodology in CY 2015 and, therefore, set the payment indicator to “Z2” for nuclear medicine procedures.

As finalized in the CY 2012 OPPS/AS C final rule with comment period (76 FR 74429 through 74430), payment indicators fo r radiology services that use contrast agents are set to “Z2” so that payment for these procedures will be based on the OPPS relative payment weight and, therefore, will in clude the cost for the contrast agent. We are proposing to continue this modificati on to the payment methodology in CY 2015 and, therefore, are proposing to assign the payment indicator “Z2” to radiology services that use contrast agents. Covered ancillary services are items and services that are integral to a covered surgical procedure performed in an ASC for which separate payment may be made under the ASC payment system (see 42 CFR 416.2). Covered ancillary se rvices include, among other categories of items and services, certain radiology services , including diagnostic imaging services, for which separate payment is allowed under the OPPS when these services are necessary for the successful completion of a surgical procedure and areCMS-1613-P 451 performed in the ASC immediately preced ing, during, or immediately following the covered surgical procedure, as evidenced by the service being provided on the same day as a covered surgical procedure (see 42 CFR 416.164(b)(5)). Currently, there are certain non-imaging diagnostic tests for which payment is not made under Medicare Part B when provided in an ASC setting although these tests are paid under the OPPS. Therefore, we believe that certain non-imagi ng diagnostic tests for which se parate payment is allowed

under the OPPS should be considered covered ancillary services and separately paid when these tests are required for the suc cessful performance of the surgery and are performed in the ASC on the same day as a covered surg ical procedure. Therefore, we are proposing that, begi nning in CY 2015, certain diagnostic tests within the medicine range of CPT codes for which separate payment is allowed under the OPPS be covered ancillary services when th e they are integral to an ASC covered surgical procedure. We believe that adop ting such a payment po licy is reasonable and appropriate to ensure access to these tests in ASCs and is consiste nt with the OPPS. We are proposing that diagnostic tests within th e medicine range of CPT codes include all Category I CPT codes in the medicine ra nge established by CPT, from 90000 to 99999, and Category III CPT codes and Level II HCPCS codes that describe diagnostic tests that crosswalk or are clinically similar to pro cedures in the medicine range established by

CPT. We are proposing to pay for these test s at the lower of the MPFS nonfacility PE RVU-based (or technical component) amount or the rate calculated according to the ASC standard ratesetting methodology, because this would ensure appropriate and equitableCMS-1613-P 452 payment for these diagnostic tests provided in tegral to covered surgical procedures and not provide a payment incentive for migrati on of the tests from physician offices to ASCs. Further, we believe these diagnostic tests are similar to the covered ancillary services that are radiology se rvices and this is the payment methodology we use for those services. We are proposing that the diagnos tic tests for which the proposed payment is based on the ASC standard ratesetting methodology be assigned to payment indicator “Z2” (proposed revised definition: Radiology or diagnostic service paid separately when provided integral to a surgic al procedure on ASC list; payment based on OPPS relative payment weight), and those for which th e proposed payment is based on the MPFS nonfacility PE RVU-based amount be assigned payment indicator “Z3” (proposed revised definition: Radiology or diagnostic service paid separately wh en provided integral to a surgical procedure on ASC list; payment base d on MPFS nonfacility PE RVUs). We are proposing changes to the definitions for payment indicators “Z2” and “Z3,” as detailed in section XII.F.2 of this preamble below, and are proposing changes to §§ 416.164(a)(11) and (b)(5) as well as § 416.171(b)(1 ) to reflect these proposals. We have identified one diagnostic test th at is within the medicine range of CPT codes and for which separate payment is allowed under the OPPS: CPT code 91035 (Esophagus, gastroesophageal reflux test; with mucosal attached telemetry pH electrode placement, recording, analysis and interpretatio n). We are proposing to add this code to the list of ASC covered ancillary services and are proposing separate ASC payment as a covered ancillary service for this code beginni ng in CY 2015 when the test is integral to an ASC covered surgical procedure. We would expect the procedure described by CPTCMS-1613-P 453 code 91035 to be integral to the endoscopic a ttachment of the electr ode to the esophageal

mucosa. Most covered ancillary services and th eir proposed payment i ndicators are listed in Addendum BB to this proposed rule (which is available via th e Internet on the CMS Web site). We invite public comment on these proposals. E. New Technology Intraocular Lenses (NTIOLs) 1. NTIOL Application Cycle Our process for reviewing applications to establish new classes of new technology intraocular lenses (NTIOLs) is as follows:

● Applicants submit their NTIOL reque sts for review to CMS by the annual deadline. For a request to be considered complete, we require submission of the information that is found in the guidance document entitled “Application Process and Information Requirements for Requests for a New Class of New Technology Intraocular Lenses (NTIOLs) or Inclusion of an IOL in an existing NTIOL Class” posted on the

CMS Web site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/ASCPayment/NTIOLs.html.

● We announce annually in the proposed rule updating the ASC and OPPS payment rates for the following calendar year , a list of all requests to establish new NTIOL classes accepted for review during th e calendar year in wh ich the proposal is published. In accordance with section 141(b )(3) of Pub. L. 103-432 and our regulationsCMS-1613-P 454 at § 416.185(b), the deadline for receipt of public comments is 30 days following publication of the lis t of requests in the proposed rule.

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

○ Provide a list of determinations made as a result of our review of all new NTIOL class requests and public comments;

○ When a new NTIOL class is created, we identify the predominant characteristic of NTIOLs in that class that sets them apar t from other IOLs (inc luding those previously approved as members of other expired or activ e NTIOL classes) and that is associated with an improved clinical outcome.

○ The date of implementation of a paymen t adjustment in the case of approval of

an IOL as a member of a new NTIOL class woul d be set prospectively as of 30 days after publication of the ASC payment update fina l rule, consistent with the statutory requirement.

○ Announce the deadline for submitting requests for review of an application for a new NTIOL class for the following calendar year. 2. Requests to Establish Ne w NTIOL Classes for CY 2015 We did not receive any requests for revi ew to establish a new NTIOL class for CY 2015 by March 3, 2014, the due date publis hed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75085).CMS-1613-P 455 3. Payment Adjustment The current payment adjustment for a 5-year period from the implementation date of a new NTIOL class is $50 per lens. Since implementation of the process for adjustment of payment amounts for NTIOLs in 1999, we have not revised the payment adjustment amount, and we are not proposing to revise the payment adjustment amount

for CY 2015. 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 comme nt period (72 FR 66855). We created Addendum DD1 to define ASC payment indi cators that we use in Addenda AA and BB to provide payment information regarding covered surgical procedures and covered ancillary services, respectively, under the revised ASC payment system. The ASC payment indicators in Addendum DD1 are intended to capture policy relevant characteristics of HCPCS codes that may recei ve packaged or separate payment in ASCs, such as whether they were on the ASC list of covered services prior to CY 2008; payment designation, such as device- intensive or office-based, and the corresponding ASC payment methodology; and their classification as separately payable ancillary services including radiology services , brachytherapy sources, OPPS pass-through devices, corneal tissue acquisition services, drugs or biologicals, or NTIOLs.CMS-1613-P 456

We also created Addendum DD2 that lists the ASC comment indicators. The

ASC comment indicators used in Addenda AA and BB to the proposed rules and final rules with comment period serve to identif y, for the revised ASC payment system, the status of a specific HCPCS code and its paym ent indicator with respect to the timeframe when comments will be accepted. The comment indicator “NI” is used in the OPPS/ASC final rule with comment period to indicate ne w codes for the next calendar year for which the interim payment indicator assigned is subject to comment. The comment indicator “NI” is also assigned to existi ng codes with substantial revisi ons to their descriptors such that we consider them to be describing new services, as discussed in the CY 2010 OPPS/ASC final rule with comment peri od (74 FR 60622). In the CY 2015 OPPS/ASC final rule with comment period, we will re spond to public comments and finalize the

ASC treatment of all codes that are labeled with comment indicator “NI” in Addenda AA

and BB to the CY 2014 OPPS/ASC fina l rule with comment period.

The “CH” comment indicator is used in Addenda AA and BB to this proposed rule (which are available vi a the Internet on the CMS Web site) to indicate that the payment indicator assignment has changed for an active HCPCS code in the current year and next calendar year; an active HCPCS code is newly recognized as payable in ASCs;

or an active HCPCS code is discontinued at the end of the current calendar year. The “CH” comment indicators that are published in the final rule with comment period are provided to alert readers that a change has been made from one calendar year to the next, but do not indicate that the change is subject to comment.CMS-1613-P 457 2. Proposed ASC Payment and Comment Indicators We are not proposing any changes to the definitions of the ASC comment indicators for CY 2015. In order to incorpor ate changes associated with our proposal for CY 2015, as detailed above in section XII. D.2.b. of this proposed rule, that certain diagnostic tests qualify as cove red ancillary services when provided integral to an ASC covered surgical procedure, we are proposi ng to revise the definitions for payment

indicators “Z2” and “Z3” to add the words “or diagnostic” after “Rad iology” so that the proposed definition for payment indi cator “Z2” would be “Radiology or diagnostic service paid separately when provided inte gral to a surgical procedure on ASC list; payment based on OPPS relative payment weight,” and the proposed definition for payment indicator “Z3” would be “Radiology or diagnostic service paid separately when provided integral to a su rgical procedure on ASC list; payment based on MPFS nonfacility PE RVUs.” We refer readers to Addenda DD1 and DD2 to this proposed rule (which are available via the Internet on the CMS Web site) for the complete list of ASC payment and comment indicators proposed for the CY 2015 update. G. Calculation of the Proposed ASC Conve rsion 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 ra tes under the revised ASC payment system on APC groups and the OPPS relative payment we ights. Consistent with that policy and the requirement at section 1833(i) (2)(D)(ii) of the Act that th e revised payment system beCMS-1613-P 458 implemented so that it would be budget neut ral, the initial ASC conversion factor (CY 2008) was calculated so that estimated total Medicare payments under the revised ASC payment system in the first year w ould be budget neutral to estimated total Medicare payments under the prior (CY 2007) ASC payment system (the ASC conversion factor is multiplied by the rela tive payment weights calculated for many ASC services in order to establish payment rates) . That is, application of the ASC conversion factor was designed to result in aggregate Medicare expenditures under the revised ASC payment system in CY 2008 being equal to ag gregate Medicare expenditures that would

have occurred in CY 2008 in the absence of th e revised system, taking into consideration the cap on ASC payments in CY 2007 as re quired under section 1833( i)(2)(E) of the Act (72 FR 42522). We adopted a policy to make the system budget neutral in subsequent calendar years (72 FR 42532 through 42533; 42 CFR 416.171(e)).

We note that we consider the term “e xpenditures” in the context of the budget neutrality requirement under se ction 1833(i)(2)(D)(ii) of the Act to mean expenditures

from the Medicare Part B Trust Fund. We do not consider expe nditures to include beneficiary coinsurance and copayments. Th is distinction was important for the CY 2008 ASC budget neutrality model that considered payments across the OPPS, ASC, and MPFS payment systems. However, because co insurance is almost always 20 percent for ASC services, this interpretation of expend itures has minimal impact for subsequent budget neutrality adjustments calculated w ithin the revised ASC payment system. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 through 66858), we set out a step-by-step illustration of the final budget neutrality adjustmentCMS-1613-P 459 calculation based on the methodology fina lized in the August 2, 2007 final rule (72 FR 42521 through 42531) and as applied to updated data available for the CY 2008

OPPS/ASC final rule with co mment period. The application of that methodology to the

data available for the CY 2008 OPPS/ASC final rule with comment period resulted in a budget neutrality adjustment of 0.65. For CY 2008, we adopted the OPPS relative payment weights as the ASC relative payment weights for most services and, consiste nt with the final polic y, we calculated the CY 2008 ASC payment rates by multiplying th e ASC relative payment weights by the final CY 2008 ASC conversion factor of $41.401. For covered office-based surgical procedures and covered ancillary radiology services (excluding covered ancillary radiology services involving certa in nuclear medicine procedur es or involving the use of contrast agents, as discussed in section XII. D.2.b. of this proposed rule), the established policy is to set the payment rate at th e lower of the MPFS unadjusted nonfacility

PE RVU-based amount or the amount calcula ted using the ASC standard ratesetting methodology. Further, as discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66841 through 66843), we also adopted alternative ratesetting methodologies for specific types of services (f or example, device-int ensive procedures). As discussed in the August 2, 2007 fi nal rule (72 FR 42517 through 42518) and as codified at § 416.172(c) of the regulations, the revised ASC payment system accounts for geographic wage variation when calculati ng individual ASC payments by applying the pre-floor and pre-reclassified hospital wage indexes to the labor-related share, which is 50 percent of the ASC payment amount base d on a GAO report of ASC costs using 2004CMS-1613-P 460 survey data. Beginning in CY 2008, CMS acc ounted for geographic wage variation in labor cost when calculating individual AS C payments by applying the pre-floor and pre-reclassified hospital wage index values that CMS calculates for payment under the IPPS, using updated Core Based Statistical Areas (CBSAs) issued by OMB in June 2003. In other words, the wage index for an ASC is the pre-floor and pre- reclassified hospital wage index under the IPPS of the CBSA th at maps to the CBSA where the ASC is

located. The reclassification provision in secti on 1886(d)(10) of the Act is specific to hospitals. We believe that using the most recently available raw pre-floor and prereclassified hospital wage indexes 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 certai n rural statewide wage inde x values that result from

reclassification. We continue to believe that the unadjusted hospital wage indexes, which are updated yearly and are used by many other Medicare payment systems, appropriately account for geographic variati on in labor costs for ASCs. On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which provides the delineations of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas , and New England City and Town Areas in

the United States and Puerto Rico based on the standards published on June 28, 2010 in

the Federal Register (75 FR 37246 through 37252) and 201 0 Census Bureau data. (A copy of this bulletin may be obtained at: http://www.whitehouse.gov/sites/defaul t/files/omb/bulle tins/2013/b-13-01.pdf .) TheCMS-1613-P 461 pre-floor and pre-reclassifi ed hospital wage indexes for FY 2014 do not reflect OMB’s new area delineations and, because the ASC wage indexes are the pre-floor and prereclassified hospital wage indexes, the CY 2014 ASC wage indexes do not reflect the OMB changes. As discussed in th e FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28068), we are proposi ng to use the new CBSAs delineations issued by OMB in OMB Bulletin 13-01 for th e IPPS hospital wage index. Therefore, because the ASC wage indexes are the pre- floor and pre-reclassified hospital wage indexes, the proposed CY 2015 ASC wage i ndexes reflect the new OMB delineations.

As discussed in section XII. G.2.b. of this proposed rule, we are proposing a transition to

these new OMB delineations in ce rtain situations for CY 2015.

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 indexes 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). For example, for CY 2014, we applied a proxy wage index base d on this methodology to ASCs located in CBSA 25980 (Hinesville-Fort Stewart, GA) and CBSA 08 (Rural Delaware). When all of the areas contiguous to the urban CBSA of interest are rural and there is no IPPS hospital that has wage index data th at could be used to set the wage index for that area, we determine the ASC wage inde x by calculating the av erage of all wage indexes for urban areas in the State (75 FR 72058 through 72059). In other situations, where there are no IPPS hospitals located ina relevant labor market area, we willCMS-1613-P 462 continue our current policy of calculating an urban or rural area’s wage index by calculating the average of the wage indexes 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 2015 and Future Years We update the ASC relative payment wei ghts each year usin g the national OPPS relative payment weights (and MPFS nonfacility PE RVU-based amounts, as applicable) for that same calendar year and uniformly scale the ASC relative payment weights for each update year to make them budget neutral (72 FR 42533). Consistent with our established policy, we are proposing to scal e the CY 2015 relative payment weights for ASCs according to the following method. Holding ASC utilization and the mix of services constant from CY 2013, we are pr oposing to compare the total payment using the CY 2014 ASC relative payment weights with the total payment using the CY 2015 relative payment weights to take into accountthe changes in the OPPS relative payment weights between CY 2014 and CY 2015. We are proposing to use the ratio of CY 2014 to CY 2015 total payment (the weight scaler) to scale the ASC relative payment weights for CY 2015. The proposed CY 2015 ASC scal er is 0.9142 and scaling would apply to the ASC relative payment weights of the c overed surgical procedures and covered ancillary radiology services for which the AS C payment rates are based on OPPS relative payment weights. Scaling would not apply in the case of ASC payment for separately payable covered ancillary services that have a pr edetermined national payment amount (that is,CMS-1613-P 463 their national ASC payment amounts are not based on OPPS relative payment weights), such as drugs and biologicals that are separately paid or services that are contractor-priced or paid at reasonable cost in ASCs. Any service with a predetermined national payment amount would be included in the ASC budget neutrality comparison, but scaling of the ASC relative payment wei ghts would not apply to those services. The ASC payment weights for those services without predetermined national payment amounts (that is, those services with nationa l payment amounts that would be based on OPPS relative payment weights) would be scal ed to eliminate any difference in the total payment between the current year and the update year. For any given year’s ratesetting, we t ypically use the most recent full calendar year of claims data to model budget neutrality adjustments. At the time of this proposed rule, we have available 98 percent of CY 2013 ASC claims data. To create an analytic file to support ca lculation of the weight scaler and budget neutrality adjustment for the wage index (discussed below), we summarized available CY 2013 ASC claims by ASC and by HCPCS c ode. We used the National Provider Identifier for the purpose of identifying uni que ASCs within the CY 2013 claims data. We used the supplier zip code reported on th e claim to associate State, county, and CBSA with each ASC. This file, available to th e public as a supporting data file for this proposed rule, is posted on the CMS Web site at: http://www.cms.gov/ResearchStatistics-Data-and-Systems/Files-for-Ord er/LimitedDataSets/ASCPaymentSystem.html

.CMS-1613-P 464 b. Proposed Transition Period to New OM B Delineations fo r ASC Wage Index

As discussed in the FY 2015 IPPS/ LTCH PPS proposed rule (79 FR 28054 through 28055), we are proposing to use the new CBSA delineations issued by OMB in OMB Bulletin 13-01 dated February 28, 2013 for the IPPS hospital wage index. Therefore, because the ASC wage indexes are the pre-floor and pre-reclassified hospital wage indexes, the proposed CY 2015 AS C wage indexes reflect the new OMB delineations. While we believe that instituting the latest OMB labor market area

delineations would create a more accurate a nd up-to-date wage index system, we also recognize that implementing the new OMB de lineations may cause some short-term instability in ASC payments; therefore, we are proposing a transition to the new OMB delineations similar to what has been pr oposed for the IPPS for FY 2015 (79 FR 28062)

and the OPPS as described in section II.C of this proposed rule. Specifically for ASCs, we are proposing a 1-year bl ended wage index for all ASCs that would experience any

decrease in their actual wa ge index exclusively due to the implementation of the new

OMB delineations. For ASCs where the CY 2015 ASC wage index with the CY 2015

CBSAs would be lower than with the CY 2014 CBSAs, we are proposing that the CY 2015 ASC wage index would be 50 percen t of the ASC wage index based on the CY 2014 CBSA and 50 percent of the AS C wage index based on the new CY 2015 CBSA. We believe a 1-year 50/50 blended wage index would mitigate the short-term instability and negativ e payment impacts due to the pr oposed implementation of the new OMB delineations, providing ASCs that would be negatively impacted by the new OMB delineations with a transition period duri ng which they may adjust to their newCMS-1613-P 465 geographic CBSA. We believe that a longer transition period would reduce the accuracy

of the overall labor market area wage index system. c. 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 2015 ASC payment system, we are proposing to calculate and apply a budget neutrality adjustment to the ASC conversion factor for supplier level changes in wage index values for the upcoming year, just as the OPPS wa ge index budget neutrality adjustment is calculated and applied to the OPPS conversi on factor. For CY 2015, we calculated this proposed adjustment for the ASC payment system by using the most recent CY 2013 claims data available and estimating the difference in total payment that would be created by introducing the proposed CY 2015 ASC wage indexes. Specifically, holding CY 2013 ASC utilization and service-mix and the pr oposed CY 2015 national payment rates after application of the weight scal er constant, we calculated th e total adjusted payment using the CY 2014 ASC wage indexes and the total adjusted payment using the proposed CY 2015 ASC wage indexes (whi ch reflect the new OMB delin eations and would include any applicable transition period). We used the 50-percent labor-related share for both total adjusted payment calculations. We th en compared the total adjusted payment calculated with the CY 2014 ASC wage indexes to the total adjusted payment calculated with the proposed CY 2015 ASC wage indexe s and applied the resulting ratio of 0.9983CMS-1613-P 466 (the proposed CY 2015 ASC wage index budget neutrality adjustment) to the CY 2014

ASC conversion factor to calculate the proposed CY 2015 ASC conversion factor. Section 1833(i)(2)(C)(i) of the Act requi res that, “if the Secretary has not updated

amounts established” under the revised ASC payment system in a calendar year, the payment amounts “shall be increased by the perc entage increase in the Consumer Price Index for all urban consumers (U.S. city aver age) as estimated by the Secretary for the 12-month period ending with the midpoint of the year involved.” The statute, therefore, does not mandate the adoption of any particular update mech anism, but it requires the payment amounts to be increased by the CPI-U in the absence of any update. Because the Secretary updates the AS C payment amounts annually, we adopted a policy, which we codified at 42 CFR 416.171(a)(2)(ii), to update the ASC conversion factor using the CPI-U for CY 2010 and subsequent calendar year s. Therefore, the annual update to the ASC payment system is the CPI-U (refe rred to as the CPI-U update factor). Section 3401(k) of the Affordable Care Act amended section 1833(i)(2)(D) of the Act by adding a new clause (v) which require s that “any annual update under [the ASC payment] system for the year, after applica tion of clause (iv), shall be reduced by the productivity adjustment described in secti on 1886(b)(3)(B)(xi) (II)” of the Act effective with the calendar year beginning January 1, 2011. The statute defines the productivity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multif actor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicab le fiscal year, year, cost reporting period, or other annual period) (the “MFP adjustment”) . Clause (iv) of sectionCMS-1613-P 467 1833(i)(2)(D) of the Act authorizes the Secret ary to provide for a reduction in any annual update for failure to report on quality measures . Clause (v) of section 1833(i)(2)(D) of the Act states that applica tion of the MFP adjustment to the ASC payment system may result in the update to the ASC payment system being less than zero for a year and may result in payment rates under the ASC paymen t system for a year being less than such payment rates for the preceding year. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), we finalized a policy that ASCs begin submitting data on quality measures for services beginning on October 1, 2012 for the CY 2014 payment determination under the ASCQR Program. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 through 68500), we finalized a methodology to calculate reduced national unadjusted payment rates using the ASCQR Program redu ced update conversion factor that would apply to ASCs that fail to meet their qua lity reporting require ments for the CY 2014 payment determination and subsequent years. The application of th e 2.0 percentage point reduction to the annual update factor, which currently is the CPI-U, may result in the update to the ASC payment syst em being less than zero for a year for ASCs that fail to meet the ASCQR Program requirements. We amended §§ 416.160(a)(1) and 416.171 to reflect these policies.

In accordance with section 1833(i)(2)(C)(i) of the Act, before applying the MFP adjustment, the Secretary first determines the “percentage increase” in the CPI-U, which we interpret cannot be a negativ e percentage. Thus, in the instance where the percentage change in the CPI-U for a year is negative, we would hold the CPI-U update factor for theCMS-1613-P 468 ASC payment system to zero. For the CY 2014 payment determination and subsequent years, under section 1833(i)(2)(D )(iv) of the Act, we would reduce the annual update by 2.0 percentage points for an ASC that fails to submit quality information under the rules established by the Secretary in accordance with section 1833(i)(7) of the Act. Section 1833(i)(2)(D)(v) of the Act, as adde d by section 3401(k) of the Affordable Care Act, requires that the Secretar y reduce the annual update fact or, after application of any quality reporting reduction, by th e MFP adjustment, and states that application of the MFP adjustment to the annual update factor after application of any quality reporting reduction may result in the update being less th an zero for a year. If the application of the MFP adjustment to the annual update factor after application of any quality reporting reduction would result in an MFP-adjusted upd ate factor that is less than zero, the resulting update to the ASC payment rate s would be negative and payments would decrease relative to the prior year. We refer readers to th e CY 2011 OPPS/ASC final rule with comment period (75 FR 72062 through 72064) for illustrative examples of how the MFP adjustment is applied to the ASC payment system. For this proposed rule, based on IHS Global Insight’s (IGI’ s) 2014 first quarter forecast with historical data through 2013 f ourth quarter, for the 12-month period ending with the midpoint of CY 2015, the CPI-U update is projected to be 1.7 percent. Also, based on IGI’s 2014 first quarter forecast, the MFP adjustment for the period ending with the midpoint of CY 2015 is projected to be 0.5 percent. IGI is a nationally recognized economic and financial forecasting firm that contracts with CMS to forecast the components of CMS’ market baskets as well as the CPI-U and MFP. We finalized theCMS-1613-P 469 methodology for calculating the MFP adjustment in the CY 2011 MPFS final rule with comment period (75 FR 73394 through 73396) as revised in the CY 2012 MPFS final rule with comment period (76 FR 73300 th rough 73301). The ASCQR Program affected payment rates beginning in CY 2014 and, under this program, there is a 2.0 percentage point reduction to the CPI-U for ASCs th at fail to meet the ASCQR Program requirements. We are proposing to reduce the CP I-U update of 1.7 percent by the MFP adjustment of 0.5 percentage point, resulting in an MFP-adjusted CPI-U update factor of 1.2 percent for ASCs meeting the quality repo rting requirements. Therefore, we are proposing to apply a 1.2 percent MFP-adjusted CPI-U update factor to the CY 2014 ASC conversion factor for ASCs meeting the quality reporting requirements. We are proposing to reduce the CPI-U update of 1.7 percent by 2.0 percentage points for ASCs that do not meet the quality reporting require ments and then apply the 0.5 percentage point MFP reduction. Therefore, we are proposing to apply a -0.8 percent quality reporting/MFP-adjusted CPI-U update factor to the CY 2014 ASC conversion factor for ASCs not meeting the quality re porting requirements. We also are proposing that if more recent data are subsequently available (for example, a more recent estimate of the CY 2015 CPI-U update and MFP adjustment), we would use such data, if appropriate, to determine the CY 2015 ASC update for th e final rule with comment period. For CY 2015, we also are proposing to adjust the CY 2014 ASC conversion factor ($43.471) by the proposed wage index budget neutrality factor of 0.9983 in addition to the MFP-adjusted update factor of 1.2 per cent discussed above, which results in aCMS-1613-P 470 proposed CY 2015 ASC conversion factor of $43.918 for ASCs meeting the quality reporting requirements. For ASCs not meeti ng the quality reporting requirements, we are proposing to adjust the CY 2014 ASC convers ion factor ($43.471) by the proposed wage index budget neutrality factor of 0.9983 in addition to the qua lity reporting/MFP-adjusted update factor of -0.8 percent discussed a bove, which results in a proposed CY 2015 ASC conversion factor of $43.050. We invite public comment on these proposals. 3. Display of Proposed CY 2015 ASC Payment Rates Addenda AA and BB to this proposed rule (which are available via the Internet on the CMS Web site) display the proposed updated ASC payment rates for CY 2015 for covered surgical procedures and covered an cillary services, respectively. The payment

rates included in these addenda reflect the full ASC payment update and not the reduced payment update used to calculate paymen t rates for ASCs not meeting the quality reporting requirements under the ASCQR Program . These addenda contain several types of information related to the proposed CY 2015 payment rates. Specifically, in Addendum AA, a “Y” in the column titled “Pro posed to be Subject to Multiple Procedure Discounting” indicates that the surgical pr ocedure would be subject to the multiple procedure payment reduction policy. As disc ussed 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 inCMS-1613-P 471 payment policy for the item or service, incl uding identifying disc ontinued HCPCS codes, designating items or services newly paya ble under the ASC payment system, and identifying items or services with changes in the ASC payment i ndicator for CY 2015. Display of the comment indicator “NI” in the column titled “Comment Indicator” indicates that the code is new (or substantia lly revised) and that the payment indicator assignment is an interim assignment that is open to comment in the final rule with comment period. The values displayed in the column titled “Proposed CY 2015 Payment Weight” are the proposed relative payment weights fo r each of the listed services for CY 2015. The proposed payment weights for all covered surgical procedures and covered ancillary services whose ASC payment rates are base d on OPPS relative payment weights were scaled for budget neutrality. Therefore, sca ling 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 co vered ancillary serv ices that have a predetermined national payment amount, such as drugs and biologicals and brachytherapy sources that are separately paid under the OPPS, or services that are contractor-priced or paid at reasonable cost in ASCs. To derive the proposed CY 2015 paymen t rate displayed in the “Proposed CY 2015 Payment Rate” column, each ASC payment weight in the “Proposed CY 2015 Payment Weight” column was multiplied by the proposed CY 2015 co nversion factor of $43.918. The conversion factor includes a budget neutrality adjustment for changes inCMS-1613-P 472 the wage index values and the annual update factor as reduce d by the productivity adjustment (as discussed in secti on XII.H.2.b. of this proposed rule). In Addendum BB, there are no relative payment weights displayed in the “Proposed CY 2015 Payment Weight” column fo r items and services with predetermined national payment amounts, such as separate ly payable drugs and biologicals. The “Proposed CY 2015 Payment” column displays the proposed CY 2015 national unadjusted ASC payment rates for all item s and services. The proposed CY 2015 ASC payment rates listed in Addendum BB for sepa rately payable drugs and biologicals are based on ASP data used for payment in physicians’ offices in April 2014. Addendum E provides the HCPCS codes and short descriptors for surgical procedures that are proposed to be ex cluded from payment in ASCs for FY 2015. III. Hospital Outpatient Qual ity Reporting Program Updates A. Background

1. Overview CMS seeks to promote higher quality and mo re efficient health care for Medicare beneficiaries. In pursuit of these goa ls, CMS has implemented quality reporting programs for multiple care settings including the quality reporting program for hospital outpatient care, known as the Hospital Ou tpatient Quality Reporting (OQR) Program, formerly known as the Hospital Outpat ient Quality Data Reporting Program (HOP QDRP). The Hospital OQR Program has generally been modeled after the quality reporting program for hospital inpatient servi ces known as the Hospital Inpatient QualityCMS-1613-P 473 Reporting (IQR) Program (formerly known as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program). In addition to the Hospital IQR and Hospital OQR Programs, CMS has implemented quality reporting programs for ot her care settings that provide financial incentives for the reporting of quality data to CMS. These additional programs include reporting for care furnished by:

● Physicians and other eligible professionals, un der the Physician Quality Reporting System (PQRS, formerly referred to as the Physician Quality Reporting Program Initiative (PQRI));

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

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

● PPS-exempt cancer hospitals, under th e PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program;

● Ambulatory surgical centers, under the Ambulatory Surgical Center Quality Reporting (ASCQR) Program;

● Inpatient psychiatric facilities, under the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program;

● Home health agencies, under the Home Health Quality Reporting Program (HH QRP); and

● Hospices, under the Hospice Quality Reporting Program.CMS-1613-P 474 In addition, CMS has implemented two value-based purchasing programs, the Hospital Value-Based Purcha sing (Hospital VBP) Program and the End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP), that link payment to performance. In implementing the Hospital OQR Program and other quality reporting programs, we have focused on measures th at have high impact and support national priorities for improved quality and efficien cy of care for Medicare beneficiaries as reflected in the National Quality Strategy (NQS) and CMS Quality Strategy, as well as

conditions for which wide cost and treatment variations have been reported, despite established clinical guidelines. To the exte nt possible under various authorizing statutes, our ultimate goal is to align the clinical quality measure require ments of our various quality reporting programs. As appropriate, we will consider the adoption of measures with electronic specifications to enable the collection of this inform ation as part of care delivery.

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68467 through 68469) for a discussion on the principles underlying consideration

for future measures that we intend to use inimplementing this and other quality reporting

programs. 2. Statutory History of the Hospital OQR Program

We refer readers to the CY 2011 OPPS/A SC final rule with comment period (75 FR 72064 through 72065) for a detailed disc ussion of the statut ory history of the Hospital OQR Program.CMS-1613-P 475 3. Measure Updates and Data Publication a. Maintenance of Technical Specifications for Quality Measures CMS maintains technical specifications for previously adopted Hospital OQR Program measures. These specifications are updated as we continue to develop the Hospital OQR Program. The manuals that c ontain specifications for the previously adopted measures can be found on the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1196289981244

. Many of the quality measures used in Medicare and Medica id reporting programs are endorsed by the National Quality Forum (NQF ). We note that not all of the measures adopted by the Hospital OQR Program are NQF-endorsed, nor is NQF endorsement a program requirement (section 1833(t)(17)(C)(i) of the Act). As part of its regular maintenance process for endorsed performance measures, the NQF requires measure stewards (owners/develope rs) to submit annual measur e maintenance updates and undergo maintenance of endorsement review every 3 years. In the measure maintenance process, the measure steward is responsible for updating and maintaining the currency

and relevance of the measure and will conf irm existing or minor specification changes with the NQF on an annual basis. The NQF solicits information from measure stewards for annual reviews, and it reviews measures for continued endorsement in a specific 3-year cycle. We note that the NQF’s annual or trie nnial maintenance processes for endorsed measures may result in the NQF requiring upd ates to measures in order to maintainCMS-1613-P 476 endorsement status. Other non-NQF measur es may undergo maintenance changes as well. We believe that it is important to have in place a subregulatory process to incorporate nonsubstantive updates into the meas ure specifications for measures that we have adopted for the Hospital OQR Program so that these measure specifications remain current. We also recognize that some changes to measures are substa ntive in nature and might not be appropriate for adoptio n using a subregulatory process. Therefore, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68469 through 68470) we finalized our pr oposal to follow the same process for updating Hospital OQR Program me asures that we adopted fo r the Hospital IQR Program measures, including the subregulatory pro cess for making updates to the adopted measures (77 FR 53504 through 53505). This process expanded upon the subregulatory process for updating measures that we fina lized in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 through 68767). b. Public Display of Quality Measures

We refer readers to the CY 2014 OPPS /ASC proposed rule (78 FR 43645) for a discussion of our policy for the publicati on of Hospital OQR Program data on the Hospital Compare Web site and noninteractive CMS Web sites. We are not proposing any changes to our policies on the public display of quality

measures.CMS-1613-P 477 B. Process for Retention of Hospital OQR Program Measures Adopted in Previous Payment Determinations In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68471), we finalized a policy that once a quality measur e is adopted for the Hospital OQR Program, it is retained for use in subsequentyears unless othe rwise specified. We are not proposing any changes to the process for re taining measures previously adopted. C. Removal of Quality Measures from the Hospital OQR Program Measure Set 1. Considerations in Removing Quality Measures from the Hospital OQR Program In the FY 2010 IPPS/LTCH PPS final rule, we finalized a process for immediate retirement, which we later termed “removal” (74 FR 43863), of Hospital IQR Program measures based on evidence that the continued use of the measure as specified raised patient safety concerns. We adopted the sa me immediate measure retirement policy for the Hospital OQR Program in the CY 2010 O PPS/ASC final rule with comment period (74 FR 60634 through 60635). We refer readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 68472 through 68473) for a discussion of our reasons for changing the term “retirement” to “r emoval” in the Hospital OQR Program.

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), we finalized a set of criteria for determining whether to remove measures from the Hospital IQR Program. These criteria are: (1) measure performan ce among hospitals is so high and unvarying that meaningful distinctions and improveme nts in performance can no longer be made (“topped-out” measures); (2) performance or improvement on a measure does not resultCMS-1613-P 478 in better patient outcomes; (3) a measure does not align with current clinical guidelines or practice; (4) the availability of a more broa dly applicable (across settings, populations, or conditions) measure for the topic; (5) the availa bility of a measure th at is more proximal in time to desired patient outcomes for the particular topic; (6) th e availability of a measure that is more strongly associated with desired patient outcomes for the particular topic; and (7) collection or public reporting of a measure leads to negative unintended consequences such as patient harm. Th ese criteria were sugg ested through public comment on proposals for the Hospital IQR Program, and we determined that these criteria are also applicable in evaluating the Hospital OQR Program quality measures for

removal. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68472 through 68473), we finalized our proposal to apply these measure remova l criteria in the Hospital OQR Program as well. In addition to the Ho spital IQR Program’s criteria, we consider eliminating measure redundancy and incor porating the views of the Measures Application Partnership (MAP) when evaluating measures for removal. 2. Proposed Criteria for Remova l of “Topped-Out” Measures In this proposed rule, we are proposing to refine the criteria for determining when a measure is “topped-out.” We had previously finalized th at a measure is “topped-out” when measure performance among hospitals is so high and unvaryi ng that meaningful distinctions and improvements in perfor mance can no longer be made (“topped-out” measures) (77 FR 68472). We do not believ e that measuring hosp ital performance on “topped-out” measures provides meaningful information on the quality of care providedCMS-1613-P 479 by hospitals. We further believe that quali ty measures, once “topped-out,” represent care standards that have been widely adopted by hos pitals. We believe su ch measures should be considered for removal from the Hosp ital OQR Program because their associated reporting burden may outweigh the value of the quality information they provide. In order to determine “topped-out” stat us, we are proposing to apply the following two criteria, the first of which was previ ously adopted by the Hospital VBP Program in the Hospital Inpatient VBP Program fi nal rule (76 FR 26496 through 26497). The

second criterion is a modified version of what was previously adopted by the Hospital VBP Program in the above mentioned final ru le, with the change from the “less than” operator (<) to the “less th an or equal to” operator ( ≤ ). Specifically, we are proposing that a measure under the Hospital OQR Program is “topped-out” when it meets both of the following criteria:

● Statistically indistinguis hable performance at the 75th and 90th percentiles; and

● A truncated coefficient of vari ation less than or equal to 0.10. To identify if a measure has statistically indistinguishable performance at the 75th and 90th percentiles, we would determin e whether the difference between the 75 th and

90 th percentiles for a measure is within two times the standard error of the full dataset. The coefficient of variation (CV) is a descri ptive statistic that e xpresses the standard deviation as a percentage of th e sample mean; this provides a statistic that is independent of the units of observation. Applied to this analysis, a large CV would indicate a broad

distribution of individual hos pital scores, with large a nd presumably meaningful differences between hospitals in relative perf ormance. A small CV would indicate thatCMS-1613-P 480 the distribution of individual hospital scores is clustered tightly around the mean value, suggesting that it is not usef ul to draw distinctions am ong individual hospitals’ measure performance. The truncated CV excludes observations whose rates are below the 5 th percentile and above the 95 th percentile. We have proposed these same criteria for when

we would consider a measure to be “t opped-out” for the Hospital VBP Program (79 FR 28119) and the Hospital IQR Program (79 FR 28219), and we are also proposing them for the ASCQR Program in section XIV.B.3. of this proposed rule. We invite public comment on this proposal. 3. Proposed Removal of Measures from the Hospital OQR Program for the CY 2017 Payment Determination and Subsequent Years We are proposing to remove thre e measures for the CY 2017 payment determination and subsequent years: OP-4, OP-6, and OP-7. Based on our analysis of Hospital OQR Program chart-abstracted measure data for January 1, 2013 – June 30, 2013 (Q1-Q2) encounters, the following meas ures meet both: (1) the previously finalized criteria for being “topped-out,” that is, measure performance among hospitals is so high and unvarying that meaningful distin ctions and improvements in performance can no longer be made (77 FR 68472), and (2) the two criteria we are proposing in section XIII.C.2. of this proposed rule for determining “topped-out” status. These

measures are:

● OP-4: Aspirin at Arrival (NQF # 0286);

● OP-6: Timing of Antibiotic Prophylaxis; and

● OP-7: Prophylactic Antibiotic Selecti on for Surgical Patients (NQF # 0528).CMS-1613-P 481 Therefore, we are proposing to remove these three measures from the Hospital OQR Program beginning with the CY 2017 payment determination. We believe that removal is appropriate as there is little room for improvement for these measures, all of which address standard clinical care. In addition, by removing these measures, we would alleviate the main tenance costs and administrative burden to hospitals associated with reta ining them. Should we determin e that hospital adherence to these practices has unacceptably declined, we would repropose these measures in future rulemaking. In addition, we would comply with any requirements imposed by the Paperwork Reduction Act before reinstituting th ese measures. We have also proposed to remove three measures under the Hospital IQR Program that are similar to these measures. We note that the similar measures are called AMI-1, SCIP-Inf-1, and SCIP-Inf-2, respectively, in th e Hospital IQR Program and th at we proposed to retain SCIP-Inf-1 and SCIP-Inf-2 as voluntarily report ed electronic clinical quality measures (79 FR 28219 through 28220 and 79 FR 29242). We invite public comment on these proposals.

Hospital OQR Program Measures Proposed for Removal for the CY 2017 Payment Determination and Subsequent Years NQF # Measure

0286 OP-4: Aspirin at Arrival N/A OP-6: Timing of Prophylactic Antibiotics 0528 OP-7: Prophylactic Antibiotic Se lection for Surgical PatientsCMS-1613-P 482 D. Quality Measures Previously Adopted for the CY 2016 Payment Determination and Subsequent Years As previously discussed, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68471), we finalized a polic y that, beginning CY 2013, when we adopt measures for the Hospital OQR Program, these measures are automatically adopted for all subsequent years’ payment determinations , unless we propose to remove, suspend, or replace the measures. The table below lists 27 measures that we adopted for the CY 2016 payment determination and subsequent years under the Hospital OQR Program.

Hospital OQR Program Measure Set Previously Adopted for the CY 2016 Payment Determination and Subsequent Years NQF# Measure Name

N/A OP-1: Median Time to Fibrinolysis 0288 OP-2: Fibrinolytic Therapy Receive d Within 30 Minutes of ED Arrival  0290 OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 0286 OP-4: Aspirin at Arrival**  0289 OP-5: Median Time to ECG N/A OP-6: Timing of Prophylactic Antibiotics ** 0528 OP-7: Prophylactic Antibiotic Selection for Surgical Patients** 0514 OP-8: MRI Lumbar Spine for Low Back Pain N/A OP-9: Mammography Follow-up Rates N/A OP-10: Abdomen CT – Use of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material N/A OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non Cardiac Low Risk Surgery

N/A OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT) N/A OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic HeadacheCMS-1613-P 483 Hospital OQR Program Measure Set Previously Adopted for the CY 2016 Payment Determination and Subsequent Years NQF# Measure Name

N/A OP-17: Tracking Clinic al Results between Visits 0496 OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients N/A OP-20: Door to Diagnostic Evalua tion by a Qualified Medical Professional 0662 OP-21: Median Time to Pain Management for Long Bone Fracture N/A OP-22: ED- Left Without Being Seen**** 0661 OP-23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT or MRI Scan Interpretation Within 45 minutes of Arrival N/A OP-25: Safe Surgery Checklist Use N/A OP-26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures* 0431 OP-27: Influenza Vaccination C overage among Healthcare Personnel 0658 OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow -up Interval for Normal Colonoscopy in Average Risk Patients 0659 OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 1536 OP-31: Cataracts – Improvement in Patie nt’s Visual Function within 90 Days Following Cataract Surgery*** * OP-26: Procedure categories and corres ponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&blobheadername1=ContentDisposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata &blobtable=MungoBlobs. ** Measures we are proposing for removal beginning with the CY 2017 payment determination in section XIII.C.3. of this proposed rule. *** Measure we are proposing for voluntary data collection in section XIII.D.3.b. of this proposed rule.   Name has been updated to correspond with NQF-endorsed name.

1. Data Submission Requirements for OP-27: Influenza Vaccination Coverage Among Healthcare Personnel (NQF # 0431) Repor ted via NHSN for the CY 2017 Payment Determination and Subsequent Years The Influenza Vaccination Coverage among Healthcare Personnel (HCP) (NQF # 0431) was finalized for the Hospital OQR Program in the CY 2014 OPPS/ASCCMS-1613-P 484 final rule with comment period (78 FR 75097 through 75100). We refer readers to the

CY 2014 OPPS/ASC final rule with comment period (78 FR 75116 through 75117) for a discussion of the previously finalized data submission requirements for this measure. This measure was previously finalized fo r the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51636). In this proposed rule, we are making two clarifications: (1) co rrecting the previously stated submission deadlin e; and (2) clarifying that hospitals should report the Influenza Vaccination Coverage among HCP (NQF # 0431) measure by CMS Certification Numb er (CCN) rather than separately reporting for both the inpatient and outpatient setting.

a. Clarification of Submission Deadline and Data Submitted We note that there was a typographical error in our discussion in the CY 2014 OPPS/ASC final rule with comment pe riod (78 FR 75116 through 75117); and we are proposing to remedy that error through this pr oposed rule. Specifically, we finalized that the first deadline for hospitals to su bmit NHSN HAI measure data would be “May 15, 2015 with respect to the October 1, 2015 through March 31, 2015 encounter period” (78 FR 75117). We are clarifying here that the begi nning of the encounter period should be “October 1, 2014” in stead of “October 1, 2015.” In addition, we are clarifying here that the data to be submitted are more specifically referred to as “health care personnel influenza vaccination summary reporti ng data” instead of “HAI measure data.” b. Clarification on Reporting by CM S Certification Number (CCN) We received public comment about the burden of separately collecting HCP influenza vaccination status for both the hospi tal inpatient and outpatient settings. WeCMS-1613-P 485 believe that reporting a single vaccination count for each health care facility enrolled in

NHSN will be less burdensome to facilities. Th erefore, in response to these concerns, we collaborated with CDC to clarify in an Operational Guidance document, that beginning with the 2014-2015 influenza season (CY 2014 reporting period and CY 2016 payment determination), facilities should collect a nd report a single vaccination count for each health care facility by CNN, instead of se parately reporting by i npatient or outpatient setting. We are clarifying he re that facilities will repor t data to NHSN by enrolled facility. CDC will then submit the data on behalf of the facilities by CNN. The CDC also has produced an Operational Guidan ce document regarding reporting for this measure, which can be found at: http://www.cdc.gov/nhsn/PDFs/HCP/OperationalGuidance-ACH-HCP-Flu.pdf

. Reporting data in this way will allow h ealth care facilities with multiple care settings to simplify data collection and submit a single count applicable across the inpatient and outpatient settings. We will th en publicly report the percentage of HCP who received an influenza vaccination per CCN . This single count per CCN will inform the public of the percentage of vaccinated HC P at a particular hea lthcare facility, which would still provide meaningful data and help to improve the quality of care. Specific

details on data submission for this measure can be found at: http://www.cdc.gov/nhsn/acute-car e-hospital/hcp-vaccination/ and at: http://www.cdc.gov/nhsn/acute -care-hospital/index.html

. This clarification regardi ng the reporting of a single count applicable across the inpatient and outpatient settings was also noted in the FY 2015 IPPS/LTCH PPSCMS-1613-P 486 proposed rule for the Hospital IQR Program (79 FR 28221). We note that, in that rule, we refer to reporting specifically by C NN rather than by “enrolled facility”. 2. Delayed Data Collection for OP-29 and OP-30

In the CY 2014 OPPS/ASC final rule with comment period, we adopted OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0558) ( 78 FR 75102) and OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interv al for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF # 0659) (78 FR 75102), both chart-abstracted measures, and proposed that aggregate data would be collected via an online Web-based tool (the QualityNet Web site) beginning with the CY 2016 payment determination. We finalized that, for the CY 2016 payment dete rmination, hospitals would be required to submit aggregate-level encounter data between July 1, 2015 and November 1, 2015 for data collected during January 1, 2014 – December 31, 2014 (78 FR 75114 through 75115). On December 31, 2013, we issued guidan ce stating that we would delay the implementation of OP-29 and OP-30 for 3 months for the CY 2016 payment determination, changing the encounter period from January 1, 2014 – December 31, 2014 to April 1, 2014 – December 31, 2014 ( https://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1228721506778 ). The data submission window for data collected from April 1, 2014 – December 31, 2014 is still July 1, 2015 – November 1, 2015. The

data submission windows and the encounter periods for subsequent years remains asCMS-1613-P 487 previously finalized (78 FR 75114); hospitals are to submit Web-based data between July 1 and November 1 of the year prior to a payment determination with respect to the encounter period of January 1 to December 31 of 2 years prior to a payment determination year. 3. OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery

In the CY 2014 OPPS/ASC final rule w ith comment period, we adopted OP-31 Cataracts – Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536) for the CY 2016 paymen t determination and subsequent years (78 FR 75103). This measure assesses the ra te of patients 18 years and older (with a diagnosis of uncomplicated cataract) in a sa mple who had improvement in visual function achieved within 90 days following catara ct surgery based on completing both a pre-operative and post-operat ive visual function survey. In this proposed rule, we are: (1) co rrecting our response to public comments, (2) noting our decision to delay data colle ction for the CY 2016 payment determination, and, (3) proposing voluntary data collection for the CY 2017 payment determination and subsequent years for OP-31: Cataracts: Impr ovement in Patient’s Visual Function within 90 Days Following CataractSurgery (NQF # 1536). a. Correction of Respon se to Public Comments

In the CY 2014 OPPS/ASC final rule with comment period, we stated in response to commenters concerned that the proposed chart-abstracted measures had not been field-tested, that, “all three measures that we are finalizing . . . were field-tested in theCMS-1613-P 488 HOPD facility setting by the measure st ewards. These three measures are: (1) Endoscopy/Polyp Surveillance: Appropr iate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658); (2) Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a Hist ory of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF # 0659); and (3) [OP- 31] Cataracts: Improvement in Patient’s Visual Function within 90 Days Foll owing Cataract Surg ery (NQF # 1536)” (78 FR 75099 through 75100). We inadvertently misstated that the OP- 31: Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536) had been

field-tested in the HOPD sett ing, and we are clarifying here that this measure has not

been field-tested in that sett ing. We note that in consideri ng and selecting this measure, however, we took into account ot her principles or factors, in cluding: NQS goals, type of measure, HHS Strategic Plan and Ini tiatives, NQF endorsement, MAP support, stakeholder input, alignment with quality goa ls and settings, relevance, utility and burden. More information about these principles can be found in the CY 2014

OPPS/ASC final rule with commen t period (78 FR 43643 through 43644 and 75090 through 75091). b. Delayed Data Collection for OP-31 and Proposed Exclusion from the CY 2016 Payment Determination Measure Set Since our adoption of this measure, we have come to believe that it may be operationally difficult for hospitals to collect and report this measure. Specifically, we

are concerned that the results of the survey used to assess the pre-operative and post-CMS-1613-P 489 operative visual function of the patient ma y not be shared across clinicians, making it difficult for hospitals to have knowledge of the visual functio n of the patient before and after surgery.

We are also concerned about the use of inconsistent surveys to assess visual function; the measure specificati ons allow for the use of any validated survey and results may be inconsistent should clinicians use different surveys. Therefore, on December 31, 2013, we issued guidance stating that we would delay the implementation of OP-31 by 3 months from January 1, 2014 to April 1, 2014 for the CY 2016 payment

determination ( https://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1228721506778 ). Because of continuing concerns, on April 2, 2014, we issued additional guidance stating that we would further delay the implementation of the measure from Apr il 1, 2014 to January 1, 2015 for the CY 2016 payment determination ( https://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1228721506778 ). Therefore, we are proposing to exclude OP-31 Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536) from the CY 2016 payment determination measure set. We will not subject hospitals to a payment reduction wi th respect to this measure for the CY 2016 payment determination. We invite comment on this proposal.CMS-1613-P 490 c. Proposed Voluntary Collection of Data for OP-31 for the CY 2017 Payment Determination and Subsequent Years

We continue to believe that this meas ure addresses an area of care that is not adequately addressed in our current measure set and that the measure serves to drive coordination of care (78 FR 75103). Further, we believe that HOPDs should be a partner in care with physicians and othe r clinicians using their facil ity, and this measure provides an opportunity to do so. Therefore, we are continuing to include this measure in the Hospital OQR Program measure set, but we ar e proposing that hospitals have the option to voluntarily collect and submit OP-31 da ta for the CY 2015 encounter period/CY 2017 payment determination and subsequent years. Further, we will not subject hospitals to a payment reduction with respect to this measure during the period of voluntary reporting. For hospitals that choose to voluntarily submit data, we w ould request that they submit such data using the means and timelines fi nalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75112 through 75113). Data submitted voluntarily will be publicly reported as discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43645) and final rule (78 FR 75092). We invite public comment on this proposal. E. Proposed New Quality Measure for the CY 2017 Payment Determination and Subsequent Years We are proposing to adopt one new clai ms-based measure into the Hospital OQR Program for the CY 2017 payment determination and subsequent years: OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy.CMS-1613-P 491 Colonoscopy is one of the most frequently perf ormed procedures in the outpatient setting

in the United States. 1 The most recent data availa ble indicate that, in 2002 alone, physicians performed an estimated 14 million colonoscopies in the United States. 2 Colonoscopies are associated with a range of well-described and potentially preventable adverse events that can lead to hospital visits , repeat procedures, or surgical intervention for treatment, including colonic perforat ion, gastrointestinal (GI) bleeding, and cardiopulmonary events such as hypoxia, aspi ration pneumonia, and cardiac arrhythmias. While hospital visits are genera lly unexpected after outpatient colonoscopy, the literature suggests that the majority of these vi sits occur within the first 7 days. 3,4,5 Reported hospital visit rates af ter outpatient colonoscopy range fr om 0.8 to 1.0 percent at 7 to 14 days post procedure, and from 2.4 to 3.8 percent at 30 days post procedure. 6 , 7 , 8 Some adverse events such as bleeding occur after the 7 th day, but based on input from clinical experts, public comment, and empirical anal yses, we concluded that unplanned hospital visits within 7 days is the op timal outcome to ensure capture of procedure-related adverse

1 Russo A, Elixhauser A, Steiner C, Wier L. Hospital-Based Ambulator y Surgery, 2007: Statistical Brief #86. Healthcare Cost and Utilization Project (HCUP) Statistical Briefs . Rockville (MD)2006. 2 Seeff LC, Richards TB, Shapiro JA, et al. How ma ny endoscopies are performed for colorectal cancer screening? Results from CDC's survey of endoscopic capacity. Gastroenterology. Dec 2004;127(6):1670-1677. 3 Rathgaber SW, Wick TM. Colonoscopy completion and complication rates in a community gastroenterology practice. Gastrointest Endosc . 2006; 64:556-62. 4 Rabeneck L, Saskin R, Paszat LF. Onset and clinical course of bleeding and perforation after outpatient colonoscopy: a population-based study. Gastrointest Endosc. 2011; 73:520-3. 5 Ko CW, Riffle S, Michael L, et al. Serious compli cations within 30 days of screening and surveillance colonoscopy are uncommon. Clin Gastroenterol Hepatol . 2010; 8:166-73. 6 Ko CW, Riffle S, Shapiro JA, et al. Incidence of minor complications and time lost from normal activities after screening or surveillance colonoscopy. Gastrointest Endosc. Apr 2007;65(4):648-656. 7 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757. 8 Chukmaitov AS, Menachemi N, Brown SL, Saunders C, Tang A, Brooks R. Is there a relationship between physician and facility volumes of ambulatory procedures and patient outcomes? J Ambul Care Manage. Oct-Dec 2008;31(4):354-369.CMS-1613-P 492 events and to minimize capture of hospital vi sits unrelated to the procedure. This measure provides the opportunity for providers to improve quality of care and to lower

the rates of adverse events le ading to hospital visits after outpatient colonoscopy; this will encourage providers to achieve the ou tcome rates of the best performers. We believe it is important to reduce adverse patient outcomes associated with preparation for colonoscopy, the procedure itsel f, and follow-up care. Therefore, we are proposing to include OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy, which is based on Medicare FFS claims, in the Hospital OQR Program for the CY 2017 payment determination and subsequent years. We expect the measure would promote improvement in patientcare over time because transparency in publicly reporting measure scores will make patient unplanned hospital visits (emergency department visits, observation stays, and inpatient admissions) following colonoscopies more visible to providers and patients and encourage providers to incorporate quality improvement activities in orde r to reduce these visits. Pr oviders are often unaware of complications following colonoscopy for which patients visit the hospital. 9 This riskstandardized quality measure will address this information gap and promote quality improvement by providing feedback to faciliti es and physicians, as well as transparency for patients on the rates and va riation across facilities in unpl anned hospital visits after colonoscopy.

The outcome measured in the OP-32 measure is all-cause, unplanned hospital visits (admissions, observation stays, and emer gency department visits) within 7 days of

9 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757.CMS-1613-P 493 an outpatient colonoscopy procedure. The meas ure score, also referre d to as the facilitylevel risk-standardized hospital visit rate, is derived from the calcula tion of the ratio of the numerator to the denominator multiplied by the crude rate. The numerator is the number of predicted (meaning adjusted actua l) hospital visits, which is the number of unplanned hospital visits within seven days of colonoscopy that the facility is predicted to

have based on its case-mix. The denominator is the number of expected hospital visits, which is the number of unplanne d hospital visits the facility is expected to have based on the nation’s performance with the facility’s case-mix. The crude rate is the national unadjusted number of patients who had a hospital visit post-colonoscopy among all patients who had a colonoscopy.

Based on discussions with clinical an d technical panel experts, the measure excludes colonoscopies for patients unde rgoing concomitant high-risk upper GI endoscopy because these patients are at a high er risk for hospital visits than patients undergoing a typical colonoscopy, and patients with a history of inflammatory bowel disease (IBD) or diverticulitis in the y ear preceding the colonoscopy because we likely could not fully characterize and adjust for their pre-procedure ri sk of needing a postprocedure hospital visit or id entify whether these admissions are planned or unplanned. The measure also excludes procedures for pa tients who lack continuous enrollment in

Medicare FFS Parts A and B in the 1 month after the pr ocedure to ensure all patients have complete data available for outcome assessmen t. The statistical risk adjustment model includes 15 clinically relevant risk-adjustment variables that are strongly associated with risk of hospital visits within 7 days following colonoscopy. Additional methodologyCMS-1613-P 494 details and information obtained from pub lic comments for measure development are

available at: http://www.cms.gov/Medicare/Quality -Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Measure-Methodology.html under “Hospital Outpatient Colonoscopy.” Section 1890A(a)(2) of the Act outlines the pre-rulemaking process established under section 1890A of the Act, which requires the Secretary to make available to the public by December 1 of each year a list of quality and efficiency measures that the Secretary is considering. This measure was included on a publicly available document titled “MAP Pre-Rulemaking Report: 2014 Recommendations on Measures for More than 20 Federal Programs” on the NQF Web site at: http://www.qualityforum.org/P ublications/2014/01/MAP_PreRulemaking_Report__2014_Recommendati ons_on_Measures_for_More_than_20_Feder al_Programs.aspx (formerly referred to as the “List of Measures Under Consideration”) in compliance with section 1890A(a)(2) of the Act. (We note that at the time the measure

was listed on the “MAP Pre-Rulemaki ng Report: 2014 Recommendations on Measures for More than 20 Federal Programs,” it was named “High-Acuity Care Visits after Outpatient Colonoscopy Procedure”). The MAP, which represents stakehol der groups, conditionally supported the measure, “noting the need to provide outcome information to inform consumer decisions and drive quality improvement.” The MAP furt her stated that “[t] his measure addresses an important quality and safety issue with in cidence of these events ranging from 10 to 22 per 1,000 after risk adjustment.” The MA P, however, also “recognized the need forCMS-1613-P 495 the measure to be further developed and ga in NQF endorsement. [The] MAP expects the endorsement process to resolve questions of th e reliability and validity of the measure as well as with the accuracy of the algorithm for a ttributing claims data in light of possible effects of the Medicare 3-day paymen t window policy.” As required under section 1890A(a)(4) of the Ac t, we considered the input and recommendations provided by the MAP in selecting measures to propose for the Hospital OQR Program.

We believe we have addressed the con cerns raised by the MAP to the extent possible. The measure is well defined and precisely specified for consistent implementation within and between organiza tions that will allow for comparability. Reliability testing demonstrated the measur e data elements produced were repeatable; that is, the same results were produced a hi gh proportion of the time when assessed in the same population in the same time period. Vali dity testing demonstrated that the measure data elements produce measure scores that co rrectly reflect the quali ty of care provided and that adequately identify diffe rences in quality. In order to ensure the accuracy of the algorithm for attributing claims data and the comprehensive capture of HOPD colonoscopies potentially affected by the pol icy, we identified physician claims for colonoscopy in the HOPD setting from the Medi care Part B Standard Analytical Files (SAF) with an inpatient admission within three days and lacking a corresponding HOPD facility claim. We then attribute the colonos copies identified as aff ected by this policy to the appropriate HOPD facility using the facil ity provider ID from the inpatient claim. Section 1833(t)(17)(C)(i) of the Act states that, “T he Secretary shall develop

measures . . . that reflect c onsensus among affected parties an d, to the extent feasible andCMS-1613-P 496 practicable, shall include measures set fort h by one or more national consensus building entities.” We believe that this proposed m easure reflects consensus among the affected parties, because the MAP, which represents stakehol der groups, reviewed, conditionally supported the measure, and stat ed that it “would provide valuable outcome information to inform consumer decision and drive quality improvement.” Further, the measure was subject to public comment during the MAP and measure development processes, with some public commenters agreeing with the MAP’s conclusions on the measure (p. 184, MAP Report, January 2014; http://www.qualityforum.org/P ublications/2014/01/MAP_PreRulemaking_Report_2014_Recommendations _on_Measures_for_More_than_20_Federal _Programs.aspx ). We also note that the measure was submitted to NQF for endorsement on February 21, 2014. Currently, there are no publicly available quality of care reports for providers or facilities that conduct outpatie nt colonoscopies. Thus, adopt ion of this measure provides an opportunity to enhance the information av ailable to patients choosing among providers who offer this elective procedure. We beli eve this measure would reduce adverse patient outcomes associated with preparation fo r colonoscopy, the procedure itself, and follow-up care by capturing and making more visible to providers and patients all unplanned hospital visits following the procedur e. Further, providing outcome rates to providers will make visible to clinicians meaningful quality differences and encourage improvement. Although this measure is not NQF-endorsed, it is cu rrently undergoing the endorsement process, as noted above. Thus , we believe the statutory requirement forCMS-1613-P 497 included measures to have, to the extent f easible and practicable, been set forth by a national consensus-building en tity has been met by the measure being proposed for adoption. We invite public comment on the proposal to include the following measure in the Hospital OQR Program for the CY 2017 paymen t determination and subsequent years.

NQF # Proposed Measure for the CY 2017 Payment Determination and Subsequent Years Pending OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy

The proposed and previously fina lized measures are listed below. Proposed Hospital OQR Program Measure Set for the CY 2017 Payment Determination and Subsequent Years NQF # Measure Name

N/A OP-1: Median Time to Fibrinolysis 0288 OP-2: Fibrinolytic Therapy Receive d Within 30 Minutes of ED Arrival** ** 0290 OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 0289 OP-5: Median Time to ECG 0514 OP-8: MRI Lumbar Spine for Low Back Pain N/A OP-9: Mammography Follow-up Rates N/A OP-10: Abdomen CT – Use of Contrast Material 0513 OP-11: Thorax CT – Us e of Contrast Material N/A OP-12: The Ability for Providers wi th HIT to Receive Laboratory Data Electronically Directly into their ONC -Certified EHR System as Discrete Searchable Data 0669 OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non Cardiac Low Risk Surgery

N/A OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed Tomography (CT) N/A OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic HeadacheCMS-1613-P 498 Proposed Hospital OQR Program Measure Set for the CY 2017 Payment Determination and Subsequent Years NQF # Measure Name

N/A OP-17: Tracking Clinic al Results between Visits 0496 OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients N/A OP-20: Door to Diagnostic Evalua tion by a Qualified Medical Professional 0662 OP-21: Median Time to Pain Management for Long Bone Fracture N/A OP-22: ED- Left Without Being Seen**** 0661 OP-23: ED- Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who Received Head CT or MRI Scan Interpretation Within 45 minutes of Arrival N/A OP-25: Safe Surgery Checklist Use N/A OP-26: Hospital Outpatient Volume on Selected Outpatient Surgical Procedures* 0431 OP-27: Influenza Vaccination C overage among Healthcare Personnel 0658 OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow -up Interval for Normal Colonoscopy in Average Risk Patients 0659 OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use 1536 OP-31: Cataracts – Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery** N/A OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy*** * OP-26: Procedure categories and corres ponding HCPCS codes are located at: http://qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228889963089&blobhe ader=multipart%2Foctet-stre am&blobheadername1=ContentDisposition&blobheadervalue1=attachment%3Bfilename%3D1r_OP26MIF_v+6+0b.pdf&blobcol=urldata &blobtable=MungoBlobs. ** Measure we are proposing for voluntary data collection in section XIII.D.3.b. of this proposed rule. *** New measure proposed for the CY 2017 payment determination and subsequent years. **** Name has been updated to correspond with NQF-endorsed name.

F. Possible Hospital OQR Program Measures and Topics for Future Consideration The current measure set for the Hospita l OQR Program includes measures that assess process of care, imaging efficiency patterns, care transitions, ED throughput efficiency, the use of health information t echnology (health IT), care coordination, patient safety, and volume. For future payment de terminations, we are considering expandingCMS-1613-P 499 these measure areas and creating measures innew areas. Specifically, we are exploring (1) electronic clinical quality measures ; (2) partial hospitalization measures; (3) behavioral health measures; and (4) other measures that align with the National Quality Strategy and the CMS Quality Strategy domains. 1. Electronic Clinical Quality Measures HHS believes all patients, their families, and their healthcare providers should have consistent and timely access to their healthinformation in a standardized format that can be securely exchanged between the patien t, providers, and others involved in the patient’s care. (HHS August 2013 Statement, “Principles and Strategies for Accelerating Health Information Exchange.” ( http://www.healthit.gov/sites/default/f iles/acceleratinghieprinciples_strategy.pdf )) The Department is committed to accelerating hea lth information exchange (HIE) through the use of electronic health records (EHRs) and other types of healthinformation technology (health IT) across the broader care co ntinuum through a number of initiatives including: (1) alignment of incentives and payment adjustments to encourage provider adoption and optimization of health IT and HIE services through Medicare and Medicaid payment policies; (2) adoption of common standards and cert ification requirements for interoperable health IT; (3) s upport for privacy and security of patient information across all HIE-focused initiatives; and (4) gove rnance of health information networks. More information on the governance of health information networks and its role in facilitating inter operability of health informa tion systems can be found at: http://www.healthit.gov/sites/default/file s/ONC10yearInteroperabilityConceptPaper.pdf

.CMS-1613-P 500 These initiatives are designed to enco urage HIE among health care providers, including professionals and hospitals elig ible for the Medicare and Medicaid EHR Incentive Programs as well as those who are not eligible for those programs, and are designed to improve care deliver y and coordination acr oss the entire care continuum. For example, the Transition of Care Measure #2 in Stage 2 of the Medicare and Medicaid EHR Incentive Programs requires HIE to share summary records for more than 10 percent of care transitions. In addition, to increase flex ibility in the Office of the

National Coordinator for Health Inform ation Technology’s (ONC’s) health IT Certification Program and expand health IT certification, ONC has i ssued a proposed rule concerning a voluntary 2015 Edition of EHR cer tification criteria, which would more easily accommodate the certification of hea lth IT used in health care settings where health care providers are not typically eligible for incentive payments under the EHR Incentive Programs, to facilitate greate r HIE across the entire care continuum.

We believe that HIE and the use of certified EHRs can effectively and efficiently help providers improve internal care deliver y practices, support management of patient care across the continuum, and support the repo rting of electronically specified clinical quality measures (eCQMs). More information on the Voluntary 2015 Edition EHR Certification Criteria propos ed rule can be found at: http://health it.gov/policyresearchers-implementers/standard s-and-certifica tion-regulations

. We anticipate that as electronic he alth records (EHR) technology evolves and more infrastructure is operational, we will begin to accept electronic reporting of many measures from EHR technology certified under th e ONC health IT Certification Program.CMS-1613-P 501 We are working diligently toward this goal. We believe that this progress would significantly reduce the admi nistrative burden on hospitals under the Hospital OQR Program to report chart-abstracted measures. We recognize that considerable work needs to be done by measure owners and health IT developers and implementers to make this possible with respect to the clin ical quality measures targeted for electronic specifications (e-specifications). This work includes co mpleting e-specifications for measures, pilot testing, reliability and validit y testing, and implementing such specifications in certified EHR technology to capture and calculate the results. 2. Partial Hospitaliza tion Program Measures We seek to develop a comprehensive set of quality measures to be available for widespread use for informed decision-maki ng and quality improvement in the hospital outpatient setting. Therefore, in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75106), we stated that, through futu re rulemaking, we intend to propose new measures that help us further our goal of achieving better health care and improved health

for Medicare beneficiaries who receive health care in hospital outpatient settings, such as partial hospitalization programs (P HPs) that are part of HOPDs. Partial hospitalization is an intensive out patient program of psychiatric services provided to patients as an alternative to i npatient psychiatric care for individuals who

have acute mental illness. The PHP was de signed to assist individuals with acute psychiatric illness in managing debilitating symptoms and prevent the need for hospitalization or re-hospitaliz ation. Behavioral health tr eatments and services have improved and evolved through medication ad vances, recovery-based therapy, andCMS-1613-P 502

evidenced-based interventions , including peer supports. PHP services have had the opportunity to evolve to provide individuals with a unique se tting that can contribute to maintaining social and community connectivity while focusing on sustained recovery to prevent initial hospitalization during a given episode and subs equent re-hospitalization. Currently, the Hospital OQR Program has not adopted measures applicable to PHPs. Although we believe that the PHP is an important program offering an alternative to inpatient stays, we note that PHP utilization has been declining. 10 Therefore, as we consider implementing PHP measures in fu ture years, we invite public comment regarding the utility of including measures for this care setting in the Hospital OQR Program. We specifically request public comment on three PHP measures we submitted to the MAP for consideration as part of the “MAP Pre-Rulemaking Report: 2014

Recommendations on Measures for Mo re than 20 Federal Programs” ( http://www.qualityforum.org/Se tting_Priorities/Partnership/ Measure_Applications_Partn ership.aspx (formerly referred to as the “List of Measures Under Consideration”)):

● 30-Day Readmission;

● Group Therapy; and

● No Individual Therapy.

These measures are included in the Pr ogram for Evaluating Payment Patterns Electronic Reports (PEPPERs) developed unde r the Comprehensive Error Rate Testing (CERT) Program. Further information on th ese claims-based measures that provide

10 http://www.cms.gov/Research-Statistics-Da ta-and-Systems/Statistics-Trends-andReports/Reports/downloads/Leung_PHP_PPS_2010.pdf

.CMS-1613-P 503 indicators of quality of care can be found at http://www.pepperresources.org/LinkClic k.aspx?fileticket=stK9uUmQWlM%3d&tabid=

148

. We also request public input on other possible quality measures for partial hospitalization services for inclusion in th e Hospital OQR Program in future years.

3. Behavioral Health Measures In addition to PHP measures, we are c onsidering other measures specific to behavioral health in the outpatient setting, including measures a ddressing depression and alcohol abuse. Major depressi on is a leading cause of disabi lity in the United States, complicates the treatment of other serious illn esses, and is associated with an increased risk of suicide. Major depression is a co mmon mental health condi tion, affecting 6 to 9 percent of those over 55 years of age. 11 Along with other serious mental health conditions, it has a higher Medi care inpatient read mission rate than all other conditions with the exception of heart failure. 12 Alcohol use disorders are the most prevalent type of

addictive disorder in i ndividuals ages 65 and over. 13 Roughly 6 percent of the elderly are considered to be heavy users of alcohol. 14 Alcohol abuse is of ten associated with depression and contributes to the etiology of serious medical conditions, including liver disease and coronary heart disease. Because of the prevalence of depression and alcohol

11 O’Connor E, Whitlock E, Beil T, et al. Screenin g for depression in adult patients in primary care settings: a systematic evidence revi ew. Annals of Internal Medicine 2009 December 1:151(11):793-803. 12 Stephen F. Jencks, M. D., M.P.H., Mark V. Williams, M.D.,and Eric A. Coleman, M.D., M.P.H. Rehospitalizations among Patients in the Medi care Fee-for-Service Pr ogram. N Engl J Med 2009;360:1418-28. 13 Stephen Ross. Alcohol Use Disorders in the Elderl y. Psychiatry Weekly (no date) Available at: http://www.psychweekly.com/aspx/artic le/ArticleDetail.as px?articleid=19. 14 AL Mirand and JW Welte. Alcohol consumption among the elderly in a general population, Erie County, New York. Am J Public Health. 1996 July; 86(7): 978–984.CMS-1613-P 504 abuse and their impact on the Medicare populat ion, we believe that we should consider

measures in these and other behavioral hea lth areas for use in future Hospital OQR Program payment determination years. Therefore, we invite public comment on measures applicable to these areas that w ould be suitable for the Hospital OQR Program. 4. National Quality Strategy and CMS Quality Strategy Measure Domains In considering future Hospital OQR Pr ogram measures, we are focusing on the following National Quality Strategy and CM S Quality Strategy measure domains: making care safer, strengthen person a nd family engagement, promote effective communication and coordination of care, prom ote effective prevention and treatment, work with communities to promote best pr actices of healthy living, and make care affordable. We believe measures in these areas will promote better care and align measures across multiple CMS quality programs, in particular, the Hospital OQR, Hospital IQR, and ASCQR Programs. We invite public comment on these possible measures. G. Proposed Payment Reduction for Hospitals That Fail to Meet the Hospital Outpatient Quality Reporting (OQR) Program Requirements for the CY 2015 Payment Update 1. Background Section 1833(t)(17) of the Act, which applies to subsection (d) hospitals (as defined under section 1886(d)(1)(B ) of the Act), states that hospitals that fail to report data required to be submitted on the measures selected by the Secretary, in the form and manner, and at a time, required by the S ecretary will incur a 2.0 percentage point reduction to their Outpatient De partment (OPD) fee schedule in crease factor; that is, theCMS-1613-P 505 annual payment update factor. Section 1833(t)( 17)(A)(ii) of the Act specifies that any reduction applies only to the payment year i nvolved and will not be taken into account in computing the applicable OPD fee schedule increase factor for a subsequent payment

year. The application of a reduced OPD fee sc hedule increase factor results in reduced national unadjusted payment rates that apply to certain outpatient items and services provided by hospitals that are re quired to report outpatient qual ity data in order to receive the full payment update factor and that fail to meet the Hospital OQR Program requirements. Hospitals that meet the reporting requirements receive the full OPPS payment update without the reduction. For a more detailed discussion of how this payment reduction was initially implemen ted, we refer readers to the CY 2009

OPPS/ASC final rule with comm ent period (73 FR 68769 through 68772). The national unadjusted payment rates for many services paid under the OPPS equal the product of the OPPS c onversion factor and the scal ed relative payment weight

for the APC to which the service is assi gned. The OPPS conversion factor, which is updated annually by the OPD fee schedule increa se factor, is used to calculate the OPPS payment rate for services with the following status indicators (lis ted in Addendum B to this proposed rule, which is av ailable via the Internet on the CMS Web site): “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” or “U.” We note that we are proposing to delete status

indicator “X”’ as described in sections II.A.3. and X. of this proposed rule. We also note that we are proposing to devel op status indicator “J1” as part of our comprehensive APC policy, effective for CY 2015, discussed in section II.A.2.e. of the CY 2014 OPPS/ASCCMS-1613-P 506 final rule with comment period (78 FR 74861 through 74910) and section II.A.2.e. of this proposed rule. Payment for all services assigned to these status indicators will be subject

to the reduction of the nationa l unadjusted payment rates for hospitals that fail to meet Hospital OQR Program requirements, with th e exception of services assigned to New Technology APCs with assigned status indicato r “S” or “T.” We refer readers to the

CY 2009 OPPS/ASC final rule with comment period (73 FR 68770 through 68771) for a discussion of this policy.

The OPD fee schedule increase factor is an input into the OPPS conversion factor, which is used to calculate OPPS payment rate s. To reduce the OPD fee schedule increase factor for hospitals that fail to meet reporting requirements, we calculate two conversion

factors--a full market basket conversion factor (tha t is, the full convers ion factor), and a reduced market basket conversion factor (tha t 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 ra tio as the “reporting ra tio” to indicate that it applies to payment for hospitals that fa il to meet their reporting requirements. Applying this reporting ratio to the OPPS pa yment amounts results in reduced national unadjusted payment rates that are mathemati cally equivalent to the reduced national unadjusted payment rates that would result if we multiplied the scaled OPPS relative payment weights by the reduced conversion factor. For example, to determine the reduced national unadjusted payment rates that applied to hospitals that failed to meet their quality reporting requirements for the CY 2010 OPPS, we multiplied the final full national unadjusted payment rate found in Addendum B of the CY 2010 OPPS/ASC finalCMS-1613-P 507 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 Me dicare beneficiary’s minimum unadjusted copayment and national unadjusted copayment fo r a service to which a reduced national unadjusted payment rate applies would each equal the product of th e reporting ratio and the national unadjusted copayment or the mini mum unadjusted copayment, as applicable, for the service. Under this policy, we a pply the reporting ratio to both the minimum unadjusted copayment and national unadjus ted copayment for services provided by hospitals that receive the payment reduction for failure to meet the Hospital OQR Program reporting requirements. This appli cation of the reporting ratio to the national unadjusted and minimum unadjusted copaymen ts 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 applicab le adjustments to the OPPS national unadjusted payment rates apply 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 adjustmentCMS-1613-P 508 for devices furnished with full or partial cr edit or without cost. Similarly, OPPS outlier payments made for high cost and complex proc edures will continue to be made when outlier criteria are met. For hospitals th at fail to meet the quality data reporting requirements, the hospitals' costs are compared to the reduced payments for purposes of outlier eligibility and paymen t calculation. We establishe d this policy in the OPPS beginning in the CY 2010 OPPS/ASC final ru le with comment period (74 FR 60642). For a complete discussion of the OPPS outlier calculation and eligibility criteria, we refer readers to section II.G. of this proposed rule. 2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2015 We are proposing to continue our estab lished policy of applyi ng the reduction of

the OPD fee schedule increase factor through the use of a reporting ratio for those hospitals that fail to meet the Hospital OQR Program requirements for the full CY 2015 annual payment update factor. For the CY 2015 OPPS, the proposed reporting ratio is 0.980, calculated by dividing the proposed re duced conversion factor of $72.692 by the proposed full conversion factor of $74.176. We are proposing to continue to apply the reporting ratio to all services calculated using the OPPS conversion factor. For the CY 2015 OPPS, we are proposing to apply the reporting ratio, when applicable, to all HCPCS codes to which we have assigned stat us indicators “P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” and “U” (other than new technology APCs to which we have assigned status indicators “S” and “T”). We note that we are proposing to delete status indicator

“X” as described in sections II.A.3. and X. of this proposed rule. We note that we are proposing to develop status indicator “J1” as part of our CY 2015 comprehensive APCCMS-1613-P 509 policy, discussed in section II.A .2.e. of this proposed rule a nd to apply the reporting ratio to the comprehensive APCs. We are proposi ng to continue to ex clude 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 a ll applicable services for those hospitals that fail to meet the Hospital OQR Program repor ting 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 fo r those hospitals that fail to meet the reporting requirements. We invite public comment on these proposals. H. Proposed Requirements for Reporting Ho spital OQR Program Data for the CY 2017 Payment Determination and Subsequent Years 1. Administrative Requirements for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75108 through 75109) for a discussion of the Hospital OQR Program procedural requirements for the CY 2015 payment determinati on and subsequent years. In that final rule with comment period, we codified these procedural requirements at 42 CFR 419.46(a).CMS-1613-P 510 2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program

a. General Proce dural Requirements

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75110 through 75111) for a discussi on of Hospital OQR Program general procedural requirements. In that final rule with comment pe riod, we finalized our proposal to codify these general proce dural requirements at 42 CFR § 419.46(c). We are proposing to correct a typogr aphical error in 42 CFR 419.46(c). This section states, “Except as provided in para graph (d) of this section, hospitals that participate in the Hospital OQR Program must submit to CMS data on measures selected under section 1833(17)(C) of the Act . . .” We are proposing to correct the erroneous reference of “section 1833(17 )(C)” to “section 1833(t)(17)(C).” We invite public comment on this proposal. b. Requirements for Chart-Abstracted Measures Where Data is Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent Years The following chart-abstracted measures in the Hospital OQR Program require data to be submitted for the CY 2017 payment determination and subsequent years:

● OP-1: Median Time to Fibrinolysis;

● OP-2: Fibrinolytic Therapy Receiv ed Within 30 Minutes of ED Arrival (NQF # 0288);

● OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention (NQF # 0290);

● OP-5: Median Time to ECG (NQF # 0289);CMS-1613-P 511

● OP-18: Median Time from ED Arriva l to ED Departure for Discharged ED Patients (NQF # 0496);

● OP-20: Door to Diagnostic Evalua tion by a Qualified Medical Professional;

● OP-21: ED – Median Time to Pa in Management for Long Bone Fracture (NQF # 0662);

● 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 Interp retation Within 45 Minutes of Arrival (NQF # 0661);

● OP-29: Endoscopy/Polyp Surveillance : Appropriate Follow-up Interval for Normal Colonoscopy in Average Ri sk Patients (NQF # 0658); and

● OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoi dance of Inappropriate Use (NQF # 1536).

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68481 through 68484) for a discussion of the form and manner for data

submission of these measures. We are neither proposing new chart-abstra cted measures where patient-level data is submitted directly to CMS nor proposi ng new requirements for data submission for

chart-abstracted measures.CMS-1613-P 512 c. Claims-Based Measure Data Requirements for the CY 2017 Payment Determination and Subsequent Years

As discussed in section XIII.E. of th e preamble of this proposed rule, we are proposing one additional claims-based measure for the CY 2017 payment determination and subsequent years, OP-32: Facility 7-Da y Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy. If this proposal is fi nalized, there will be a total of eight claimsbased measures for the CY 2017 payment determination and subsequent years:

● OP-8: MRI Lumbar Spine for Low Back Pain (NQF # 0514);

● OP-9: Mammography Follow-Up Rates;

● OP-10: Abdomen CT – Us e of Contrast Material;

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

● OP-13: Cardiac Imaging for Preopera tive Risk Assessment for Non-Cardiac Low Risk Surgery (NQF # 0669);

● 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; and

● OP-32: Facility 7-Day Risk-Standardi zed Hospital Visit Rate after Outpatient Colonoscopy.

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75111 through 75112) for a discussion of the claims-based measure data submission requirements for the CY 2015 payment determination and subsequent years.CMS-1613-P 513 In the CY 2012 OPPS/ASC final rule with comment period, we deferred the public reporting of OP-15 (76 FR 74456). We extended the postponement of public reporting for this measure in the CY 2013 and CY 2014 OPPS/ASC final rules with comment period (77 FR 68481, 78 FR 75111). We are not proposing any changes to this policy. Public reporting for OP-15 continue s to be deferred, and this deferral has no effect on any payment determinations; however, hospitals are still required to submit data as previously finalized (76 FR 74456). d. Data Submission Requirements for Measure Data Submitted via the CMS Web-Based Tool for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75112 through 75115) for a discussion of the requirements for measure data submitted via the Web-based tool on a CMS Web site (the QualityNet Web site) for the CY 2016 payment determination and subsequent years. We are not proposing any changes to th e data submission requirements for data

submitted via the CMS Web-based tool. e. Population and Sampling Data Requireme nts for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2011 OPPS/A SC final rule with comment period (75 FR 72100 through 72103) and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74482 through 74483) for discussi ons of our policy that hospitals may voluntarily submit aggregate population and sa mple size counts for Medicare and non-CMS-1613-P 514 Medicare encounters for the measure populations for which chart-abstracted data must be submitted. We are not proposing any changes to this policy. f. Proposed Review and Corrections Period for Chart-Abstracted Measures Under the Hospital OQR Program, hospitals submit chart-abstracted data to CMS on a quarterly basis. This data is typica lly due 4 months after the quarter has ended, unless we grant an extension or exception, as fu rther described in sec tion XIII.J. of this proposed rule. We refer readers to the CY 2014 OPPS/ASC final rule with comment period for a discussion of our previously finalized policies regarding submissions deadlines for chart-abstracted measures ( 78 FR 68482). Hospitals can begin submitting data on the first discharge day of any reporting quarter and can modify this data up until the close of the submission period (or 4 m onths after the quarter has ended). For example, if a hospital enters data on January 2, it could continue to review, correct, and change this data until August 1, the first qua rter submission deadline. We generally provide rates for the measures that have been submitted for chart-abstracted, patient-level data 24-48 hours following submission. Hospitals are encouraged to submit data early in the submission schedule so that they can id entify errors and resubmit data before the quarterly submission deadline. We are proposing to formalize this 4-m onth period as the review and corrections period for chart-abstracted data for the Ho spital OQR Program. During this review and corrections period, hospitals can enter, revi ew, and correct data submitted directly to CMS. After the submission deadline, however, hospitals would not be allowed to changeCMS-1613-P 515

these data. We believe that 4 months is sufficient time for hospitals to perform these activities. We invite pub lic comment on this proposal. 3. Hospital OQR Program Validation Requireme nts for Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent

Years a. Background

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68484 through 68487) for a discussion of finalized policies regarding our validation requirements. We codified these policies at 42 CFR 419.46(e). We are proposing three changes to our validation procedures: (1) we are proposing to change the eligibility requirements for hospitals selected for validation so that a hospital would be eligible if it submits at least one case to the Hospital OQR Program Clinical Data Warehouse during the quarter c ontaining the most recently available data; (2) we are proposing give hospitals the option to either submit paper copies of patient charts or securely transmit electronic ve rsions of medical informati on for validation; and (3) we are proposing that a ho spital must identify the medical record staff responsible for submission of records under the Hospital OQR Program to the designated CMS

contractor. b. Proposed Selection of Hospitals for Data Validation of Chart-Abstracted Measures for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2012 a nd CY 2013 OPPS/ASC final rules with comment period (76 FR 74484 through 74485 and 77 FR 68484 through 68485) for aCMS-1613-P 516 discussion of finalized policies regardi ng our sampling methodology, including sample size, eligibility for validation selection, and encounter minimums for patient-level data

for measures where data is obtained from chart abstraction and submitted directly to CMS from selected hospitals. We are proposing one change to this pr ocess. Previously, to be eligible for random selection for validation, a hospital mu st have been coded as “open” in the CASPER system at the time of selection a nd must have submitted at least 10 encounters to the OPPS Clinical Warehouse during the da ta collection period for the applicable payment determination (76 FR 74484). We are proposing that, beginning with the CY 2015 encounter period for the CY 2017 paymen t determination and subsequent years, a hospital will be eligible for validation if it submits at least one case to the Hospital OQR Program Clinical Data Warehouse during the quarter containing the most recently available data. The quarter containing the mo st recently available data will be defined based on when the random sample is drawn. For example, if we draw a sample in December 2014, the most recent data available would be that from the second quarter of 2014, which ends June 2014, because the submission deadline for second quarter data would be November 1, 2014 ( https://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1205442125082 ; 78 FR 68482). As another example, if a sample is drawn in October 2014, the most recent availabl e data would be from quarter one, which ended in March 2014, because data must be submitted by August 1, 2014. We believe this change is necessary because it increases the probability that selected hospitals haveCMS-1613-P 517

current data in the Warehouse to be validate d. Previously, hospitals that did not have data from the current year available could st ill be selected for validation. We invite public comment on this proposal. c. Targeting Criteria for Data Valid ation Selection for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68485 through 68486) for a discussion of our targeting crit eria. We are not proposing any changes to these policies. d. Methodology for Encounter Selection fo r the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68486) for a discussion of our methodol ogy for encounter selection. We are not proposing any changes to this policy. e. Proposed Medical Record Documentati on Requests for Validation and Validation Score Calculation for the CY 2017 Paymen t Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68486 through 68487) for a discussion of our previously finalized procedures for requesting medical record documentation for va lidation and validation score calculation.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75118), we codified these procedures at 42 CFR 419.46(e)(1) and (e )(2). We are proposing two changes to these policies for the CY 2017 pa yment determination and subs equent years: (1) we are proposing to give hospitals the option to either submit paper c opies of patient charts orCMS-1613-P 518 securely transmit electronic ve rsions of medical informati on for validation; and (2) we are proposing that a ho spital must identify the medical record staff responsible for submission of records under the Hospital OQR Program to the designated CMS

contractor.

For records stored electr onically, hospitals expend a dditional resources printing records onto paper that may be more effici ently transmitted electronically. In addition, the length of paper charts ha s been increasing, and the paper used to submit these records has an environmental impact. Therefore, we are proposing to give hos pitals the option to either submit copies of paper patient charts or securely transmit electronic versions of medical information, which has the potentia l to significantly reduce administrative burden, cost, and environmental impact. We have already finalized a similar policy for the Hospital IQR Program in the FY 2014 IPPS/LTCH PPS fina l rule (78 FR 50834 through 50836) that allows hospitals for the Hospital IQR Program to submit electronic records through the mail on a CD, DVD, or fl ash drive. In addition, in the FY 2015 IPPS/LTCH PPS proposed rule for the Hospita l IQR Program (79 FR 28251), we have proposed to also allow hospitals to submit pa tient charts using a S ecure File Transfer Portal on the QualityNet Web site. The current Hospital OQR Program re gulation at § 419.46(e)(1) states: ‘‘Upon written request by CMS or its contractor , a hospital must submit to CMS supporting medical record documentation that the hospi tal used for purposes of data submission under the program. . . .” We are proposi ng that this requirement may be met by employing either of the following options for the CY 2017 payment determination andCMS-1613-P 519 subsequent years: (1) a hospital may submit pa per medical records, the form in which we have historically requested them; or (2) a hospital may securely transmit electronic

versions of medical information. For the CY 2017 payment determination a nd subsequent years, we are proposing that hospitals that chose to securely transm it electronic versions of medical information should either: (1) download or copy the digital image of the patient chart onto CD, DVD, or flash drive and ship the electronic media following in structions specified on the QualityNet Web site; or (2) securely submit digital images (PDFs) of patient charts using a Secure File Transfer Portal on the Quality Net Web site. The Secure File Transfer Portal would allow hospitals to transfer files through e ither a Web-based portal or directly from a client application using a s ecure file transfer pr otocol. The system provides a mechanism for securely ex changing documents containing sensitive

information such as Protected Health In formation (PHI) or Personally Identifiable Information (PII). Detailed instructions on how to use this system are available in the

Secure File Transfer 1.0 User Manual available on QualityNet at: http://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetBasic&cid=1228773343598

. In addition, in the CY 2013 OPPS/AS C final rule with comment period (77 FR 68486 through 68487), we stated that our validation contra ctor would request medical documentation from each hospital sel ected for validation via certified mail or other trackable method. This request would be sent to “the hospital’s medical record staff identified by the hospital for the submission of records under the Hospital IQRCMS-1613-P 520 Program (that is, the hospital’s medical records staff identified by the hospital to the State QIO)” (77 FR 68487). Quality Improvement Or ganizations (QIOs) are CMS contractors required by the Act (section 1152 through 1154) tasked with, among other responsibilities, assisting hospitals with quality improvement activities. Due to the evolution of the structure of the QIO pr ogram, beginning with CY 2015 for the CY 2017 payment determination and subsequent year s, we are proposing th at a hospital must identify the medical record staff responsible for submission of records under the Hospital OQR Program to the designated CMS contra ctor; this CMS contractor may be a contractor other than the State QIO. Finally, we note that a t ypographical error exists in our validation language in § 419.46(e). This section states, “CMS may validate one or more measures selected under section 1833(17)(C) of the Act . . . .” “[S]ection 1833(17)(C)” should instead state “section 1833(t)(17)(C).” We are proposing to make this change in the regulation text. We invite public comment on these proposals. I. Hospital OQR Program Reconsiderati on and Appeals Procedures for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68487 through 68489) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75118 through 75119) for a discussi on of our reconsideration and appeals procedures. We codified this process by which participating hospitals may submit requests for reconsideration at 42 CFR 419.46( f). We also codified language at § 419.46(f)(3) stating that a hosp ital that is dissatisfied w ith a decision made by CMS onCMS-1613-P 521 its reconsideration request may file an app eal with the Provider Reimbursement Review

Board. We are not proposing any changes to the reconsideration and appeals procedures. J. Extension or Exception Process for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment period (78 FR 75119 through 75120), and 42 CFR 419.46(d) for a comp lete discussion of our extraordinary circumstances extension or waiver process under the Hospital OQR Program. We are not proposing any substantive changes to these policies or the processes. However, in the future, we will refer to the process as the Extraordinary Circumstances Extensions or Exemptions process, instead of the Extraordinary Circumstances Extensions or Waiver process. We are in the pr ocess of revising the Extraordinary Circumstances/Disaster Extens ion or Waiver Request form (CMS-10432), approved under OMB control number 0938-1171. We are updating the forms and instructions so that a hospital or facility may apply for an extension for all applicable quality reporting programs at one time. In addition, we are proposing to make a conforming change from the phrase “extension or waiver” to the phrase “ext ension or exemption” in 42 CFR 419.46(d). Section 419.46(d) currently states, “Exception

. CMS may grant an extension or waiver of one or more data submission deadlines and requirements in th e event of extraord inary circumstancesCMS-1613-P 522 beyond the control of the hospital, such as when an act of nature affects an entire region or locale or a systemic problem with one of CMS’ data collection systems directly or indirectly affects data submi ssion. CMS may grant an extension or waiver as follows: (1) Upon request by the hospital. Specific requirements for submission of a request for an extension or waiver ar e available on the QualityNet Web site. (2) At the discretion of CMS. CMS may grant waivers or extensions to hospitals that have not requested them when CMS determines that an extraordinary circumstance

has occurred.’ We are proposing to revise this language to state, “Exception

. CMS may grant an extension or exception of one or more data submission deadlines and requirements in th e event of extraordinary circumstances beyond the control of the hospital, such as when an act of nature affects an entire region or locale or a systemic problem with one of CMS’ data collection systems directly or indirectly affects data subm ission. CMS may grant an extension or exception as follows: (1) Upon request by the hospital. Specific requirements for submission of a request for an extension or exception are available on the QualityNet Web site.CMS-1613-P 523 (2) At the discretion of CMS. CMS may grant exceptions or extensions to hospitals that have not reque sted them when CMS determines that an extraordinary

circumstance has occurred.” XIV. Requirements for the Ambulator y Surgical Center Quality Reporting (ASCQR) Program A. Background

1. Overview

We refer readers to section XIII.A.1. of th is proposed rule for a general overview of our quality reporting programs. 2. Statutory History of th e Ambulatory Surgical Center Quality Reporting (ASCQR) Program

We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 through 74493) for a detailed discussion of the statutory history of the ASCQR Program. 3. Regulatory History of the ASCQR Program

We refer readers to section XV.A.3. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 75122) for an overview of the regulatory history of the ASCQR Program.CMS-1613-P 524 B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68493 through 68494) for a detailed disc ussion of priorities we consider for ASCQR Program quality measure selection. 2. Proposed Policy for Removal of Qua lity Measures from the ASCQR Program We previously adopted a policy to reta in measures from the previous year’s ASCQR Program measure set for subsequent ye ars’ measure sets except when they are removed, suspended or replaced as indicat ed (76 FR 74504; 77 FR 68494 through 68495; 78 FR 75122). In this proposed rule, we ar e proposing a process for removing adopted

measures. In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43863 through 43865), we finalized a process for immediat e retirement (a term we later changed to “removal”) of RHQDAPU Program (now referred to as th e Hospital IQR Program) measures based on

evidence that the continued use of the measure as specified raised patient safety concerns. We stated that we believe immediate retirement of quality measures should occur when the clinical evidence suggests that continued collection of the data may result in harm to patients. For example, we removed the AMI-6 -Beta Blocker at Arrival measure from the Hospital IQR Program because it encouraged care that raised potential safety concerns according to newly published research suggesting that beta-blockers could increase mortality risks for certain patient populati ons (74 FR 43863). Under such circumstances, we may not be able to wait until the annual rulemaking cycle or until we have had theCMS-1613-P 525 opportunity to obtain input from the public to retire the measure because of the need to discourage potentially harmful practices whic h may result from continued collection of

the measure. In these situations, we would promptly retire the measure and notify hospitals and the public of the retirement of the measure and the reasons for its retirement through the usual communication channels. Further, we w ould confirm the retirement of the measure that was the subject of immedi ate retirement in the next prog ram rulemaking. Finally, we stated that, in other circumstances where we do not believe that continued use of a measure raises specific safety concerns, we in tend to use the rulema king process to retire a measure. For the same reasons stated for the Hospital IQR Program, we believe that this process also would be appropriate fo r the ASCQR Program. Therefore, we are proposing to adopt this same removal pro cess for the ASCQR Program. Under this process, we would immediately remove an ASCQR Program measure based on evidence that the continued use of the measure as specifi ed raised patient safety concerns. In these situations, we would promptly remove the m easure and notify ASCs and the public of the

removal of the measure and the reasons fo r its removal through the ASCQR Program ListServ and the ASCQR Program QualityNet Web site at http://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1228772879650 . Further, we would confirm the removal of the measure that was the subject of immediat e removal in the next OPPS/ASC rulemaking.

For situations where we do not believe that continued use of a measure raises specific safety concerns, we are proposing to use the re gular rulemaking process toCMS-1613-P 526 remove a measure to allow for public comm ent. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53505 through 53506), we listed the criteria we have used to determine whether to remove measures from the Hosp ital IQR Program. Thes e criteria are: (1) measure performance among hospitals is so high and unvarying that meaningful distinctions and improvements in perfor mance can no longer be made (“topped out” measures); (2) availability of alternative meas ures with a stronger relationship to patient outcomes; (3) a measure does not align with curr ent clinical guidelines or practice; (4) the availability of a more broadly applicable (across settings, popul ations, or conditions) measure for the topic; (5) the availability of a measure that is more proximal in time to desired patient outcomes for the pa rticular topic; (6) the availa bility of a measure that is more strongly associated with desired patient outcomes for th e particular topic; and (7) collection or public reporting of a measure leads to negative unin tended consequences other than patient harm. These criteria were suggested through public comment on proposals for the Hospital IQR Program and, we agreed that these criteria should be considered in evaluating the Hospital IQR Program quality measures for removal (75 FR 53506). We believe that these criteria also are applicable in evaluating ASCQR Program quality measures for removal, because we have found them useful for evaluating measures in the Hospital IQR Program and our other quality reporting programs, which share similar goals to the ASCQR Program. Accordingly, we are proposing to adopt these measure removal criteria for the ASCQR Program. We invite public comment on these proposals.CMS-1613-P 527 3. Proposed Criteria for Remova l of “Topped-Out” Measures We are proposing to define criteria for when we would consider a measure to be “topped-out.” A measure is “topped-out” whenmeasure performance among ASCs is so high and unvarying that meani ngful distinctions and impr ovements in performance can no longer be made (“topped-out” measures). We do not believe that measuring ASC performance on “topped-out” measures provide s meaningful information on the quality of care provided by ASCs. We further believ e that quality measures, once “topped-out,” represent care standards that have been wi dely adopted by ASCs. We believe such

measures should be considered for remova l from the ASCQR Program because their associated reporting burden may outweigh the value of the qualit y information they provide. Specifically, we are proposing that a measure under the ASCQR Program is “topped-out” when it meets both of the following criteria:

● Statistically indistinguis hable performance at the 75th and 90th percentiles; and

● A truncated coefficient of vari ation less than or equal to 0.10 To identify if a measure has statistica lly indistinguishable performance at the 75 th

and 90 th percentiles, we would determine whether the difference between the 75 th and 90 th percentiles for an ASC’s measure is within two times the standard error of the full

dataset. The coefficient of variation (CV) is a descriptiv e statistic that expresses the standard deviation as a percentage of the sa mple mean; this provides a statistic that is independent of the units of observation. A pplied to this analysis, a large CV would

indicate a broad distributi on of individual ASC scores, with large and presumablyCMS-1613-P 528 meaningful differences between ASCs in relative performance. A small CV would

indicate that the distribution of individual hospital scores is clustered tightly around the mean value, suggesting that it is not useful to draw distinctions among individual ASCs’ measure performance. The truncated CV excludes observations whose rates are below

the 5 th percentile and above the 95 th percentile. This was done to avoid undue effects of the highest and lowest outlier ASCs, which if included, would tend to greatly widen the dispersion of the distribution and make the measure appear to be more reliable or discerning. These same criteria for when we would consider a measure to be “toppedout” have been proposed for adoption in the Hospital VBP Program (79 FR 28119) and the Hospital IQR Program (79 FR 28219). We invite public comment on this proposal. 4. ASCQR Program Qualit y Measures Adopted in Previous Rulemaking In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 through 74517), we finalized our proposal to implement the ASCQR Program beginning with the CY 2014 payment determination. In the CY 2012 OPPS/ASC final rule with comment period, we adopted five claims-based meas ures for the CY 2014 payment determination and subsequent years, two measures with da ta submission via an online Web page for the CY 2015 payment determination and subsequent years, and one process of care measure for the CY 2016 payment determination and subsequent years (74 FR 74496 to 74511).

In the CY 2014 OPPS/ASC final rule with comment period, we adopted three chartabstracted measures for the CY 2016 paymen t determination and subsequent years (78 FR 75124 to 75130).CMS-1613-P 529 The quality measures that we have previously adopted are listed below.

ASC Program Measure Set Previously Adopted for the CY 2016 Payment Determination and Subsequent Years ASC # NQF # Measure Name ASC-1 0263 Patient Burn ASC-2 0266 Patient Fall ASC-3 0267 Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant ASC-4 0265 Hospital Transfer/Admission ASC-5 0264 Prophylactic Intrave nous (IV) Antibiotic Timing ASC-6 N/A Safe Surgery Checklist Use ASC-7 N/A ASC Facility Volume Data on Selected ASC Surgical Procedures Procedure categories and correspondi ng HCPCS codes are located at: http://qualitynet.org/dcs/ContentS erver?c=Page&pagename=QnetPublic% 2FPage%2FQnetTier2&cid=1228772475754 ASC-8 0431 Influenza Vaccination Coverage among Healthcare Personnel ASC-9 0658 Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in Av erage Risk Patients ASC-10 0659 Endoscopy/Polyp Surveillance: Colonos copy Interval for Patients with a History of Adenomatous Polyps-A voidance of Inappropriate Use ASC-11 1536 Cataracts: Impr ovement in Patient’s Visual Function within 90 Days Following Cataract Surgery* * We are proposing voluntary data collection starting in CY 2017 for this previously adopted measure in section XIV.E.3.c. of this proposed rule. 5. Proposed New ASCQR Program Quality Measure for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75124) for a detailed discussion of our a pproach to ASCQR measure selection. In this proposed rule, we are proposing to adopt one new claims-based measure into the ASCQR Program for the CY 2017 payment de termination and subsequent years:CMS-1613-P 530 ASC-12: Facility Seven -Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy. Colonoscopy is the most commonly perf ormed ambulatory surgery in the United

States. 15 The most recent data available i ndicate that, in 2002 alone, physicians performed an estimated 14 million co lonoscopies in the United States. 16 Colonoscopies are associated with a range of well-describe d and potentially preventable adverse events that can lead to hospital visits, repeat proce dures, or surgical intervention for treatment, including colonic perf oration, gastrointestinal (GI) blee ding, and cardiopulmonary events such as hypoxia, aspiration pneumonia, and ca rdiac arrhythmias. While hospital visits are generally unexpected after outpatient col onoscopy, the literature suggests that the majority of these visits occur within the first 7 days. 17 , 18 , 19 Reported hospital visit rates after outpatient colonoscopy range from 0.8 to 1.0 percent at 7 to 14 days post procedure, and from 2.4 to 3.8 percent at 30 days post procedure. 20 , 21 , 22 Some adverse events such as

15 Russo A, Elixhauser A, Steiner C, Wier L. Hospita l-Based Ambulatory Surgery, 2007: Statistical Brief #86. Healthcare Cost and Utilization Project (HCUP) Statistical Briefs . Rockville (MD)2006. 16 Seeff LC, Richards TB, Shapiro JA, et al. How ma ny endoscopies are performed for colorectal cancer screening? Results from CDC's survey of endoscopic capacity. Gastroenterology. Dec 2004;127(6):1670-1677.

17 Rathgaber SW, Wick TM. Colonoscopy completion and complication rates in a community gastroenterology practice. Gastrointest Endosc . 2006; 64:556-62. 18 Rabeneck L, Saskin R, Paszat LF. Onset and clinical course of bleeding and perforation after outpatient colonoscopy: a population-based study. Gastrointest Endosc. 2011; 73:520-3. 19 Ko CW, Riffle S, Michael L, et al. Serious compli cations within 30 days of screening and surveillance colonoscopy are uncommon. Clin Gastroenterol Hepatol . 2010; 8:166-73. 20 Ko CW, Riffle S, Shapiro JA, et al. Incidence of minor complications and time lost from normal activities after screening or surveillance colonoscopy. Gastrointest Endosc. Apr 2007;65(4):648-656. 21 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757. 22 Chukmaitov AS, Menachemi N, Brown SL, Saunders C, Tang A, Brooks R. Is there a relationship between physician and facility volumes of ambulatory procedures and patient outcomes? J Ambul Care Manage. Oct-Dec 2008;31(4):354-369.CMS-1613-P 531 bleeding occur after day 7, but based on input from clinical experts, public comment, and empirical analyses, we concluded that unplan ned hospital visits within 7 days is the optimal outcome to ensure capture of proce dure-related adverse events and to minimize capture of hospital visits unr elated to the procedure. This measure provides the opportunity for ASCs to improve quality of care and to lower the rates of adverse events leading to hospital visits af ter outpatient colonoscopy; this would encourage ASCs to achieve the outcome rates of the best performers. We believe it is important to reduce adverse patient outcomes associated with preparation for colonoscopy, the procedure itsel f, and follow-up care. Therefore, we are proposing to include the ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy measure, which is based on Medicare FFS claims, in the ASCQR Program for the CY 2017 payment de termination and subsequent years. We expect the measure would promote improve ment in patient care over time because transparency in publicly reporting measure sc ores would make pati ent unplanned hospital visits (emergency department visits, obs ervation stays and inpatient admissions) following colonoscopies more visible to ASCs and patient s and incentivize ASCs to incorporate quality improvement activities in order to reduce th ese visits. ASCs are often unaware of complications following colonoscopy for which patients visit the hospital. 23 This risk-standardized quality measure woul d address this information gap and promote quality improvement by providing feedback to facilities and physicians, as well as

23 Leffler DA, Kheraj R, Garud S, et al. The inciden ce and cost of unexpected hospital use after scheduled outpatient endoscopy. Arch Intern Med. Oct 25 2010;170(19):1752-1757.CMS-1613-P 532 transparency for patients on the rates and va riation across facilitie s in unplanned hospital visits after colonoscopy.

The outcome measured in the ASC-12 m easure is all-cause, unplanned hospital visits (admissions, observation stays, and emer gency department visits) within 7 days of an outpatient colonoscopy procedure. The measure score, also referred to as the facility-level risk-standardized hospital vis it rate, is derived from the calculation of the

ratio of the numerator to the denominator mu ltiplied by the crude rate. The numerator is the number of predicted (meaning adjusted actua l) hospital visits, which is the number of unplanned hospital visits within seven days of colonoscopy that the facility is predicted to

have based on its case-mix. The denominator is the number of expected hospital visits, which is the number of unplanne d hospital visits the facility is expected to have based on the nation’s performance with the facility’s case-mix. The crude rate is the national unadjusted number of patients who had a hospital visit post-colonoscopy among all patients who had a colonoscopy.

Based on discussions with clinical an d technical panel experts, the measure excludes colonoscopies for patients unde rgoing concomitant high-risk upper GI endoscopy because these patients are at a high er risk for hospital visits than patients undergoing a typical colonoscopy, and patients with a history of inflammatory bowel disease (IBD) or diverticulitis in the y ear preceding the colonoscopy because we likely could not fully characterize and adjust for their pre-procedure ri sk of needing a postprocedure hospital visit or id entify whether these admissions are planned or unplanned. The measure also excludes procedures for pa tients who lack continuous enrollment inCMS-1613-P 533

Medicare FFS Parts A and B in the first month after the procedure to ensure all patients have complete data available for outcome a ssessment. The statistical risk adjustment model includes 15 clinically relevant ri sk-adjustment variables that are strongly associated with risk of hospital visits within seven days following a colonoscopy. Additional methodology details, and inform ation obtained from public comment for measure development are available at: http://www.cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/Hospita lQualityInits/Measure-Methodology.html

. Section 1890A of the Act requires the Secretary to establish a pre-rulemaking process with respect to the selection of certain categories of quality and efficiency measures. Under section 1890A(a)(2) of the Ac t, the Secretary must make available to the public by December 1 st of each year a list of quality a nd efficiency measures that the Secretary is considering for the Medicare pr ogram. The measure that we are proposing was reviewed by the MAP and was included on a publicly available document entitled “MAP Pre-Rulemaking Report: 2014 Recomme ndations on Measures for More than 20 Federal Programs” (formerly referred to as the “List of Measures Under Consideration”) on the NQF Web site at: http://www.qualityforum.org/P ublications/2014/01/MAP_PreRulemaking_Report__2014_Recommendati ons_on_Measures_for_More_than_20_Feder al_Programs.aspx (“MAP Report”). (We note that at the time the measure was listed on the “MAP Pre-Rulemaking Report: 2014 Recommendations on Measures for More than 20 Federal Programs” it was named, “High-Ac uity Care Visits after Outpatient Colonoscopy Procedure.”) The MAP conditionally supported this measure for the ASCQR Program.CMS-1613-P 534 The MAP Report stated that the measur e “[s]hould be submitted for and receive NQF endorsement; Measure is promising butneeds further development,” (p. 187, MAP Report). Further, the MAP Report stated that the measure “woul d provide valuable outcome information to inform consumer decision and drive quality improvement” and that the “NQF endorsement process would re solve questions about the reliability and validity of the measure.” The MAP also st ated that NQF endorsement would resolve questions about “the feasibility of the algorithm for attributin g claims data in light of possible effects of the Me dicare three-day payment window” (p. 187, MAP Report). However, this concern with Part A hospital payments relates to the Hospital OQR Program and not the ASCQR Program. As required under section 1890A(a)(4) of the Act, we considered the i nput and recommendations provi ded by the MAP in selecting measures to propose for the ASCQR Program.

We believe we have addressed the con cerns raised by the MAP to the extent possible. The measure was submitted to NQF for endorsement on February 21, 2014. The measure is well-defined and precisely sp ecified for consistent implementation within and between organizations th at will allow for comparabil ity. Reliability testing demonstrated the measure data elements produced were repeatable; that is, the same results were produced a high proportion of the time when assessed in the same population in the same time. Validity testing demonstr ated that the measure data elements produce measure scores that correctly reflect the qua lity of care provided and that adequately identify differences in quality.CMS-1613-P 535 Currently, there are no publicly available quality of care reports for ASCs that conduct outpatient colonoscopies. Thus, adoption of this measure provides an opportunity to enhance the information avai lable to patients c hoosing among ASCs who offer this elective procedure. We believe this measure would reduce adverse patient outcomes associated with preparation fo r colonoscopy, the procedure itself, and follow-up care by capturing and making more vi sible to ASCs and pa tients all unplanned hospital visits following the pr ocedure. In addition, providi ng outcome rates to ASCs

would make visible to clinicians meani ngful quality differences and incentivize improvement. Sections 1833(i)(7)(B) and 1833(t)(17)(C)(i) of the Act, when read together, require the Secretary, except as the Secr etary may otherwise provide, to develop measures appropriate for the measurement of the quality of care 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 natio nal consensus building entities. As stated

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74465 and 74505), we believe that consensus among affected partie s can be reflected through means other than NQF endorsement, including consensus ach ieved during the measure development process, consensus shown through broad accepta nce and use of measures, and consensus through public comment. We believe this proposed measure meets these statutory requirements. We believe that this measure is appropriate for the measurement of quality of care furnished by ASCs because this procedure is commonly performed in ASCs and, as discussed above, can signify important issues in the care being provided in ASCs. WeCMS-1613-P 536

also believe this measure reflects consensus among affected parties, because the MAP, which represents stakeholder groups, reviewed and conditionally supported the measure, and stated that it “would pr ovide valuable outcome information to inform consumer decision and drive quality improvement.” Fu rther, the measure was subject to public comment during the MAP and measure deve lopment processes, with some public commenters agreeing with the MAP’s conclu sions on the measure (p. 187, MAP Report, January 2014; http://www.qualityforum.org/P ublications/2014/01/MAP_PreRulemaking_Report_2014_Recommendations _on_Measures_for_More_than_20_Federal _Programs.aspx ). As discussed above, the statute also requi res the Secretary, except as the Secretary may otherwise provide, to include measures set forth by one or more national consensus building entities to the extent feasible and practicable. This measure is not NQF-endorsed; however, as noted above, this measure is currently undergoing the NQF endorsement process. We note that section 1833(t)(17) of the Act does not require that each measure we adopt for the ASCQR Program be endorsed by a national consensus building entity, or by the NQF specifically. Further, under section 1833(i)(7)(B) of the Act, section 1833(t)(17)(C)(i) of the Act, which contains this requirement, applies to the ASCQR Program, except as the Secretary may otherwise provide. Under this provision, the Secretary has further authority to adopt non-endorsed measures. In summary, we are proposing to adopt one new measure for the ASCQR Program for the CY 2017 payment determination and subsequent years.CMS-1613-P 537 ASC # NQF# Proposed ASCQR Measure for the CY 2017 Payment Determination and Subsequent Years ASC-12 Pending Facility Seven-Day Ri sk-Standardized Hospital Visit Rate after Outpatient Colonoscopy

If this proposal is finalized, the m easure set for the ASCQR Program CY 2017 payment determination and subsequent years would be as listed below. Proposed ASC Program Measure Set fo r the CY 2017 Payment Determination and Subsequent Years ASC # NQF # Measure Name ASC-1 0263 Patient Burn ASC-2 0266 Patient Fall ASC-3 0267 Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant ASC-4 0265 Hospital Transfer/Admission ASC-5 0264 Prophylactic Intrave nous (IV) Antibiotic Timing ASC-6 N/A Safe Surgery Checklist Use ASC-7 N/A ASC Facility Volume Data on Selected ASC Surgical Procedures Procedure categories and co rresponding HCPCS codes are located at: http://qualitynet.org/dcs/C ontentServer?c=Page&pagename= QnetPublic%2FPage%2FQnetTier2&cid=1228772475754 ASC-8 0431 Influenza Vaccination Coverage among Healthcare Personnel ASC-9 0658 Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonosc opy in Average Risk Patients ASC-10 0659 Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Ad enomatous Polyps-Avoidance of Inappropriate Use ASC-11 1536 Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery* ASC-12 Pending Facility Seven-Day Ri sk-Standardized Hospital Visit Rate after Outpatient Colonoscopy** * We are proposing voluntary data collection for this previously adopted measure in section XIV.E.3.c. of this proposed rule. ** New measure proposed for CY 2017 payment determination and subsequent years.CMS-1613-P 538 We invite public comment on our proposal to include ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy in the ASCQR Program beginning with the CY 2017 payment determination. 6. ASCQR Program Measures for Future Consideration

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68493 through 68494), where we finali zed our approach to future measure selection for the ASCQR Program. We seek to develop a comprehensive set of quality measures to be available for widespread us e for informed “patient decision-making and quality improvement in the ASC setting” (77 FR 68496). We also seek to align these quality measures with the National Quality Strategy (NQS), the CMS Strategic Plan (which includes the CMS Quality Strategy), and our other quality reporting and valuebased purchasing programs, as appropriate. Accordingly, in considering future ASCQR Program measures, we are focusing on the following NQS and CMS Quality Strategy measure domains: make care safer; strength en person and family engagement; promote

effective communication and coordination of care; promote effective prevention and treatment; work with communities to promote best practices of healthy living; and make

care affordable. 7. Maintenance of Technical Specifications for Quality Measures

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74513 through 74514), where we finali zed our proposal to follow the same process for updating the ASCQR Program meas ures that we adopted for the Hospital OQR Program measures, includ ing the subregulatory proces s for making updates to theCMS-1613-P 539 adopted measures. In the CY 2013 OPPS/ ASC final rule with comment period (77 FR 68496 through 68497) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75131), we provided additiona l clarification regarding the ASCQR Program policy in the context of the previ ously finalized Hospital OQR Program policy, including the processes for addressing nonsubs tantive and substantiv e changes to adopted

measures. We maintain technical specifications for previously adopted ASCQR Program measures. These specifications are update d as we continue to develop the ASCQR Program. The manuals that contain specifica tions for the previously adopted measures can be found on the QualityNet Web site at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage %2FQnetTier2&cid=1228772475754

. Many of the quality measures used in Medicare and Medica id reporting programs are NQF-endorsed. We note that two of the me asures previously adopted for the ASCQR Program are not NQF-endorsed, and NQF endorse ment is not a program requirement. However, for those measures that are NQF -endorsed, the NQF requires measure stewards to submit annual measure maintenance update s and undergo maintenance of endorsement review every 3 years as part of its re gular maintenance process for NQF-endorsed performance measures. In the measure maintenance process, the measure steward (owner/developer) is responsible for updating an d maintaining the curr ency and relevance of the measure and will confirm existing or minor specification ch anges with the NQF onCMS-1613-P 540 an annual basis. The NQF solicits inform ation from measure stewards for annual reviews, and it reviews measures for continue d endorsement in a spec ific 3-year cycle. We note that the NQF’s annual or trie nnial maintenance processes for endorsed measures may result in the NQF requiring upd ates to measures in order to maintain endorsement status. Other non-NQF measur es may undergo maintenance changes as well. We believe that it is important to ha ve in place the subregulatory process that we have adopted for the ASCQR Program to in corporate nonsubstantive updates into the measure specifications for measures so that the measure specifications remain current. We also recognize that some changes to measur es are substantive in nature and might not be appropriate for adoption us ing a subregulatory process. We are not proposing any changes to this policy. 8. Public Reporting of ASCQR Program Data In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 through 74515), we finalized a policy to make data that an ASC submitted for the ASCQR Program publicly available on a CMS Web site after providing an ASC an opportunity to review the data to be made public. These data will be displayed at the CCN level. We are not proposing any ch anges to this policy. C. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements 1. Statutory Background

We refer readers to section XV.C.1. of the CY 2014 OPPS/ASC final rule with comment period (78 FR 75131 through 75132) for a detailed discussion of the statutoryCMS-1613-P 541 background regarding payment reductions fo r ASCs that fail to meet the ASCQR Program requirements. 2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR Program Requirements for a Payment Determination Year The national unadjusted payment rates for many services paid under the ASC payment system equal the product of the ASC conversion factor and the scaled relative payment weight for the APC to which the service is assigned. Currently, the ASC conversion factor is equal to the conversi on factor calculated for the previous year updated by the MFP-adjusted CPI-U update factor , which is the adjustment set forth in section 1833(i)(2)(D)(v) of the Act. The MFP-adjusted CPI-U update factor is the

Consumer Price Index for all urban consumer s (CPI-U), which curre ntly is the annual update for the ASC payment system, minus th e MFP adjustment. As discussed in the CY 2011 MPFS final rule with comment period (75 FR 73397), if the CPI-U is a negative number, the CPI-U would be held to zer o. Under the ASCQR Program, any annual update would be reduced by 2.0 percentage points for ASCs that fail to meet the reporting requirements of the ASCQR Program. This reduction would apply beginning with the CY 2014 payment rates. For a complete discussion of the calculation of the ASC conversion factor, we refer readers to section XII.G. of this proposed rule. In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 through 68500), in order to implement the requirement to reduce the annual update for ASCs that fail to meet the ASCQR Program requirements, we finalized our proposal that we would

calculate two conversion fact ors: a full update convers ion factor and an ASCQRCMS-1613-P 542 Program reduced update conversion factor. We finalized our proposal to calculate the reduced national unadjusted payment rates using the ASCQR Program reduced update

conversion factor that would apply to ASCs that fail to meet their quality reporting requirements for that calendar year payment determination. We finalized our proposal that application of the 2.0 percentage point reduction to the annual update may result in the update to the ASC payment system being less than zero prior to th e application of the MFP adjustment.

The ASC conversion factor is used to cal culate the ASC payment rate for services with the following payment indicators (lis ted in Addenda AA and BB to this proposed rule, which are available via the Internet on the CMS Web site): “A2,” “G2,” “P2,” “R2,” “Z2,” as well as the service portion of device-intensive pr ocedures identified by “J8.” We finalized our propos al that payment for all se rvices assigned the payment

indicators listed above woul d be subject to the reducti on of the national unadjusted payment rates for applicable ASCs using the ASCQR Program reduced update

conversion factor.

The conversion factor is not used to calculate the ASC payment rates for separately payable services that are assi gned status indicators other than payment indicators “A2,” “G2,” “J8,” “P2,” “R2,” and “Z2.” These services include separately payable drugs and biologicals, pass-thr ough devices that are contractor-priced, brachytherapy sources that ar e paid based on the OPPS payment rates, and certain office-based procedures and ra diology services where payment is based on the MPFS PE RVU amount and a few other specific services that receive cost-based payment. As aCMS-1613-P 543 result, we also finalized our proposal that the ASC payment ra tes for these services would not be reduced for failure to meet the ASCQR Program requirements because the payment rates for these services are not cal culated using the ASC conversion factor and, therefore, not affected by reductions to the annual update. Office-based surgical procedures (perform ed more than 50 percent of the time in physicians’ offices) and separately paid radi ology services (excluding covered ancillary radiology services involving certa in nuclear medicine procedur es or involving the use of contrast agents, as discussed in section XII. C.1.b. of this proposed rule) are paid at the lesser of the MPFS nonfacility PE RVU-base d amounts and the sta ndard ASC ratesetting methodology. We finalized our proposal that the standard ASC ra tesetting methodology for this comparison would use the ASC conversi on factor that has been calculated using the full ASC update adjusted for productivity. This is necessary so that the resulting ASC payment indicator, based on the comparison, a ssigned to an office-based or radiology procedure is consistent for each HCPCS code regardless of whether payment is based on the full update conversion factor or th e reduced update conversion factor.

For ASCs that receive the reduced ASC payment for failure to meet the ASCQR Program requirements, we believe that it is both equitable and appropriate that a reduction in the payment for a service should result in proportionately reduced copayment liability for beneficiaries. Ther efore, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 68500), we fina lized our proposal that the Medicare beneficiary’s national unadjusted copayment for a service to which a reduced nationalCMS-1613-P 544 unadjusted payment rate applies would be based on the reduced national unadjusted payment rate. In that final rule with comment perio d, we finalized our proposal that all other applicable adjustments to the ASC nationa l unadjusted payment rates would apply in those cases when the annual update is re duced for ASCs that fail to meet the requirements of the ASCQR Program (77 FR 68500). For example, the following standard adjustments would a pply to the reduced national una djusted payment rates: the wage index adjustment, the multiple procedure adjustment, the interrupted procedure adjustment, and the adjustment for devices furn ished with full or partial credit or without cost. We believe that these adjustments continue to be equally applicable to payment for ASCs that do not meet the ASCQR Program requirements. In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75132), we did not make any changes to these policies. We are not proposing any changes to these policies. D. Administrative Requirements 1. Requirements Regarding QualityNet Account and Security Administrator

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75132 through 75133) for a detailed discussion of the QualityNet security administrator requirements, including setting up a QualityNet account, and the associated timelines, for the CY 2014 payment determina tion and subsequent years. We are not proposing any changes to these policies.CMS-1613-P 545 2. Requirements Regarding Participation Status

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75133 through 78 FR 75135) for a complete discussion of the participation status requirements for the CY 2014 payment determina tion and subsequent years. We are not proposing any changes to these policies. E. Form, Manner, and Timing of Data Submitted for the ASCQR Program 1. Requirements Regarding Data Processing and Collection Periods for Claims-Based Measures Using Qualit y Data Codes (QDCs)

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75135) for a complete summary of the data processing and collection periods for the claims-based measures using QDCs for the CY 2014 payment determination and subsequent years. We are not propo sing any changes to these policies. 2. Minimum Threshold, Minimum Case Volume, and Data Completeness for Claims-Based Measures Using QDCs

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75135 through 75137) for a complete discussion of the minimum thresholds, minimum case volume, and data completeness for successful reporting for the CY 2014 payment determination and subsequent years. We are not proposing any changes to these policies.CMS-1613-P 546 3. Requirements for Data Submitted Via a CMS Online Data Submission Tool

a. Data Collection for ASC-6 and ASC-7

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74509) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75137 through 75138) for a complete di scussion of the requirements for data

collection and submission for the ASC-6: Sa fe Surgery Checklist Use and ASC-7: ASC Facility Volume Data on Selected ASC Surg ical Procedures meas ures for the CY 2015 payment determination and subsequent years. We are not proposing any changes to these policies. b. Delayed Data Collection for ASC-9 and ASC-10 In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75124 through 75130), we adopted ASC-9: Endoscopy/Pol yp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Aver age Risk Patients (NQF #0658) and ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy In terval for Patients with a History of Adenomatous Polyps – Avoidance of Inappropriate Use (NQF #0659), two additional chart-abstracted measures, and we finalized a policy that aggregate data (numerators, denominators, and exclusions) on all ASC pa tients would be collected via an online Web-based tool that would be made available to ASCs via the QualityNet Web site.

We finalized that the data collection time period would be the calendar year (January 1 to December 31) 2 years prior to the affected payment determination year, and the data collected would be submitted during th e time period of January 1 to August 15 in the year prior to the affected payment determination year. Thus, for the CY 2016CMS-1613-P 547 payment determination, ASCs would be requi red to submit aggregate-level encounter data from January 1, 2014 to December 31, 2014 using our Web-based tool during the data submission window of January 1, 2015 to August 15, 2015 (78 FR 75138 through 75139). On December 31, 2013, we issued guidan ce stating that we would delay the implementation of ASC-9 and ASC-10 for 3 months for the CY 2016 payment determination, with a resulting encounter period of April 1, 2014 to December 31, 2014 instead of January 1, 2014 to December 31, 2014 ( https://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier3&cid=1228772879036 ). The data submission timeframe and the encounter period for subsequent years rema in as previously finalized (78 FR 75139). c. Delayed Data Collection and Propos ed Exclusion for ASC-11 for the CY 2016 Payment Determination and Proposed Volunt ary Data Collection for ASC-11 for CY 2017 and Subsequent Payment Determination Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period, where we adopted ASC-11: Cataracts – Improve ment in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536) beginning with the CY 2016 payment determination (78 FR 75129), and finalized the data collection and data submission timelines (78 FR 75138 to 75139). This measure assesses the rate of patients 18 years and older (with a diagnosis of uncomplicated cataract) in a sample who had improvement

in visual function achieved within 90 days following catar act surgery based on completing both a pre-operative and pos t-operative visual function survey.CMS-1613-P 548 Since our adoption of this measure, we have come to believe that it may be operationally difficult at this time for ASCs to collect and report this measure. Specifically, we are concerned that the resu lts of the survey used to assess the preoperative and post-operative visual function of the patient may not be shared across clinicians and facilities, ma king it difficult for ASCs to have knowledge of the visual function of the patient before and after surgery. We are also concerned about the surveys used to assess visual function; the measure a llows for the use of a ny validated survey and results may be inconsistent should clinicians use different surveys. Therefore, on December 31, 2013, we issued guidance stating that we would delay data collection for ASC-11 for 3 mont hs (data collection would commence with April 1, 2014 encounters) for the CY 2016 payment determination ( https://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier3&cid=1228772879036 ). We issued additional guidance on April 2, 2014, stating that we would furt her delay the implementation of ASC-11 for an additional 9 months, until January 1, 2015 for the CY 2016 payment determination, due to

continued concerns ( https://www.qualitynet.org/dcs/ContentSer ver?c=Page&pagename=QnetPublic%2FPage %2FQnetTier3&cid=1228773811586 ). Therefore, we are proposing to exclude ASC-11 Cataracts: Improvement in Patient’s Visual Function within 90 Days Following Cataract Surgery (NQF #1536) from the CY 2016 payment determination measure set. We would not subject ASCs to a payment reduction withrespect to this measure for the CY 2016 payment determination.CMS-1613-P 549

We continue to believe that this meas ure addresses an area of care that is not adequately addressed in our current meas ure set and the measure serves to drive coordination of care (78 FR 75129). Further, we believe ASCs shoul d be a partner in care with physicians and other clinicians us ing their facility and that this measure provides an opportunity to do so. Therefore, we are continuing to include this measure in the ASCQR Program measure set for th e CY 2017 payment determination and subsequent years. However, we understa nd the concerns and, th erefore, are proposing that data collection and submission be voluntary for this measure for the CY 2017 payment determination and subsequent years. ASCs would not be subject to a payment reduction for failing to report this measure du ring the period of vol untary reporting. For ASCs that choose to submit data, we continue to request that they submit such data using

the means and timelines finalized in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75138 to 75139). Data submitted voluntarily will be publicly reported as

discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 75138 to 75139). We invite public comment on this proposal. 4. Claims-Based Measure Data Requirements for the Proposed New Measure for the CY 2017 Payment Determination and Subsequent Years We are proposing to adopt the ASC-12: Facility Seven-Day Risk-Standardized Hospital Visit Rate after Outpatient Col onoscopy measure, which is a claims-based measure that does not require any additional data submission apart from standard Medicare FFS claims. We are proposing that, for this measure, which uses ASC Medicare claims data as specified in the ASCQR Specifications Manual and does notCMS-1613-P 550 require any additional data submission such as QDCs, we would use paid Medicare FFS claims from a 12-month period from July 1 of the year 3 years before the payment determination year to June 30 of the fo llowing year. Thus, for the CY 2017 payment determination for this measure, claims from July 1, 2014 to June 30, 2015 would be used. We note that we are proposing to adopt this measure under the Hospital OQR Program,

as described in section XIII.H.2.c. of this proposed rule. This ASCQR Program time period provides for the timeliest data possible while aligning the proposed data submission requirements with our Hospital OQR Program proposal, which would use the claims-based measure data submission requirements for the CY 2015 payment determination and subsequent years that we adopted in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75111 through 75112). We invite public comment on this proposal. 5. Data Submission Requirements for ASC- 8 (Influenza Vaccination Coverage Among Healthcare Personnel) Reported via the National Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination and Subsequent Years a. Previously Adopted Requirements for the CY 2016 Payment Determination

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74510) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75139 through 75140) for a complete disc ussion of the ASC-8 measure (Influenza Vaccination Coverage among Healthcare Pers onnel) (NQF #0431), including the data collection timeframe and the data reporti ng standard procedures for the CY 2016 payment determination.CMS-1613-P 551 In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75139 through 75140), we finalized our proposal to use the data submi ssion 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 for detailed procedures for enrollment ( http://www.cdc.gov/nhsn/ambulatorysurgery/enroll.html ), set-up ( http://www.cdc.gov/nhsn/ambul atory-surgery/setup.html ), and reporting ( https://sams.cdc.gov ) (user authorization through Secure Access Management Services (SAMS) is required for access to NHSN). We note that the reporting link has been upda ted in this proposed rule. b. Proposed Data Collection Timeframes for the CY 2017 Payment Determination and Subsequent Years and Proposed Submi ssion Deadlines for the CY 2016 Payment Determination and Subsequent Years In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74510), we

finalized that data collection for the CY 2016 payment determination would be from October 1, 2014 through March 31, 2015 (the 201 4-2015 influenza season data). We are proposing that for the CY 2017 payment dete rmination and subsequent years, ASCs would collect data from October 1 of the year 2 years prior to the payment determination year to March 31 of the year prior to the pa yment determination year. For example, the CY 2017 payment determination would requir e data collection from October 1, 2015 to March 31, 2016. In the CY 2014 OPPS/ASC proposed rule, we proposed that ASCs would have until August 15, 2015 to submit their 2014-2015 influenza season data (October 1, 2014CMS-1613-P 552 through March 31, 2015) to NHSN. We stated that this date is the latest date possible for data entry that would provide sufficient time for CMS to make the CY 2016 payment determinations and is aligned with the data entry deadline for the measures entered via the CMS online tool (78 FR 43670). While some commenters suppor ted this proposal, others expressed disagreement with this proposal because it differed from the May 15 deadline proposed for the Hospital IQR Program (78 FR 27700, 50822) and the Hospital OQR Program (78 FR 43656, 75116 through 75117) a nd they believed this difference in

deadlines could cause confusion, thereby disadvantag ing ASCs (78 FR 75140). Other commenters believed that providi ng ASCs with a later deadli ne would provide an unfair advantage because ASCs would have longer to submit their data. Due to these concerns, we did not finalize the August 15, 2015 deadline. We stated th at we intended to propose

a submission deadline for this measure for the CY 2016 payment determination in this proposed rule. In this proposed rule, we are proposing that May 15 of the year in which the

influenza season ends be the submission dead line for each payment determination year, similar to the Hospital IQR and OQR Programs. For example, for the CY 2016 payment determination, ASCs would be required to submit their 2014-2015 influenza season data (October 1, 2014 through March 31, 2015) by May 15, 2015. Similarly, for the CY 2017 payment determination, ASCs would be re quired to submit their 2015-2016 influenza season data (October 1, 2015 through Marc h 31, 2016) by May 15, 2016. We believe a May 15 reporting deadline would enable ASCs to use data summarizing the results of their previous influenza vaccination campaign to set targets and make plans for theirCMS-1613-P 553 influenza vaccination campaigns prior to the next influenza season. This deadline also would enable us to post and the public to revi ew the summary data before the start of the next influenza season. Finally, th is date aligns to the May 15 deadline used in the Hospital IQR and OQR Programs for this measure. We invite public comment on this proposal. 6. ASCQR Program Validation of Claims -Based and CMS Web-Based Measures

We refer readers to the FY 2013 I PPS/LTCH PPS final rule (77 FR 53641 through 53642) for a complete discussion of our policy not to require validation of claims-based measures (beyond the usual cl aims validation activities conducted by our administrative contractors) or Web-based m easures for the ASCQR Program, which is in alignment with our requirements for the Ho spital IQR and OQR Programs. We are not proposing any changes to this policy. 7. Extraordinary Circumstances Extensions or Exemptions for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the FY 2013 I PPS/LTCH PPS final rule (77 FR 53642 through 53643) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75140 through 75141) for a complete discussion of our extraordinary circumstances extension or waiver pro cess under the ASCQR Program. We are not proposing any substantive changes to these polic ies or the processes. However, in the future, we will refer to the process as the “Extraordinary Circumstances Extensions or Exemptions” process rather than the “Ext raordinary Circumstances Extensions or Waivers” process.CMS-1613-P 554 We also are in the process of revising the Extraordinary Circumstances/Disaster Extension or Waiver Request form (CMS -10432), approved under OMB control number 0938-1171. We are updating the instructions and the form so that a hospital or facility may apply for an extension for all applicable quality reporting programs at the same time. In addition, the instructions for the form will be updated. 8. ASCQR Program Reconsideration Procedures for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the FY 2013 I PPS/LTCH PPS final rule (77 FR 53643 through 53644) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75141) for a complete discussion of our informal reconsideration process for the ASCQR Program for the CY 2014 payment determ ination and subsequent years. We are not proposing any changes to the in formal reconsideration process.

XV. Proposed Changes to the Rural Pr ovider and Hospital Ownership Exceptions to the Physician Self-Referral Law: Expansion Exception Process A. Background 1. Statutory Basis Section 1877 of the Act, also known as th e “physician self-refe rral law” prohibits: (1) a physician from making referrals for certa in designated health services payable by Medicare to an entity with which the physic ian (or an immediate family member) has a financial relationship (ownership or comp ensation), unless an exception applies; and (2) the entity from submitting claims to Me dicare (or to another individual, entity, orCMS-1613-P 555 third party payer) for those designated health se rvices furnished as a result of a prohibited

referral. The Act establishes a number of specific exceptions to the physician self-referral law and grants th e Secretary the authority to cr eate regulatory exceptions that pose no risk of program or patient abuse. Si nce the original enactment of the statute in 1989, we have published a series of final rule s interpreting the stat ute and promulgating numerous exceptions. Section 1877(d) of the Act sets fort h exceptions related to ownership and investment interests held by a physician (or an immediate family member of a physician) in an entity that furnishes designated hea lth services. Sectio n 1877(d)(2) of the Act provides an exception for owners hip and investment interests in rural providers. Under the provision of section 1877(d)(2 ) of the Act, in order for an ownership or investment interest to qualify for the ex ception, the designated health services must be furnished in a rural area (as defined in s ection 1886(d)(2) of the Act), a nd substantially all of the designated health services fu rnished by the entity must be furnished to individuals residing in a rural area. Section 1877(d)(3 ) of the Act provides the hospital ownership exception, often referred to as the “whol e hospital exception,” for ownership and investment interests in a hospital located outside of Puerto Ri co, provided that the referring physician is authorized to perform services at the hospita l and the ownership or investment interest is in the hospital itsel f (and not merely in a subdivision of the hospital). 2. Affordable Care Act Amendments to the Rural Provider and Hospital Ownership Exceptions to the Physician Self-Referral LawCMS-1613-P 556 Section 6001(a) of the Affordable Care Act amended the rural provider and whole hospital exceptions to the phys ician self-referral law to im pose additional restrictions on physician ownership and investment in rura l providers and hospitals. Section 6001(a) defines a “physician owner or investor” as a physician, or immediate family member of a physician, who has a direct or indi rect ownership or investment interest in a hospital. We refer to hospitals with direct or indi rect physician owners or investors as “physician-owned hospitals.” Section 6001(a)(3) of the A ffordable Care Act established new section 1877(i) of the Act, which imposes additional requireme nts for physician-owned hospitals to qualify for the rural provider or whole hospital excep tion. In addition to other requirements, section 1877(i)(1) of the Act prohibits a physician-owned hospital from expanding its facility capacity beyond the number of operati ng rooms, procedure rooms, and beds for which the hospital was licensed as of Marc h 23, 2010, unless an exception is granted by the Secretary. Section 1877(i)(3) of the Ac t requires the Secretary to establish and implement an exception process to the prohibition on expansio n of facility capacity. We refer to this process as the “expansion exception proce ss.” Section 1877(i)(3)(A)(i) of the Act provides that a hospital qualifying as an “a pplicable hospital” or a “high Medicaid facility” may apply for an expansion excepti on. Section 1877(i)(3)(E ) of the Act sets forth the eligibility criteria for applicable hospitals, which include criteria concerning inpatient Medicaid admissions, bed capacit y, and bed occupancy. Section 1877(i)(3)(F)CMS-1613-P 557 of the Act sets forth the eligibility criteria for high Medicaid faci lities, which include a criterion concerning inpatie nt Medicaid admissions. In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72240), we addressed many of the additional requirements that were established by section 6001(a)

of the Affordable Care Act for the rura l provider and whole hospital exceptions, including the prohibition on expansion of fac ility capacity. In that final rule with comment period, we finalized regulations at 42 CFR 411.362(b)(2) that prohibit a physician-owned hospital from increasing the number of operating rooms, procedure rooms, and beds beyond that for which th e hospital was licensed on March 23, 2010 (or, in the case of a physician-owned hospital that did not have a provider agreement in effect as of that date, but did have a provider agreement in effect on December 31, 2010, the effective date of such agreement), if the hospi tal seeks to avail itself of the rural provider or whole hospital exception. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74517), we promulgated regulations under 42 CFR 411.362(c) that govern the expansion exception process. Section 411.362(c)(2) sets forth th e criteria for a physici an-owned hospital to qualify for an expansion exception as an applicable hospital. Specifically, § 411.362(c)(2) states that: (1) the hospital’s a nnual percent of tota l inpatient admissions under Medicaid must be equal to or greater th an the average percent with respect to such admissions for all hospitals located in the c ounty in which the hospital is located during the most recent fiscal year for which data ar e available as of the date that the hospital submits its exception request; (2) the hospital must be located in a State in which theCMS-1613-P 558 average bed capacity in the St ate is less than the national average bed capacity during the most recent fiscal year for which data are avai lable as of the date that the hospital submits its request; and (3) the hospital must have an average bed occupancy ra te that is greater than the average bed occupancy rate in the St ate in which the hospital is located during the most recent fiscal year for which data ar e available as of the date that the hospital submits its request. Section 411.362(c)(3) specifies the criteria for a physic ian-owned hospital seeking an exception under the expansion exception proc ess on the basis that it is a high Medicaid facility, including the requirement that, with respect to each of the 3 most recent fiscal years for which data are available as of the date that the hospital submits its exception request, the hospital must have 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 c ounty in which the hospital is located. In the CY 2012 OPPS/ASC proposed rule (76 FR 42350 through 42352), we proposed that data from the CMS Healthcare Cost Report Information System (HCRIS) be used to determine whether a hospital sati sfies the inpatient Medicaid admissions, bed capacity, and bed occupancy criteria for appli cable hospitals and the inpatient Medicaid admissions criterion for high Medicaid f acilities. We reque sted public comments concerning alternative data sources that could result in more a ccurate determinations as to whether a hospital satisfies the relevant cr iteria (76 FR 42350). The public comments that we received provided no persuasive support for a data source more accurate than the filed hospital cost report da ta reported to HCRIS and, therefore, we finalized theCMS-1613-P 559 requirement to use filed hospital cost report data for purposes of facility capacity expansion exception requests in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74518). We refer to the filed hospital cost report data that are required under our existing regulations as “HCRI S data” in this proposal. As required by section 1877( i)(3)(A) of the Act, the regulations addressing the expansion exception process in the CY 2012 OP PS/ASC final rule with comment period were issued by January 1, 2012, and the pr ocess was implemented on February 1, 2012. B. Limitations Identified by Stakeholders Regarding the Required Use of HCRIS Data Following the implementation of the expansion exception process, industry stakeholders informed us of what they be lieved to be certain limitations regarding the required use of HCRIS data, which we de scribe in the following two sections.CMS-1613-P 560 1. Medicaid Managed Care Data Existing § 411.362(c)(2)(ii) pr ovides that an applicable hospital must use filed cost report discharge data to estimate its annual percent of tota l inpatient admissions under Medicaid for the most recent fiscal year for which data are available. Existing § 411.362(c)(3)(ii) similarly provid es that a high Medicaid faci lity must use filed cost report discharge data to estimate its annual percent of total inpa tient admissions under Medicaid and such percent for every other hos pital located in its county for each of the 3 most recent fiscal years for which data are available. Since the issuance and implementation of this rule, several in dustry stakeholders have informed us that a correctly comp leted hospital cost re port does not include Medicaid managed care admissions or discha rges and, therefore, Medicaid managed care admissions and discharges are not availabl e in HCRIS. The industry stakeholders claimed that, because HCRIS data does not include Medicaid managed care admissions or discharges, they are unable to satisfy §§ 411.362(c)(2)(ii) and (c)(3)(ii) and, thus, cannot qualify for an exception under the exis ting expansion exception process, despite claiming to have served a significant number of total Medicaid patients. After being notified of this issue, we confirmed that hospitals cannot report Medicaid managed care admissions or discha rges through their hosp ital cost reports and

that this information is not available in HCRI S. In addition, we have concluded that the information collected currentlythrough HCRIS cannot be used to estimate Medicaid managed care admissions or discharges for purposes of estimating inpatient Medicaid admissions under §§ 411.362(c)(2 )(ii) and (c)(3)(ii).CMS-1613-P 561 We believe that some physician-owned hos pitals that serve a significant number of Medicaid managed care patien ts and are interested in th e expansion exception process may fail to qualify for an exception based on the exclusion of Medi caid managed care data. Accordingly, as detailed in section XV.C. of this proposed rule, we are proposing to revise the expansion exception process to permit physician-owned hospitals to use filed hospital cost report data, data from internal data source s, or data from external data sources to estimate the required percentage s of inpatient admissions under Medicaid. (We refer in this proposal to the non-HCRIS internal data sources and external data sources that we are proposi ng to permit for purposes of th e expansion exception process as “supplemental data sources.”) We believe that our proposal to permit the use of supplemental data sources is necessary to e ffectuate section 6001(a) of the Affordable Care Act for those physician-owned hospitals that are unable to satisfy the criteria for an expansion exception using only HCRIS data. 2. Hospitals That Lack Filed Cost Re ports for the Relevant Fiscal Years As stated above, existing § 411.362(c)(3)( ii) provides that a high Medicaid facility must use filed cost report discharge data to estim ate its annual percent of total inpatient admissions under Medicaid and such pe rcent for every other hospital located in its county for each of the 3 most recent fis cal years for which data are available. One industry stakeholder, seeking to avail itself of the whole hospital excepti on, stated that it would like to expand its facili ty capacity by qualifying as a high Medicaid facility. The stakeholder claimed that, although it treated Me dicaid patients during th e relevant 3-year period, it does not have filed cost report disc harge data available for each of the relevantCMS-1613-P 562 fiscal years because it was not a Medicare participating provider during the entire period. The industry stakeholder furthe r claimed that it is unable to request an exception as a high Medicaid facility until it has 3 years of the required filed cost report data. The stakeholder is correct that a hospital th at has not participated as a provider in the Medicare program for all of the 3 most recen t fiscal years for which data are available would be precluded from seeking a facility expansion exception. It would be similarly prohibitive if the hospitals in the county in which the requesting hospital is located were not Medicare participating provi ders or were not participa ting in the Medicare program for the entire period for which comparisons are required under the statute and our regulations. We find this to be anothe r persuasive reason to permit the use of supplemental data sources and, as such, we ar e proposing to permit the use of other data sources, as further detailed in section XV.C. of this proposed rule, for physician-owned hospitals to estimate the percentages of inpatient admissions under Medicaid for § 411.362(c)(3)(ii). We believe that our propos al will enable physician-owned hospitals to perform the comparison set forth in § 411.362( c)(3)(ii), even if the requesting hospital and/or another hospital located in its county lacks filed hospita l cost report data for some or all of the relevant fiscal years. We not e that the proposal would apply regardless of the reason that the requesting hos pital and/or another hospita l in its county lacks filed hospital cost report data. The industry stakeholder that informed us of this issue would like to qualify as a high Medicaid facility; ther efore, the stakeholder’s comments addressed only the inpatient Medicaid admissions criterion for high Medicaid facilities. However, as statedCMS-1613-P 563 above, hospitals seeking to qualify as an appl icable hospital also us e filed hospital cost report data for the inpatient Medicaid ad missions, bed capacity, and bed occupancy criteria set forth in § 411.362(c )(2). We recognize that these hospitals may also lack filed hospital cost report data or may be subject to comparisons against other hospitals that lack filed cost report data for the relevant fiscal year. Therefore, as further detailed in section XV.C. of this proposed rule, we are proposing to permit the use of supplemental data sources for the inpatient Medicaid admissions, bed capacity, and bed occupancy criteria for applicable hospitals. C. Proposed Changes to Permit Supplemental Data Sources in the Expansion Exception

Process Given the limitations regarding the requi red use of HCRIS data described in sections XV.B.1. and XV.B.2. of this proposed rule, we are proposing to revise our regulations at §§ 411.362(c)(2)( ii), (c)(2)(iv), (c)(2)(v), and (c)(3)(ii) to permit physician-owned hospitals to use data from certa in internal data sources or external data sources, in addition to HCRIS data, in orde r to estimate the percentages of inpatient Medicaid admissions, and to determine the bed capacities and the bed occupancy rates

referenced in those sections. We are notprescribing that hospitals use a specific

individual data source or combination of data sources. We are proposing that, for purposes of the expansion exception process, internal data sources are sources gene rated, maintained, or under the control of the Department. The following list provides examples of inte rnal data sources th at we are proposing physician-owned hospitals may use in the expansion exception process:CMS-1613-P 564

● Healthcare Cost and Utilization Project (HCUP) – HCUP is a family of health

care databases and related software t ools and products developed through a Federal-State-industry partners hip and sponsored by the Agency for Healthcare Research and Quality (AHRQ). HCUP databases bring to gether the data collection efforts of State data organizations, hospital associations, pr ivate data organizations, and the Federal government to create a national information re source of encounter-lev el health care data (HCUP Partners)

.

● Medicaid Statistical Information System (MSIS) - States re port Medicaid data through MSIS. Through this system, States submit raw eligibility and claims data to CMS, which CMS uses to produce Medicaid program characteristics and utilization

information.

● Medicaid Analytic Extract (MAX) - MAX data are person-level data files on Medicaid eligibility, service utilization, and payment information for all individuals, whether or not they used any Medicaid servic es in a given calendar year. The purpose of MAX is to produce data to support research and policy analysis on Medicaid populations. We also are seeking public comments thatrecommend other possible internal data

sources. We are proposing that, for purposes of the expansion exception process, external data sources are data sources generated, ma intained, or under the control of a State Medicaid agency. We are seeking public comments that recommend other possible external data sources, incl uding those of other State ag encies or departments.CMS-1613-P 565 We are proposing to define the terms “i nternal data source” and “external data source” in § 411.351. We recognize the need fo r an accurate and consistent expansion exception process. Accordingly, we are propos ing to define “internal data source” to include only non-HCRIS data sour ces that are reliable and tran sparent, and that maintain or generate data that are accurate, complete, and objectively verifiable for purposes of the expansion exception process. In addition, we are proposing to define “external data source” to include only data sources that are re liable and transparent, and that maintain or generate data that are accurate, complete, a nd objectively verifiable for purposes of the expansion exception process. Finally, we are proposing in § 411.351 that internal data

sources and external data sources must main tain data that are readily available and accessible to the requesting hospital, compar ison hospitals, and to CMS for purposes of the expansion exception process. We note th at the expansion exception process includes both the physician-owned hospital’s completion of its request and CM S’ consideration of the physician-owned hos pital’s request. We believe that the supplemental data sources should--

● Be transparent regarding what compri ses the data, where the data originated, and the manner and method by which the data source received the data;

● Be maintained on a secure database th at prevents distortion or corruption of

data and that ensures th e accuracy of the data;

● Contain sufficient information to enable accurate estimates of the percentages of inpatient Medicaid admissions, and accurate determinations of bed capacities and bed occupancy rates;CMS-1613-P 566

● Contain sufficient information to enable the comparisons required by §§ 411.362(c)(2)(ii), (c)(2)(iv), (c)(2)( v), and (c)(3)(ii) for the fi scal year(s) at issue; and

● Contain sufficiently clear and detailed data that will enable multiple users to produce consistent results and outcome s when using the same data set. Under the existing expansion exception process, CMS uses HCRIS data to provide the average percent of total inpatient Medicai d admissions per county, the average bed capacity per State, the nationa l average bed capacity, and the average bed occupancy rate per State on the CMS Web site at: http://www.cms.gov/Medicare/Fraudand-Abuse/PhysicianSelfReferral/ Physician_Owned_Hospitals.html . If we finalize our proposal to permit the use of supplemental data sources, we plan to continue to provide HCRIS-based information and issue guidance on the potential use of supplemental data

sources on the CMS Web site. We recognize that if a physician-owned hospital uses data from a supplemental data source, the hospitals may ultimately need to make estimates or determinations in

addition to those referenced in our existi ng regulations. Accordingly, we are proposing to revise our regulations to allow for the a dditional estimates or determinations that may be necessary under our revised process. Specifically, we are proposing to permit a requesting hospital to use data fr om a supplemental data source to:

● Estimate its own annual percenta ge of inpatient Medicaid admissions (§ 411.362(c)(2)(ii)).

● Estimate the average percentage with respect to such admissions for all hospitals located in the county in which the hospital is locate d (§ 411.362(c)(2)(ii)).CMS-1613-P 567

● Determine the average bed capacity in the State in which the hospital is located (§ 411.362(c)(2)(iv)).

● Determine the national averag e bed capacity (§ 411.362(c)(2)(iv)).

● Determine its own average bed occupancy rate (§ 411.362(c)(2)(v)).

● Determine the average bed occupancy rate for the State in which the hospital is located (§ 411.362(c)(2)(v)).

● Estimate its annual percentage of to tal inpatient admissions under Medicaid for each of the 3 most recent fiscal years for wh ich data are available (§ 411.362(c)(3)(ii)).

● Estimate the annual percentages of total inpatient admissions under Medicaid for every other hospital located in the county in which the ho spital is located for each of the 3 most recent fiscal years for whic h data are available (§ 411.362(c)(3)(ii)). We note that section 1877(i)(3)(F) of the Act requires that a high Medicaid facility use data from the 3 most recent fiscal years for which data are available. In the

CY 2012 OPPS/ASC final rule with comment period (76 FR 74518), we stated that we consider the most recent fiscal year for whic h data are available to be the most recent year for which HCRIS contains data from at least 6,100 hospitals. We currently apply this standard to expansio n exception requests for both applicable hospitals and high Medicaid facilities. We are pr oposing to revise our standard so that the most recent fiscal year for which data are available would be th e year for which the data source(s) used in an expansion exception request contain suffi cient data to perform the comparisons required under §§ 411.362(c)(2 )(ii), (c)(2)(iv), (c)(2)(v), a nd (c)(3)(ii). Specifically, we are proposing that data sources, either alone or in combination with other data sources,CMS-1613-P 568

would be considered to contain “sufficient data” if they contain all data from the requesting hospital and each hos pital to which the requesting hospital must compare itself that are necessary to perform the estimates re quired in the expansion exception process. In addition, with respect to a hospital seeki ng an expansion exception as an applicable hospital, we are proposing that, in order to be considered to contain “sufficient data,” the data sources, either alone or in combination w ith other data sources, must contain the data necessary to determine the State and nationa l average bed capacity and the average bed occupancy rate in the State in which the requ esting hospital is located for purposes of the expansion exception process. Modifying our current interpretation of “the most recent fiscal year for which data are available” would allow physician-owned hosp itals in counties or States where all data necessary to perform the required estimates and determinations have been filed or otherwise included in the perm issible data source(s) to proceed with an expansion exception request, even if hospitals unrelated to the request have notfiled or otherwise submitted data to the source(s) being used in the hospital’s request. We also are proposing to require that data from the same fiscal year be used for the applicable hospital eligibility criteria at §§ 411.362(c)(2)(ii), (c )(2)(iv), (c)(2)(v), ev en if the hospital uses multiple data sources for those criteria. We believe that requiring the use of data from the same fiscal year will ensure c onsistency and equitabili ty in the expansion exception process. We are seeking public comments on our propos al to revise the

standard that determines the most recent fisc al year(s) for which data are available, asCMS-1613-P 569 well as other ways to define “sufficient data” for purposes of the expansion exception

process. In addition, we are proposing to require that the requesting hospital provide actual notification directly to hospita ls whose data are part of the comparisons set forth under §§ 411.362(c)(2)(ii) and (c)(3)(ii ) of the regulations. U nder proposed § 411.362(c)(5), the notification must be in writing, in either electronic or hard copy form, and must be provided at the same time that the hospital discloses on any public Web site for the hospital that it is requesting an exception. This additional safeguard would ensure that comparison hospitals are aware of the opportunity to confirm or dispute the accuracy or reliability of the data in the physician-owned hospital’s request. Finally, our existing regulations at § 411.362(c)(5) set forth the process for community input and the timing of a comple te expansion exception request. These regulations provide for a 30-day comment period following publication in the Federal Register of notice of the physician-owned hospita l’s expansion exception request and a 30-day rebuttal period for the requesting hospi tal to respond, if it c hooses, to any written

comments that CMS receives from the comm unity. Currently, an expansion exception request is considered complete at the end of the 30-day comment period if CMS does not

receive written comments from the communit y. If CMS receives written comments from the community, the request is considered co mplete at the end of the 30-day rebuttal period, regardless of whether the requesting hos pital submits a rebuttal statement. We believe that permitting the use of data from aninternal data source or an external data source would likely require additional time fo r our review of an expansion exceptionCMS-1613-P 570 request, including any comments submitted withrespect to the request. For example, CMS may need to obtain the data from the original source, confirm that the data presented in the request are an accurate repr esentation of the original source data, and objectively verify the estimates and determina tions presented in the request. Therefore, we are proposing to revise our regulations at § 411.362(c)(5) to ex tend the date by which certain expansion exception requests will be deemed complete. Specifically, we are proposing to revise § 411.362(c)(5) to provi de that, where the request, any written comments, and any rebuttal statement include only HCRIS data, an expansion exception request will be deemed complete no later than : (1) the end of the 30-day comment period if no written comments from the community are received; and (2) the end of the 30-day rebuttal period if written comments from the community are received, regardless of whether the physician-owned hospital submitting the request submits a rebuttal statement. We also are proposing that, wh ere the request, any wr itten comments, or a rebuttal statement includes data from a suppl emental data source, an expansion exception request will be deemed complete no later than : (1) 180 days after the end of the 30-day comment period if no written comments from the community are received; and (2) 180 days after the end of the 30-da y rebuttal period if written comments from the community are received, regardless of whether the physician-owned hospital submitting the request

submits a rebuttal statement. We note that additional revisions may be necessary to conform our regulations at § 411.362(c) if we finalize our proposal to perm it the use of supplemental data sources.CMS-1613-P 571

D. Additional Considerations As stated above, we recognize the need fo r an accurate and consistent expansion exception process. We are aware that data sources have unique ch aracteristics due to their inputs, collection methods , compilation, and other factors, and will take this into consideration if we finalize our proposal to permit the use of supplem ental data sources. In an effort to implement an accurate and consistent expansion exception process, we are seeking public comments on the utility, appr opriateness, and limitations of our proposal to permit the use of supplemental data s ources. Specifically, we are seeking public

comments that:

● Address whether permitting the use of s upplemental internal or external data sources would significantly affect the outcomes for any of the estimates or determinations required in our regulations.

● Address whether permitting the use of supplemental data sources would materially affect a physician- owned hospital’s ability to re quest an exception or CMS’ determination on an exception request.

● Describe the length of time that would be necessary to obtain or generate the required data from a specific data source.

● Address whether and when the data will be available and accessible per fiscal

year.

● Address whether the data will be av ailable and accessible in a format that enables the requesting hospital to perform the necessary comparisons.CMS-1613-P 572

● Describe how supplemental data s ources could or should be prioritized, including, but not limited to, rankings related to accuracy or reliability.

● Describe how data from a particular da ta source could be used in the expansion exception process. We encourage commenters to specify whether a particular data source already maintains the percentages or rates required, or whether calculations will be necessary to generate the require d percentages or rates. If calculations will be necessary, we are requesting that commenter s describe the calculations.

● Describe the cost to industry stake holders, State governments, and the Federal government for obtaining or generating data from any potential data sources. We

consider cost to include bot h resources (for example, human capital and information technology) and actual fina ncial burden (for example, fees to use or purchase the data). We also seek public comments on whether any additional burdens would affect the quality of care for beneficiaries as a resu lt of additional costs borne by a requesting hospital. XVI. Proposed Revision of the Requirements for Physician Certification of Hospital Inpatient Services Other Than Psychiatric Inpatient Services In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27644 through 27650), we discussed the statutory requirement for certif ication of hospital inpatient services for payment under Medicare Part A. The certific ation requirement for inpatient services other than psychiatric inpatientservices is found in section 1814(a)(3) of the Act, which provides that Medicare Part A payment will only be made for such services “which areCMS-1613-P 573 furnished over a period of time, [if] a physician certifies that such services are required to be given on an inpatient basis.” In commenting on our FY 2014 proposal, some commenters argued that the statutory reference to services furnished “ over a period of time” and the then-existing regulation’s lack of any specific deadline fo r physician certifications in nonoutlier cases indicate that no certification is required for s hort-stay cases. In support of their argument, the commenters cited the legislative history of section 1814(a)(3) of the Act, which these commenters interpreted as indicating that the certification requirements should apply only to certain long-term stays. As we indicated in our response to these public comments in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50939), we do not agree with the assertion that the only possible interpretation of the statut e is that the requirement for physician certification only applies to long- stay cases. The statute does not define “over a period of time,” and further provides that “such certificatio n shall be furnished only in such cases, and with such frequency, and accompanied by such supporting material . . . as may be provided by regulations.” By this language, Congress explicitly de legated authority to the agency to elucidate this provi sion of the statute by regulation. In our current regulations, we have in terpreted the statute’s requirement of a physician certification fo r inpatient hospital services furn ished “over a period of time” to apply to all inpatient admissions. While this is not the only possibl e interpretation of the statute, we believe that it is a permissible interpretation. We continue to believe that the requireme nt of an order from a physician or otherCMS-1613-P 574 qualified practitioner in order to trigger an inpatient hospital admission as specified in 42 CFR 412.3 is necessary for all inpatient admissions. As described more fully in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50938 through 50954), the requirement for a physician order for a hospital inpatient admission has long be en clear in the Medicare hospital conditions of participation (CoPs), and we promulgated § 412.3 to make more explicit that admission pursuant to this order is the means whereby a beneficiary becomes a hospital inpatient and, therefor e, is required for payment of hospital inpatient services under Medicare Part A. A beneficiary becomes a hospital inpatient when admitted as such after a physician (or othe r qualified practitioner as pr ovided in the regulations) orders inpatient admission in accordance with the CoPs, and Medicare pays under Part A

for such an admission if the order is documen ted in the medical record. The order must be supported by objective medical informati on for purposes of the Part A payment determinations. Thus, the physic ian order must be present in the medical record and be supported by the physician admission and progre ss notes in order for the hospital to be paid for hospital i npatient services.

As further noted in the FY 2014 IPPS/ LTCH PPS final rule (78 FR 50938 through 50954), we believe the additional certifica tion requirements now specified under 42 CFR 424.13(a)(2), (a)(3), and (a)(4) (t hat is, the reason for hosp italization, the estimated time the patient will need to remain in the hospi tal, and the plan of posthospital care, if applicable) generally can be satisfied by elements routinely found in a patient’s medical record, such as progress notes. However, as we look to achieve our policy goals with the minimumCMS-1613-P 575 administrative requirements necessary, and afte r considering previous public comments and our experience with our existing regulations, we believe that, in the majority of cases, the additional benefits (for example, as a program safeguard) of formally requiring a physician certification may not outweigh th e associated administrative requirements placed on hospitals. Therefore, while we con tinue to believe that the inpatient admission order is necessary for all inpatient admissions, we are proposing to require such orders as a condition of payment based upon our genera l rulemaking authority under section 1871

of the Act rather than as an element of the physician certification under section 1814(a)(3) of the Act. Section 1871 of the Ac t authorizes the Secr etary “to prescribe such regulations as may be necessary to car ry out the administration of the insurance programs under [Title XVIII].” A clear re gulatory definition of when and how a beneficiary becomes an inpatient is necessary to carry out the admi nistration of Medicare Part A. Section 1861(b) of the Act defines “inpatient hospital servic es” as certain items and services furnished to “an inpatient of a hos pital,” but does not de fine “an inpatient of a hospital.” Accordingly, 42 CFR 412.3 provide s the necessary definition for purposes of Medicare Part A payment by clarifying when “an individual is considered an inpatient of a hospital, including a critical access hospital.” We are pr oposing to remove paragraph (c) from § 412.3. As we are proposing to rely on a different statutory authority for such regulation, an admission order would no longe r be a required component of physician certification of medical necessity. As to the physician certification requirement, we maintain that our existing longstanding policy is based upon a permissibl e interpretation of section 1814(a)(3) ofCMS-1613-P 576 the Act pursuant to that provi sion’s express delegation of authority to the agency to

determine the circumstances under which su ch certification shoul d be required. Nonetheless, after consideration of public feedback, our experience under the existing regulations, and our policy goals, we are proposi ng to change our interpretation of section 1814(a)(3) of the Act to require a physician certifi cation only for long-stay cases and

outlier cases. As noted above, we believe that, in most cases, the admission order, medical record, and progress notes w ill contain sufficient information to support the medical necessity of an inpatient admission without a separate requirement of an additional, formal, physician certification. However, we believe that evidence of additional review and documentation by a treating physician be yond the admission orde r is necessary to

substantiate the continued medi cal necessity of long or cost ly inpatient stays. While granting the Secretary broad discretion to determine the circumstances under which a physician certification should be required, the statut e specifies that th e certification by a physician with respect to inpa tient hospital services (other than inpatient psychiatric hospital services) “shall be furnished no later th an the 20th day” of the stay. Because the statute specifically requires that certifica tion must occur no later than the 20th day, we believe that, at a minimum, Congress inte nded that physicians should conduct a more thorough review of such cases to help ensure that all requirements of medical necessity

continue to be met. We also note the cu rrent regulations at § 424.13(f)(2) specify our longstanding requirement that the physician certification for cost outlier cases occur no later than 20 days into th e hospital stay, and we are not proposing to change theCMS-1613-P 577 requirements for these cases. Therefore, we believe that, for nonoutlier cases, 20 days is also an appropriate minimum threshold fo r the physician certification, and we are proposing to define long-stay cases as cas es with stays of 20 days or longer. Specifically, in this proposed rule, we are proposing to revise paragraph (a) of § 424.13 to specify that “Medicare Part A pays for inpatient hospital se rvices (other than inpatient psychiatric facility services) for cases that are 20 inpatient days or more, or are outlier cases under subpart F of Part 412 of this chapter, on ly if a physician certifies or recertifies the following: (1) The reasons for either— (i) Continued hospitalization of the pa tient for medical treatment or medically required diagnostic study; or (ii) Special or unusual services for cost outlier cases (under the prospective payment system set forth in subpart F of part 412 of this chapter). (2) The estimated time the patient w ill need to remain in the hospital. (3) The plans for posthosp ital care, if appropriate.” We also are proposing to revise pa ragraph (b) of § 424.13 to specify that certifications for long-stay cases must be furn ished no later than 20 days into the hospital stay. Because the care furnished in inpatient psychiatric facilities is often purely

custodial and therefore not covered under Me dicare and because the primary purpose of

the certification of thes e cases is to help ensure that Medicare pays only for services of the type appropriate for Me dicare coverage, we are not proposing changes to theCMS-1613-P 578 certification requirements for inpati ent psychiatric hospital services. As discussed more fully in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50942 through 50943), there also are inherent differe nces in the operation of and beneficiary admission to IRFs. Therefore, we also ar e not proposing any changes to the admission requirements for IRFs. We are inviting public comment on these proposals. XVII. CMS-Identified Overpayments Asso ciated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors (Proposed §§ 422.330 and 423.352) A. Background Medicare Part C and Part D payments to Medicare Advantage (MA) organizations and Part D sponsors are determined, in pa rt, using data submitted to CMS by the MA organizations and Part D sponsors. These “pay ment data” include diagnosis data that are used by CMS to risk adjust Part C and Pa rt D payments, Prescription Dug Event (PDE) data that are used by CMS to cost reconcile various Part D subsidies, as well as other types of data discussed below. Through our review and oversight of payment data submitted by MA organizations and Part D s ponsors, CMS identifies situations where MA organizations and/or Part D sponsors have submitted payment data to CMS that

should not have been submitted--either because the data submitted are inaccurate or

because the data are inconsistent with Part C and Part D requirements. (Throughout this section, we refer to these data submissions as “erroneous payment data.”) If an MA organization or Part D sponsor submits er roneous payment data to CMS, the MACMS-1613-P 579 organization or Part D sponsor can address errors by submitting corrected data to the CMS payment systems, and our approach thus fa r to these kinds of situations has been to request that MA organizations and Part D sponsors make these kinds of data corrections voluntarily. However, in instances in which the MA organization or Part D sponsor fails to make the requested data correction, the paym ent amount calculated for the plan may also be incorrect. As a result, we have conc luded that CMS needs to establish a formal process that allows us to recoup overpay ments that result from the submission of erroneous payment data by an MA organi zation or Part D sponsor in the limited circumstances when the organization fails to correct those data. We emphasize that, in our experience, the circumstance where an MA organization or Part D sponsor fails to correct identified erroneous paymen t data arises very infrequently. This proposed new process is not intende d to replace established recovery and appeals processes such as the Risk Adjust ment Data Validation (RADV) audit dispute and appeal process described at 42 CFR 422.311 or the Part D payment appeals process described at 42 CFR 423.350. This proposed pr ocess would not const itute a change to the existing Part C or Part D payment met hodologies. Rather, we are merely proposing to adopt a procedural mechanism for recouping overpayments that CMS will use in those limited circumstances when an MA organiza tion or Part D sponsor fails to correct erroneous payment data. The established r ecovery and appeals processes do not support this scenario. Section 1856(b) of the Act establishes authorit y for us to add standards for Part C and MA organizations. Section 1853 of the Act for Part C and sections 1860D-14CMS-1613-P 580

and 1860D-15 of the Act for Part D establis h the methodology for computing payments to MA organizations and Part D sponsors, resp ectively. We believe th at inherent in the methodology under which payments to MA organizations and Part D sponsors are calculated is the authority for CMS to estab lish a process for identifying and recouping overpayments, in order to ensure that paym ents are made consistent with the payment

framework established in the st atute. Therefore, we are proposing to implement such a process through changes to our regulations. 1. Medicare Part C Payment Background For Medicare Part C, CMS makes pr ospective monthly payments to MA organizations for each enrollee in the plan. CMS’ monthly Part C payment for each MA plan enrollee consists of two components: the capitated payment for each enrollee (calculated as the plan-specific county payment rate multiplied by the enrollee risk score), plus the plan rebate amount (if any). The plan-specific county rates and the plan rebate amount are based on the bid appr oved by CMS and are set in advance for a payment year. In addition, payment rates may be adjusted for enrollees with end-stage renal disease, enrollees in Medical Savings A ccount MA plans, and enrollees in religious fraternal benefit society MA plans under § 422.304. Prospective payments are made during the year, subject to a reconc iliation after the end of the year. CMS adjusts the plan-specific county payment rate for each enrollee based on an

enrollee risk score. Enrollee risk scores are determined using the CMS-Hierarchical Condition Category (CMS-HCC) risk adjustmentmodel in effect for the payment year, plan-submitted diagnoses for the data co llection year, and other data that CMSCMS-1613-P 581 determines to be appropriate to perform risk adjustment. The CMS-HCC model is prospective in that it uses diagnosis informati on from a base year (data collection year) to adjust payments for the next year (payment year or coverage year). For example, the risk adjustment model uses diagnosis data from 201 3 to adjust payments to MA organizations for coverage in 2014. To determine the appropriate risk score for each beneficiary, CMS uses demographic characteristics of beneficiaries and diagnostic information gathered in the administration of Original Medicare and submitted by MA organizations. MA organizations are required to submit an occurrence of an HCC model-relevant diagnosis only once during the data collection year, ev en though a beneficiary may have several

service dates in a data collec tion year associated with a given diagnosis. The minimum data elements currently collected from MA organizations under § 422.310 are: Health Insurance Claim (HIC) Number; provider type (hospital inpatient, hospital outpatient, or physician); service from date; service thr ough date; and ICD-9 code s at the level of specificity used by the HCC model. In addition, effective January 2012, CMS collects

more detailed Part C utilization and cost data from MA organizat ions (often referred to as encounter data), that are used in setting the risk score.

CMS allows 13 months after the end of a data collec tion year for MA organizations to update the risk adjustment data submitted under § 422.310; this period provides MA organizations an oppor tunity to identify and correct errors in data they have submitted for that data collection year (that is , by deleting diagnoses from CMS’ systems) and to identify and submit additional diagnos es not submitted during the data collectionCMS-1613-P 582 year. During this 13-month period, CMS uses the diagnosis data th at MA organizations have submitted up to that point to calculate in terim beneficiary risk scores for adjusting prospective payments made during the payment year. The end of this 13-month period is called the final risk adjustment data submission deadline (§ 422.310(g)(2)(ii)). For each payment year, we apply three sets of risk scores to adjust payments: initial and midyear risk scores during th e payment year (both sets are based on incomplete diagnosis data from the data colle ction year), and final risk scores after the payment year using data MA organizations submitted as of the final deadline for risk adjustment data (which reflect complete datafor the data collection year). During the year, CMS makes monthly prospective paym ents to the MA organization based on enrollment information and using interim ri sk scores calculated based on the data available before the final risk adjustment data submission deadline. CMS calculates the preliminary risk scores before the first pa yment is made (that is, for January of the payment year) and again in the middle of the payment year; an interim reconciliation is made so that the prospective payments to MA organizations are based on the most recent

risk score available for each enrollee. After the final risk adjustment da ta submission deadline, CMS conducts a reconciliation, in which the prospective Part C payments made during the coverage year based on interim risk scores are compared to Part C payments recalculated using final

risk scores and the latest enrollment data. While changes in enrollment data are updated every month by CMS’ systems during the paym ent year (for example, disenrollments from MA organizations and dates of death from the Social Security AdministrationCMS-1613-P 583 (SSA)), risk adjustment data are not finalized until the final risk adjustment data

submission deadline.

We note that after the final risk ad justment data subm ission deadline, MA organizations are allowed to submit corrected diagnosis data to correct overpayments they received from CMS. However, after this deadline, MA organizations are not allowed to submit diagnosis codes for additional payment, as specified in § 422.310(g)(2)(ii); this provision was recen tly adopted in the final rule entitled “Medicare Program; Contract Year 2015 Polic y and Technical Changes to the Medicare Advantage and the Medicare Prescription Dr ug Benefit Programs” (79 FR 29843). When such corrections are submitted, CMS conducts another reconciliation to correct the payments made to the MA organization us ing the established payment adjustment process. In addition, under § 422.311, CM S conducts RADV audits of the risk adjustment data submitted by MA orga nizations pursuant to § 422.310. Such RADV audits are conducted at the MA organization cont ract level and are designed to calculate a

contract–level error rate a nd payment adjustment amount for a specific payment year

under audit. 2. Medicare Part D Payment Background For Medicare Part D, the Medicare Pr escription Drug Benefit, Improvement, and Modernization Act (MMA), which amended the Act by adding Part D under Title 18, provides four payment mechanisms: di rect subsidy (codified at § 423.329(a)); reinsurance subsidy (codifie d at § 423.329(c)); low income subsidy (codified at §§ 423.780 and 423.782); and risk sharing (codified at § 423.336(b)). As a condition ofCMS-1613-P 584 payment, section 1860D-15(d)(2)(A) of the Act requires that Part D sponsors submit data and information necessary for CMS to carry out those payment provisions. Part D sponsors submit PDE data, direct and indi rect remuneration (DIR) data, and risk adjustment data to CMS for payment purposes. Throughout the coverage year, CMS make s prospective payments to Part D sponsors that cover three subs idies: the direct subsidy; the low income cost-sharing subsidy; and the reinsurance subsidy. Th e payment amounts are based on information in the approved basic bid and on data received by CMS that are used to update payments throughout the year. Following the end of th e coverage year, the prospective payments are reconciled against the actua l costs of the Part D sponsor . Reconciliation of the low income cost-sharing subsidy and reinsurance an d the calculation of risk sharing are based on PDE and DIR data submitted by the Part D sponsor, as well as data captured from other CMS systems. CMS instructs Part D s ponsors that they should continually monitor their submitted data throughout the year in or der to ensure that the reconciliation and final payment determinations are accurate. The final payment determination may be reopened and revised at CMS discretion under § 423.346. In our final rule, “Medic are Program; Medicare Prescription Drug Benefit” published in the Federal Register on January 28, 2005 (70 FR 4194), we stated that including the Medicare Part D reopeni ng provision at § 423.346 would “ensure that the discovery of any overpayment or underpay ments could be rectified” (70 FR 4316). However, this is only possible to the extent that the data submitted by Part D sponsors are accurate. Accordingly, prior to making a pa yment determination for a coverage year,CMS-1613-P 585 either through a reconcilia tion described at § 423.343 or a reopening described at § 423.346, CMS periodically makes requests that Part D sponsors correct payment data that do not comply with program requireme nts (that is, what we have defined as “erroneous payment data”). These may be gene ral requests to all Part D sponsors to look for a type of payment issue (for example, the Health Plan Management System (HPMS) memorandum, “Correcting Missing, Invalid, and Inactive Prescriber Identifiers on 2012 Prescription Drug Event (PDE) Records,” dated February 4, 2013) or targeted requests to specific Part D sponsors known to have partic ular payment issues (as was done in the “Prescriber NPI Project” a nnounced in the HPMS memo randum, “Announcement of Prescriber NPI Project and Website Releas e,” dated December 4, 2012). If a Part D sponsor fails to correct its payment data, the erroneous payment data remain in the payment system, rendering the reopeni ng provision ineffective for rectifying overpayments as it was intended. B. Provisions of our Proposals In this proposed rule, we are pr oposing to establish regulations at 42 CFR 422.330, relating to MA organizations , and at 42 CFR 423.352, relating to Part D sponsors, that would specify the procedural mechanism used by CMS to recoup overpayments associated with errors identified by CMS in payment data submitted by MA organizations and Part D sponsors. We also are proposing to create a process whereby an MA organization or Part D sponsor can appeal the finding that payment data

are erroneous.CMS-1613-P 586 We note that our proposal is intended to establish a process to address errors and payment adjustments that are not addresse d by existing processes such as the RADV audit and appeal process or overpayments identified by the MA organization or Part D sponsor, which are subject to separate proced ures. If an MA organization or a Part D sponsor self-identifies an overpayment, that overpayment must be re ported and returned to CMS in accordance with section 1128J(d ) of the Act, which was added by section 6402 of the Affordable Care Act. Regulat ions implementing section 1128J(d) have recently been adopted at §§ 422.326 and 423.360 in the final rule entitled “Medicare Program; Contract Year 2015 Policy and Techni cal Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs” (79 FR 29843). 1. Proposed Definitions of “Payment Da ta” and “Applicable Reconciliation Date” We are proposing to define “payment data” to mean data controlled and submitted to CMS by an MA organization or a Part D sponsor that is used for payment purposes (proposed §§ 422.330(a) and 423.352(a)). The MA organization or Part D sponsor is responsible for the accuracy of such data. MA organizations a nd Part D sponsors are currently required to attest to the accuracy, completeness, and truthfulness of such data under § 422.504(l) and § 423.505(k), respectively. For Medicare Part C, the data submitted by the MA organization to CMS include, for example, enrollment data and risk adjustment data specified at § 422.310. For Medicare Part D, data submitted by the Part D sponsor to CMS include enrollment data and data submitted under § 423.329(b)(3) (risk adjustment data), § 423.336(c)(1) (cos t data), § 423.343 (dat a for retroactive adjustments and reconciliations), and data provided for purposes of supporting allowableCMS-1613-P 587

reinsurance costs and allowable risk corrido r costs as defined in § 423.308, which include data submitted to CMS regarding dir ect or indirect re muneration (DIR). There are additional payment-related data that CMS uses to calculate Part C and Part D payments that are submitted directly to CMS by other entities, such as the Social Security Administration (SSA). These entities are the author itative source for data that they submit to CMS, and MA organizations and Part D sponsors are not the official source for data submitted by these other entities. For example, the SSA is the

authoritative source for date of death of Medi care beneficiaries. An MA organization or a Part D sponsor generally does not submit a bene ficiary’s date of deat h directly to CMS’ systems; such data come from the SSA data feed. When the SSA su bmits corrected data regarding a beneficiary’s date of death to CMS, CMS’ systems recalculate the payments made to the plan for that beneficiary and correct any incorrect payment through a routine retroactive payment adjustment process. Ther efore, the proposed definition of “payment data” refers only to data that the MA organization or Part D sponsor controls and submits to CMS for payment purposes. For MA organizations under Part C, we are proposing that the “applicable

reconciliation date” occu rs on the date of the annual fina l risk adjustment data submission deadline set under § 422.310(g)(2 )(ii). While changes in enrollment data are updated every month by CMS’ systems during the paym ent year (for example, disenrollments from MA organizations and dates of death fr om the SSA), risk adjustment data are not finalized until the final risk adjustment data submission deadline. Pr ior to that deadline, CMS allows the MA organization to conti nue submitting corrected and new diagnosisCMS-1613-P 588 data. However, once the final risk adjust ment data submission deadline has passed, CMS uses this final diagnosis data to calculate the final risk scores for the payment year. CMS then uses those final risk scores for pa yment reconciliation. By proposing that the applicable reconciliation date occurs on the risk adjustment data submission deadline, we intend to signal that the normal payment pr ocess for the year has been concluded. For Part D sponsors, we are proposing that the “applicable rec onciliation date” is the later of either: the annual deadline for submitting PDE data for the annual Part D payment reconciliations referenced in § 423.343( c) and (d); or the annual deadline for submitting DIR data. The annual deadline for submitting PDE data is the last Federal business day prior to June 30 of the year follo wing the coverage year being reconciled. The annual deadline for submitting DIR data is announced annually through subregulatory guidance and generally occurs ar ound the last business day in June of the year following the coverage year being reconc iled. We selected these events to define the Part D applicable reconciliation date because data must be submitted by these deadlines in order to be used for the purpos es of the final Part D payment reconciliation. We note that the proposed definitions of “applicable reconciliation date” are nearly identical to the definitions of “a pplicable reconciliatio n” at existing §§ 422.326 and 423.360. Similarly, the proposed definitions of “payment data” are nearly identical

to the definitions of “funds” at existing §§ 422.326 and 423.360. Although proposed §§ 422.330 and 423.352 address overpayments to MA organizations and Part D sponsors that have been identified by CMS, whereas §§ 422.326 and 423.360 address overpayments that are identif ied by the MA organization or Part D sponsor, we do notCMS-1613-P 589 believe that the issue of which entity (CMS or the plan) identified the overpayment is relevant to the question of when the overpay ment occurred or what information is at issue. Both the current policy regarding overpayments identified by MA organizations and Part D sponsors and the proposed policy regarding CMS-identified overpayments are

intended to address circumstances in whic h an overpayment has been identified; therefore, we believe it would be appropr iate and avoid unnecessary confusion to use

similar definitions. 2. Request for Corrections of Payment Data We are proposing that if CMS identifies an error in payment data submitted by an MA organization or Part D sponsor that would result in an overpayment, CMS may request that the organization ma ke corrections to the appli cable payment data (proposed §§ 422.330(b) and 423.352(b)). We are proposin g that CMS would make the request through a data correction notice that would c ontain or make reference to the specific payment data identified by CMS as errone ous, the reason why CMS believes that the payment data are erroneous, and the timeframe in which the MA organization or Part D sponsor must make corrections to the data. CMS may identify payment data that need to be corrected through a variety of differen t mechanisms, including, but not limited to, CMS analyses of payment data, CMS a udits, or communications with the MA organization or Part D sponsor. We understand that, at some point, it would no longer be practical for MA organizations and Part D sponsors to correct payment data for coverage years that have long since been reconciled. Therefore, consistent with the look-back period forCMS-1613-P 590 overpayments that are identif ied by the MA organization or Part D sponsor found at existing §§ 422.326 and 423.360, we are proposing th at CMS would request corrections to erroneous payment data only if the erroneous data affects payments for one or more of the 6 most recently completed payment years. That would mean, for example, that after the initial reconciliation takes place for Part D payments under § 423.343 (that is, the

determination of the final amount of direct subsidy described in § 423.329(a)(1), final reinsurance payments described in § 423.329( c), the final amount of the low income subsidy described in § 423.329(d) , or final risk corridor payments as described in § 423.336) for contract year 2015 (which woul d take place in 2016), CMS may request corrections to erroneous payment data fo r contract years 2010 through 2015. We are proposing to use the same 6-year look-back period as applies to plan-identified overpayments under existing §§ 422.326 and 423.360 because both overpayment policies

are intended to address circumstances in whic h an overpayment has been identified, and

we do not believe that the issue of which entity (CMS or the plan) identified the overpayment is relevant to the length of the look-back period. The timeframes for correcting payment data would be the same as under our current practice for correcting payment data described in existing procedural rules and subregulatory guidance and would be explai ned in additional procedural rules and subregulatory guidance, as necessary. For ex ample, current Part D guidance states that corrections to PDE data must be completed within 90 days from discovery of the issue.

We refer readers to the Health Plan Mana gement System (HPMS) memorandum entitledCMS-1613-P 591

“Revision to Previous Guidance Titled ‘T imely Submission of Prescription Drug Event (PDE) Records and Resolution of Rejected PDEs,’” dated October 6, 2011. 3. Proposed Payment Offset If the MA organization or Part D sponsor submits corrected payment data in response to CMS’s request pursuant to proposed § 422.330(b) and § 423.352(b), CMS will perform a reconciliation in the paymen t system using the established payment adjustment process. CMS’ systems will c onduct a payment reconciliation and determine the associated payment adjustment based on th e corrected data using established payment procedures. However, if the MA organizati on of Part D sponsor fails to correct the erroneous payment data, we are proposing that CMS would conduct a payment offset from plan payments (proposed §§ 422.330(c) and 423.352(c)).

a. Offset Amount

Because the data would not have been co rrected in the routine payment process, we are proposing, to be codified at §§ 422.330(c) and 423.352(c), that CMS determine the overpayment offset amount by applying a payment calculation algo rithm to simulate the payment calculations curren tly applied by CMS to produce th e routine Part C and Part D payments. The payment calculation algor ithm would apply the Part C or Part D payment rules for the applicable year to ca lculate what the correct payment should have been using corrected payment data. CMS currently simulates payment error amounts for a variety of different purposes including fo r the annual Part C and Part D error rate reporting (required by the Improper Payment El imination and Recovery Act (IPERA) and subject to the annual agency’s Chief Financia l Officer’s (CFO) audi t and reported in theCMS-1613-P 592 annual Agency Financial Report (AFR)), R ADV payment error estimation (subject to public comment), and the Part C and Part D monthly payment validation required by CFO auditors. These payment error calculations are all conducted outsi de of the suite of payment systems that CMS uses to make rou tine payments to MA organizations and Part D sponsors. We believe that these calculations are reliable and an accurate reflection of what the routine payment systems would calcu late using the corrected data if the MA organization or Part D sponsor had submitted corrected payment data. The actual process for calculating the overpayment will be different for Part C and Part D due to the different payment rules for the two programs. The Part C and Part D programs are both subject to risk adjustme nt payment error resulting from invalid diagnoses and to payment error due to inaccura te enrollment data. The Part D program is further subject to payment reconciliation erro r resulting from errors in PDE data and/or DIR data. The two programs also are subject to different schedules with regard to the applicable reconciliation da te and subsequent payment reconciliation processes. When new payment-related data are submitted to CMS payment systems, there is generally a change to the correct amountof payment once CMS conducts a payment reconciliation using the establ ished payment adjustment process. However, it is not sufficient for the plan to just submit the new corrected risk adjustment, PDE, or DIR data to CMS systems because data submission does not automatically trigger a system reconciliation and payment adjustment. A change in payment will only occur if a payment reconciliation is conducted. If the applicable reconciliation has already beenCMS-1613-P 593 performed, CMS, at its discretion, may conduc t risk adjustment reruns or Part D reopenings to ensure that payments also are corrected to reflect the newly corrected data. We are proposing that, under the pa yment calculation algorithm, CMS would calculate the payment to the MA organization or Part D s ponsor with and then without

the corrected data as of a certain specified date. The difference in the two amounts would be the payment recovery or offset amount. The following are examples of how the offset

amount would be calculated for Part C and Pa rt D relative to tw o different types of payment data errors.

● Part C Offset Calculation. The ex ample for Part C relates to incorrect diagnosis data identified by CMS in the pro cess of calculating the national payment error estimate. A beneficiary’s final risk score and annual payment will be recalculated outside of the routine payment system without the invalid diagnoses but using all the other data used in the routine payment system. The year-appropriate CMS-HCC risk adjustment software will be used to pr oduce the revised risk scores. The difference in payment for the beneficiary pre- and post- change in the invalid diagnosis will be the offset amount. This offset amount--generated using the same process for each beneficiary for whom erroneous payment data are identified by CMS--will be summed across all beneficiaries.

● Part D Offset Calculation. The exampl e for Part D relates to the situation in which a Part D plan sponsor has submitted PD E records for a benefi ciary that include invalid National Drug Codes (NDCs). For payment purposes, PDEs are required to

reference valid NDCs. In order to calculate the Part D payment offset amount, all of the beneficiary’s entire post-reconciliation PDE da ta will be pulled, and the incorrect PDEsCMS-1613-P 594 will be deleted or adjusted. The programmed calculation logic will keep track of a variety of payment-related information; for example, a beneficiary’s benefit phase, gross covered drug cost, true out-o f-pocket (TrOOP) costs, low income cost-sharing subsidies (if any), and plan payment as the benefici ary progresses through the Part D coverage benefit. The calculation algorithm will tap into a variety of different data sets, such as health plan benefit parameters, beneficiary low income subsidy status, and standard low income cost-sharing subsidy parameters. Reports will then be produced on Gross Covered Drug Cost (GCDC) and low income co st-sharing subsidy payment differentials. These payment differential amounts will be in corporated into final reinsurance, low income cost-sharing subsidy, and risk shar ing summary totals for a contract. DIR adjustments will be factored into these calculati ons to arrive at the related payment offset amount to be applied at the c ontract level. The difference in reinsurance, low income cost-sharing subsidy, and risk sharing dollars with and without the correction to the PDEs will constitute the payment offset related to the beneficiaries with the incorrect PDEs. If the erroneous payment da ta in question is subseque ntly corrected through the CMS payment system, the offset amount will be reversed, and the payment to the MA organization or Part D sponsor will be updated through the routine payment process. However, if the data in the CMS system are not corrected and CMS conducts a reconciliation or reopening for the applicable payment year after the offset has been determined, the data will not be properly synchronized, and it is possible that the resulting payment adjustments could be incorrec t. In order to resolve this problem, CMS may reverse the original offset and recalculate the offset using the more recent data usedCMS-1613-P 595 in the most recent payment reconciliation or reopening. The new offset amount will replace the previous offset amount, and CM S would need to evaluate and act on the resulting overpayment or underpayment. b. Payment Offset Notification We are proposing that CMS would provi de a payment offset notice to the MA organization or Part D sponsor (pro posed §§ 422.330(d)(1) through (d)(3) and 423.352(d)(1) through (d)(3)). The notice would pr ovide the dollar amount to be offset against a plan’s monthly prospective payments and an explanation of how the erroneous

data were identified and of the calculation of the payment offset amount. Under our proposal, the payment offset notice would also explain that, in th e event that the MA organization or Part D sponsordisagrees with the payment offset, it may request an appeal within 30 days of the issuan ce of the payment offset notice. 4. Proposed Appeals Process for MA Organizations and Part D Sponsors We are proposing an appeals process fo r MA organizations and Part D sponsors

with three levels of revi ew, including reconsiderati on (described at proposed §§ 422.330(e)(1) and 423.352(e)(1)), an informal hearing (described at proposed §§ 422.330(e)(2) and 423.352(e)(2)), and an Administrator review (described at proposed §§ 422.330(e)(3) and 423.352(e)(3)).

a. Reconsideration We are proposing that an MA organization or Part D sponsor must file its request for reconsideration within 30 days from the date that CMS issued the payment offset notice to the MA organization or the Part D sponsor (proposed §§ 422.330(e)(1)(i) andCMS-1613-P 596 423.352(e)(1)(i)). At proposed §§ 422.330(e)(1)(ii ) and 423.352(e)(1)(ii), we address the

information that must be included in the MA organization’s or Part D sponsor’s request for reconsideration. The request must contai n the findings or issues with which the MA organization or Part D spons or disagrees, the reasons for its disagreement, and any additional documentary evidence that the MA organization or Part D sponsor wishes to submit in support of its position. This addi tional evidence must be submitted with the request for reconsideration. Any information submitted after this time will be rejected as untimely. In conducting the reconsideration, the CMS reconsideration official reviews the underlying data that were used to determ ine the amount of the payment offset and any additional documentary evidence that the MA organization or Part D sponsor timely submitted with its reconsideration request ( §§ 422.330(e)(1)(iii) and 423.352(e)(1)(iii)). We are proposing at proposed §§ 422.330(e )(1)(iv) and 423.352(e )(1)(iv) that CMS would inform the MA organization or Part D sponsor of its deci sion. We are proposing at §§ 422.330(e)(1)(v) and 423.352(e )(1)(v) that a reconsider ation decision would be final and binding unless a timely request for an informal hearing is filed by the MA organization or Part D sponsor. b. Informal Hearing Under our proposal, if the MA organization or Part D spons or is dissatisfied with CMS’ reconsideration decision, it would be en titled to request an informal hearing (proposed §§ 422.330(e)(2) and 423.352(e)(2)). As proposed at §§ 422.330(e)(2)(i) and 423.352(e)(2)(i), a request for an informal hear ing must be made in writing and filed within 30 days of the date of CMS’ reconsid eration decision. The request must include aCMS-1613-P 597 copy of CMS’ reconsideration decision and mu st specify the findings or issues in the

decision with which the MA or ganization or Part D sponsor disagrees and the reasons for its disagreement (proposed §§ 422.330(e)(2)(ii) and 423.352(e)(2)(ii)). We set forth the proposed procedures for conducting the informal hearing at proposed §§ 422.330(e)(2)(iii) a nd 423.352(e)(2)(iii). Unde r these procedures, CMS would provide written notice of the time a nd place of the informal hearing at least 10 days before the scheduled date of th e hearing (proposed § 422.330(e)(2)(iii)(A) and § 423.352(e)(2)(iii)(A)); the in formal hearing would be conducted by a CMS hearing officer. The hearing officer would be limited to reviewing the reco rd that was before

CMS when CMS made its reconsid eration determination (proposed § 422.330(e)(2)(iii)(B) and § 423.352(e)(2)(iii)(B)). Unde r our proposal, no new or additional documentation or evidence may be submitted at this hearing. At proposed § 422.330(e)(2)(iii)(C) and § 423.352(e)(2)(iii)(C), we are proposing that the CMS hearing officer would review the reco rd of the proceeding before the CMS

reconsideration official us ing the clearly erroneous st andard of review. CMS’

reconsideration decision would not be reversed unless the MA organization or Part D sponsor establishes that the d ecision was clearly erroneous in light of the evidence in the

record before the CMS reconsideration official. At proposed §§ 422.330(e)(2)(iv) and 423.352(e) (2)(iv), we are proposing that the CMS hearing officer would send a written deci sion of the informal hearing to the MA organization or Part D sponsorexplaining the basis for the decision. The CMS hearingCMS-1613-P 598

officer’s decision would be fi nal and binding, unless the decisi on is reversed or modified by the Administrator (proposed §§ 422.330(e)(2)(v) and 423.352(e)(2)(v)). c. Review by Administrator We are proposing that the MA organizati on or Part D sponsor may request review of the hearing officer’s decision by the Administ rator within 30 days of issuance of the hearing officer’s decision (proposed §§ 422.330(e)(3)(i) and 423.352(e)(3)(i)). The MA organization or Part D sponsor may provide written arguments to the Administrator for review. Under proposed §§ 422.330(e)(3)(ii) and 423.352(e)(3)(ii), after receiving the request to review, the Admini strator would have the discretion to elect to review the hearing determination or decline to reviewit. At proposed §§ 422.330(e)(3)(iii) and 423.352(e)(3)(iii), if the Administrator declines to review the heari ng officer’s decision, the hearing officer’s decision would be final and binding. At proposed §§ 422.330(e)(3)(iv) and 423.352(e)(3)(iv), we are proposing that if the Administrator

elects to review the heari ng officer’s decision, the Admi nistrator would review the hearing officer’s decision, as well as any other information in cluded in the record of the hearing officer's decision and any written arguments submitted by the MA organization or Part D sponsor. The Admi nistrator may determine whether to uphold, reverse, or modify the hearing officer’s decision. The Administrator’s determin ation would be final and binding (proposed §§ 422.330(e) (3)(v) and 423.352(e)(3)(v)). 5. Matters Subject to Appeal and Burden of Proof At proposed §§ 422.330(f)(1) and (2) and 423.352(f)(1) and (2), we are proposing to limit the subject-matter that an MA organi zation or Part D sponsor may appeal underCMS-1613-P 599 this provision and establish the burden of proof that the MA organization or Part D sponsor must meet in its appeal. Under th is provision, an MA organization or Part D sponsor would be able to appeal the notice of payment offset solely on the grounds that CMS’ finding that the MA organization’s or Part D sponsor’s payment data were

erroneous was incorrect or otherwise inconsiste nt with applicable program requirements. The MA organization or Part D sponsor would bear the burden of proof by a preponderance of the evidence in demonstrat ing that CMS’ finding was incorrect or inconsistent with applicable program requirements. At proposed §§ 422.330(g) and 423.352(g), we are proposing that the appeals process under paragraph (e) of these secti ons would apply only to payment offsets described at proposed §§ 422.330(c) and 423.352(c). It woul d not apply to any other CMS payment offset process. 6. Effective Date of Proposed Appeals Process Provisions We are proposing that this new proce dural mechanism for a payment offset at proposed § 422.330 and § 423.352 would apply after th e effective date of any final rule implementing the new payment offset and app eals process, but that requests to correct payment data under proposed §§ 422.330(b) and 423.352(b) and the payment offsets under proposed §§ 422.330(c) and 423.352(c) may a pply to any payment year, subject to the 6-year limitation under §§ 422.330(b) and 423.352(b). We are inviting public comment on these proposals.CMS-1613-P 600

XVIII. Files Available to th e Public via the Internet Addendum J to this proposed rule is a new addendum that we are proposing for CY 2015, in response to requests by public commenters on the CY 2014 OPPS/ASC final rule with comment period for additional data regarding ratesetting for the new comprehensive APCs established in that final rule with comment period, which are discussed in section II.A.2.e. of this propos ed rule. Addendum J lists the HCPCS code pairs for which we are proposing complex ity adjustments for CY 2015, by clinical family; the HCPCS codes proposed for exclus ion from the comprehensive APC payment bundle; and the relevant cost statistics. The Addenda to the OPPS/ASC proposed ru les and the final rules with comment period are published and available only via th e Internet on the CMS Web site. To view the Addenda of this proposed rule pertaining to CY 2015 payments under the OPPS, we

refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/ Hospital-Outpatient-Regulations-andNotices.html; select “1613-P” from the list of regulations. All OPPS Addenda for this proposed rule are contained in the zipped folder entitled “2015 OPPS 1613-P Addenda” at the bottom of the page. To view the Addenda of this proposed rule pertaining to the proposed CY 2015 payments under the ASC payment system, we refer readers to the

CMS Web site at: http://www.cms.gov/Medicare/ Medicare-Fee-for-ServicePayment/ASCPayment/ASC-Regulations-and-Notices.html; select “1613-P” from the list of regulations. All ASC A ddenda for this proposed rule are contained in the zippedCMS-1613-P 601 folders entitled “Addendum AA, BB, DD1 and DD2,” and “Addendum EE” at the bottom of the page. XIX. 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 commen t before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2 )(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues:

● The need for the information collecti on and its usefulness in carrying out the proper functions of our agency.

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

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

● Recommendations to minimize the information collection burden on the affected public, including auto mated collection techniques. In this proposed rule, we are soliciting public comments on each of the issues outlined above for the information collection requirements discussed below.CMS-1613-P 602 B. Requirements in Regulation Text: Pr oposed Changes to the Rural Provider and Hospital Ownership Exceptions to the P hysician Self-Referral Law: Expansion Exception Process (§ 411.362) Section XV.C. of the preamble of this proposed rule discusses our proposal to revise the expansion exception process fo r physician-owned hospita ls under the rural provider and hospital ownership exceptions to the physician se lf-referral law. Specifically, we are proposing to revise 42 CFR 411.362(c) to permit physician-owned hospitals to use data from HCRIS, internal data sources, or extern al data sources to estimate the percentages of inpatient Medi caid admissions and to determine the bed capacities and the bed occupancy rates referenc ed in that section for the hospitals to demonstrate eligibility fo r an expansion exception. We believe the burden associated with this revision is exempt from the PRA under 5 CFR 1320.3(c), which defines the agency collection of informa tion subject to the requirements of the PRA as information colle ction imposed on 10 or more persons within any 12-month period. We do not believe this information collection impacts 10 or more entities in a 12-month period. We have r eceived four requests since the expansion exception process was implemented on Februa ry 1, 2012; only one of the four requests was complete and eligible to proceed in the process. In CYs 2012, 2013, and 2014, we received zero, two, and tw o requests, respectively.CMS-1613-P 603

C. Associated Information Collectio ns Not Specified in Regulatory Text In this proposed rule, we make refere nce to proposed associated information collection requirements that were not discusse d in the regulation text contained in this proposed rule. The following is a discussion of those requirements. 1. Hospital OQR Program

As we stated in section XIV. of the CY 2012 OPPS/ASC final rule with comment period, the Hospital OQR Program has been ge nerally modeled after the quality data reporting program for the Hospital IQR Program (76 FR 74451). We refer readers to the

CY 2011 OPPS/ASC final rule with comme nt period (75 FR 72111 through 72114), the

CY 2012 OPPS/ASC final rule with comme nt period (76 FR 74549 through 74554), the

CY 2013 OPPS/ASC final rule with comme nt period (77 FR 68527 through 68532) and

the CY 2014 OPPS/ASC final rule with comment period (78 FR 75170 through 75172) for detailed discussions of the Hosp ital OQR Program information collection requirements we have previously finalized.

a. Revisions to the CY 2016 Pa yment Determination Estimates In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75103), we finalized the adoption of four new measures for the CY 2016 payment determination and subsequent years: (1) OP-27: Influe nza Vaccination Coverage among Healthcare Personnel (NQF # 0431); (2) OP-29: E ndoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658); (3) OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidan ce of Inappropriate Use (NQF # 0659); andCMS-1613-P 604 (4) OP-31: Cataracts – Improvement in Pa tient’s Visual Functi on within 90 Days Following Cataract Surgery (NQF # 1536). In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75171), we estimated measures OP-29, OP-30 and OP-31 would require 40 hours of reporting per quarter (96 cases x 0.417 hours). We also estimated that reporting these measures via our Web-based tool would take 10 minutes (or 0.167 hours) per measure per year (or 2.5 minutes for each qua rter’s worth of data, which is submitted on an annual basis) (78 FR 75171 through 75172).

As stated in section X III.D.2. of this proposed rule, we delayed reporting for OP-29 and OP-30 by one quarter. Therefor e, we estimate a reduction in burden of 40 hours for each of these measures (40 hours per quarter for reporting + 2.5 minutes of reporting via the Web-based tool) per hospita l for the CY 2016 payment determination. In addition, in section XIII.D.3. of this propos ed rule, we are proposing to exclude this measure from the CY 2016 payment determinati on measure set. Therefore, we estimate

that there will be no burden for reporting OP-31 for the CY 2016 payment determination,

and an overall reduction in burden of 160 hour s ((40 hours per quarter for reporting x 4 quarters) + 0.167 hours per year for reporting via the Web-based tool) per hospital for the CY 2016 payment determination because of this proposal. Combining the estimated reductions in bur den for all three of these measures, we

estimate a total reduction in burden of 240 hours (40 hours + 40 hours + 160 hours) per hospital for the CY 2016 payment determinati on due to delayed data collection and the proposed measure exclusion. We estimate that approximately 3,300 hospitals will participate in the Hospital OQR Program for the CY 2016 payment determination.CMS-1613-P 605 Therefore, we estimate a to tal reduction in burden of 792,000 hours (240 hours x 3,300 hospital) for all hospitals participating in the Hospita l OQR Program for the CY 2016 payment determination based on the data colle ction delays for OP-29, OP-30, and OP-31.

In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75171), we estimated

that these measures would result in a financ ial burden of $30 per hour. Therefore, we estimate that the delay of these three meas ures will result in a reduction of $23.8 million ($30/hour x 792,000 hours). b. Hospital OQR Program Requirements fo r the CY 2017 Payment Determination and Subsequent Years

As we stated in the CY 2014 OPPS/ ASC final rule with comment period (78 FR 75171), we believe there is a burden a ssociated with successful participation in the Hospital OQR Program, where successful participation resu lts in a full annual payment update (APU) for the particular paym ent determination. For the reasons stated in that rule, we believe that the burden a ssociated with these requirements is 42 hours per hospital or 138,600 hours for all hospitals. We estimate a financial burden for these requirements of $4.2 million ($30/hour x 138,600) for all hospitals. (1) Claims-Based Measures for the CY 2017 Payment Determination and Subsequent

Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68530) for detailed discussions of the information collection requirements for the previously finalized claims -based measures (OP-8, OP- 9, OP-10, OP-11, OP-13, OP-14, and OP-15). In section XIII.E. of this proposed rule, we are proposing to adopt oneCMS-1613-P 606 additional claims-based measure for the CY 2017 payment determination and subsequent years: OP-32: Facility Seven-Day Risk-Standa rdized Hospital Visit Rate after Outpatient Colonoscopy. As we note in the CY 2013 O PPS/ASC final rule with comment period (77 FR 68530), we calculate the claims-based measures using Medicare FFS claims data that do not require additiona l hospital data submissions. (2) Chart-Abstracted Measures for the CY 2017 Payment Determination and Subsequent

Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68530 through 68531) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75171) for detailed discussions of the information collection requirements for the previously finalized chart-abstract ed measures (OP-1, OP-2, OP-3, OP-4, OP-5, OP-6, OP-7, OP-18, OP-20, OP-21, OP- 22, OP-23, OP-29, OP-30, and OP-31). In section XIII. of this proposed rule, we are proposing to remove three chartabstracted measures from the Hospital OQR Program for the CY 2017 payment determination and subsequent years: OP-4: Aspirin at Arrival (NQF # 0286); OP-6: Timing of Prophylactic Antibiotics; and OP -7: Perioperative Care: Prophylactic Antibiotic Selection for Surgical Patients ( NQF # 0528). We previously estimated that each participating hospital will spend 35 minut es (or 0.583 hours) per case to collect and submit the data required for the chart-abst racted measures finalized for the CY 2015 payment determination and subsequent y ears (OP-1, OP-2, OP-3, OP-4, OP-5, OP-6, OP-7, OP-18, OP-20, OP-21, OP-22, OP-23) fo r each case (78 FR 75171). Since we are proposing to remove three of these measures, we believe that the time to chart-abstractCMS-1613-P 607 these measures will be reduced by 25 percent (3 of 12 measures). Therefore, we estimate that hospitals will spend approximately 26 minutes (0.433 hours) per case to collect and

submit these data. Data submitted for the CY 2014 payment determination indicate that a hospital will submit approximately 1,266 cases per year for these measures. Therefore, we estimate that the time it will take a hospital to abstract data for all of the chart-abstracted measures will be 549 hours per year (1,266 cases x 0.433 hours). We estimate that there will be approximately 3,300 hospitals that participate in the Hospital OQR Program for the CY 2017 payment determination and subseque nt years. Therefore, we estimate that the chart-abstracted measures for the CY 2017 payment determination and subsequent years will result in a burden of 1.8 mill ion hours (549 hours x 3,300 hospitals) for all participating hospitals, for a total financ ial burden of approximately $54 million (1.8 million hours x $30/hour). In addition, in the CY 2014 OPPS/AS C final rule with comment period (78 FR 75171), we estimated that OP-29 and OP-30 would require 25 minutes (0.417 hours) per case per measure to chart-abst ract. We also estimated that hospitals would abstract 384 cases per year for each of these measures. Our estimate for the CY 2017 payment determination and subsequent years has not changed from last year’s estimate (although, as noted above, we have changed our estimate for the CY 2016 payment determination based on the delay of OP-29 and OP-30). Therefore, for the CY 2017 payment determination and subsequent years, we estimate a burden of 1.1 million hours (3,300 hospitals x 0.417 hours/ case x 384 case/measure x 2 measures)CMS-1613-P 608 for all participating hospitals for OP-29 and OP-30 for a total financial burden of approximately $33 million ($30/hour x 1.1 million hours). In section XIII.D.3. of this proposed rule, we are proposing to exclude OP-31 from the CY 2016 payment determination measure set and, for the CY 2017 payment determination and subsequent years, to cha nge this measure from required to voluntary. Hospitals would not be subject to a payment reduction with respect to this measure for the CY 2016 payment determination or during the period of voluntary reporting. We

continue to believe this measure addresses an important area of car e, and anticipate that many facilities will report this measure on a voluntary basis. In the CY 2014 ASC/OPPS final rule with comment period (78 FR 75171) , we estimated that OP-31 would require 25 minutes (0.417 hours) per case to chart-abstra ct. We also estimated that hospitals would abstract 384 cases per year for this measure. We estimate that approximately 20 percent of hospitals (660 hospitals (3,300 hospitals x 0.2)) will elect to report this measure on a voluntary basis. Therefore, we are revising the estimated burden for this measure to 105,685 hours (660 hospitals x 0.417 hour s/case x 384 cases) for participating hospitals for the CY 2017 payment determination and subsequent years, for a total financial burden of approximately $3.2 million ($30/hour x 105,685 hours). Therefore, for the chart-abstracted meas ures, we estimate a total burden for all participating hospitals of 3 million hours (1.8 million hours + 105,685 hours + 1.1 million hours) and $90 million (3 million hours x $30/hour) for the CY 2017 payment determination and subsequent years.CMS-1613-P 609 (3) Web-Based Measures Submitted Directly to CMS for the CY 2017 Payment Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75171) for detailed discussions of the information collection requirements for the previously finalized measures submitted via th e Web-based tool. For the reasons stated in that final rule with comment period, we estimate that each partic ipating hospital would spend 10 minutes per measure per year to colle ct and submit the data for the six measures (OP-12, OP-17, OP-25, OP-26, OP-29, and OP-30) submitted via the Web-based tool. Therefore, the estimated annual estimate burde n associated with these measures for all participating hospitals is 3,307 hours (3,300 hospitals x 0.167 hours/measure x 6 measures/hospital) for the CY 2017 paymen t determination and subsequent years. As stated above, in section XIII.D.3. of this proposed rule, we are proposing to require voluntary reporting for OP-31, meaning that failing to repor t this measure would not affect a hospital’s CY 2017 and subseque nt years’ payment determinations. We estimate that approximately 20 percent of hos pitals (660 hospitals (3,300 hospitals x 0.2)) will elect to report this measure on a voluntar y basis. Therefore, we are revising the

estimated burden for this measure for a ll participating hospita ls to 111 hours (660 hospitals x 0.167 hours) for the CY 2017 paymen t determination and subsequent years. Therefore, we estimate that the financ ial burden incurred for the Web-based submission of these measures for all part icipating hospitals wi ll be $119,070 ($30/hour x (3,858 hours + 111 hours)) for the CY 2017 payment determination and subsequent

years.CMS-1613-P 610 (4) NHSN HAI Measure for the CY 2017 Paym ent Determination and Subsequent Years

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 75172) for detailed discussions of th e information collection requirements for OP-27: Influenza Vaccination Coverage among Healthcare Personnel. In section XIII.D.1. of this proposed rule, we are proposi ng to correct a submission deadline for this

measure. We do not believe there will be a ch ange in burden due to this proposal since it was a typographical error and our previous estimates were based on the corrected

submission timeframe. We also noted that ho spitals may report this measure for both the Hospital IQR Program and the Hospital OQR Program by CCN. Although we believe an

overall reduction in burden will occur from th is guidance because hospitals will only be required to submit this information once for each program, submitting this information is still a requirement of the Hospital OQR Progr am. Therefore, we do not believe this guidance will result in a reduction in burden attributable to the Hospital OQR Program. Therefore, for the reasons discussed in th e CY 2014 OPPS/ASC final rule with comment period (78 FR 75172), we estimate a total bur den for all particip ating hospitals of 106,940 hours and a total financial burden of $3,208,203 associated with this measure.

c. Review and Corrections Period Requirements for the CY 2017 Payment Determination and Subsequent Years In section XIII.H.2.f. of this proposed ru le, we are proposing to formalize that the time during which hospitals submit chart-abstra cted data is the re view and corrections period for that data. Because this proposal does not require hospitals to submit additional data, we do not believe it will increase burden for these hospitals.CMS-1613-P 611 d. Hospital OQR Program Validation Requirements for the CY 2017 Payment Determination and Subsequent Years In section XIII.H.3.d. of this proposed ru le, we are proposing three changes to our validation procedures: (1) we are proposing to change the eligibility requirements for hospitals selected for validation so that a hosp ital would be eligible if it submits at least one case to the Hospital OQR Program Clinical Data Warehouse during the quarter containing the most recently available data; (2) we are proposing to give hospitals the option to either submit paper copies of patie nt charts or securely transmit electronic

versions of medical information for validatio n; and (3) we are propos ing that a hospital must identify the medical record staff re sponsible for submissi on of records under the Hospital OQR Program to the designated CM S contractor. We do not believe that changing the eligibility requirements will re sult in additional burden since the same number of hospitals will be selected for vali dation, as discussed be low. In addition, we do not believe that changing to whom a hos pital must identify the medical staff responsible for submission of records will resu lt in additional burden since hospitals must already submit this data; that is, only the contractor to whom the data is submitted may change. We do believe, however, that the seco nd requirement may result in a change in

burden. We are proposing that the requirement to submit patient charts for validation of Hospital OQR Program data may be met by employing either of the following options: (1) a hospital may submit paper medical records, the form in which we have historically requested them; or (2) a hosp ital may securely transmit electronic versions of medicalCMS-1613-P 612 information beginning in the CY 2017 payment determination. We are proposing that hospitals that chose to securely transmit electronic versions of medical information should either: (1) download or copy the digital image of the patient chart onto CD, DVD, or flash drive and ship the electronic media following in structions specified on the QualityNet Web site; or (2) securely submit digital images (PDFs) of patient charts using a Secure File Transfer Portal on the Qua lityNet Web site. In the FY 2014 IPPS/LTCH PPS final rule, the Hospital IQR Program previ ously finalized a sim ilar policy that also allows hospitals to submit electronic versi ons of records for valid ation using the first method (78 FR 50834 through 78 FR 50835). The Hospital IQR Program has proposed the second method, secure submission of digital images via a Secure File Transfer Portal, in the FY 2015 IPPS/LTCH proposed rule (79 FR 28251). For the same reasons outlined in the Hospital IQR Program (78 FR 50956), we are proposing a reimbursement rate of $3.00 per patient chart submitted electronically (using either of the proposed methods for electronic submission) for validation fo r the CY 2017 payment determination and subsequent years. We will continue to reimburse hospitals at a rate of 12 cents per page, plus shipping, for records pr ovided on paper (76 FR 74577).

The burden associated with validation is the time and effort necessary to submit

validation data to the CMS contractor. Fo r some hospitals, we believe that submitting this data electronically may result in a reduc tion in burden; for others we believe that submitting paper copies will be the least bur densome option. We sample 500 hospitals for validation, and we estimate that it will take each hospital 12 hours to comply with the data submission requirements. Therefore, we estimate a total burden of approximatelyCMS-1613-P 613 6,000 hours (500 hospitals x 12 hours/hospital) and a total financial impact of $180,000 ($30/hour x 6,000 hours) for the CY 2017 payment determination and subsequent years. e. Extraordinary Circumstances Ex tensions or Exemptions Process

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment period (78 FR 75119 through 75120), and 42 CFR 419.46(d) for a comp lete discussion of our extraordinary circumstances extension or waiver process under the Hospital OQR Program. In this proposed rule, we are proposing to make a ch ange from the phrase “extension or waiver” to the phrase “extension or ex emption” throughout the regula tion. We do not anticipate that this proposed minor cha nge will affect the collection of information burden estimates for this process. f. Reconsideration and Appeals

While there is burden associated wi th filing a reconsideration request, 5 CFR 1320.4 of the Paperwork Reduction Act of 1995 regulations excludes collection activities during the conduct of administrative actions such as redeterminations, reconsiderations, or appeal s or all of these actions. We invite public comment on the burden associated with these information collection requirements. 2. ASCQR Program Requirements a. Background

We refer readers to the CY 2012 OPPS/A SC final rule with comment period (76 FR 74554), the FY 2013 IPPS/LTCH fi nal rule (77 FR 53672), the CY 2013CMS-1613-P 614

OPPS/ASC final rule with comment period (77 FR 68532 through 68533), and the

CY 2014 OPPS/ASC final rule with comme nt period (78 FR 75172 through 75174) for detailed discussions of the ASCQR Program information collection requirements we have previously finalized.

b. Revisions to the CY 2016 Pa yment Determination Estimates In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75124 through 75130), we finalized the adoption of thr ee new measures for the CY 2016 payment determination and subsequent years: ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658), ASC-10: Endoscopy/Polyp Surveillance: Col onoscopy Interval for Patients with a History of Adenomatous Polyps – Avoidan ce of Inappropriate Use (NQF # 0659), and ASC-11: Cataracts – Improvement in Patie nt’s Visual Function within 90 Days Following Cataract Surgery (NQF # 1536). In that rule, we estimated that each participating ASC would spend 35 minutes per case to collect and submit the data for these measures, making a total estimated burden for ASCs with a single case per ASC of 3,067 hours (5,260 ASCs × 0.583 hours per case per ASC). We also stated that we expected ASCs would vary greatly as to the number of cases per ASC due to ASC specialization (78 FR 75173). As stated in section XIV.E.3. of th is proposed rule, we have delayed reporting for ASC-9 and ASC-10 by one quarter. Therefore, we estimate a 25-percent reduction in cases and burden fo r these measures for the CY 2016 payment

determination. As stated in section XIV. E.3.c. of this proposed rule, we delayed reporting of ASC-11 by one year and are pr oposing to exclude ASC-11 from the CYCMS-1613-P 615 2016 payment determination measure set . As a result, we do not believe there would be any burden associated with this measur e for the CY 2016 payment determination. c. Claims-Based Measures for the CY 2017 Payment Determination and Subsequent

Years

We refer readers to the CY 2013 OPPS /ASC final rule with comment period (77 FR 68532) and CY 2014 OPPS/ASC final rule with comment period (78 FR 75172 through 75174) for detailed discussions of the information collection requirements for the five previously-adopted claims-based ASCQR Program measures (four outcome measures and one process measure). The fi ve previously adopted measures are: ASC-1: Patient Burn (NQF # 0263); ASC-2: Patient Fall (NQF # 0266); ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant (NQF # 0267); ASC-4: Hospital Transfer/Admission ( NQF # 0265); and ASC-5: Prophylactic Intravenous (IV) Antibio tic Timing (NQF # 0264). For th e reasons we discussed in the

CY 2014 OPPS/ASC final rule with comme nt period (78 FR 75172 through 75173), we estimate that the reporting bur den to report Quality Data Co des (QDCs) for these five

claims-based outcome measures woul d be nominal for the CY 2017 payment determination and for subsequent years.

In section XIV.B.5. of this proposed ru le, we are proposing to add one additional claims-based measure to the ASCQR Program. The additional measure, ASC-12: Facility Seven -Day Risk-Standardized Hospital Visit Rate after Outpatient Colonoscopy, would be computed by CMS ba sed on Medicare FFS claims, and would not require ASCs to input QDCs. Therefore, we do not anticipate that this proposedCMS-1613-P 616

measure would add additional burden to AS Cs for the CY 2017 payment determination and for subsequent years. d. Web-Based Measures for the CY 2017 Paym ent Determination and Subsequent Years

We refer readers to the CY 2013 OPPS/A SC final rule with comment period (77 FR 68532) and CY 2014 OPPS/ASC final rule with comment period (78 FR 75172 through 75174) for detailed discussions of the information collection requirements for the five previously-adopted Web-based m easures, excluding ASC-11, which we are proposing for voluntary inclusion in the ASCQR Program for CY 2017. The five previously adopted measures are: ASC-6: Safe Surgery Check list Use; ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures; ASC-8: Influenza Vaccination Coverage Among Hea lthcare Personnel (NQF # 0431); ASC-9: Endoscopy/Polyp Surveillance: Appr opriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658); and ASC-10: Endoscopy/Polyp Surveillance: Colonoscopy Interv al for Patients with a History of Adenomatous PolypsAvoidance of Inappropriate Use (NQF # 0659).

For the reasons we discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75173 through 75174), we estimat e that the reporting burden for the ASC-6: Safe Surgery Checklist Use and the ASC-7: ASC Facility Volume measures would be 1,756 hours (5,260 ASCs x 2 measures x 0.167 hours per ASC) and $52,680 (1,756 hours x $30.00 per hour) annually for the CY 2017 payment determination and for subsequent years.CMS-1613-P 617

For the reasons discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75173 through 75174), we estimat e that the reporting burden for the ASC-8: Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431) measure would be 18,005 hours and $540,150 (18,005 hours x $30.00 per hour) annually for the CY 2017 payment determinat ion and for subsequent years.

For the reasons discussed in the CY 2014 OPPS/ASC final rule with comment period (78 FR 75173 through 75174), we estimate that the reporting burden for ASCs with a single case per ASC for the ch art-abstracted ASC-9: Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk Patients (NQF # 0658) and ASC-10: Endos copy/Polyp Surveillance: Colonoscopy

Interval for Patients with a History of Adenomatous Polyps -Avoidance of Inappropriate Use (NQF # 0659) measures would be 3,067 hours and $92,010 (3,067 hours x $30.00 per hour) annually for the CY 2017 payment determination and for subsequent years.

In section XIV.E.3.c. of th is proposed rule, we are pr oposing that data collection and submission be voluntary for ASC-11: Cata racts: Improvement in Patient’s Visual Function within 90 Days Following CataractSurgery (NQF # 1536), meaning we would not subject ASCs to payment reduction with re spect to this measure during the period of voluntary reporting. We continue to believe this measure addr esses an important area of care, and anticipate that many facilities will re port this measure on a voluntary basis. In

the CY 2014 ASC/OPPS final rule with co mment period (78 FR 75173), we estimated that each participating ASC would spend 35 minutes per case to collect and submit the data for this measure, making the total esti mated burden for ASCs with a single case perCMS-1613-P 618 ASC of 3,067 hours (5,260 ASCs x 0.583 hours pe r case per ASC) annually. We expect that ASCs would vary greatly as to the number of cases per ASC due to ASC specialization. We estim ate that approximately 20 percent of ASCs would elect to report this measure on a voluntary basis; therefore, we estimate the total estimated burden for ASCs with a single case per ASC to be 613 hours (1,052 ASCs x 0.583 hours per case per ASC) and $18,390 (613 hours x $30.00 per hour) annually for the CY 2017 payment determination and subsequent years. e. Extraordinary Circumstances Extension or Exemptions Process

We refer readers to the FY 2013 I PPS/LTCH PPS final rule (77 FR 53642 through 53643) and the CY 2014 OPPS/ASC final rule with comment period (78 FR 75140) for a complete discussion of our extraordinary circumstances extension or waiver process under the ASCQR Program. We are not proposing to make any substantive changes to this process. However, in the future, we will refer to the process as the extraordinary circumstances exte nsions or exemptions process. In section XIV.E.7. of this proposed rule, we note that we are proposing to make certain changes to the form to ensure that the form is consistent across CMS quality reporting programs. We do not anticipate that these pr oposed minor changes will affect the burden estimates for this process. f. Reconsideration and Appeals

While there is burden associated wi th filing a reconsideration request, 5 CFR 1320.4 of the Paperwork Reduction Act of 1995 regulations excludes collectionCMS-1613-P 619 activities during the conduct of administrative actions such as redeterminations, reconsiderations, or appeal s or all of these actions. We invite public comment on the burden associated with these information collection requirements. XX. Response to Comments Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowle dge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this proposed rule, and, when we proceed with a subsequent document(s), we will respond to those comments in the preamble to that document.

XXI. 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 Pl anning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Re gulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (Septemb er 19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Contract w ith America Advancement Act of 1996 (Pub. L. 104-121) (5 U.S.C. 804(2)). This se ction of the proposed rule contains the impact and other economic analyses for th e provisions that we are proposing.CMS-1613-P 620 Executive Orders 12866 and 13563 direct agenci es to assess all costs and benefits of available regulatory alterna tives and, if regulation is n ecessary, to select regulatory approaches that maximize net benefits (inc luding potential economi c, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both co sts and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This proposed rule has been designated as an economically significan t rule under section 3(f)(1 ) of Executive Order 12866 and a major rule under the Contract w ith America Advancement Act of 1996 (Pub. L. 104-121). Accordingly, this proposed ru le has been reviewed by the Office of Management and Budget. We have prepared a regulatory impact analysis that, to the best of our ability, presents the costs and benefits of this proposed rule. We are soliciting public comments on the regulator y impact analysis provided.

2. Statement of Need This proposed rule is necessa ry to update the Medicare hos pital OPPS rates. It is necessary to make changes to the payment policies and ra tes for outpatient services furnished by hospitals and CMHCs in CY 2015. We are required under section 1833(t)(3)(C)(ii) of the Act to update annua lly the OPPS conversion factor used to determine the payment rates for APCs. We also are required under section 1833(t)(9)(A) of the Act to review, not le ss often than annually, and re vise the groups, the relative payment weights, and the wage and other ad justments described insection 1833(t)(2) of

the Act. We must review the clinical in tegrity of payment groups and relative payment weights at least annually. We are proposing to revise the APC relative payment weightsCMS-1613-P 621 using claims data for services furnis hed on and after January 1, 2013, through and including December 31, 2013, and updated cost report information. This proposed rule also is necessary to update the ASC payment rates for CY 2015, enabling CMS to make changes to payment policies and payment rates for covered surgical procedures and covered ancill ary services that are performed in an ASC in CY 2015. Because ASC payment rates are based on the OPPS relative payment weights for the majority of the procedures performed in ASCs, the ASC payment rates are updated annually to reflect annual changes to the OPPS relative payment weights. In addition, we are required under section 1833(i)(1) of the Act to review and update the list of surgical procedures that can be performed in an ASC not less frequently than every 2 years. 3. Overall Impacts for the Proposed OPPS and ASC Payment Provisions

We estimate that the total increase in Federal government expenditures under the OPPS for CY 2015 compared to CY 2014 due to th e changes in this proposed rule would be approximately $800 million. Taking into account our estimated changes in enrollment, utilization, and case-mix, we estim ate that the proposedOPPS expenditures for CY 2015 would be approximately $5.224 bill ion higher relative to expenditures in CY 2014. Because this proposed rule is ec onomically significant as measured by the threshold of an additional $100 million in expenditures in one year, we have prepared this regulatory impact analysis that, to the best of our ab ility, presents its costs and benefits. Table 52 displays the redistributional imp act of the proposed CY 2015 changes in OPPS payment to various groups of hospitals and for CMHCs.CMS-1613-P 622 We estimate that the proposed update to the conversion factor and other adjustments (not including the effects of outlier payments, the pass-through estimates, and the application of the proposed frontier State wage adjustment for CY 2015) would increase total OPPS payments by 2.1 percen t in CY 2015. The proposed changes to the APC weights, the proposed changes to the wa ge indexes, the proposed continuation of a payment adjustment for rural SCHs, incl uding EACHs, and the proposed payment adjustment for cancer hospitals would not increase OPPS payments because these proposed changes to the OPPS are budget neut ral. However, these proposed updates would change the distribution of payments within the budget ne utral system. We estimate that the total change in paymen ts between CY 2014 and CY 2015, considering all proposed payments, including proposed chan ges in estimated total outlier payments, pass-through payments, and the application of the frontier State wage adjustment outside of budget neutrality, in additi on to the application of the proposed OPD fee schedule increase factor after all adjustments requi red by sections 1833(t)( 3)(F), 1833(t)(3)(G), and 1833(t)(17) of the Act, would increas e total estimated OPPS payments by 2.2 percent.

We estimate the total incr ease (from proposed changes to the ASC provisions in this proposed rule as well as from enrollm ent, utilization, and case-mix changes) in expenditures under the ASC payment system for CY 2015 compared to CY 2014 to be approximately $243 million. Because the prov isions for the ASC payment system are part of a proposed rule that is economica lly significant as measured by the $100 million threshold, we have prepared a regulatory imp act analysis of the proposed changes to theCMS-1613-P 623 ASC payment system that, to the best of our ab ility, presents the costs and benefits of this portion of the proposed rule. Tables 53 and Table 54 of this proposed rule display the redistributional impact of the proposed CY 2015 changes on ASC payment, grouped by specialty area and then grouped by procedur es with the greatest ASC expenditures, respectively. 4. Detailed Economic Analyses a. Estimated Effects of Proposed O PPS Changes in this Proposed Rule (1) Limitations of Our Analysis The distributional impacts pr esented here are the projec ted effects of the proposed CY 2015 policy changes on various hospital gr oups. We post on the CMS Web site our proposed hospital-specific es timated payments for CY 2015 with the other supporting documentation for this proposed rule. To vi ew the hospital-specific estimates, we refer

readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/index.html . At the Web site, select “regulations and notices” from the left side of the page and then select “CMS-1613-P” from the list of regulations and notices. The hos pital-specific file layout and the hospital-specific file are listed with the other suppor ting documentation for this proposed rule. We show hospital-specific data only for hospitals whos e claims were used for modeling the impacts

shown in Table 52 below. We do not show hos pital-specific impacts for hospitals whose

claims we were unable to use. We refer read ers to section II.A. of this proposed rule for a discussion of the hospitals whose claims we do not use for ratesetting and impact

purposes.CMS-1613-P 624 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 predic t behavioral responses to our proposed policy changes. In addition, we do not make adjustme nts for future changes in variables such as service volume, service-mix, or number of en counters. In this proposed rule, we are soliciting public comment and information a bout the anticipated e ffects of our proposed changes on providers and our methodology for estimating them. Any public comments

that we receive will be addressed in the a pplicable sections of the final rule with comment period. (2) Estimated Effects of Proposed OPPS Changes on Hospitals Table 52 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 incl uded cancer and children’s hospitals, which are held harmless to their pre-BBA amount. We also include CMHCs in the first line that includes all providers. We now include a second line for all hospitals, excluding permanently held harmless hospitals and CMHCs. We present separate impacts for CM HCs in Table 52, and we discuss them separately below, because CMHCs are paid on ly for partial hospitaliz ation services under the OPPS and are a different provider t ype from hospitals. In CY 2015, we are continuing to pay CMHCs under APC 0172 (Level I Partial Hospitali zation (3 services) for CMHCs) and APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), and we are paying hospitals for pa rtial hospitalization services under APCCMS-1613-P 625 0175 (Level I Partial Hospitaliz ation (3 services) for hospi tal-based PHPs) and APC 0176 (Level II Partial Hospitalization (4 or mo re services) for hospital-based PHPs). The estimated increase in the total paym ents made under the OPPS is determined largely by the increase to th e conversion factor under the statutory methodology. The distributional impacts presented do not include assumptions about changes in volume and service-mix. The conversion factor is update d annually by the OPD f ee schedule increase factor as discussed in detail in section II.B. of this proposed rule. Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule increase factor is equal to the market basket percentage incr ease applicable under se ction 1886(b )(3)(B)(iii) of the Act, which we refer to as the IPPS market basket percentage increase. The proposed IPPS market basket percentage increase for FY 2015 is 2.7 percent (79 FR 28087). Section 1833(t) (3)(F)(i) of the Act reduces that 2.7 percent by the multifactor productivity adjustment described in section 1886(b)(3)(B)(x i)(II) of the Act, which is proposed to be 0.4 percentage poi nts for FY 2015 (which is also the proposed MFP adjustment for FY 2015 in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28087); and sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iv) of the Act further reduce the market basket percentage increase by 0.2 percentage points, resulting in the proposed OPD fee schedule increase factor of 2.1 percent. We are proposing to use the proposed OPD fee schedule increase factor of 2.1 percent in the calculation of the CY 2015 proposed OPPS conversion factor. Se ction 10324 of the Affordable Care Act, as amended by HCERA, further authori zed additional expenditures outside budget neutrality for hospitals in certain frontier St ates that have a wage index less than 1.00.CMS-1613-P 626

The amounts attributable to this frontier State wage index adjustment are incorporated in

the CY 2015 estimates in Table 52. To illustrate the impact of the proposed CY 2015 changes, our analysis begins

with a baseline simulation m odel that uses the CY 2014 re lative payment weights, the FY 2014 final IPPS wage indexes that include reclassifications, and the final CY 2014

conversion factor. Table 52 shows the estima ted redistribution of the proposed increase in payments for CY 2015 over CY 2014 payments to hospitals and CMHCs as a result of the following factors: the impact of the APC reconfiguration a nd recalibration changes between CY 2014 and CY 2015 (Column 2); the proposed wage indexes and the provider adjustments (Column 3); the combined impact of all the proposed changes described in the preceding columns plus the proposed 2.1 percent OPD fee schedule increase factor update to the conversion factor(Column 4); the combined impact shown in Column 4 plus the proposed CY 2015 frontier State wa ge index adjustment (Column 5); and the estimated impact taking into account all pr oposed payments for CY 2015 relative to all payments for CY 2014, including the impact of proposed changes in estimated outlier payments and proposed changes to the pa ss-through payment estimate (Column 6). We did not model an explicit budget neutrali ty adjustment for the rural adjustment for SCHs because we are proposing to mainta in the current adjustment percentage for CY 2015. Because the updates to the conversi on factor (including the update of the OPD fee schedule increase factor), the estimated co st of the rural adjustment, and the estimated cost of projected pass-through payment fo r CY 2015 are applied uniformly across services, observed redistributions of payments in the impact table for hospitals largelyCMS-1613-P 627 depend on the mix of services furnished by a hos pital (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, tota l 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 pa tterns, and the mix of services billed between CY 2014 and CY 2015 by various groups of hospitals, which CMS cannot

forecast. Overall, we estimate that the proposed rates for CY 2015 would increase Medicare OPPS payments by an estimated 2.2 percent. 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 results in an estimated 2.2 percent increase in Medica re payments to all other hospitals. These estimated payments would not signifi cantly impact other providers. Column 1: Total Number of Hospitals

The first line in Column 1 in Table 52 shows the total numbe r of facilities (3,947), including designated cancer a nd children’s hospitals and CMHCs, for which we were able to use CY 2013 hospital outpatient and CMHC claims data to model CY 2014 and CY 2015 payments, by classes of hospitals, for CMHCs and for dedicated cancer hospitals. We excluded all hospitals and CMHCs for which we could not plausibly estimate CY 2014 or CY 2015 payment and entit ies that are not paid under the OPPS. The latter entities include CAHs, all-inclusiv e hospitals, and hospita ls located in Guam, the U.S. Virgin Islands, Northern Mariana Is lands, American Samoa, and the State ofCMS-1613-P 628 Maryland. This process is discussed in greate r detail in section II.A. of this proposed rule. At this time, we are unable to calcul ate a disproportionate sh are (DSH) variable for hospitals not particip ating in the IPPS. Hospitals for which we do not have a DSH variable are grouped separately and generally include freestanding psychiatric hospitals, rehabilitation hospitals, and long-term care hospitals. We show the total number of OPPS hospitals (3,814), excluding the hold-ha rmless cancer and child ren’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 perm anently holds harmless cancer hospitals and children’s hospitals to th eir “pre-BBA amount” as spec ified under the terms of the statute, and therefore, we removed them from our impact analyses. We show the isolated impact on 72 CMHCs at the bottom of the impact table and discuss th at impact separately

below. Column 2: APC Recalibration – All Proposed Changes

Column 2 shows the estimated effect of APC recalibration. Column 2 also reflects any changes in multiple procedure disc ount patterns or conditional packaging that occur as a result of the changes in th e relative magnitude of payment weights. As a result of APC recalibration, we estimate that urba n hospitals would e xperience a decrease of -0.1 percent, with the impact ranging from an increase of 0.1 percent to a decrease of -0.3 percent, depending on the number of beds. Rural hospitals would experience an increase of 0.5 percent, with the impact ra nging from an increase of 1.2 percent to a decrease of -0.6 percent, depending on the number of beds. Major teaching hospitals would experience an increas e of 0.6 percent overall.CMS-1613-P 629 Column 3: New Wage Indexes and th e Effect of the Provider Adjustments

Column 3 demonstrates the combined budget neutral impact of the proposed APC recalibration; the proposed updates for the wage indexes with the proposed fiscal year (FY) 2015 IPPS post-reclassification wage inde xes; and the proposed rural adjustment. We modeled the independent effect of the proposed budget neutrality adjustments and the proposed OPD fee schedule increase factor by using the relative payment weights and wage indexes for each year, and using a CY 2014 conversion factor that included the

OPD fee schedule increase and a budget neutrality adjustment for differences in wage

indexes. Column 3 reflects the independent effect s of the proposed updated wage indexes, including the applicat ion of budget neutrality for the ru ral floor policy on a nationwide

basis. This column excludes the effects of the proposed frontier State wage index adjustment, which is not budget neutral and is included in Column 5. We did not model a budget neutrality adjustment for the rural adju stment for SCHs because we are proposing to continue the rural payment adjustment of 7.1 percent to rura l SCHs for CY 2015, as

described in section II.E. of this proposed rule. We modeled the independent effect of updating the wage indexes by varying only the wage indexes, holding APC relative pa yment weights, service-mix, and the rural adjustment constant and using the propos ed CY 2015 scaled weights and a CY 2014

conversion factor that included a budget neutrality adjustment for the effect of changing the wage indexes between CY 2014 and CY 2015. The proposed FY 2015 wage policy

results in modest redistributions.CMS-1613-P 630 There is no difference in impact be tween the CY 2014 cancer hospital payment adjustment and the proposed CY 2015 cancer hospital payment adjustment because we are proposing the same payment-to-cost ratio target in CY 2015 as in CY 2014. Column 4: All Proposed Budget Neutrality Changes Combined with the Proposed Market Basket Update

Column 4 demonstrates the combined impact of all the proposed changes previously described and the proposed update to the conversion fact or of 2.1 percent. Overall, these changes would increase payments to urban hospitals by 2.1 percent and to rural hospitals by 2.4 percent. Most classes of hospitals would receive an increase in line with the proposed 2.1 percent overall increa se after the update is applied to the budget neutrality adjustments. Column 5: All Proposed Adjustments with the Proposed Frontier State Wage Index Adjustment This column shows the impact of all proposed budget neutrality adjustments, application of the proposed 2.1 percent OP D fee schedule increase factor, and the nonbudget-neutral impact of applying th e proposed CY 2015 frontier State wage adjustment. Rural hospitals in West North Central and Mountain States would experience estimated increases in paymen t of 3.8 and 4.3 percent, respectively, as a result of the proposed frontier State wage index adjustment , while urban hospitals in those States would experience estimated increases of 3.2 and 2.5 percen t, respectively. Column 6: All Proposed Changes for CY 2015CMS-1613-P 631 Column 6 depicts the full impact of the proposed CY 2015 policies on each hospital group by including the effect of all of the proposed changes for CY 2015 and comparing them to all estimated payments in CY 2014. Column 6 shows the combined budget neutral effects of Column 2 and 3; th e proposed OPD fee schedule increase; the impact of the proposed frontier State wage index adjustment; the impact of estimated OPPS outlier payments as discussed in section II.G. of this proposed rule; the proposed change in the Hospital OQR Program pa yment reduction for the small number of hospitals in our impact model that failed to meet the reporting require ments (discussed in section XIII. of this proposed rule); and the difference in total OPPS payments dedicated to transitional pass-through payments. Of those hospitals that failed to m eet the Hospital OQR Program reporting requirements for the full CY 2014 update (and assumed, for modeling purposes, to be the same number for CY 2015), we included 35 hos pitals in our model because they had both CY 2013 claims data and recent cost report data . We estimate that the cumulative effect of all proposed changes for CY 2015 would increase payments to all providers by 2.2 percent for CY 2015. We modeled the indepe ndent effect of all proposed changes in Column 6 using the final relative payment we ights for CY 2014 and the proposed relative payment weights for CY 2015. We used th e final conversion factor for CY 2014 of $72.672 and the proposed CY 2015 conversion factor of $74.176 discussed in section II.B. of this proposed rule. Column 6 contains simulated outlier paym ents for each year. We used the 1-year proposed charge inflation factor used in the FY 2015 IPPS/LTCH PPS proposed ruleCMS-1613-P 632 (79 FR 28321) of 5.57 percent (1.0557) to increase individual costs on the CY 2013 claims, and we used the most recent overall CCR in the April 2014 Outpatient Provider-Specific File (OPSF) to estimate outlier payments for CY 2014. Using the CY 2013 claims and a 5.57 percent charge infl ation factor, we currently estimate that outlier payments for CY 2014, using a multiple threshold of 1.75 and a proposed fixed-dollar threshold of $2,900 would be appr oximately 0.9 percent of total payments. The estimated current outlier payments of 0.9 percent are incorporated in the comparison

in Column 6. We used the same set of clai ms and a proposed charge inflation factor of 11.46 percent (1.1146) and the CCRs in the April 2014 OPSF, with an adjustment of 0.9813, to reflect relative changes in cost and charge inflation between CY 2013 and CY 2015, to model the CY 2015 proposed outlie rs at 1.0 percent of estimated total payments using a multiple threshold of 1.75 and a proposed fixed-dollar threshold of $3,100. The charge inflation and CCR inflation factors are discussed in detail in the FY 2015 IPPS/LTCH PPS propos ed rule (79 FR 28321). We estimate that the anticipated ch ange in payment between CY 2014 and CY 2015 for the hospitals failing to meet th e Hospital OQR Program requirements would be negligible. Overall, we estimate thatfacilities would expe rience an increase of 2.2 percent under this proposed rule in CY 2015 relative to total spending in CY 2014. This projected increase (shown in Column 6) of Table 52 reflects the proposed 2.1 percent OPD fee schedule in crease factor, less 0.01 perc ent for the proposed change in the pass-through estimate between CY 2014 and CY 2015, plus 0.1 percent for the difference in estimated outlier payments between CY 2014 (0.9 percent) and CY 2015CMS-1613-P 633 (1.0 percent), less 0.1 percent due to the fron tier adjustment in CY 2014, plus 0.1 percent due to the proposed frontier State wage inde x adjustment in CY 2015. We estimate that the combined effect of all proposed changes for CY 2015 would increase payments to urban hospitals by 2.2 percent. Overall, we estimate that rural hospitals would experience a 2.5 percent increase as a result of the combined effects of all proposed changes for CY 2015. We estimate that rural hospitals that b ill less than 5,000 lines of OPPS services would experience a decrease of -3.1 percent a nd rural hospitals that bill 11,000 or more lines of OPPS services would experience increases ranging from 1.5 to 3.0 percent. Among hospitals by teaching status, we es timate that the impacts resulting from the combined effects of all proposed changes would include an increase of 2.9 percent for major teaching hospitals and 2.1 percent fo r nonteaching hospitals. Minor teaching hospitals would experience an es timated increase of 1.8 percent. In our analysis, we also have categori zed hospitals by type of ownership. Based on this analysis, we estimate that voluntary hos pitals would experien ce an increase of 2.4 percent, proprietary hosp itals would experience an increase of 1.7 percent, and governmental hospitals would experien ce an increase of 2.2 percent.CMS-1613-P 634

TABLE 52.—ESTIMATED IMPACT OF THE PROPOSED CY 2015 CHANGES

FOR THE HOSPITAL OUTPATIENT PROSPECTIVE PAYMENT SYSTEM

(1) (2) (3) (4) (5) (6)

Number of Hospitals APC Recalibration (all proposed

changes) Proposed New Wage Index and Provider Adjustments All Budget Neutral Changes (combined

cols 2,3)

with Proposed

Market Basket Update All Proposed

Budget Neutral Changes and Proposed

Update (Column 4) with Proposed

Frontier

Wage Index Adjustment All Proposed Changes

ALL FACILITIES * 3,947 0.0 0.0 2.1 2.2 2.2 ALL HOSPITALS 3,814 0.0 0.0 2.1 2.2 2.2 (excludes hospitals permanently held harmless and CMHCs) URBAN HOSPITALS 2,953 -0.1 0.0 2.1 2.2 2.2 LARGE URBAN 1,616 -0.1 0.1 2.2 2.2 2.3 (GT 1 MILL.) OTHER URBAN 1,337 -0.1 -0.1 1.9 2.2 2.1 (LE 1 MILL.)

RURAL HOSPITALS 861 0.5 -0.2 2.4 2.7 2.5 SOLE COMMUNITY 377 0.7 -0.1 2.6 3.0 2.7 OTHER RURAL 484 0.3 -0.3 2.2 2.3 2.2 BEDS (URBAN) 0 - 99 BEDS 1,008 0.1 0.1 2.4 2.6 2.5 100-199 BEDS 856 0.2 0.0 2.3 2.4 2.4 200-299 BEDS 462 -0.2 0.1 2.0 2.2 2.2 300-499 BEDS 412 -0.3 0.0 1.8 2.0 2.0 500 + BEDS 215 0.1 0.0 2.1 2.1 2.3 BEDS (RURAL) 0 - 49 BEDS 338 0.9 0.0 3.0 3.2 3.0 50- 100 BEDS 319 1.2 -0.2 3.0 3.3 3.1 101- 149 BEDS 117 0.3 -0.1 2.3 2.6 2.4 150- 199 BEDS 47 0.0 -0.5 1.6 2.3 1.7 200 + BEDS 40 -0.6 -0.2 1.3 1.3 1.4 VOLUME (URBAN) LT 5,000 Lines 500 -2.6 -0.2 -0.8 -0.6 -0.7CMS-1613-P 635 5,000 - 10,999 Lines 138 -2.7 -0.1 -0.7 -0.1 -0.5 11,000 - 20,999 Lines 120 -2.4 0.0 -0.3 -0.1 -0.1 21,000 - 42,999 Lines 237 -0.4 0.1 1.8 1.8 1.9 42,999 - 89,999 Lines 540 -0.2 0.0 1.9 1.9 2.0 GT 89,999 Lines 1,418 0.0 0.0 2.1 2.2 2.3 VOLUME (RURAL) LT 5,000 Lines 35 -5.1 -0.1 -3.1 -0.3 -3.1 5,000 - 10,999 Lines 27 -4.1 0.1 -1.9 -0.7 -1.9 11,000 - 20,999 Lines 50 -0.2 -0.4 1.5 1.7 1.5 21,000 - 42,999 Lines 162 1.0 -0.1 3.0 3.5 3.0 GT 42,999 Lines 587 0.5 -0.2 2.4 2.6 2.5 REGION (URBAN) NEW ENGLAND 151 1.3 -0.1 3.3 3.3 3.4 MIDDLE ATLANTIC 357 0.5 0.5 3.1 3.1 3.2 SOUTH ATLANTIC 468 -0.2 -0.2 1.6 1.6 1.8 EAST NORTH CENT. 465 0.1 -0.3 1.9 1.9 2.1 EAST SOUTH CENT. 175 -1.0 -0.5 0.6 0.6 0.8 WEST NORTH CENT. 192 -0.1 0.0 2.0 3.2 2.1 WEST SOUTH CENT. 509 -1.1 -0.2 0.8 0.8 1.0 MOUNTAIN 199 0.0 0.0 2.1 2.5 2.3 PACIFIC 390 -0.1 1.0 3.1 3.1 3.2 PUERTO RICO 47 1.0 0.5 3.6 3.6 3.6 REGION (RURAL) NEW ENGLAND 23 2.0 -0.1 4.0 4.0 4.1 MIDDLE ATLANTIC 58 1.4 0.4 3.9 3.9 4.0 SOUTH ATLANTIC 130 -0.3 -0.5 1.3 1.3 1.4 EAST NORTH CENT. 120 0.7 0.0 2.8 2.8 2.9 EAST SOUTH CENT. 165 -0.2 -0.4 1.5 1.5 1.6 WEST NORTH CENT. 99 0.7 -0.2 2.6 3.8 2.6 WEST SOUTH CENT. 181 0.1 -0.6 1.6 1.6 1.7 MOUNTAIN 61 0.9 -0.5 2.6 4.3 2.8 PACIFIC 24 1.4 0.9 4.4 4.4 4.4

TEACHING STATUS NON-TEACHING 2,793 -0.1 0.0 2.0 2.1 2.1 MINOR 699 -0.3 -0.1 1.7 1.9 1.8 MAJOR 322 0.6 0.1 2.8 2.8 2.9

DSH PATIENT PERCENT 0 15 0.2 0.5 2.8 3.2 2.8 GT 0 - 0.10 334 0.3 0.2 2.6 2.8 2.7 0.10 - 0.16 317 0.3 -0.1 2.4 2.5 2.4 0.16 - 0.23 681 0.2 -0.1 2.3 2.4 2.4 0.23 - 0.35 1,095 0.0 0.0 2.1 2.3 2.2 GE 0.35 811 -0.2 0.0 1.9 1.9 2.1 DSH NOT AVAILABLE ** 561 -6.6 0.1 -4.4 -4.4 -4.5

URBAN TEACHING/DSHCMS-1613-P 636

Column (1) shows total hospitals and/or CMHCs.

Column (2) includes all proposed CY 2015 OPPS policies and compares those to the CY 2014 OPPS.

Column (3) shows the budget neutral impact of updating the wage index by applying the proposed FY 2015 hospital inpatient wage index, including all proposed hold harmless policie s and transitional wages. The proposed rural adjustment continues our current policy of 7.1 perc ent so the budget neutrality factor is 1. The budget neutrality adjustment for the proposed cancer hospital adjustment is 1. 000 because the payment-to-cost ratio tar get remains the same as in CY 2014.

Column (4) shows the impact of all budget neutrality adj ustments and the addition of the proposed 2.1 percent OPD fee schedule update factor (2.7 percent reduc ed by 0.4 percentage points for the fina l productivity adjustment and further reduced by 0.2 percentage point in order to satisfy statut ory requirements set forth in the Affordable Care Act).

Column (5) shows the non-budget neutral impact of appl ying the frontier State wage adjustment in CY 2015. Column (6) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate, adding estimated outlier payments, and applying payment wage indexes.

*These 3,947 providers include children and cancer hospital s, which are held harmless to pre-BBA amounts, and CMHCs. ** Complete DSH numbers are not available for providers that are not paid under IPPS, in cluding rehabilitati on, psychiatric, and long-term care hospitals. TEACHING & DSH 928 0.1 0.0 2.2 2.3 2.3 NO TEACHING/DSH 1,482 -0.2 0.1 2.0 2.1 2.1 NO TEACHING/NO DSH 13 0.2 0.5 2.9 2.9 2.9 DSH NOT AVAILABLE** 530 -6.1 0.2 -3.8 -3.8 -3.9

TYPE OF OWNERSHIP VOLUNTARY 2,007 0.1 0.0 2.2 2.4 2.4 PROPRIETARY 1,255 -0.5 0.0 1.6 1.7 1.7 GOVERNMENT 552 0.0 -0.1 2.1 2.1 2.2

CMHCs 72 -4.0 -0.1 -2.0 -2.0 -1.6CMS-1613-P 637 (3) Estimated Effects of Proposed OPPS Changes on CMHCs

The last line of Table 52 demonstrates the isolated impact on CMHCs, which furnish only partial hospitalization services under the OPPS. In CY 2014, CMHCs are paid under two APCs for thes e services: APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) and APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs). Hospitals are paid for partial hospitalization services under APC 0175 (Level I Partial Hospitaliz ation (3 services) for hospi tal-based PHPs) and APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based PHPs). We use our standard ratesetting methodology to deri ve the payment rates for each APC based on

the cost data derived from claims and cost reports for the provider-type-specific APC. For CY 2015, we are proposing to continue th e provider-type-specifi c APC structure that we adopted in CY 2011. We modeled the imp act of this proposed 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 se rvices, as seen in the CY 2013 claims data used for this proposed rule. We excluded da ys with 1 or 2 services because our policy only pays a per diem rate for partial hospita lization when 3 or more qualifying services are provided to the beneficiary. We es timate that CMHCs would experience an overall -1.6 percent decrease in paymen ts from CY 2014 (shown in Column 6).

Column 3 shows that the estimated impact of adopting the proposed FY 2015 wage index values would result in a small d ecrease of -0.1 percent to CMHCs. We note that all providers paid under the OPPS, including CMHCs, would receive a 2.1 percent

OPD fee schedule increase fact or. Column 4 shows that combining this proposed OPDCMS-1613-P 638 fee schedule increase factor, along with pr oposed changes in APC policy for CY 2015 and the proposed FY 2015 wage index updates, w ould result in an estimated decrease of - 2.0 percent. Column 5 shows that adding the proposed frontier State wage index adjustment would result in no change to the cumulative -2.0 percent decrease. Column 6 shows that adding the proposed changes in outlier and pass-though payments would result in an additional 0.4 pe rcent increase in payment for CM HCs, for a total decrease of -1.6 percent. This reflects all pr oposed changes to CMHCs for CY 2015. (4) Estimated Effect of Propos ed OPPS Changes on Beneficiaries For services for which the beneficiary pays a copayment of 20 percent of the payment rate, the beneficiary share of paymen t would increase for services for which the OPPS payments would rise and would decr ease for services for which the OPPS payments would fall. For further discussion on the calculation of the national unadjusted copayments and minimum unadjusted copayments, we refer readers to section II.I. of this proposed rule. In all cases, the statute limits beneficiary liability for copayment for a procedure to the hospital inpatient de ductible for the a pplicable year. We estimate that the aggregate benefici ary coinsurance percentage would be 20.1 percent for all services pa id under the OPPS in CY 2015. The estimated aggregate beneficiary coinsurance reflects general system adjustments, including proposed recalibration of the APC relative payment we ights, proposed change in the portion of OPPS payments dedicated to pass-through payments, and the CY 2015 comprehensive APC policy discussed in section II.A.2.e. of this proposed rule.CMS-1613-P 639 (5) Estimated Effects of Proposed OPPS Changes on Other Providers The relative payment weights and paym ent amounts established under the OPPS affect the payments made to ASCs as discussed in section XII. of this proposed rule. No types of providers or suppliers other than hospitals, CMHCs and ASCs would be affected by the proposed changes in this proposed rule. (6) Estimated Effects of Proposed O PPS Changes on the Medicare and Medicaid Programs The effect on the Medicare program is expected to be $800 million in additional program payments for OPPS services furnishe d in CY 2015. The effect on the Medicaid program is expected to be limited to incr eased copayments that Medicaid may make on behalf of Medicaid recipients who are also Medicare beneficiaries. We refer readers to our discussion of the impact on beneficiaries in section XXI .A. of this proposed rule. (7) Alternative OPPS Policies Considered Alternatives to the OPPS changes we ar e proposing to make and the reasons for

our selected alternatives are disc ussed throughout this proposed rule.

● Alternatives Considered for the Establishment of Comprehensive APCs

We refer readers to the CY 2014 OPPS/A SC final rule with comment period (78 FR 74861 through 74910 and 75184 through 75185) for a discussion of our policy to establish comprehensive APCs for CY 2015 and th e alternatives we considered. We note that we published tables in that final rule with comment period to demonstrate how this policy would have been implemented in CY 2014, and stated that we would beCMS-1613-P 640 considering any additional public comments we receive when we update the policy for CY 2015 to account for changes that may occur in the CY 2013 claims data.

b. Estimated Effects of CY 2015 ASC Payment System Proposed Policies Most ASC payment rates are calculated by multiplying the ASC conversion factor by the ASC relative payment weight. As discus sed fully in section XII. of this proposed rule, we are proposing to set the CY 2015 AS C relative payment weights by scaling the proposed CY 2015 OPPS relative payment we ights by the proposed ASC scaler of 0.9142. The estimated effects of the propos ed updated relative payment weights on payment rates are varied and are reflected in the estimated payments displayed in

Tables 53 and 54 below. Beginning in CY 2011, section 3401 of the Affordable Care Act requires that the annual update to the ASC payment system (which currently is the CPI-U) after application of any quality reporting reduction be reduced by a productivity adjustment. The Affordable Care Act defines the productiv ity adjustment to be equal to the 10-year moving average of changes in annual economy-wide private nonfarm business multifactor productivity (MFP) (as projecte d by the Secretary for the 10-year period ending with the applicable fiscal year, year, cost reporting period, or other annual period). For ASCs that fail to meet their quality reporting requirements, the CY 2015 payment determinations will be based on the applicati on of a 2.0 percentage point reduction to the annual update factor, which currently is the CPI-U. We calculated the proposed CY 2015 ASC conversion factor by adjusting the CY 2014 ASC conversion factor by 0.9983 to account for changes in the pre-floor and pre- reclassified hospital wage indexes betweenCMS-1613-P 641 CY 2014 and CY 2015 and by applying the proposed CY 2015 MFP-adjusted CPI-U update factor of 1.2 percent (projected CP I-U update of 1.7 percent minus a projected productivity adjustment of 0.5 percent). The proposed CY 2015 ASC conversion factor is $43.918. (1) Limitations of Our Analysis Presented here are the projected eff ects of the proposed changes for CY 2015 on Medicare payment to ASCs. A key limitation of our analysis is our inability to predict changes in ASC service-mix between CY 2013 and CY 2015 with prec ision. We believe that the net effect on Medicare expenditu res resulting from the proposed CY 2015 changes would be small in the aggregate for all ASCs. However, such changes may have differential effects across surgic al specialty groups as ASCs continue to adjust to the payment rates based on the polic ies of the revised ASC paym ent system. We are unable to accurately project such changes at a disa ggregated level. Clearly, individual ASCs would experience changes in payment that di ffer from the aggregated estimated impacts presented below. (2) Estimated Effects of ASC Payment System Proposed Policies on ASCs Some ASCs are multispecialty facilities that perform the gamut of surgical procedures from excision of lesions to hernia repair to cataract extraction; others focus on a single specialty and perform only a limited rang e 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 2015 paymen ts would depend on a number of factors, including, but not limited to, the mix of se rvices the ASC provides, the volume ofCMS-1613-P 642 specific services provided by the ASC, the pe rcentage of its patie nts 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 2015 updates to the ASC payment system on Medicare payments to ASCs, assuming the same mix of services as reflec ted in our CY 2013 claims data. Table 53 depicts the estimated aggregate percent change in payment by surgical specialty or ancillary items and services group by co mparing estimated CY 2014 payments to estimated CY 2015 payments and Table 54 shows a comparison of estimated CY 2014 payments to estimated CY 2015 payments for pr ocedures that we estimate would receive the most Medicare payment in CY 2014.

Table 53 shows the estimated effects on aggregate Medicare payments under the ASC payment system by surgical specialty or ancillary items and services group. We have aggregated the surgical HCPCS code s by specialty group, grouped all HCPCS codes for covered ancillary items and services into a single group, and then estimated the effect on aggregated payment for surgical specialty and ancillary items and services groups. The groups are sorted for display in des cending order by estimated Medicare program payment to ASCs. The following is an expl anation of the information presented in

Table 53.

● Column 1—Surgical Specialty or Anc illary Items and Services Group indicates the surgical specialty into which ASC proce dures are grouped and the ancillary items and services group which includes all HCPCS codes for covered an cillary items and services. To group surgical procedures by surgical specialty, we used the CPT code rangeCMS-1613-P 643 definitions and Level II HCPCS codes and Category III CPT codes as appropriate, to account for all surgical procedures to wh ich the Medicare pr ogram payments are

attributed.

● Column 2—Estimated CY 2014 ASC Payments were calculated using CY 2013 ASC utilization (the most recent fu ll year of ASC utilization) and CY 2014 ASC payment rates. The surg ical specialty and ancillary items and services groups are displayed in descending order base d on estimated CY 2014 ASC payments.

● Column 3—Estimated CY 2015 Percent Change is the aggregate percentage increase or decrease in Medicare program pa yment to ASCs for each surgical specialty or ancillary items and services group that ar e attributable to proposed updates to ASC payment rates for CY 2015 compared to CY 2014. As seen in Table 53, for the six specialty groups that account for the most ASC utilization and spending, we estimate that the proposed update to ASC rates for CY 2015 would result in a 2-percent decrease in a ggregate payment amounts for eye and ocular adnexa procedures, a 6-percent increase in aggregate payment amounts for digestive system procedures, a 1-percent increase in aggregate payment amounts for nervous system procedures, a 2-percent incr ease in aggregate payment amounts for musculoskeletal system procedures, and a 3-percent increase in aggregate payment amounts for genitourinary system procedures and integumentary system procedures. An estimated increase in aggregate pa yment for the specialty group does not mean that all procedures in the group would experien ce increased payment rates. For example, the estimated increase for CY 2015 for digestiv e system procedures is likely due to anCMS-1613-P 644 increase in the ASC payment weight for some of the high volume procedures, such as CPT code 43239 (Upper GI endoscopy biopsy) where estimated payment would increase by 9 percent for CY 2015. Also displayed in Table 53 is a separa te estimate of Medicare ASC payments for the group of separately payable covered an cillary items and serv ices. The payment estimates for the covered surgical procedures include the costs of packaged ancillary items and services. We estimate that aggregate payments for these items and services would not change for CY 2015.CMS-1613-P 645

TABLE 53.—ESTIMATED IMPACT OF THE PROPOSED CY 2015 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE CY 2015 MEDICARE PROGRAM PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND SERVICES GROUP

Surgical Specialty Group (1) Estimated CY 2014

ASC Payments (in Millions) (2) Estimated CY 2015 Percent Change (3) Total $3,819 1% Eye and ocular adnexa $1,556 -2% Digestive system $780 6% Nervous system $572 1% Musculoskeletal system $474 2% Genitourinary system $167 3% Integumentary system $137 3% Respiratory system $54 1% Cardiovascular system $35 -3% Ancillary items and services $24 0% Auditory system $14 0% Hematologic & lymphatic systems $6 12%

Table 54 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 2015. The table displays 30 of the procedures receiving the greatest estimated CY 2014 aggregate Medicare payments to AS Cs. The HCPCS codes are sorted in descending order by estimated CY 2014 program payment.

● Column 1–CPT/HCPCS code.

● Column 2–Short Descriptor of the HCPCS code.CMS-1613-P 646

● Column 3–Estimated CY 2014 ASC Payments were calculated using CY 2013 ASC utilization (the most recent full year of ASC utilization) and the CY 2014 ASC payment rates. The estimated CY 2014 paym ents are expressed in millions of dollars.

● Column 4–Estimated CY 2015 Percent Change reflects the percent differences between the estimated ASC payment for CY 2014 and the estimated payment for CY 2015 based on the proposed update.

TABLE 54.--ESTIMATED IMPACT OF THE PROPOSED CY 2015 UPDATE TO THE ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS FOR SELECTED PROCEDURES

CPT/HCPCS Code*

(1) Short Descriptor (2) Estimated CY 2014

ASC Payments (in millions) (3) Estimated CY 2015 Percent Change (4) 66984 Cataract surg w/iol, 1 stage $1,132 -2% 43239 Upper GI endoscopy, biopsy $170 9% 45380 Colonoscopy and biopsy $168 6% 45385 Lesion removal colonoscopy $107 6% 66982 Cataract surgery, complex $93 -2% 64483 Inj foramen epidural l/s $90 0% 62311 Inject spine l/s (cd) $79 0% 45378 Diagnostic colonoscopy $72 6% 66821 After cataract laser surgery $63 2% 64493 Inj paravert f jnt l/s 1 lev $47 0% 64635 Destroy lumb/sac facet jnt $45 -3% G0105 Colorectal scrn; hi risk ind $45 0% 63650 Implant neuroelectrodes $41 5% G0121 Colon ca scrn not hi rsk ind $41 0% 64590 Insrt/redo pn/gastr stimul $39 -4% 15823 Revision of upper eyelid $35 1% 63685 Insrt/redo spine n generator $35 27% 29827 Arthroscop rotator cuff repr $34 1% 64721 Carpal tunnel surgery $32 -1%CMS-1613-P 647

CPT/HCPCS Code*

(1) Short Descriptor (2) Estimated CY 2014

ASC Payments (in millions) (3) Estimated CY 2015 Percent Change (4) 29881 Knee arthroscopy/surgery $30 -1% 29824 Shoulder arthroscopy/surgery $28 1% 29880 Knee arthroscopy/surgery $25 -1% 43235 Uppr gi endoscopy diagnosis $23 9% 62310 Inject spine c/t $23 0% 29823 Shoulder arthroscopy/surgery $22 1% 52000 Cystoscopy $22 1% G0260 Inj for sacroiliac jt anesth $21 0% 45384 Lesion remove colonoscopy $21 6% 67042 Vit for macular hole $21 -1% 26055 Incise finger tendon sheath $20 -1%

(3) Estimated Effects of ASC Payment System Proposed Policies on Beneficiaries We estimate that the proposed CY 2015 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 surgic al procedures and for those that we are proposing to designate as office-based for CY 2015. First, other than certain preventive

services where coinsurance and the Part B dedu ctible is waived to comply with sections 1833(a)(1) and (b) of the Act, the ASC coinsuran ce rate for all procedur es is 20 percent. This contrasts with procedures performed in HOPDs under the OPPS, where the beneficiary is responsible for copayments that range from 20 percent to 40 percent of the procedure payment (other than for certain pr eventive services). Second, in almost all cases, the ASC payment rates under the ASC payment system are lower than payment rates for the same procedures under the OPPS. Therefore, the beneficiary coinsuranceCMS-1613-P 648 amount under the ASC payment system will almost always be less than the OPPS copayment amount for the same services. (T he only exceptions would be if the ASC coinsurance amount exceeds the inpatient de ductible. The statute requires that copayment amounts under the OPPS not exceed th e inpatient deductible .) Beneficiary coinsurance for services migrating from phys icians’ offices to ASCs may decrease or

increase under the revised AS C payment system, depending on the particular service and the relative payment amounts under the MPFS comp ared to the ASC. However, for those additional procedures that we are proposing to designate as office-based in CY 2015, the beneficiary coinsurance amount under the ASC payment system generally would be no greater than the beneficiar y coinsurance under the MPFS b ecause the coinsurance under both payment systems generally is 20 percen t (except for certain preventive services

where the coinsurance is waiv ed under both payment systems). (4) Alternative ASC Payment Policies Considered

Alternatives to the minor changes that we are proposing to make to the ASC payment system and the reasons that we ha ve chosen specific options are discussed throughout this proposed rule. There are no pr oposed major changes to ASC policies for

CY 2015.CMS-1613-P 649 c.. Accounting Statements and Tables As required by OMB Circul ar A-4 (available on the Office of Management and Budget Web Site at: http://www.whitehouse.gov/sites/default/file s/omb/assets/regulatory_matters_pdf/a4.pdf), we have prepared two accounting statemen ts to illustrate th e impacts of this proposed rule. The first accounting statem ent, Table 55 (below), illustrates the classification of expenditure s for the CY 2015 estimated hos pital OPPS incurred benefit impacts associated with the proposed CY 2015 OPD fee schedule increase, based on the 2014 Trustee’s Report. The second accounting statement, Table 56 (below), illustrates the classification of expenditures associ ated with the 1.2 percent proposed CY 2015 update to the ASC payment system, based on th e provisions of this proposed rule and the baseline spending estimates for ASCs in the 2014 Trustee’s Report. Lastly, the tables classify most estimated impacts as transfers.

TABLE 55.--ACCOUNTING STATEMENT: CY 2015 ESTIMATED HOSPITAL

OPPS TRANSFERS FROM CY 2014 TO CY 2015 ASSOCIATED WITH THE PROPOSED CY 2015 HOSPITAL OUTP ATIENT OPD FEE SCHEDULE INCREASE

Category Transfers Annualized Monetized Transfers $800 million From Whom to Whom Federal Govern ment to outpatient hospitals and other providers who r eceive payment under the hospital OPPS Total $800 millionCMS-1613-P 650

TABLE 56.--ACCOUNTING STATEM ENT: CLASSIFICATION OF ESTIMATED TRANSFERS FROM CY 2014 TO CY 2015 AS A RESULT OF THE PROPOSED CY 2015 UPDATE TO THE ASC PAYMENT SYSTEM Category Transfers Annualized Monetized Transfers $36 million

From Whom to Whom Federal Government to Medicare Providers and Suppliers Total $36 million

d. Effects of Proposed Requireme nts for the Hospital OQR Program In section XIII. of this proposed rule, we are proposing to adopt policies affecting the Hospital OQR Program. Of 3,325 hospitals that me t eligibility requirements for the CY 2014 payment determination, we determined that 88 hospitals did not meet the requirements to receive

the full OPD fee schedule increase factor. Most of these hospitals (70 of the 88) chose not to participate in the Hospital OQR Progr am for the CY 2014 payment determination. We estimate that approximately 90 hospitals will not receive the full OPD fee schedule increase factor for the CY 2017 payment determination and subsequent years.

In sections XIII.E. and XIII.C.3.of this proposed rule, for the CY 2017 payment determination and subsequent years, we are proposing to add one claims-based quality measure and to remove three measures from the Hospital OQR Program. In sections XIII.D.3.b. and c. of this proposed rule we are proposing to remove one measure from the CY 2016 payment determination measur e set and to change that measure from required to voluntary for the CY 2017 paymen t determination and subsequent years. Hospitals would not be subject to a payment reduction with respect to this measure for the CY 2016 payment determination or duri ng the period of voluntary reporting.CMS-1613-P 651 Because the measure we are proposing to add for the CY 2017 payment determination and subsequent years is claims-based, it will not require additional burden from data reporting or other action on the pa rt of the hospitals. Therefore, we do not anticipate that this measure will cause any additional facilities to fail the Hospital OQR Program requirements. We anticipate a reduction in burden of approximately 862,077 hours or $25.9 million across participating hospi tals from the three measures we are proposing to remove and the one measure we are proposing to make voluntary as further

detailed in sections XIII.C.3. and XIII.D.3.c. of this proposed rule, respectively, adnd the information collection requirements in s ection XIX.C.1. of this proposed rule. The validation requirements for the CY 2017 payment determination and subsequent years would result in medical record documentation of approximately 6,000 cases per quarter (up to 12 cases per quarter for 500 hospitals) submitted to the designated CMS contractor. In section XIII.H.3.e. of this proposed rule, we are proposing to allow hospitals to submit medical record documentation for validation using either of two methods: (1) through paper medi cal records; or (2) by securely transmitting

electronic versions of medical informati on by either (a) downloading or copying the digital image of the patient chart onto CD , DVD, or flash drive and shipping the electronic media following inst ructions specified on the QualityNet Web site; or (b) securely submitting digital images (PDFs) of patient charts using a Secure File

Transfer Portal on the QualityNet Web site. As stated previously (76 FR 74577), we would pay for the cost of sending paper medical record documentation to the designate d CMS contractor at the rate of 12 centsCMS-1613-P 652 per page for copying and approximately $1.00 per case for postage. For both new proposed electronic methods, we are pr oposing in the information collection requirements section of this proposed rule to reimburse hospitals for sending medical records electronically at a ra te of $3.00 per patient chart.

As we stated in the CY 2014 OPPS/ ASC final rule with comment period (78 FR 75192), we have found that an outpa tient medical chart is generally up to 10 pages. However, because we do not yet know how many hospitals will choose to submit data electronically or through pape r, we cannot estimate the total cost of expenditures and are unable to estimate the number of hospitals that would fail the validation documentation submission requirement for the CY 2017 payment determination. Because we would pay for th e data collection effort though, we believe that a requirement for medical record docum entation for up to 12 cases per quarter for up to 500 hospitals for CY 2015 represents a minimal burden to Hospital OQR Program participating hospitals. e. Effects of CY 2015 Proposed Policies for the ASCQR Program In section XIV. of this proposed rule, we are proposing to adopt policies affecting the ASCQR Program. Of 5,300 ASCs that met eligibility requirements, we determined that 116 ASCs did not meet the requirements to receive the full annual payment update

for CY 2014. In section XIV.B.5. of this proposed ru le, for the CY 2017 payment determination and subsequent years, we are proposing to a dd one claims-based quality measure. The measure we are proposing for CY 2017 and subs equent years is claims-based and wouldCMS-1613-P 653 not require additional data reporting or ot her action by ASCs. Therefore, we do not anticipate that this measure would cause any additional ASCs to fail to meet the ASCQR Program requirements. We present the time a nd burdens associated with our policies and proposals in section XIX.C .2. of this proposed rule.

In section XIV.E.3.b. of th is proposed rule, we note a 3-month delay in data

collection for two measures for the CY 2016 payment determination. We do not believe that this 3-month delay in da ta collection would significantly affect the number of ASCs that meet the ASCQR Program requirements.

In section XIV.E.3.c. of this proposed rule, we are proposing that one measure

which was to be first included in the CY 2016 payment determination, would not be

included in the CY 2016 measure set and that the measure would be voluntary for the CY 2017 payment determination and subsequent years. ASCs would not be subject to a payment reduction for the CY 2016 payment determination, nor would ASCs be subject to a payment reduction for the CY 2017 paymen t determination and subsequent years for failing to report this measure. Because this measure wa s not included in the CY 2014 payment determination and has not yet aff ected any payment determination, we do not believe that there will be an impact on the number of ASCs that meet the ASCQR Program requirements from our proposals not to include this measure in the measure set for the CY 2016 payment determination and to make this measure voluntary for the CY 2017 payment determination and subsequent years.

We do not believe that the other measur es we previously adopted would cause any additional ASCs to fail to meet th e ASCQR Program requirements. (We referCMS-1613-P 654

readers to the CY 2014 OPPS/AS C final rule with comment period for a list of these measures (78 FR 75130). Further, we do not believe that any of the proposals in this proposed rule would significantly affect the number of ASCs that do not receive a full annual payment update for the CY 2017 payment determination. We ar e unable to estimate the number of ASCs that would not receive the full annual pa yment update based on the CY 2015 and CY 2016 payment determinations (78 FR 75192). For this reason, using the CY 2014 payment determination numbers as a baseline , we estimate that approximately 116 ASCs would not receive the full annual payment upda te in CY 2017 due to failure to meet the ASCQR Program requirements.CMS-1613-P 655 f. Effects of Proposed Changes to the Rura l Provider and Hospital Ownership Exceptions to the Physician Self-Referral Law Section 6001(a) of the Affordable Ca re Act amended the rural provider and hospital ownership exceptions to the physicia n self-referral law (s ections 1877(d)(2) and (d)(3) of the Act, respectively) to impose additional restrictions on physician ownership or investment in hospitals. The ame nded rural provider and hospital ownership 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 ha ve a provider agreement in effect as of this date, but did have a pr ovider agreement in ef fect on December 31, 2010, the date of effect of such agreement). We issued regulations a ddressing the prohibition against facility expansion in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72240). Section 6001(a)(3) of the Affordable Care Act added section 1877(i)(3)(A)(i) of the Act to set forth that the Secretary sha ll establish and implement an exception process to the prohibition on expansion of facility capacity. We i ssued regulations that govern the expansion exception pro cess in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74517) at 42 CFR 411.362(c). The regulations addressing the expansion exception process were issued by January 1, 2012, and the process was implemented on February 1, 2012. As required by the statute, the expansi on exception process provides that hospitals that qualify as an “applicable hospital” or a “high Medicaid facility” may request anCMS-1613-P 656 exception to the prohibition on facility expa nsion. The existing expansion exception process requires the use of filed Medicare cost report data from the Healthcare Cost Report Information System (HCRIS) for hospita ls to demonstrate that they satisfy the relevant eligibility criteria set forth in § 411.362(c)(2) for applicable hospitals and § 411.362(c)(3) for high Medicaid facilities (76 FR 42350 through 42352). In section XV. of this proposed rule, we discuss our propos al to permit hospitals also to use internal or external data sources, as defined in th e proposal, to demonstrate satisfaction of the eligibility criteria. Under our proposal, we would con tinue to require each hospital seeking to qualify for an expansion exception to access and utilize data for its estimations

or determinations to demonstrate that the hospital meets the releva nt criteria and to provide a detailed explanation regarding whether and how it satis fies each of the relevant criteria. We believe the impact of our pr oposed modification on affected hospitals would be minimal, given that the use of data from an internal or external source is voluntary. Our proposal would require each reques ting hospital also to provide actual notification that it is requesti ng an expansion exception direc tly to hospitals whose data are part of the comparisons set forth in §§ 411.362(c)(2)(ii) and (c)(3)(ii) of the regulations, in addition to performing the ot her methods of notification specified in our existing regulations. We believe the impact of this proposed additional requirement on physician-owned hospitals would be minimal. We believe that our proposals would affect a relatively small number of physician-owned hospitals. We estimate that there are approximately 265 physician-owned hospitals in the country. Since the process was implemented inCMS-1613-P 657 February 2012, we have received only four requests, only one of which has been considered sufficiently complete to continue with publication in the Federal Register , under the current regulations. We anticipate receiving a si milar number of requests each year. We do not believe thatwe can use the four request s to estimate accurately the potential increase in operating rooms, procedure rooms, and beds pursuant to approved expansion exception requests, and we are not awar e of any data that may indicate such an increase. At this time, we also have no da ta or projections that may help estimate the number of physicians that would be affected by these pr oposals as a result of their ownership interests in hospitals. We believe that beneficiaries may be positively impacted by our proposals. Specifically, an increase in ope rating rooms, procedure rooms, and beds may augment the volume or nature of services offered by physic ian-owned hospitals. An expansion in the number of hospital beds may also permit additional inpatient admissions and overnight stays. Increased operating rooms, procedur e 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 amen dments to section 1877 of the Act. We are soliciting public comments on each of the issues outlined above that

contain estimates of the costs and benefits of the proposed rule. We are specifically soliciting comments on the potential impact on State governments, given that we are proposing to define external data sources as data sources generated, maintained, or under the control of a State Medicaid agency.CMS-1613-P 658 g. Effects of Proposed Policies Related to CMS-Identified Overpayments Associated with Payment Data Submitted by Medicare Advantage (MA) Organizations and Medicare Part D Sponsors In section XVII. of this proposed rule, we discuss our proposals to set forth in regulations a formal process, including app eals processes, that allows us to recoup overpayments in the limited set of circumstances where CMS makes a determination that an overpayment to an MA organization or Part D sponsor occurred because the organization or sponsor submitted erroneous data to CMS. It is difficult to predict how many times CMS would annually determine an overpayment due to erroneous data submitted to CMS by the MA organization or Pa rt D sponsor and that, therefore, would be subject to the proposed offset and appeals regulations. However, we predict that it would be highly unlikely to exceed 10 cases a year and would probably be fewer. Further, electing to appeal a CMS overp ayment determination under the proposed regulations is completely at the discretion of the MA organi zation or Part D sponsor. The MA organization or Part D sponsor may ag ree that the data require correction and resubmit the data; MA organizations and Part D sponsors that receive notification of an overpayment are under no obligation to ini tiate the appeal process. If the MA organization or Part D sponsor chooses not to appeal, there are no costs or burden associated with the appeal. If the MA orga nization or Part D spons or chooses to appeal the overpayment determination, th ere would be costs associated with preparing the appeal request.CMS-1613-P 659 We are proposing three levels of ap peal review (reconsideration, informal hearing, and Administrator review), each of which the MA organization or Part D sponsor would have to request. Once the appe al has been filed, however; there will be little or no cost experienced by the MA organi zation or Part D sponsor because the appeal process is on the record and would not involve oral testimony. The extent to which there would be costs associated with preparing the appeal request is subj ect to preference and

choice. We estimate that it would take a plan 5 hours to prepare and file a reconsideration request. In terms of cost, it has been our experience that most appeals have been prepared by high-level officials of th e plan or lawyers. According to the most recent wage data provided by the Bureau of Labor Statistics (BLS) for May 2012, the mean hourly wage for the category of “Lawyers”—which we believe, considering the variety of officials who have submitted appe als, is the most appropriate category—is $62.93. Multiplying this figure by 50 hours (10 submissions x 5 hours) results in a projected annual cost burden of $3,147. We estimate the preparation and filing of a request for a hearing, or for Ad ministrator’s review would take 2 hours, at most, because the MA organization or Part D sponsor cannot submit new evidence. The hearing officer

or Administrator is limited to a review of th e record. Multiplying this figure by 40 hours (10 submissions x 4 hours) results in a proj ected annual cost burden of $2,517. It is

estimated that if the costs of benefits and overhead are incl uded, the total annual costs for requests at the three levels would be approximately $11,000.CMS-1613-P 660 B. Regulatory Flexibility Act (RFA) Analysis The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a signi ficant impact on a substantial nu mber of small entities. For purposes of the RFA, we estimate that most hospitals, ASCs and CMHCs are small

entities as that term is used in the RFA. For purposes of the RFA, most hospitals are considered small businesses according to th e Small Business Administration’s size standards with total revenues of $35.5 million or less in any single year. Most ASCs and

most CMHCs are considered small businesse s with total revenues of $14 million or less in any single year. We estimate that this proposed rule may have a significant impact on approximately 2,007 hospitals with voluntary ownership. For details, see the Small

Business Administration’s “Table of Small Business Size Standards” at http://www.sba.gov/content/table- small-business-size-standards. In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the opera tions 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 th e Act, we define a small rural hospital as a hospital that is located outside of a metr opolitan statistical area and has 100 or fewer beds. We estimate that this proposed rule may have a significant impact on approximately 709 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 AnalysisCMS-1613-P 661 Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before i ssuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. That threshold level is currently approximately $141 million. This proposed rule does not mandate any requirement s for State, local, or tribal governments, or for the private sector.

D. Conclusion The changes we are proposing to make in this proposed rule would affect all classes of hospitals paid under the OPPS a nd would affect both CM HCs and ASCs. We estimate that most classes of hospitals pa id under the OPPS would experience a modest increase or a minimal decrease in paymen t for services furnished under the OPPS in

CY 2015. Table 52 demonstrates the estimateddistributional impact of the OPPS budget neutrality requirements that would result in a 2.2 percent increase in payments for all services paid under the OPPS in CY 2015, afte r considering all of the proposed changes to APC reconfiguration and recalibration, as well as th e proposed OPD fee schedule increase factor, proposed wage index change s, including the proposed frontier State wage index adjustment, estimated payment for outliers, and proposed changes to the pass-through payment estimate. However, some classes of providers that are paid under the OPPS would experience more significant ga ins and others would experience modest losses in OPPS payments in CY 2015. The proposed updates to the ASC payment system for CY 2015 would affect each of the approximately 5,300 ASCs currently appr oved for participation in the MedicareCMS-1613-P 662 program. The effect on an individual ASC would depend on its mix of patients, the proportion of the ASC’s patients who are Medicare be neficiaries, the degree to which the payments for the procedures offered by the ASC are changed under the ASC payment system, and the extent to which the ASC provi des a different set of procedures in the coming year. Table 53 demonstrates the estimated distributional impact among ASC surgical specialties of the MFP-adjusted CPI-U update factor of 1.2 percent for CY 2015. XXII. Federalism Analysis Executive Order 13132 establishes certain requ irements that an agency must meet when it promulgates a proposed rule (and subseq uent final rule) that imposes substantial direct costs on State and local governments , preempts State law, or otherwise has Federalism implications. We have examin ed the OPPS and ASC provisions included in this proposed rule in accordance with Executive Order 13132, Federalism, and have determined that they would not have a substan tial direct effect on St ate, local or tribal governments, preempt State law, or otherw ise have a Federalism implication. As reflected in Table 52 of this proposed ru le, we estimate that OPPS payments to governmental hospitals (including State and lo cal governmental hospitals) would increase by 2.2 percent under this proposed rule. While we do not know the number of ASCs or CMHCs with government ownership, we anticipate th at it is small. The analyses we have provided in this section of this proposed rule , in conjunction with th e remainder of this document, demonstrate that this proposed rule is consistent with the regulatory philosophy and principles identified in Ex ecutive Order 12866, the RFA, and section 1102(b) of the Act.CMS-1613-P 663 This proposed rule would affect payments to a substantial number of small rural hospitals and a small number of rural ASCs, as well as other classes of hospitals, CMHCs, and ASCs, and some effects may be significant.CMS-1613-P 664 List of Subjects

42 CFR Part 411 Kidney diseases, Medicare, Physician referral, Reporting and recordkeeping requirements.

42 CFR Part 412 Administrative practice and procedure, Health facilitie s, Medicare, Puerto Rico, Reporting and recordkeeping requirements.

42 CFR Part 416 Health facilities, Health professions , Medicare, Reporting and recordkeeping requirements.

42 CFR Part 419 Hospitals, Medicare, Reporting an d recordkeeping requirements.

42 CFR Part 422 Administrative practice a nd procedure, Health facili ties, Health maintenance, organizations (HMO), Medicare, Penaltie s, Privacy, Reporting and recordkeeping requirements.

42 CFR Part 423 Administrative practice and procedure, Emergency medical services, Health facilities, Health maintenance organizations (HMO), Health professionals, Medicare, Penalties, Privacy, Reporting a nd recordkeeping requirements.

42 CFR Part 424 Emergency medical services, Health professions, MedicareCMS-1613-P 665 For reasons stated in the preamble of th is document, the Centers for Medicare & Medicaid Services is proposing to ame nd 42 CFR Chapter IV as set forth below:

Part 411—EXCLUSIONS FROM MEDI CARE AND LIMITATION ON

MEDICARE PAYMENT 1. 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). 2. Section 411.351 is amended by adding the definitions “External data source”

and “Internal data source ” in alphabetical order to read as follows: § 411.351 Definitions

* * * * *

External data source means a data source that— (1) Is generated, maintained, or under the control of a State Medicaid agency; (2) Is reliable and transparent; (3) Maintains data that , for purposes of the proce ss described in § 411.362(c), are readily available and accessible to the re questing hospital, comp arison hospitals, and CMS; and (4) Maintains or generates data that, for purposes of the process described in § 411.362(c), are accurate, complete , and objectively verifiable.

* * * * *CMS-1613-P 666

Internal data source means a data sour ce other than the Healthcare Cost Report Information System that— (1) Is generated, maintained, or under the control of the Department; (2) Is reliable and transparent; (3) Maintains data that , for purposes of the proce ss described in § 411.362(c), are readily available and accessible to the re questing hospital, comp arison hospitals, and CMS; and (4) Maintains or generates data that, for purposes of the process described in § 411.362(c), are accurate, complete , and objectively verifiable.

* * * * * 3. Section 411.362 is amended by revisi ng paragraphs (c)(2)(ii), (c)(2)(iv), (c)(2)(v), (c)(3)(ii), and (c)(5) to read as follows: § 411.362 Additional requirements concernin g physician ownership and investment in hospitals.

* * * * * (c) * * * (2) * * * (ii) Medicaid inpatient admissions. Has an annual pe rcent of total inpatient admissions under Medicaid that is equal to or greater than the average percent with respect to such admissions for all hospitals lo cated in the county in which the hospital is located during the most recent fiscal year for which data are available as of the date that the hospital submits its request. A hospital must use only filed Me dicare hospital costCMS-1613-P 667 report data, data from an internal data s ource (as defined at § 411.351) , and/or data from an external data source (as defined at § 411.351) to estimate its a nnual percent of total inpatient admissions under Medicaid and the average percent with respect to such admissions for all hospitals located in th e county in which the hospital is located:

* * * * * (iv) Average bed capacity. Is located in a State in which the average bed capacity in the State is less th an the national average bed cap acity during the most recent fiscal year for which data are available as of the date that the hospital submits its request. A hospital must use only filed Medicare hospital cost report data, data from an internal data source (as defined at § 411.351), and/or data from an external data source (as defined at § 411.351) to determine the averag e bed capacity in the State in which the hospital is located and the na tional average bed capacity. (v) Average bed occupancy. Has an aver age bed occupancy rate that is greater than the average bed occupancy rate in the St ate in which the hospital is located during the most recent fiscal year for which data ar e available as of the date that the hospital submits its request. A hospital must use onl y filed Medicare hosp ital cost report data,

data from an internal data source (as defined at § 411.351), and/ or data from an external data source (as defined at § 411.351) to determ ine its average bed occupancy rate and the average bed occupancy rate for the Stat e in which the hospital is located. (3) * * * (ii) Medicaid inpatient admissions. W ith respect to each of the 3 most recent fiscal years for which data are available as of the date the hospital submits its request, hasCMS-1613-P 668 an annual percent of total inpatient admissi ons under Medicaid that is estimated to be greater than such percent with respect to su ch admissions for any other hospital located in the county in which the hospita l is located. A hospital mu st use only filed Medicare hospital cost report data, data from an in ternal data source (a s defined at § 411.351),

and/or data from an external data source (as defined at § 411.351) to estimate its annual percentage of total inpatient admissions under Medicaid and the annual percentages of total inpatient admissions under Medicaid for ev ery other hospital located in the county in which the hospital is located.

* * * * * (5) Community input and timing of complete request. Upon submitting a request for an exception and until th e hospital receives a CMS decision, the hospital must disclose on any public Web site for the hospi tal that it is requesting an exception and must also provide actual notif ication that it is requesting an exception, in either electronic or hard copy form, directly to hospitals whose data are part of the comparisons in paragraphs (c)(2)(ii) and (c)(3 )(ii) of this section. Indi viduals 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. If CMS receives written comments from the community, the hospital ha s 30 days after CMS notifies the hospital

of the written comments to submit a rebuttal statement.CMS-1613-P 669 (i) If only filed Medicare hospital cost report data are used in the hospital’s request, the written comments, and the hospital’s rebuttal statement— (A) A request will be deemed complete at the end of the 30-day comment period if CMS does not receive written comments from the community. (B) A request will be deemed complete at the end of the 30-day rebuttal period, regardless of whether the hospital submits a rebuttal statement, if CMS receives written comments from the community. (ii) If data from an internal data sour ce or external data s ource are used in the hospital’s request, the writ ten comments, or the hospital’s rebuttal statement— (A) A request will be deemed complete no later than 180 days after the end of the 30-day comment period if CMS does not receive written comments from the community. (B) A request will be deemed complete no later than 180 days after the end of the 30-day rebuttal period, regardless of whether the hospital subm its a rebuttal statement, if CMS receives written comments from the community.

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PART 412—PROSPECTIVE PAYM ENT SYSTEMS FOR INPATIENT

HOSPITAL SERVICES 4. The authority citation for part 412 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), and sec. 124 of Public Law 106-113 (113 Stat.1501A-332). § 412.3 [Amended] 5. Section 412.3 is amended by—CMS-1613-P 670 a. Removing paragraph (c). b. Redesignating paragraphs (d) and (e) as paragraphs (c) and (d), respectively. c. In newly redesignated paragra ph (d)(1), removing the cross-reference “paragraph (e)(2)” and adding in its place the cross-reference “paragraph (d)(2)”.

PART 416—AMBULATORY SURGICAL SERVICES 6. The authority citation for Part 416 continues to read as follows: Authority: Secs. 1102 and 1871 of the Soci al Security Act (42 U.S.C. 1302 and 1395hh). 7. Section 416.164 is amended by revising pa ragraphs (a)(11) and (b)(5) to read

as follows: § 416.164 Scope of ASC services. (a) * * *CMS-1613-P 671 (11) Radiology services for which sepa rate payment is not allowed under the OPPS and other diagnostic tests or interpretive services that are inte gral to a surgical procedure, except certain diagnostic tests fo r which separate payment is allowed under the OPPS;

* * * * * (b) * * * (5) Certain radiology services and cert ain diagnostic tests for which separate payment is allowed under the OPPS.

* * * * * 8. Section 416.171 is amended by revising paragraphs (b)(1) a nd (2) to read as

follows: § 416.171 Determination of paymen t rates for ASC services.

* * * * * (b) * * * (1) Covered ancillary services specif ied in § 416.164(b), w ith the exception of radiology services and cert ain diagnostic tests as provided in § 416.164(b)(5); (2) The device portion of device-intens ive procedures, whic h are procedures assigned to an APC with a device cost grea ter than 40 percent of the APC costs when calculated according to the standard OPPS APC ratesetting methodology.

* * * * *

PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL

OUTPATIENT DEPARTMENT SERVICESCMS-1613-P 672 9. The authority citation for part 419 continues to read as follows: Authority: Secs. 1102, 1833(t), and 1871 of the So cial Security Act (42 U.S.C. 1302, 1395l(t), and 1395hh). 10. Section 419.2 is amended by revising pa ragraphs (b)(7) and (16) to read as

follows: § 419.2 Basis of payment.

* * * * * (b) * * * (7) Ancillary services;

* * * * * (16) Drugs and biological s that function as supplies when used in a surgical procedure (including, but not limited to, skinsubstitutes and similar products that aid wound healing and implantable biologicals);

* * * * * 11. Section 419.22 is amended by revising paragraph (j) to read as follows: § 419.22 Hospital services excluded from payment under the hospital outpatient prospective payment system

. * * * * * (j) Except as provided in § 419.2(b)(11), prosthetic devices a nd orthotic devices.

* * * * *

12. Section 419.32 is amended by adding paragraph (b)(1)(iv)(B)( 6 ) to read as follows: § 419.32 Calculation of prospective payment rates for hospital outpatient services.CMS-1613-P 673

* * * * * (b) * * * (1) * * * (iv) * * * (B) * * * ( 6 ) For calendar year 2015, a multifactor pr oductivity adjustment (as determined by CMS) and 0.2 percentage point.

* * * * * § 419.46 [Amended] 13. Section 419.46 is amended by— a. In paragraph (c)(1), removing th e phrase “section 1833(17 )(C)” and adding in its place the phrase “s ection 1833(t)(17)(C)”. b. In paragraph (d) introductory textand paragraph (d)(1), removing the term “waiver” and adding in its place the term “exception” each time it apppears. c. In paragraph (d)(2), removing the te rm “waivers” and adding in its place the term “exceptions”. d. In paragraph (e) introductory text , removing the phrase “section 1833(17)(C)” and adding in its place the phr ase “section 1833(t)(17)(C)”. 14. Section 419.64 is amended by revisi ng paragraph (a)(4)(iv) to read as

follows: § 419.64 Transitional pass-through p ayments: Drugs and biologicals.

* * * * *CMS-1613-P 674 (a) * * * (4) * * * (iv) A biological that is not a skin substitute or similar product that aids wound healing, unless pass-through payment for a skin s ubstitute as a biolog ical is made on or before January 1, 2015.

* * * * * 15. Section 419.66 is amended by revi sing paragraph (b)(3) and removing paragraph (b)(4)(iii).

The revision reads as follows: § 419.66 Transitional pass-through payments: Medical devices.

* * * * * (b) * * * (3) The device is an integral part of th e service furnished, is used for one patient only, comes in contact with human tissue, and is surgically implanted or inserted (either permanently or temporarily) or applied in or on a wound or other skin lesion.

* * * * *

PART 422—MEDICARE ADVANTAGE PROGRAM 16. The authority citation for part 422 continues to read as follows: Authority : Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh).CMS-1613-P 675

17. Section 422.330 is added to s ubpart G to read as follows: § 422.330 CMS-identified overpayments asso ciated with payment data submitted by MA organizations. (a) Definitions. For pur poses of this section— Payment data means data controlled and submitted by an MA organization to CMS and used for payment purposes, including enrollment data and data submitted under § 422.310. Applicable reconciliation da te occurs on the date of the annual final deadline for risk adjustment data submission described at § 422.310(g)(2)(ii). (b) Request to correct payment data. If CMS identifies an error in payment data other than an error identified throug h the process described in § 422.311, and the payment error identified affects payments fo r any of the 6 most recently completed payment years, CMS may send a data co rrection notice to the MA organization requesting that the MA organization correct th e payment data. The notice will include or make reference to the specific payment data that need to be corrected, the reason why CMS believes that the payment data are err oneous, and the timeframe for correcting the payment data. (c) Payment offset. If the MA organization fails to submit the corrected payment data within the timeframe as requested in acco rdance with paragraph (b) of this section, CMS will conduct a payment offset against payments made to the MA organization. CMS will calculate the payment offset amount using a payment algorithm that applies the payment rules for the applicable year.CMS-1613-P 676 (d) Payment offset notification. CMS will issue a payment offset notice to the MA organization that includes the following: (1) The dollar amount of the offset from plan payments. (2) An explanation of how the erroneous data were identified and used to calculate the payment offset amount. (3) An explanation that, if the MA organization disagrees with the payment offset, it may request an appeal within 30 days of issuance of the payment offset

notification. (e) Appeals process. If an MA or ganization does not agre e with the payment offset described in paragraph (c) of this section, it may appeal under the following three-level appeal process: (1) Reconsideration. An MA organizat ion may request reconsideration of the payment offset described in paragraph (c) of this section, according to the following

process: (i) Manner and timing of request

. A written request for reconsideration must be filed within 30 days from the date that CMS issued the payment offset notice to the MA organization. (ii) Content of request. The written request for rec onsideration must specify the findings or issues with which the MA orga nization disagrees and the reasons for its disagreement. As part of its request fo r reconsideration, the MA organization may include any additional documentary evidence in support of its posit ion. Any additionalCMS-1613-P 677 evidence must be submitted with the request for reconsideration. Additional information submitted after this time will be rejected as untimely. (iii) Conduct of reconsideration. In conducting the recons ideration, the CMS

reconsideration official revi ews the underlying data that were used to determine the amount of the payment offset and any addi tional documentary evidence timely submitted by the MA organization. (iv) Reconsideration decision. The CMS reconsideration official informs the MA organization of its decision on the reconsideration request. (v) Effect of reconsideration decisio n. The decision of the CMS reconsideration official is final and binding unless a timely request for an in formal hearing is filed in accordance with paragraph (e )(2) of this section. (2) Informal hearing. An MA or ganization dissatisfied with CMS’ reconsideration decision made under paragraph (e)(1) of this secti on is entitled to an informal hearing as provided for under paragraphs (e)(2)(i) through (v ) of this section. (i) Manner and timing for request. A re quest for an informal hearing must be made in writing and filed with CMS within 30 days of the date of CMS’ reconsideration

decision. (ii) Content of request. The request for an informal hearing must include a copy of the reconsideration decision and must speci fy the findings or issues in the decision with which the MA organization disagrees and the reasons for its disagreement. (iii) Informal hearing procedures. The informal hearing will be conducted in accordance with the following:CMS-1613-P 678 (A) CMS provides written notice of the time and place of the informal hearing at least 10 days before the scheduled date. (B) The informal hearing is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not timely presented with the reconsideration request. The CM S hearing officer is limited to the review of the record

that was before the CMS reconsideration o fficial when CMS made its reconsideration

determination. (C) The CMS hearing officer will review the proceeding before the CMS

reconsideration official on the record made before the CMS r econsideration official using the clearly erroneous standard of review. (iv) Decision of the CMS hearing offi cer. The CMS hearing officer decides the

case and sends a written decision to the MA organization explaining the basis for the

decision. (v) Effect of hearing officer’s decisi on. The hearing officer’s decision is final and binding, unless the decisi on is reversed or modifiedby the Administrator in accordance with paragraph (e )(3) of this section. (3) Review by the Administrator. The Administrator review will be conducted in the following manner: (i) An MA organization that has re ceived a hearing officer’s decision may request review by the Administra tor within 30 days of the date of issuance of the hearing officer’s decision under paragraph (e)(2)(iv) of this section. The MA organization may submit written arguments to the Administrator for review.CMS-1613-P 679 (ii) After receiving a request for review , the Administrator has the discretion to

elect to review the heari ng officer’s determination in accordance with paragraph (e)(3)(iii) of this section or to decline to review the hearing officer’s decision. (iii) If the Administrator declines to review the hearing o fficer’s decision, the hearing officer’s decision is final and binding. (iv) If the Administrato r elects to review the he aring officer’s decision, the Administrator will review the hearing offi cer’s decision, as well as any information included in the record of the hearing o fficer’s decision and an y written argument submitted by the MA organization, and determin e whether to uphold, reverse, or modify the hearing officer’s decision. (v) The Administrator’s determination is final and binding. (f) Matters subject to ap peal and burden of proof. (1) The MA organization’s appeal is limited to CMS’ finding that the payment data submitted by the MA organization are erroneous. (2) The MA organization bears the bu rden of proof by a preponderance of the evidence in demonstrating that CMS’ finding that the payment data were erroneous was

incorrect or otherwise inconsistent w ith applicable program requirements. (g) Applicability of appeals process. The appeals process under paragraph (e) of this section applies only to payment offs ets under paragraph (c) of this section.

PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT 18. The authority citation for part 423 continues to read as follows:CMS-1613-P 680 Authority : Secs. 1102, 1106, 1860D–1 through 1860D–42, and 1871 of the Social Security Act (42 U.S. C. 1302, 1306, 1395w–101 through 1395w–152, and

1395hh.

19. Section 423.352 is added to read as follows: § 423.352 CMS-identified overpayments asso ciated with payment data submitted by Part D sponsors. (a) Definitions. For purposes of this section-- Applicable reconciliation da te occurs on the later of either the annual deadline for submitting— (1) Prescription drug event (PDE) data for the annual Part D payment

reconciliations referred to in § 423.343(c) and (d); or (2) Direct and indi rect remuneration data. Payment data means data controlled and submitted by a Part D sponsor to CMS and used for payment purposes, including enrollment data and data submitted under §§ 423.329(b)(3), 423.336(c)(1), and 423.343, and data provided for purposes of supporting allowable reinsurance costs and allowable risk co rridor costs as defined in § 423.308, including data submitted to CMS regard ing direct and indirect remuneration. (b) Request to correct payment data. If CMS identifies an error in payment data submitted by a Part D sponsor, and the payment error identified affects payments for any of the 6 most recently completed payment years, CMS may send a data correction notice to the Part D sponsor requesting that the Pa rt D sponsor correct the payment data. The

notice will include or make reference to the specific payment data that need to beCMS-1613-P 681 corrected, the reason why CMS believes that the payment data are erroneous, and the timeframe for correcting the payment data. (c) Payment offset. If the Part D sponsor fails to submit the corrected payment data within the timeframe as requested in acco rdance with paragraph (b) of this section, CMS will conduct a payment offset against payments made to the Part D sponsor. CMS will calculate the payment offset amount us ing a payment algorithm that applies the payment rules for the applicable year. (d) Payment offset notification. CMS will issue a payment offset notice to the Part D sponsor that includes the following: (1) The dollar amount of the offset from plan payments. (2) An explanation of how the erroneous data were identified and used to calculate the payment offset amount. (3) An explanation that, if the Part D sponsor disagrees with the payment offset, it may request an appeal within 30 days of issuance of the payment offset notification. (e) Appeals process. If a Part D spon sor does not agree with the payment offset described in paragraph (c) of this section, it may appeal under the following three-level appeal process: (1) Reconsideration. A Part D spons or may request rec onsideration of the payment offset described in paragraph (c) of this section, according to the following

process:CMS-1613-P 682 (i) Manner and timing of request

. A written request for reconsideration must be filed within 30 days from the date that CMS issued the payment offset notice to the Part D sponsor. (ii) Content of request. The written request for rec onsideration must specify the findings or issues with which the Part D sponsor disagrees and the reasons for its disagreement. As part of its request for r econsideration, the Part D sponsor may include any additional documentary evidence in suppor t of its position. Any additional evidence must be submitted with the request for reconsideration. Additional information submitted after this time will be rejected as untimely. (iii) Conduct of reconsideration. In conducting the recons ideration, the CMS

reconsideration official revi ews the underlying data that were used to determine the amount of the payment offset and any addi tional documentary evidence timely submitted by the Part D sponsor. (iv) Reconsideration decision. The CMS reconsideration official informs the Part D sponsor of its decision on the reconsideration request. (v) Effect of reconsideration decisio n. The decision of the CMS reconsideration official is final and binding unless a timely request for an in formal hearing is filed in accordance with paragraph (e )(2) of this section. (2) Informal hearing. A Part D sponso r dissatisfied with CMS’ reconsideration decision made under paragraph (e)(1) of this sect ion is entitled to an informal hearing as provided for under paragraphs (e)(2)( i) through (v) of this section.CMS-1613-P 683 (i) Manner and timing for request. A re quest for an informal hearing must be made in writing and filed with CMS within 30 days of the date of CMS’ reconsideration

decision. (ii) Content of request. The request for an informal hearing must include a copy of the reconsideration decision and must speci fy the findings or issues in the decision with which the Part D sponsor disagrees and the reasons fo r its disagreement. (iii) Informal hearing procedures. The informal hearing will be conducted in accordance with the following: (A) CMS provides written notice of the time and place of the informal hearing at least 10 days before the scheduled date. (B) The informal hearing is conducted by a CMS hearing officer who neither receives testimony nor accepts any new evidence that was not timely presented with the reconsideration request. The CM S hearing officer is limited to the review of the record

that was before the CMS reconsideration o fficial when CMS made its reconsideration

determination. (C) The CMS hearing officer will review the proceeding before the CMS

reconsideration official on the record made before the CMS r econsideration official using the clearly erroneous standard of review. (iv) Decision of the CMS hearing offi cer. The CMS hearing officer decides the

case and sends a written decision to the Pa rt D sponsor explaining the basis for the

decision.CMS-1613-P 684 (v) Effect of hearing officer’s decisi on. The hearing officer’s decision is final and binding, unless the decisi on is reversed or modifiedby the Administrator in accordance with paragraph (e )(3) of this section. (3) Review by the Administrator. The Administrator review will be conducted in the following manner: (i) A Part D sponsor that has receiveda hearing officer’s decision may request review by the Administrator within 30 days of the date of issuance of the hearing officer’s decision under paragraph (e)(2)(iv) of this section. The Part D sponsor may submit written arguments to the Administrator for review. (ii) After receiving a request for review , the Administrator has the discretion to

elect to review the heari ng officer’s determination in accordance with paragraph (e)(3)(iii) of this section or to decline to review the hearing officer’s decision. (iii) If the Administrator declines to review the hearing o fficer’s decision, the hearing officer’s decision is final and binding. (iv) If the Administrato r elects to review the he aring officer’s decision, the Administrator will review the hearing offi cer’s decision, as well as any information included in the record of the hearing o fficer’s decision and an y written argument submitted by the Part D sponsor, and determine whether to uphold, reverse, or modify the hearing officer’s decision. (v) The Administrator’s determination is final and binding.CMS-1613-P 685 (f) Matters subject to ap peal and burden of proof. (1) The Part D sponsor’s appeal is limited to CMS’ fi nding that the payment data s ubmitted by the Part D sponsor

are erroneous. (2) The Part D sponsor bears the bur den of proof by a preponderance of the evidence in demonstrating that CMS’ finding that the payment data were erroneous was

incorrect or otherwise inconsistent w ith applicable program requirements. (g) Applicability of appeals process. The appeals process under paragraph (e) of this section applies only to payment offs ets under paragraph (c) of this section.

PART 424--CONDITIONS FOR PAYMENT 20. The authority citation for part 424 continues to read as follows: Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 21. Section 424.13 is amended by— a. Revising paragraph (a) introductory text. b. Removing paragraph (a)(1). c. Redesignating paragraphs (a)(2), (3), and (4) as paragraphs (a)(1), (2), and (3), respectively. d. Revising newly redesi gnated paragraph (a)(1)(i). e. Revising paragraph (b).

The revisions read as follows: § 424.13 Requirements for inpatient services of hospitals other than inpatient psychiatric facilities.CMS-1613-P 686 (a) Content of certificati on and recertification. Me dicare Part A pays for inpatient hospital services (other than inpatient psychiatric facility services) for cases that are 20 inpatient days or more, or are outlier cases under subpart F of part 412 of this chapter, only if a physician certif ies or recertifies the following:

* * * * * (1) * * * (i) Hospitalization of the patient fo r medical treatment or medically required diagnostic study; or

* * * * * (b) Timing of certification. For outlier cases under subpart F of part 412 of this chapter, the certification must be signed a nd documented in the medical record and as specified in paragraphs (e) through (h) of this section. For all other cases, the certification must be signed and documented no later than 20 days into the hospital stay.

* * * * *CMS-1613-P

Dated: __June 24, 2014_____________

______________________________ Marilyn Tavenner, Administrator,

Centers for Medicare & Medicaid

Services.

Dated: _June 27, 2014______________

___________________________ Sylvia M. Burwell, Secretary.

BILLING CODE 4120-01-P

[FR Doc. 2014-15939 Filed 07/03/2014 at 4:15 pm; Publication Date: 07/14/2014]