DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 416, 419, 476, 478, 480, and 495 

[CMS-1589-FC] 

RIN 0938-AR10 

Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and 

Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; 

Electronic Reporting Pilot; Inpatient Rehabilitation Facilities Quality Reporting 

Program; Revision to Quality Improvement Organization Regulations 

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

ACTION: Final rule with comment period. 

SUMMARY: This final rule with comment period revises the Medicare hospital 

outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical 

center (ASC) payment system for CY 2013 to implement applicable statutory 

requirements and changes arising from our continuing experience with these systems. In 

this final rule with comment period, we describe the changes to the amounts and factors 

used to determine the payment rates for Medicare services paid under the OPPS and those 

paid under the ASC payment system. In addition, this final rule with comment period 

updates and refines the requirements for the Hospital Outpatient Quality Reporting 

(OQR) Program, the ASC Quality Reporting (ASCQR) Program, and the Inpatient 

Rehabilitation Facility (IRF) Quality Reporting Program. We are continuing the 

electronic reporting pilot for the Electronic Health Record (EHR) Incentive Program, and 

revising the various regulations governing Quality Improvement Organizations (QIOs), 
CMS-1589-FC 2 

including the secure transmittal of electronic medical information, beneficiary complaint 

resolution and notification processes, and technical changes. The technical changes to 

the QIO regulations reflect CMS’ commitment to the general principles of the President’s 

Executive Order on Regulatory Reform, Executive Order 13563 (January 18, 2011). 

DATES: Effective Date: This final rule with comment period is effective on 

January 1, 2013. 

Comment Period: To be assured consideration, comments on the payment 

classifications assigned to HCPCS codes identified in Addenda B, AA, and BB of this 

final rule with comment period with the “NI” comment indicator and on other areas 

specified throughout this final rule with comment period 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]. 

Application Deadline--New Class of New Technology Intraocular Lenses: 

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

must be received by 5 p.m. EST on March 1, 2013, at the following address: 

ASC/NTOL, Division of Outpatient Care, Mailstop C4-05-17, Centers for Medicare and 

Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. 

ADDRESSES: In commenting, please refer to file code CMS-1589-FC. 

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

(FAX) transmission. 

You may submit comments in one of four ways (no duplicates, please): 
CMS-1589-FC 3 

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

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

under the “submit a comment” tab. 

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

ONLY: 

Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Attention: CMS-1589-FC, 

P.O. Box 8013, 

Baltimore, MD 21244-1850. 

Please allow sufficient time for mailed comments to be received before the close 

of the comment period. 

3. By express or overnight mail. You may send written comments via express or 

overnight mail to the following address ONLY: 

Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Attention: CMS-1589-FC, 

Mail Stop C4-26-05, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 
CMS-1589-FC 4 

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

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

addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

200 Independence Avenue, S.W., 

Washington, DC 20201. 

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

available to persons without Federal Government identification, commenters are 

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

the building. A stamp-in clock is available for persons wishing to retain a proof of filing 

by stamping in and retaining an extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

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. 
CMS-1589-FC 5 

Comments mailed to the addresses indicated as appropriate for hand or courier 

delivery may be delayed and received after the comment period. 

For information on viewing public comments, we refer readers to the beginning of 

the “SUPPLEMENTARY INFORMATION” section. 

FOR FURTHER INFORMATION, CONTACT:

Marjorie Baldo, (401) 786-4617, for issues related to new CPT and Level II 

HCPCS codes, exceptions to the 2 times rule, and new technology APCs. 

Anita Bhatia, (410) 786-7236, Ambulatory Surgical Center Quality Reporting 

(ASCQR) Program – Program Administration and Reconsideration Issues. 

Douglas Brown, (410) 786-0028, for issues related to Electronic Health Record 

(EHR) Incentive Program Electronic Reporting Pilot. 

Carrie Bullock, (401) 786-0378, for issues related to blood products. 

Erick Chuang, (410) 786-1816, for issues related to OPPS APC weights, mean 

calculation, copayments, wage index, outlier payments, and rural hospital payments. 

Caroline Gallaher, (410) 786-8705, for issues related to Inpatient Rehabilitation 

Facility (IRF) Quality Reporting Program. 

Shaheen Halim (410) 786-0641, Hospital Outpatient Quality Reporting Program 

(OQR) – Measures Issues and Publication of Hospital OQR Program Data, and 

Ambulatory Surgical Center Quality Reporting (ASCQR) Program – Measures Issues and 

Publication of ASCQR Program Data. 
CMS-1589-FC 6 

Twi Jackson, (410) 786-1159, for issues related to device-dependent APCs, no 

cost/full credit and partial credit devices, hospital outpatient visits, extended assessment 

and management composite APCs, and inpatient-only procedures. 

Thomas Kessler, (401) 786-1991, for issues related to QIO regulations. 

Marina Kushnirova, (410) 786-2682, for issues related to OPPS status indicators 

and comment indicators. 

Barry Levi, (410) 786-4529, for issues related to OPPS pass-through devices, 

brachytherapy sources, intraoperative radiation therapy (IORT), brachytherapy composite 

APC, multiple imaging composite APCs, cardiac resynchronization therapy composite 

APC, and cardiac electrophysiologic evaluation and ablation composite APC. 

Jana Lindquist, (410) 786-4533, for issues related to partial hospitalization and 

community mental health center (CMHC) issues. 

Ann Marshall, (410) 786-3059, for issues related to hospital outpatient 

supervision, outpatient status, proton beam therapy, and the Hospital Outpatient Payment 

(HOP) Panel. 

John McInnes, (410) 786-0378, for issues related to new technology intraocular 

lenses (NTIOLs) and packaged items/services. 

James Poyer, (410) 786-2261, Hospital Outpatient Quality Reporting - Program 

Administration, Validation, and Reconsideration Issues. 

Char Thompson, (410) 786-2300, for issues related to OPPS drugs, 

radiopharmaceuticals, biologicals, blood clotting factors, cost-to-charge ratios (CCRs), 

and ambulatory surgical center (ASC) payments. 
CMS-1589-FC 7 

Marjorie Baldo, (410) 786-4617, for all other issues related to hospital outpatient 

and ambulatory surgical center payments not previously identified. 

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: All comments received before the close of the 

comment period are available for viewing by the public, including any personally 

identifiable or confidential business information that is included in a comment. We post 

all comments received before the close of the comment period on the following Web site 

as soon as possible after they have been received: http://www.regulations.gov. Follow 

the search instructions on that Web site to view public comments. 

Comments received timely will also be available for public inspection, generally 

beginning approximately 3 weeks after publication of the rule, at the headquarters of the 

Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 

Baltimore, MD 21244, on Monday through Friday of each week from 8:30 a.m. to 4:00 

p.m. EST. To schedule an appointment to view public comments, phone 

1-800-743-3951. 

Electronic Access

This Federal Register document is also available from the Federal Register

online database through Federal Digital System (FDsys), a service of the U.S. 

Government Printing Office. This database can be accessed via the internet at 

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

Addenda Available Only Through the Internet on the CMS Web Site 
CMS-1589-FC 8 

In the past, a majority of the Addenda referred to in our OPPS/ASC proposed and 

final rules were published in the Federal Register as part of the annual rulemakings. 

However, beginning with the CY 2012 OPPS/ASC proposed rule, all of the Addenda no 

longer appear in the Federal Register as part of the annual OPPS/ASC proposed and 

final rules to decrease administrative burden and reduce costs associated with publishing 

lengthy tables. Instead, these Addenda will be published and available only on the CMS 

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. Readers who experience any problems accessing any 

of the Addenda that are posted on the CMS Web site identified above should contact 

Charles Braver at (410) 786-0378. 

Alphabetical List of Acronyms Appearing in This Federal Register Document 

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 
CMS-1589-FC 9 

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

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

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 

Act of 2000, Pub. L. 106-554 

BLS Bureau of Labor Statistics 

CAH Critical access hospital 

CAP Competitive Acquisition Program 

CASPER Certification and Survey Provider Enhanced Reporting 

CAUTI Catheter associated urinary tract infection 

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 

CoP [Medicare] Condition of participation 

CPI-U Consumer Price Index for All Urban Consumers 
CMS-1589-FC 10 

CPT Current Procedural Terminology (copyrighted by the American Medical 

Association) 

CQM Clinical quality measure 

CR Change request 

CSAC Consensus Standards Approval Committee 

CY Calendar year 

DFO Designated Federal Official 

DRA Deficit Reduction Act of 2005, Pub. L. 109-171 

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 

GAO Government Accountability Office 
CMS-1589-FC 11 

HAI Healthcare-associated infection 

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

HCPCS Healthcare Common Procedure Coding System 

HCRIS Hospital Cost Report Information System 

HEU Highly enriched uranium 

HIPAA Health Insurance Portability and Accountability Act of 1996, 

Pub. L. 104-191 

HITECH Health Information Technology for Economic and Clinical Health [Act] 

(found in the American Recovery and Reinvestment Act of 2009, Pub. L. 

111-5) 

HOP Hospital Outpatient Payment [Panel] 

HOPD Hospital outpatient department 

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

Modification 

ICD Implantable cardioverter defibrillator 

ICU Intensive care unit 

IHS Indian Health Service 

IMRT Intensity Modulated Radiation Therapy 

I/OCE Integrated Outpatient Code Editor 

IOL Intraocular lens 

IOM Institute of Medicine 

IORT Intraoperative radiation treatment 
CMS-1589-FC 12 

IPF Inpatient Psychiatric Facility 

IPPS [Hospital] Inpatient Prospective Payment System 

IQR [Hospital] Inpatient Quality Reporting 

IRF Inpatient rehabilitation facility 

IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment Instrument 

IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program 

LDR Low dose rate 

LOS Length of Stay 

LTCH Long-term care hospital 

MAC Medicare Administrative Contractor 

MAP Measure Application Partnership 

MedPAC Medicare Payment Advisory Commission 

MEI Medicare Economic Index 

MFP Multifactor productivity 

MGCRB Medicare Geographic Classification Review Board 

MIEA-TRHCA Medicare Improvements and Extension Act under Division B, Title I 

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

MIPPA Medicare Improvements for Patients and Providers Act of 2008, 

Pub. L. 110-275 

MMA Medicare Prescription Drug, Improvement, and Modernization Act of 

2003, Pub. L. 108-173 

MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309 
CMS-1589-FC 13 

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

MPFS Medicare Physician Fee Schedule 

MRA Magnetic resonance angiography 

MRI Magnetic resonance imaging 

MSA Metropolitan Statistical Area 

NCCI National Correct Coding Initiative 

NHSN National Healthcare Safety Network 

NQF National Quality Forum 

NTIOL New technology intraocular lens 

NUBC National Uniform Billing Committee 

OACT [CMS] Office of the Actuary 

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

OIG [HHS] Office of the Inspector General 

OMB Office of Management and Budget 

OPD [Hospital] Outpatient Department 

OPPS [Hospital] Outpatient Prospective Payment System 

OPSF Outpatient Provider-Specific File 

OQR [Hospital] Outpatient Quality Reporting 

OT Occupational therapy 

PCR Payment-to-cost ratio 

PE Practice expense 

PEPPER Program for Evaluating Payment Patterns Electronic Report 
CMS-1589-FC 14 

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 

RAC Recovery Audit Contractor 

RFA Regulatory Flexibility Act 

RTI Research Triangle Institute, International 

RVU Relative value unit 

SCH Sole community hospital 

SCOD Specified covered outpatient drugs 

SI Status indicator 

SIR Standardized infection ratio 

SLP Speech-language pathology 

SNF Skilled Nursing Facility 

SRS Stereotactic Radiosurgery 

TEP Technical Expert Panel 

TMS Transcranial Magnetic Stimulation Therapy 

TOPs Transitional Outpatient Payments 
CMS-1589-FC 15 

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 Final Rule with Comment Period 

1. Purpose 

2. Summary of the Major Provisions 

3. Summary of Costs and Benefits 

B. Legislative and Regulatory Authority for the Hospital OPPS 

C. Excluded OPPS Services and Hospitals 

D. Prior Rulemaking 

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel), 

Formerly Named the Advisory Panel on Ambulatory Payment Classification Groups 

(APC Panel) 

1. Authority of the Panel 

2. Establishment of the Panel 

3. Panel Meetings and Organizational Structure 

F. Public Comments Received in Response to the CY 2013 OPPS/ASC Proposed 

Rule 
CMS-1589-FC 16 

G. Public Comments Received on the CY 2012 OPPS/ASC Final Rule with 

Comment Period 

II. Updates Affecting OPPS Payments 

A. Recalibration of APC Relative Payment Weights 

1. Database Construction 

a. Database Source and Methodology 

b. Use of Single and Multiple Procedure Claims 

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

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

a. Claims Preparation 

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims 

(1) Splitting Claims 

(2) Creation of “Pseudo” Single Procedure Claims 

c. Completion of Claim Records and Geometric Mean Cost Calculations 

(1) General Process 

(2) Recommendations of the Advisory Panel on Hospital Outpatient Payment 

Regarding Data Development 

d. Calculation of Single Procedure APC Criteria-Based Costs 

(1) Device-Dependent APCs 

(2) Blood and Blood Products 

(3) Brachytherapy Sources 

e. Calculation of Composite APC Criteria-Based Costs 
CMS-1589-FC 17 

(1) Extended Assessment and Management Composite APCs (APCs 8002 and 

8003) 

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

(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 

(APC 8000) 

(4) Mental Health Services Composite APC (APC 0034) 

(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 

8008) 

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

f. Geometric Mean-Based Relative Payment Weights 

3. Changes to Packaged Services 

a. Background 

b. Clarification of Regulations at 42 CFR 419.2(b) 

c. Packaging Recommendations of the HOP Panel (“The Panel”) at its 

February 2012 Meeting 

d. Packaging Recommendations of the HOP Panel (“The Panel”) at its 

August 2012 Meeting 

e. Other Packaging Proposals and Policies for CY 2013 

f. Packaging of Drugs, Biologicals, and Radiopharmaceuticals 

(1) Existing Packaging Policies 

(2) Clarification of Packaging Policy for Anesthesia Drugs 
CMS-1589-FC 18 

g. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast Agents, 

and Implantable Biologicals (“Policy-Packaged” Drugs and Devices) 

h. Summary of Proposals 

4. Calculation of OPPS Scaled Payment Weights 

B. Conversion Factor Update 

C. Wage Index Changes 

D. Statewide Average Default CCRs 

E. OPPS Payments to Certain Rural and Other Hospitals 

1. Hold Harmless Transitional Payment Changes 

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

Act 

F. OPPS Payment to Certain Cancer Hospitals Described by Section 

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

1. Background 

2. Payment Adjustment for Certain Cancer Hospitals for CY 2013 

G. Hospital Outpatient Outlier Payments 

1. Background 

2. Proposed Outlier Calculation 

3. Final Outlier Calculation 

4. Outlier Reconciliation 

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

Medicare Payment 
CMS-1589-FC 19 

I. Beneficiary Copayments 

1. Background 

2. OPPS Copayment Policy 

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

III. OPPS Ambulatory Payment Classification (APC) Group Policies 

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

1. Treatment of New CY 2012 Level II HCPCS and CPT Codes Effective 

April 1, 2012 and July 1, 2012 for Which We Solicited Public Comments in the CY 2013 

OPPS/ASC Proposed Rule 

2. Process for New Level II HCPCS Codes That Will Be Effective 

October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective 

January 1, 2013 for Which We Are Soliciting Public Comments in this CY 2013 

OPPS/ASC Final Rule with Comment Period 

B. OPPS Changes--Variations within APCs 

1. Background 

2. Application of the 2 Times Rule 

3. Exceptions to the 2 Times Rule 

C. New Technology APCs 

1. Background 

2. Movement of Procedures from New Technology APCs to Clinical APCs 

3. Payment Adjustment Policy for Radioisotopes Derived from Non-Highly 

Enriched Uranium (HEU) Sources 
CMS-1589-FC 20 

a. Background 

b. Payment Policy 

D. OPPS APC-Specific Policies 

1. Cardiovascular and Vascular Services 

a. Cardiac Telemetry (APC 0213) 

b. Mechanical Thrombectomy (APC 0653) 

c. Non-Congenital Cardiac Catheterization (APC 0080) 

d. Endovascular Revascularization of the Lower Extremity (APCs 0083, 0229, 

and 0319) 

e. External Electrocardiographic Monitoring (APC 0097) 

f. Echocardiography (APCs 0177, 0178, 0269, 0270, and 0697) 

2. Gastrointestinal Services 

a. Laparoscopic Adjustable Gastric Band (APC 0132) 

b. Transoral Incisionless Fundoplication (APC 0422) 

c. Gastrointestinal Transit and Pressure Measurement (APC 0361) 

3. Integumentary System Services 

a. Extracorporeal Shock Wave Wound Treatment (APC 0340) 

b. Application of Skin Substitute (APCs 0133 and 0134) 

c. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0015) 

4. Nervous System Services 

a. Scrambler Therapy (APC 0275) 

b. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0216) 
CMS-1589-FC 21 

c. Paravertebral Neurolytic Agent (APC 0207) 

d. Programmable Implantable Pump (APC 0691) 

e. Revision/Removal of Neurostimulator Electrodes (APC 0687) 

5. Ocular Services: Placement of Amniotic Membrane (APC 0233) 

6. Radiology Oncology 

a. Proton Beam Therapy (APCs 0664 and 0667) 

b. Device Construction for Intensity Modulated Radiation Therapy (IMRT) (APC 

0305) 

c. Other Radiation Oncology Services (APCs 0310 and 0412) 

d. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 

0066, 0067 and 0127) 

e. Intraoperative Radiation Therapy (IORT) (APC 0412) 

(1) Background 

(2) CY 2013 Proposals and Final Policies for CPT Codes 77424, 77425, and 

77469 

7. Imaging 

a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0397) 

b. Level II Nervous System Imaging (APC 0402) 

c. Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334) 

8. Respiratory Services 

a. Bronchoscopy (APC 0415) 

b. Upper Airway Endoscopy (APC 0075) 
CMS-1589-FC 22 

9. Other Services 

a. Payment for Molecular Pathology Services 

b. Bone Marrow (APC 0112) 

IV. OPPS Payment for Devices 

A. Pass-Through Payments for Devices 

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

a. Background 

b. CY 2013 Policy 

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

Packaged into APC Groups 

a. Background 

b. CY 2013 Policy 

3. Clarification of Existing Device Category Criterion 

a. Background 

b. Clarification of CY 2013 Policy 

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

Devices 

1. Background 

2. APCs and Devices Subject to the Adjustment Policy 

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

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

Biologicals, and Radiopharmaceuticals 
CMS-1589-FC 23 

1. Background 

2. Drugs and Biologicals with Expiring Pass-Through Status in CY 2012 

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

Pass-Through Status in CY 2013 

4. Provisions for Reducing Transitional Pass-Through Payments for Diagnostic 

Radiopharmaceuticals and Contrast Agents to Offset Costs Packaged into APC Groups 

a. Background 

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals 

c. Payment Offset Policy for Contrast Agents 

B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals without 

Pass-Through Status 

1. Background 

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

Radiopharmaceuticals 

a. Background 

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

Certain Drugs, Nonimplantable Biologicals, and Therapeutic Radiopharmaceuticals 

(“Threshold-Packaged Drugs”) 

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

Biological but Different Dosages 

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

Packaged 
CMS-1589-FC 24 

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

Separately Payable and Packaged Drugs and Biologicals 

b. CY 2013 Payment Policy 

4. Payment Policy for Therapeutic Radiopharmaceuticals 

5. Payment for Blood Clotting Factors 

6. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals 

with HCPCS Codes, but without OPPS Hospital Claims Data 

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

Radiopharmaceuticals, and Devices 

A. Background 

B. Estimate of Pass-Through Spending 

VII. OPPS Payment for Hospital Outpatient Visits 

A. Background 

B. Policies for Hospital Outpatient Visits 

C. Transitional Care Management 

VIII. Payment for Partial Hospitalization Services 

A. Background 

B. PHP APC Update for CY 2013 

C. Coding Changes 

D. Separate Threshold for Outlier Payments to CMHCs 

IX. Procedures That Would Be Paid Only as Inpatient Procedures 

A. Background 
CMS-1589-FC 25 

B. Changes to the Inpatient List 

X. Policies for the Supervision of Outpatient Services in Hospitals and CAHs 

A. Conditions of Payment for Physical Therapy, Speech-Language Pathology, 

and Occupational Therapy Services in Hospitals and CAHs 

B. Enforcement Instruction for the Supervision of Outpatient Therapeutic 

Services in CAHs and Certain Small Rural Hospitals 

XI. Outpatient Status: Solicitation of Public Comments in the CY 2013 OPPS/ASC 

Proposed Rule 

A. Background 

B. Summary of Public Comments Received 

1. Part A to Part B Rebilling 

2. Clarifying Current Admission Instructions or Establishing Specified Clinical 

Criteria 

3. Hospital Utilization Review 

4. Prior Authorization 

5. Time-Based Criteria for Inpatient Admission 

6. Payment Alignment 

7. Public Comments on Other Topics 

a. Rules for the External Review of Inpatient Claims 

b. Improving Beneficiary Protections 

c. Revising the Qualifying Criteria for Skilled Nursing Facility (SNF) Coverage 

C. Summary 
CMS-1589-FC 26 

XII. CY 2013 OPPS Payment Status and Comment Indicators 

A. CY 2013 OPPS Payment Status Indicator Definitions 

B. CY 2013 Comment Indicator Definitions 

XIII. OPPS Policy and Payment Recommendations 

A. MedPAC Recommendations 

B. GAO Recommendations 

C. OIG Recommendations 

XIV. Updates to the Ambulatory Surgical Center (ASC) Payment System 

A. Background 

1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC 

Payment System 

2. Policies Governing Changes to the Lists of Codes and Payment Rates for ASC 

Covered Surgical Procedures and Covered Ancillary Services 

B. Treatment of New Codes 

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

Level II HCPCS Codes 

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

Implemented in April and July 2012 for Which We Solicited Public Comments in the 

CY 2013 OPPS/ASC Proposed Rule 

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

Codes for Which We Are Soliciting Public Comments in this CY 2013 OPPS/ASC Final 

Rule with Comment Period 
CMS-1589-FC 27 

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

Ancillary Services 

1. Covered Surgical Procedures 

a. Additions to the List of ASC Covered Surgical Procedures 

b. Covered Surgical Procedures Designated as Office-Based 

(1) Background 

(2) Changes for CY 2013 to Covered Surgical Procedures Designated as 

Office-Based 

c. ASC Covered Surgical Procedures Designated as Device-Intensive 

(1) Background 

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

Device-Intensive for CY 2013 

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

Devices 

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

for CY 2013 

2. Covered Ancillary Services 

D. ASC Payment for Covered Surgical Procedures and Covered Ancillary 

Services 

1. Payment for Covered Surgical Procedures 

a. Background 

b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2013 
CMS-1589-FC 28 

c. Waiver of Coinsurance and Deductible for Certain Preventive Services 

d. Payment for the Cardiac Resynchronization Therapy Composite 

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

2. Payment for Covered Ancillary Services 

a. Background 

b. Payment for Covered Ancillary Services for CY 2013 

E. New Technology Intraocular Lenses (NTIOLs) 

1. NTIOL Cycle and Evaluation Criteria 

2. NTIOL Application Process for Payment Adjustment 

3. Requests to Establish New NTIOL Classes for CY 2013 and Deadline for 

Public Comments 

4. Payment Adjustment 

5. Revisions to the Major NTIOL Criteria Described in 42 CFR 416.195 

6. Request for Public Comment on the “Other Comparable Clinical Advantages” 

Improved Outcome 

7. Announcement of CY 2013 Deadline for Submitting Requests for CMS 

Review of Appropriateness of ASC Payment for Insertion of an NTIOL Following 

Cataract Surgery 

F. ASC Payment and Comment Indicators 

1. Background 

2. ASC Payment and Comment Indicators 

G. ASC Policy and Payment Recommendations 
CMS-1589-FC 29 

H. Calculation of the ASC Conversion Factor and the ASC Payment Rates 

1. Background 

2. Calculation of the ASC Payment Rates 

a. Updating the ASC Relative Payment Weights for CY 2013 and Future Years 

b. Updating the ASC Conversion Factor 

3. Display of CY 2013 ASC Payment Rates 

XV. Hospital Outpatient Quality Reporting Program Updates 

A. Background 

1. Overview 

2. Statutory History of the Hospital Outpatient Quality Reporting (Hospital OQR) 

Program 

3. Measure Updates and Data Publication 

a. Process for Updating Quality Measures 

b. Publication of Hospital OQR Program Data 

B. Process for Retention of Hospital OQR Program Measures Adopted in 

Previous Payment Determinations 

C. Removal or Suspension of Quality Measures from the Hospital OQR Program 

Measure Set 

1. Considerations in Removing Quality Measures from the Hospital OQR 

Program 

2. Removal of One Chart-Abstracted Measure for the CY 2013 and Subsequent 

Years Payment Determinations 
CMS-1589-FC 30 

3. Suspension of One Chart-Abstracted Measure for the CY 2014 and Subsequent 

Years Payment Determinations 

4. Deferred Data Collection of OP-24: Cardiac Rehabilitation Measure: Patient 

Referral from an Outpatient Setting for the CY 2014 Payment Determination 

D. Quality Measures for CY 2015 Payment Determination 

E. Possible Quality Measures Under Consideration for Future Inclusion in the 

Hospital OQR Program 

F. Payment Reduction for Hospitals That Fail to Meet the Hospital OQR Program 

Requirements for the CY 2013 Payment Update 

1. Background 

2. Reporting Ratio Application and Associated Adjustment Policy for CY 2013 

G. Requirements for Reporting of Hospital OQR Data for the CY 2014 Payment 

Determination and Subsequent Years 

1. Administrative Requirements for the CY 2014 Payment Determination and 

Subsequent Years 

2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program 

for the CY 2014 Payment Determination and Subsequent Years 

a. Background 

b. General Requirements 

c. Chart-Abstracted Measure Requirements for CY 2014 and Subsequent 

Payment Determination Years 
CMS-1589-FC 31 

d. Claims-Based Measure Data Requirements for the CY 2014 and CY 2015 

Payment Determinations 

e. Structural Measure Data Requirements for the CY 2014 Payment 

Determination and Subsequent Years 

f. Data Submission Requirements for OP-22: ED-Patient Left Without Being 

Seen for the CY 2015 Payment Determination 

g. Population and Sampling Data Requirements for the CY 2014 Payment 

Determination and Subsequent Years 

3. Hospital OQR Program Validation Requirements for Chart-Abstracted 

Measure Data Submitted Directly to CMS for the CY 2014 Payment Determination and 

Subsequent Years 

a. Random Selection of Hospitals for Data Validation of Chart-Abstracted 

Measures for the CY 2014 Payment Determination and Subsequent Years 

b. Targeting and Targeting Criteria for Data Validation Selection for CY 2014 

Payment Determination and for Subsequent Years 

c. Methodology for Encounter Selection for the CY 2014 Payment Determination 

and Subsequent Years 

d. Validation Score Calculation for the CY 2014 Payment Determination and 

Subsequent Years 

H. Hospital OQR Reconsideration and Appeals Procedures for the CY 2014 

Payment Determination and Subsequent Years 
CMS-1589-FC 32 

I. Extraordinary Circumstances Extension or Waiver for the CY 2013 Payment 

Determination and Subsequent Years 

J. Electronic Health Records (EHRs) 

K. 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible 

Hospitals and CAHs 

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

Program 

A. Background 

1. Overview 

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

3. History of the ASCQR Program 

B. ASCQR Program Quality Measures 

1. Considerations in the Selection of ASCQR Program Quality Measures 

2. ASCQR Program Quality Measures 

3. ASC Measure Topics for Future Consideration 

4. Clarification Regarding the Process for Updating ASCQR Program Quality 

Measures 

C. Requirements for Reporting of ASC Quality Data 

1. Form, Manner, and Timing for Claims-Based Measures for the CY 2014 

Payment Determination and Subsequent Payment Determination Years 

a. Background 
CMS-1589-FC 33 

b. Form, Manner, and Timing for Claims-Based Measures for the CY 2015 

Payment Determination and Subsequent Payment Determination Years 

2. Data Completeness and Minimum Threshold for Claims-Based Measures 

Using QDCs 

a. Background 

b. Data Completeness Requirements for the CY 2015 Payment Determination 

and Subsequent Payment Determination Years 

3. Other Comments on the ASCQR Program 

D. 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 the CY 2014 Payment Determination and Subsequent 

Payment Determination Years 

XVII. Inpatient Rehabilitation Facility (IRF) Quality Reporting Program Updates 

A. Overview 

B. Updates to IRF QRP Measures Which Are Made as a Result of Review by the 

National Quality Forum (NQF) Process 

C. Process for Retention of IRF Quality Measures Adopted in Previous Fiscal 

Year Rulemaking Cycles 

D. Measures for the FY 2014 Payment Determination 
CMS-1589-FC 34 

1. Clarification Regarding Existing IRF Quality Measures That Have Undergone 

Changes During the NQF Measure Maintenance Processes 

2. Updates to the “Percent of Residents Who Have Pressure Ulcers That Are New 

or Worsened” Measure 

XVIII. Revisions to the Quality Improvement Organization (QIO) Regulations 

(42 CFR Parts 476, 478, and 480) 

A. Summary of Changes 

B. Quality of Care Reviews 

1. Beneficiary Complaint Reviews 

2. Completion of General Quality of Care Reviews 

C. Use of Confidential Information That Explicitly or Implicitly Identifies 

Patients 

D. Secure Transmissions of Electronic Versions of Medical Information 

E. Active Staff Privileges 

F. Technical Corrections 

XIX. Files Available to the Public Via the Internet 

XX. Collection of Information Requirements 

A. Legislative Requirements for Solicitation of Comments 

B. Requirements in Regulation Text 

1. 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for 

Hospitals and CAHs (§ 495.8) 

C. Associated Information Collections Not Specified in Regulatory Text 
CMS-1589-FC 35 

1. Hospital OQR Program 

2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014 and 

CY 2015 Payment Determinations 

a. Previously Adopted Hospital OQR Program Measures for the CY 2012, 

CY 2013, and CY 2014 Payment Determinations 

b. Hospital OQR Program Measures for the CY 2014 Payment Determination 

c. Hospital OQR Program Measures for CY 2015 

3. Hospital OQR Program Validation Requirements for CY 2014 

4. Hospital OQR Program Reconsideration and Appeals Procedures 

5. ASCQR Program Requirements 

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

b. Claims-Based Process, Structural, and Volume Measures for the CY 2015 and 

CY 2016 Payment Determinations 

c. Program Administrative Requirements and QualityNet Accounts; 

Extraordinary Circumstance and Extension Requests; Reconsideration Requests 

6. IRF QRP 

a. Pressure Ulcer Measure 

b. CAUTI Measure 

XXI. Waiver of Proposed Rulemaking and Response to Comments 

A. Waiver of Proposed Rulemaking 

B. Response to Comments 

XXII. Economic Analyses 
CMS-1589-FC 36 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impacts for OPPS and ASC Payment Provisions 

4. Detailed Economic Analyses 

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

(1) Limitations of Our Analysis 

(2) Estimated Effects of OPPS Changes on Hospitals 

(3) Estimated Effects of OPPS Changes on CMHCs 

(4) Estimated Effect of OPPS Changes on Beneficiaries 

(5) Estimated Effects of OPPS Changes on Other Providers 

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

(7) Alternative OPPS Policies Considered 

b. Estimated Effects of ASC Payment System Final Policies 

(1) Limitations of Our Analysis 

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

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

(4) Alternative ASC Payment Policies Considered 

c. Effects of the Revisions to the QIO Regulations 

d. Accounting Statements and Tables 

e. Effects of Requirements for the Hospital OQR Program 

f. Effects of the EHR Electronic Reporting Pilot 
CMS-1589-FC 37 

g. Effects of Proposals for the ASCQR Program 

h. Effects of Updates to the IRF QRP 

B. Regulatory Flexibility Act (RFA) Analysis 

C. Unfunded Mandates Reform Act Analysis 

D. Conclusion 

XXIII. Federalism Analysis 

Regulation Text 

I. Summary and Background 

A. Executive Summary of this Final Rule with Comment Period 

1. Purpose 

In this final rule with comment period, we are updating the payment policies and 

payment rates for services furnished to Medicare beneficiaries in hospital outpatient 

departments and Ambulatory Surgical Centers (ASCs) beginning January 1, 2013. 

Section 1833(t) of the Social Security Act (the Act) requires us to annually review and 

update the relative payment weights and the conversion factor for services payable under 

the Outpatient Prospective Payment System (OPPS). Under section 1833(i) of the Act, 

we annually review and update the ASC payment rates. We describe these and various 

other statutory authorities in the relevant sections of this final rule. 

In addition to establishing payment rates for CY 2013, we are updating and 

implementing new requirements under the Hospital Outpatient Quality Reporting (OQR) 

Program, the Ambulatory Surgical Center Quality Reporting (ASCQR) Program, and the 

Inpatient Rehabilitation Facility (IRF) Quality Reporting Program. We are continuing 
CMS-1589-FC 38 

the electronic reporting pilot for the Electronic Health Record (EHR) Incentive Program 

and making revisions to the regulations governing the Quality Improvement 

Organizations (QIOs), including the secure transmittal of electronic medical information, 

beneficiary complaint resolution and notification processes, and technical corrections. 

The technical changes to the QIO regulations that we are making to improve the 

regulations reflect CMS’ commitment to the principles of the President’s Executive 

Order on Regulatory Reform, Executive Order 13563 (January 18, 2011). 

2. Summary of the Major Provisions 

● OPPS Update: For CY 2013, we are increasing the payment rates under the 

OPPS by an Outpatient Department (OPD) fee schedule increase factor of 1.8 percent. 

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

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

system (IPPS), minus the multifactor productivity (MFP) adjustment of 0.7 percentage 

points, and minus a 0.1 percentage point adjustment required by the Affordable Care Act. 

Under this final rule with comment period, we estimate that total payments for CY 2013, 

including beneficiary cost-sharing, to the more than 4,000 facilities paid under the OPPS 

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

community mental health centers (CMHCs)), will be approximately $48.1 billion, an 

increase of approximately $4.6 billion compared to CY 2012 payments, or $600 million 

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

We are continuing to implement the statutory 2.0 percentage point reduction in 

payments for hospitals failing to meet the hospital outpatient quality reporting 
CMS-1589-FC 39 

requirements, by applying a reporting factor of 0.980 to the OPPS payments and 

copayments for all applicable services. 

● Geometric Mean-Based Relative Payment Weights: CMS has discretion under 

the statute to set OPPS payments based upon either the estimated mean or median costs 

of services within an Ambulatory Payment Classification (APC) group, the unit of 

payment. To improve our cost estimation process, for CY 2013 we are using the 

geometric mean costs of services within an APC to determine the relative payment 

weights of services, rather than the median costs that we have used since the inception of 

the OPPS. Our analysis shows that the change to means will have a limited payment 

impact on most providers, with a small number experiencing payment gain or loss based 

on their service-mix. 

● Rural Adjustment: We are continuing the adjustment of 7.1 percent to the 

OPPS payments to certain rural sole community hospitals (SCHs), including essential 

access community hospitals (EACHs). This adjustment will apply to all services paid 

under the OPPS, excluding separately payable drugs and biologicals, devices paid under 

the pass-through payment policy, and items paid at charges reduced to cost. 

● Cancer Hospital Payment Adjustment: For CY 2013, we are continuing our 

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

payment-to-cost ratio (PCR) with the payment adjustment is equal to the weighted 

average PCR for the other OPPS hospitals using the most recent submitted or settled cost 

report data. Based on those data, a target PCR of 0.91 will be used to determine the 

CY 2013 cancer hospital payment adjustment to be paid at cost report settlement. That 
CMS-1589-FC 40 

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

the additional payment needed to result in a PCR equal to 0.91 for each cancer hospital. 

● Payment Adjustment Policy for Radio-Isotopes Derived from Non-Highly 

Enriched Uranium Sources: We are exercising our statutory authority to make payment 

adjustments necessary to ensure equitable payments in order to provide an adjustment for 

CY 2013 to cover the marginal cost of hospital conversion to the use of non-HEU sources 

of radio-isotopes used in medical imaging. The adjustment will cover the marginal cost 

of radio-isotopes produced from non-HEU sources over the costs of radio-isotopes 

produced by HEU sources. 

● Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2013, 

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

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

average sales price (ASP) plus 6 percent. 

● Supervision of Hospital Outpatient Therapeutic Services: We are clarifying 

the application of the supervision regulations to physical therapy, speech-language 

pathology, and occupational therapy services that are furnished in OPPS hospitals and 

critical access hospitals (CAHs). In addition, in this final rule we note that we will 

extend the enforcement instruction one final year through CY 2013. This additional year, 

which we expect will be the final year of the extension, will provide additional 

opportunities for stakeholders to bring their issues to the Hospital Outpatient Payment 

Panel. 
CMS-1589-FC 41 

● Outpatient Status: We are concerned about recent increases in the length of 

time that Medicare beneficiaries spend as outpatients receiving observation services. In 

addition, hospitals continue to express concern about Medicare Part A to Part B rebilling 

policies when a hospital inpatient claim is denied because the inpatient admission was not 

medically necessary. In the CY 2013 OPPS/ASC proposed rule (77 FR 45155 through 

45157), we provided an update on the Part A to Part B Rebilling Demonstration that is in 

effect for CY 2012 through CY 2014, which was designed to assist us in evaluating these 

issues. We also solicited public comments on potential clarifications or changes to our 

policies regarding patient status that may be appropriate, which we discuss in this final 

rule with comment period. 

● Ambulatory Surgical Center Payment Update: For CY 2013, we are increasing 

payment rates under the ASC payment system by 0.6 percent. This increase is based on a 

projected CPI-U update of 1.4 percent minus a multifactor productivity adjustment 

required by the Affordable Care Act that is projected to be 0.8 percent. Based on this 

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

estimated changes in enrollment, utilization, and case-mix), for CY 2013 will be 

approximately $4.074 billion, an increase of approximately $310 million compared to 

estimated CY 2012 payments. 

● New Technology Intraocular Lenses: We are revising the regulations 

governing payments for new technology intraocular lenses (NTIOLs) to require that the 

IOL’s labeling, which must be approved by the FDA, contain a claim of a specific 

clinical benefit based on a new lens characteristic in comparison to currently available 
CMS-1589-FC 42 

IOLs. We also are revising the regulations to require that any specific clinical benefit 

referred to in § 416.195(a)(2) must be supported by evidence that demonstrates that the 

IOL results in a measurable, clinically meaningful, improved outcome. 

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

ASCQR Program, we address the public comments received as a result of our solicitation 

in the proposed rule on our approach for future measure selection and development as 

well as certain measures for future potential inclusion in the ASCQR Program measure 

set. We are finalizing our approach to future measure selection and development for the 

ASCQR Program. For the CY 2015 payment determination and subsequent years’ 

payment determinations, we are adopting requirements for claims-based measures 

regarding the dates for submission and payment of claims and data completeness. We 

also are finalizing our policy regarding how the payment rates will be reduced in 

CY 2014 and in subsequent calendar years for ASCs that fail to meet program 

requirements, and we are clarifying our policy on updating measures. 

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

OQR Program, we are not establishing any new measures for CY 2013. We also are not 

specifying any new targeting criteria to select hospitals for validation of medical records. 

We are confirming the removal or suspension of data collection for specific measures. 

We are specifying that the criteria we will consider when determining whether to remove 

measures for the Hospital Inpatient Quality Reporting (IQR) Program will also apply to 

the Hospital OQR Program. We are providing that measures adopted in future 

rulemaking are automatically adopted for all subsequent year payment determinations 
CMS-1589-FC 43 

unless we remove, suspend, or replace them. We are making changes to administrative 

forms used in the program. We are extending the deadline for submitting a notice of 

participation form and to enter structural measures data. 

● Electronic Health Record (EHR) Incentive Program: For the EHR Incentive 

Program, we are extending the 2012 Medicare EHR Incentive Program Electronic 

Reporting Pilot for Eligible Hospitals and CAHs through 2013, exactly as finalized for 

2012. We recently issued a final rule (77 FR 53968) for Stage 2 of the Medicare and 

Medicaid EHR Incentive Programs. 

● Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP): We 

are: (1) adopting updates on one (out of two) previously adopted measure for the IRF 

QRP that will affect annual prospective payment amounts for FY 2014; (2) adopting a 

nonrisk-adjusted version of an NQF-endorsed pressure ulcer measure for the IRF QRP, 

and we will not publicly report any pressure ulcer measure data until we begin risk 

adjustment of these data; (3) adopting a policy that will provide that any measure that has 

been adopted for use in the IRF QRP will remain in effect until the measure is actively 

removed, suspended, or replaced; and (4) adopting policies regarding when 

notice-and-comment rulemaking will be used to update existing IRF QRP measures. 

● Revisions to the Quality Improvement Organization (QIO) Regulations: We 

are revising the QIO program regulations to: (1) give QIOs the authority to send and 

receive secure transmissions of electronic versions of medical information; (2) provide 

more detailed and improved procedures for QIOs when completing Medicare beneficiary 

complaint reviews and general quality of care reviews, including procedures related to a 
CMS-1589-FC 44 

new alternative dispute resolution process called “immediate advocacy”; (3) increase the 

information beneficiaries receive in response to QIO review activities; (4) convey to 

Medicare beneficiaries the right to authorize the release of confidential information by 

QIOs; and (5) make other technical changes that are designed to improve the regulations. 

The technical changes to the QIO regulations that we are making to improve the 

regulations reflect CMS’ commitment to the principles of the President’s Executive 

Order on Regulatory Reform, Executive Order 13563 (January 18, 2011). 

3. Summary of Costs and Benefits 

In sections XXII. and XXIII. of this final rule with comment period, we set forth a 

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

affected entities and beneficiaries. Key estimated impacts include the following: 

a. Impacts of the OPPS Update 

(1) Impacts of All OPPS Changes 

Table 57 in section XXII. of this final rule with comment period displays the 

distributional impact all the OPPS changes on various groups of hospitals and CMHCs 

for CY 2013 compared to all estimated OPPS payments in CY 2012. We estimate that 

the policies in this final rule will result in a 1.9 percent overall increase in OPPS 

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

beneficiary cost-sharing, will be approximately $600 million, not taking into account 

potential changes in enrollment, utilization, and case-mix. Taking into account estimated 

spending changes that are attributable to these factors, we estimate an increase of 

approximately $4.571 billion in OPPS expenditures, including beneficiary cost-sharing, 
CMS-1589-FC 45 

for CY 2013 compared to CY 2012 OPPS expenditures. We estimate that total OPPS 

payments, including beneficiary cost-sharing, will be $48.1 billion for CY 2013. 

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

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

provider-specific structure that we adopted for CY 2011 and basing payment fully on the 

type of provider furnishing the service, we estimate a 4.4 percent decrease in CY 2013 

payments to CMHCs relative to their CY 2012 payments. 

(2) Impacts of Basing APC Relative Payment Weights on Geometric Mean Costs 

We estimate that our final policy to base the APC relative payment weights on the 

geometric mean costs rather than the median costs of services within an APC will not 

significantly impact most providers. Payments to very low volume urban hospitals and to 

hospitals for which disproportionate share hospital (DSH) data are not available will 

increase by an estimated 2.5 and 4.3 percent, respectively. The hospitals for which DSH 

data are not available are largely non-IPPS psychiatric hospitals. In contrast, payments to 

CMHCs will decrease by an estimated 3.9 percent due to basing the relative payment 

weights on the geometric mean costs of services rather than the median costs of services. 

(3) Impacts of the Updated Wage Indices 

We estimate no significant impacts related to updating the wage indices and 

applying the frontier State wage index. Adjustments to the wage indices other than the 

frontier State wage adjustment will not significantly affect most hospitals. The updated 

wage indices will most affect urban hospitals in the Pacific and East South Central 

regions and rural hospitals in the Mountain and Pacific regions. 
CMS-1589-FC 46 

(4) Impacts of the Rural Adjustment and the Cancer Hospital Payment Adjustment 

There are no significant impacts of our CY 2013 payment policies for hospitals 

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

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

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

neutrality adjustments for these policies. 

(5) Impacts of the OPD Fee Schedule Increase Factor 

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

increase factor of 1.8 percent to the conversion factor for CY 2013 will mitigate the small 

negative impacts of the budget neutrality adjustments. Certain low volume hospitals and 

hospitals for which DSH data are not available will experience larger increases ranging 

from 4.5 percent to 8.2 percent. As a result of the OPD fee schedule increase factor and 

other budget neutrality adjustments, we estimate that rural and urban hospitals will 

experience similar increases of approximately 1.8 percent for urban hospitals and 2.1 

percent for rural hospitals. Classifying hospitals by teaching status or type of ownership 

suggests that these hospitals will receive similar increases. 

b. Impacts of the ASC Payment Update 

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

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

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

under the CY 2013 payment rates compared to estimated CY 2012 payment rates ranges 
CMS-1589-FC 47 

between -3 percent for respiratory system procedures, integumentary system procedures, 

and cardiovascular system procedures and 3 percent for nervous system procedures. 
CMS-1589-FC 48 

c. Impacts of the Hospital OQR Program 

We do not expect our CY 2013 policies to significantly affect the number of 

hospitals that do not receive a full annual payment update. 

d. Impacts of the EHR Incentive Program Proposal 

There are no changes from the 2012 OPPS/ASC final rule to the costs or impact 

for the 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals 

and CAHs. 

e. Impacts of the ASCQR Program 

We do not expect our CY 2013 final policies to significantly affect the number of 

ASCs that do not receive a full annual payment update beginning in CY 2014. 

B. Legislative and Regulatory Authority for the Hospital OPPS

When Title XVIII of the Social Security Act was enacted, Medicare payment for 

hospital outpatient services was based on hospital-specific costs. In an effort to ensure 

that Medicare and its beneficiaries pay appropriately for services and to encourage more 

efficient delivery of care, the Congress mandated replacement of the reasonable 

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

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

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

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

for the OPPS are located at 42 CFR Parts 410 and 419. 

The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 

(BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following 
CMS-1589-FC 49 

Acts made additional changes to the OPPS: the Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the 

Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) 

(Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted 

on February 8, 2006; the Medicare Improvements and Extension Act under Division B of 

Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 

109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension 

Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare 

Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), 

enacted on July 15, 2008; the Patient Protection and Affordable Care Act 

(Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and 

Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 

(These two public laws are collectively known as the Affordable Care Act); the Medicare 

and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the Temporary Payroll 

Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), enacted on December 23, 

2011; and most recently the Middle Class Tax Relief and Job Creation Act of 2012 

(MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012. 

Under the OPPS, we pay for hospital outpatient services on a rate-per-service 

basis that varies according to the APC group to which the service is assigned. We use the 

Healthcare Common Procedure Coding System (HCPCS) (which includes certain Current 

Procedural Terminology (CPT) codes) to identify and group the services within each 

APC. The OPPS includes payment for most hospital outpatient services, except those 
CMS-1589-FC 50 

identified in section I.C. of this final rule with comment period. Section 1833(t)(1)(B) of 

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

by the Secretary (which includes partial hospitalization services furnished by CMHCs), 

and certain inpatient hospital services designated by the Secretary that are furnished to 

inpatients who are entitled to Part A and have exhausted their Part A benefits, or who are 

not so entitled. 

The OPPS rate is an unadjusted national payment amount that includes the 

Medicare payment and the beneficiary copayment. This rate is divided into a 

labor-related amount and a nonlabor-related amount. The labor-related amount is 

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

locality in which the hospital or CMHC is located. 

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

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

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

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

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

the APC group is more than 2 times greater than the lowest median cost (or mean cost, if 

elected by the Secretary) for an item or service within the same APC group (referred to as 

the “2 times rule”). In implementing this provision, we generally use the cost of the item 

or service assigned to an APC group. 

For new technology items and services, special payments under the OPPS may be 

made in one of two ways. Section 1833(t)(6) of the Act provides for temporary 
CMS-1589-FC 51 

additional payments, which we refer to as “transitional pass-through payments,” for at 

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

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

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

for which we lack sufficient clinical information and cost data to appropriately assign 

them to a clinical APC group, we have established special APC groups based on costs, 

which we refer to as New Technology APCs. These New Technology APCs are 

designated by cost bands which allow us to provide appropriate and consistent payment 

for designated new procedures that are not yet reflected in our claims data. Similar to 

pass-through payments, an assignment to a New Technology APC is temporary; that is, 

we retain a service within a New Technology APC until we acquire sufficient data to 

assign it to a clinically appropriate APC group. 

C. Excluded OPPS Services and Hospitals

Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the 

hospital outpatient services that are paid under the OPPS. While most hospital outpatient 

services are payable under the OPPS, section 1833(t)(1)(B)(iv) of the Act excludes 

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

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

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

annual wellness visit providing personalized prevention plan services. The Secretary 

exercised the authority granted under the statute to also exclude from the OPPS those 

services that are paid under fee schedules or other payment systems. Such excluded 
CMS-1589-FC 52 

services include, for example, the professional services of physicians and nonphysician 

practitioners paid under the MPFS; laboratory services paid under the Clinical Laboratory 

Fee Schedule (CLFS); services for beneficiaries with end-stage renal disease (ESRD) that 

are paid under the ESRD composite rate; and services and procedures that require an 

inpatient stay that are paid under the hospital IPPS. We set forth the services that are 

excluded from payment under the OPPS in regulations at 42 CFR 419.22. 

Under § 419.20(b) of the regulations, we specify the types of hospitals and 

entities that are excluded from payment under the OPPS. These excluded entities 

include: Maryland hospitals, but only for services that are paid under a cost containment 

waiver in accordance with section 1814(b)(3) of the Act; CAHs; hospitals located outside 

of the 50 States, the District of Columbia, and Puerto Rico; and Indian Health Service 

(IHS) hospitals. 

D. Prior Rulemaking

On April 7, 2000, we published in the Federal Register a final rule with 

comment period (65 FR 18434) to implement a prospective payment system for hospital 

outpatient services. The hospital OPPS was first implemented for services furnished on 

or after August 1, 2000. Section 1833(t)(9) of the Act requires the Secretary to review 

certain components of the OPPS, not less often than annually, and to revise the groups, 

relative payment weights, and other adjustments that take into account changes in 

medical practices, changes in technologies, and the addition of new services, new cost 

data, and other relevant information and factors. 
CMS-1589-FC 53 

Since initially implementing the OPPS, we have published final rules in the 

Federal Register annually to implement statutory requirements and changes arising from 

our continuing experience with this system. These rules can be viewed on the CMS Web 

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

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the Panel), 

Formerly Named the Advisory Panel on Ambulatory Payment Classification Groups 

(APC Panel)

1. Authority of the Panel 

Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 

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

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

integrity of the payment groups and their weights under the OPPS. In CY 2000, based on 

section 1833(t)(9)(A) of the Act and section 222 of the Public Health Service (PHS) Act, 

the Secretary established the Advisory Panel on Ambulatory Payment Classification 

Groups (APC Panel) to fulfill this requirement. In CY 2011, based on section 222 of the 

PHS Act which gives discretionary authority to the Secretary to convene advisory 

councils and committees, the Secretary expanded the panel’s scope to include the 

supervision of hospital outpatient therapeutic services in addition to the APC groups and 

weights. To reflect this new role of the panel, the Secretary changed the panel’s name to 

the Advisory Panel on Hospital Outpatient Payment (the HOP Panel, or the Panel). The 
CMS-1589-FC 54 

Panel is not restricted to using data compiled by CMS, and in conducting its review it 

may use data collected or developed by organizations outside the Department. 

2. Establishment of the Panel 

On November 21, 2000, the Secretary signed the initial charter establishing the 

HOP Panel, at that time named the APC Panel. This expert panel, which may be 

composed of up to 19 appropriate representatives of providers (currently employed fulltime, not as consultants, in their respective areas of expertise), reviews clinical data and 

advises CMS about the clinical integrity of the APC groups and their payment weights. 

Since CY 2012, the Panel also is charged with advising the Secretary on the appropriate 

level of supervision for individual hospital outpatient therapeutic services. The Panel is 

technical in nature, and it is governed by the provisions of the Federal Advisory 

Committee Act (FACA). Since its initial chartering, the Secretary has renewed the 

Panel’s charter five times: on November 1, 2002; on November 1, 2004; on 

November 21, 2006; on November 2, 2008 and November 12, 2010. The current charter 

specifies, among other requirements, that: the Panel continues to be technical in nature; is 

governed by the provisions of the FACA; may convene up to three meetings per year; has 

a Designated Federal Official (DFO); and is chaired by a Federal Official designated by 

the Secretary. The current charter was amended on November 15, 2011 and the Panel 

was renamed to reflect expanding the Panel’s authority to include supervision of hospital 

outpatient therapeutic services and therefore to add CAHs to its membership. 

The current Panel membership and other information pertaining to the Panel, 

including its charter, Federal Register notices, membership, meeting dates, agenda 
CMS-1589-FC 55 

topics, and meeting reports, can be viewed on the CMS Web site at: 

http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp#TopOfPage.

3. Panel Meetings and Organizational Structure 

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

August 27-28, 2012. Prior to each meeting, we publish a notice in the Federal Register

to announce the meeting and, when necessary, to solicit nominations for Panel 

membership and to announce new members. 

The Panel has established an operational structure that, in part, currently includes 

the use of three subcommittees to facilitate its required review process. The three current 

subcommittees are the Data Subcommittee, the Visits and Observation Subcommittee, 

and the Subcommittee for APC Groups and Status Indicator (SI) Assignments 

(previously known as the Packaging Subcommittee). 

The Data Subcommittee is responsible for studying the data issues confronting the 

Panel and for recommending options for resolving them. The Visits and Observation 

Subcommittee reviews and makes recommendations to the Panel on all technical issues 

pertaining to observation services and hospital outpatient visits paid under the OPPS (for 

example, APC configurations and APC relative payment weights). The Subcommittee 

for APC Groups and SI Assignments advises the Panel on the following issues: the 

appropriate SIs to be assigned to HCPCS codes, including but not limited to whether a 

HCPCS code or a category of codes should be packaged or separately paid; and the 
CMS-1589-FC 56 

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 that the 

subcommittees continue at the August 2012 Panel meeting. We accepted this 

recommendation. 

Discussions of the other recommendations made by the Panel at the 

February 2012 and August 2012 Panel meetings are included in the sections of this final 

rule that are specific to each recommendation. For discussions of earlier Panel meetings 

and recommendations, we refer readers to previously published OPPS/ASC proposed and 

final rules, the CMS Web site mentioned earlier in this section, and the FACA database 

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

F. Public Comments Received in Response to the CY 2013 OPPS/ASC Proposed Rule

We received approximately 668 timely pieces of correspondence on the CY 2013 

PPS/ASC proposed rule that appeared in the Federal Register on July 30, 2012 

(77 FR 45061). We note that we received some public comments that were outside the 

scope of the proposed rule and that are not addressed in this final rule with comment 

period. Summaries of the public comments that are within the scope of the proposed rule 

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

period under the appropriate subject-matter headings.
CMS-1589-FC 57 

G. Public Comments Received on the CY 2012 OPPS/ASC Final Rule with Comment 

Period

We received approximately 61 timely pieces of correspondence on the CY 2012 

OPPS/ASC final rule with comment period that appeared in the Federal Register on 

November 30, 2011 (76 FR 74122), some of which contained comments on the interim 

APC assignments and/or status indicators of HCPCS codes identified with comment 

indicator “NI” in Addendum B to that final rule. Summaries of these public comments 

on topics that were open to comment and our responses to them are set forth in various 

sections of this final rule with comment period under the appropriate subject-matter 

headings. 

II. Updates Affecting OPPS Payments 

A. Recalibration of APC Relative Payment Weights

1. Database Construction 

a. Database Source and Methodology 

Section 1833(t)(9)(A) of the Act requires that the Secretary review not less often 

than annually and revise the relative payment weights for APCs. In the April 7, 2000 

OPPS final rule with comment period (65 FR 18482), we explained in detail how we 

calculated the relative payment weights that were implemented on August 1, 2000 for 

each APC group. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45071), for the CY 2013 OPPS, 

we proposed to recalibrate the APC relative payment weights for services furnished on or 

after January 1, 2013, and before January 1, 2014 (CY 2013), using the same basic 
CMS-1589-FC 58 

methodology that we described in the CY 2012 OPPS/ASC final rule with comment 

period. That is, we proposed to recalibrate the relative payment weights for each APC 

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

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

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

weights for CY 2013, we used approximately 141 million final action claims (claims for 

which all disputes and adjustments have been resolved and payment has been made) for 

hospital outpatient department services furnished on or after January 1, 2011, and before 

January 1, 2012. For this final rule with comment period, for the purpose of recalibrating 

the final APC relative payment weights for CY 2013, we used approximately 153 million 

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

payment has been made) for HOPD services furnished on or after January 1, 2011, and 

before January 1, 2012. For exact counts of claims used, we refer readers to the claims 

accounting narrative under supporting documentation for the proposed rule and this final 

rule with comment period on the CMS Web site at: 

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

Of the approximately 153 million final action claims for services provided in 

hospital outpatient settings used to calculate the final CY 2013 OPPS payment rates for 

this final rule with comment period, approximately 121 million claims were the type of 

bill potentially appropriate for use in setting rates for OPPS services (but did not 

necessarily contain services payable under the OPPS). Of the approximately 121 million 
CMS-1589-FC 59 

claims, approximately 5 million claims were not for services paid under the OPPS or 

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

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

116 million claims, we created approximately 120 million single records, of which 

approximately 81 million were “pseudo” single or “single session” claims (created from 

approximately 39 million multiple procedure claims using the process we discuss later in 

this section). Approximately 1 million claims were trimmed out on cost or units in 

excess of +/- 3 standard deviations from the geometric mean, yielding approximately 

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

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

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

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

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

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

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

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

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

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

for ratesetting purposes. Ultimately, we were able to use for CY 2013 ratesetting some 

portion of approximately 95 percent of the CY 2011 claims containing services payable 

under the OPPS. 
CMS-1589-FC 60 

The final APC relative weights and payments for CY 2013 in Addenda A and B 

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

Web site) were calculated using claims from CY 2011 that were processed through 

June 30, 2012. While we have historically based the payments on median hospital costs 

for services in the APC groups, we proposed in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45071) to establish the cost-based relative payment weights of the CY 2013 OPPS 

using geometric mean costs, as discussed in section II.A.2.f. of this final rule with 

comment period. Therefore, on the CMS Web site, along with Addenda A and B, we 

provided a file that presented payment information for the proposed CY 2013 OPPS 

payments based on geometric mean costs compared to those based on median costs. 

Under this methodology, we select claims for services paid under the OPPS and match 

these claims to the most recent cost report filed by the individual hospitals represented in 

our claims data. We continue to believe that it is appropriate to use the most current full 

calendar year claims data and the most recently submitted cost reports to calculate the 

relative costs underpinning the APC relative payment weights and the CY 2013 payment 

rates. 

b. Use of Single and Multiple Procedure Claims 

For CY 2013, in general, we proposed to continue to use single procedure claims 

to set the costs on which the APC relative payment weights are based. We generally use 

single procedure claims to set the estimated costs for APCs because we believe that the 

OPPS relative weights on which payment rates are based should be derived from the 

costs of furnishing one unit of one procedure and because, in many circumstances, we are 
CMS-1589-FC 61 

unable to ensure that packaged costs can be appropriately allocated across multiple 

procedures performed on the same date of service. 

It is generally desirable to use the data from as many claims as possible to 

recalibrate the APC relative payment weights, including those claims for multiple 

procedures. As we have for several years, we proposed to continue to use date of service 

stratification and a list of codes to be bypassed to convert multiple procedure claims to 

“pseudo” single procedure claims. Through bypassing specified codes that we believe do 

not have significant packaged costs, we are able to use more data from multiple 

procedure claims. In many cases, this enables us to create multiple “pseudo” single 

procedure claims from claims that were submitted as multiple procedure claims spanning 

multiple dates of service, or claims that contained numerous separately paid procedures 

reported on the same date on one claim. We refer to these newly created single 

procedure claims as “pseudo” single procedure claims. The history of our use of a bypass 

list to generate “pseudo” single procedure claims is well documented, most recently in 

the CY 2012 OPPS/ASC final rule with comment period (76 FR 74132 through 74134). 

In addition, for CY 2008 (72 FR 66614 through 66664), we increased packaging and 

created the first composite APCs, and continued those policies through CY 2012. 

Increased packaging and creation of composite APCs also increased the number of bills 

that we were able to use for ratesetting by enabling us to use claims that contained 

multiple major procedures that previously would not have been usable. Further, for 

CY 2009, we expanded the composite APC model to one additional clinical area, 

multiple imaging services (73 FR 68559 through 68569), which also increased the 
CMS-1589-FC 62 

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 2012. We did not receive any public comments on this policy, and 

therefore, we are finalizing our proposal to continue this policy for CY 2013. We refer 

readers to section II.A.2.e. of this final rule with comment period for a discussion of the 

use of claims in modeling the costs for composite APCs. 

We proposed to continue to apply these processes to enable us to use as much 

claims data as possible for ratesetting for the CY 2013 OPPS. This methodology enabled 

us to create, for this final rule with comment period, approximately 81 million “pseudo” 

single procedure claims, including multiple imaging composite “single session” bills (we 

refer readers to section II.A.2.e.(5) of this final rule with comment period for further 

discussion), to add to the approximately 39 million “natural” single procedure claims. 

For this final rule with comment period, “pseudo” single procedure and “single session” 

procedure bills represented approximately 67 percent of all single procedure bills used for 

ratesetting purposes. 

For CY 2013, we proposed to bypass 480 HCPCS codes that were identified in 

Addendum N to the CY 2013 OPPS/ASC proposed rule (which was available via the 

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

codes to be bypassed to convert multiple procedure claims to “pseudo” single procedure 

claims, we have calculated the percent of “natural” single bills that contained packaging 

for each HCPCS code and the amount of packaging on each “natural” single bill for each 

code. Each year, we generally retain the codes on the previous year’s bypass list and use 
CMS-1589-FC 63 

the updated year’s data (for CY 2013, data available for the February 27, 2012 meeting of 

the Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2011 claims 

processed through September 30, 2011, and CY 2010 claims data processed through June 

30, 2011, used to model the payment rates for CY 2012) to determine whether it would 

be appropriate to add additional codes to the previous year’s bypass list. For CY 2013, 

we proposed to continue to bypass all of the HCPCS codes on the CY 2012 OPPS bypass 

list, with the exception of HCPCS codes that we proposed to delete for CY 2013, which 

are listed in Table 1 of the proposed rule. We also proposed to remove HCPCS codes 

that are not separately paid under the OPPS because the purpose of the bypass list is to 

obtain more data for those codes relevant to ratesetting. In addition, we proposed to add 

to the bypass list for CY 2013 HCPCS codes not on the CY 2012 bypass list that, using 

either the CY 2012 final rule data (CY 2010 claims) or the February 27, 2012 Panel data 

(first 9 months of CY 2011 claims), met the empirical criteria for the bypass list that are 

summarized below. Finally, to remain consistent with the CY 2013 final policy to 

develop OPPS relative payment weights based on geometric mean costs, we proposed 

that the median cost of packaging criterion instead be based on the geometric mean cost 

of packaging. The entire list proposed for CY 2013 (including the codes that remain on 

the bypass list from prior years) was open to public comment in the CY 2013 OPPS/ASC 

proposed rule. Because we must make some assumptions about packaging in the 

multiple procedure claims in order to assess a HCPCS code for addition to the bypass list, 

we assumed that the representation of packaging on “natural” single procedure claims for 
CMS-1589-FC 64 

any given code is comparable to packaging for that code in the multiple procedure 

claims. As we proposed, the criteria for the bypass list are: 

● There are 100 or more “natural” single procedure claims for the code. This 

number of single procedure claims ensures that observed outcomes are sufficiently 

representative of packaging that might occur in the multiple claims. 

● Five percent or fewer of the “natural” single procedure claims for the code 

have packaged costs on that single procedure claim for the code. This criterion results in 

limiting the amount of packaging being redistributed to the separately payable procedures 

remaining on the claim after the bypass code is removed and ensures that the costs 

associated with the bypass code represent the cost of the bypassed service. 

● The geometric mean cost of packaging observed in the “natural” single 

procedure claims is equal to or less than $55. This criterion also limits the amount of 

error in redistributed costs. During the assessment of claims against the bypass criteria, 

we do not know the dollar value of the packaged cost that should be appropriately 

attributed to the other procedures on the claim. Therefore, ensuring that redistributed 

costs associated with a bypass code are small in amount and volume protects the validity 

of cost estimates for low cost services billed with the bypassed service. 

We note that, in the CY 2013 OPPS/ASC proposed rule (77 FR 45072), we 

proposed to establish the CY 2013 OPPS relative payment weights based on geometric 

mean costs. To remain consistent in the metric used for identifying cost patterns, we 

proposed to use the geometric mean cost of packaging to identify potential codes to add 

to the bypass list. The development of the CY 2013 OPPS relative payment weights 
CMS-1589-FC 65 

based on geometric mean costs is discussed in greater detail in section II.A.2.f. of this 

final rule with comment period. 

In response to public comments on the CY 2010 OPPS/ASC proposed rule 

requesting that the packaged cost threshold be updated, we considered whether it would 

be appropriate to update the $50 packaged cost threshold for inflation when examining 

potential bypass list additions. As discussed in the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60328), the real value of this packaged cost threshold criterion 

has declined due to inflation, making the packaged cost threshold more restrictive over 

time when considering additions to the bypass list. Therefore, adjusting the threshold by 

the market basket increase would prevent continuing decline in the threshold’s real value. 

Based on the same rationale described for the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74133), we proposed for CY 2013 to continue to update the 

packaged cost threshold by the market basket increase. By applying the final CY 2012 

market basket increase of 1.9 percent to the prior non-rounded dollar threshold of $52.76 

(76 FR 74133), we determined that the threshold remains for CY 2013 at $55 ($53.76 

rounded to $55, the nearest $5 increment). Therefore, we proposed to set the geometric 

mean packaged cost threshold on the CY 2011 claims at $55 for a code to be considered 

for addition to the CY 2013 OPPS bypass list. 

● The code is not a code for an unlisted service. Unlisted codes do not describe a 

specific service, and thus their costs would not be appropriate for bypass list purposes. 

In addition, we proposed to continue to include on the bypass list HCPCS codes 

that CMS medical advisors believe have minimal associated packaging based on their 
CMS-1589-FC 66 

clinical assessment of the complete CY 2013 OPPS proposal. Some of these codes were 

identified by CMS medical advisors and some were identified in prior years by 

commenters with specialized knowledge of the packaging associated with specific 

services. We also proposed to continue to include certain HCPCS codes on the bypass 

list in order to purposefully direct the assignment of packaged costs to a companion code 

where services always appear together and where there would otherwise be few single 

procedure claims available for ratesetting. For example, we have previously discussed 

our reasoning for adding HCPCS code G0390 (Trauma response team associated with 

hospital critical care service) and the CPT codes for additional hours of drug 

administration to the bypass list (73 FR 68513 and 71 FR 68117 through 68118). 

As a result of the multiple imaging composite APCs that we established in 

CY 2009, the program logic for creating “pseudo” single procedure claims from bypassed 

codes that are also members of multiple imaging composite APCs changed. When 

creating the set of “pseudo” single procedure claims, claims that contain “overlap bypass 

codes” (those HCPCS codes that are both on the bypass list and are members of the 

multiple imaging composite APCs) were identified first. These HCPCS codes were then 

processed to create multiple imaging composite “single session” bills, that is, claims 

containing HCPCS codes from only one imaging family, thus suppressing the initial use 

of these codes as bypass codes. However, these “overlap bypass codes” were retained on 

the bypass list because, at the end of the “pseudo” single processing logic, we reassessed 

the claims without suppression of the “overlap bypass codes” under our longstanding 

“pseudo” single process to determine whether we could convert additional claims to 
CMS-1589-FC 67 

“pseudo” single procedure claims. (We refer readers to section II.A.2.b. of this final rule 

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

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

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

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

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

site). 

Addendum N to this final rule with comment period includes the list of bypass 

codes for CY 2013. The list of bypass codes contains codes that were reported on claims 

for services in CY 2011 and, therefore, includes codes that were in effect in 2011 and 

used for billing but were deleted for CY 2012. We retained these deleted bypass codes 

on the CY 2013 bypass list because these codes existed in CY 2011 and were covered 

OPD services in that period, and CY 2011 claims data are used to calculate CY 2013 

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 proposed multiple imaging composite APCs are 

identified by asterisks (*) in the third column of Addendum N to this final rule with 

comment period. HCPCS codes that we are adding for CY 2013 are identified by 

asterisks (*) in the fourth column of Addendum N. Table 1 of the proposed rule 

contained the list of codes that we proposed to remove from the CY 2013 bypass list for 

CY 2013 (77 FR 45073). 
CMS-1589-FC 68 

Comment: One commenter supported the proposal to include CPT codes 76881 

(Ultrasound, extremity, nonvascular, real-time with image documentation; complete) and 

76882 (Ultrasound, extremity, nonvascular, real-time with image documentation; limited, 

anatomic specific) on the CY 2013 OPPS bypass list. 

Response: We appreciate the commenter’s support. 

Comment: Several commenters expressed appreciation for our efforts to include 

multiple procedure claims in the ratesetting process through processes such as the bypass 

list and date of service stratification, which are used to create “pseudo” single claims. 

However, the commenters remained concerned about the limited number of claims used 

to model brachytherapy APCs 0312 (Radioelement Applications), 0651 (Complex 

Interstitial Radiation Source Application), and 8001 (LDR Prostate Brachytherapy 

Composite) and encouraged CMS to continue exploring potential methodologies through 

which more claims data could be used in OPPS ratesetting. 

Response: We appreciate the commenters’ support of our efforts to include more 

appropriate claims data for ratesetting purposes. As discussed above, one of the 

challenges in modeling the APC costs on which the OPPS/ASC relative payment weights 

are based is appropriately allocating the packaged cost associated with a service, when 

multiple separately payable procedures appear on the claim. However, recognizing the 

challenges associated with obtaining additional information, we will continue to explore 

potential methodologies through which we would be able to derive accurate cost data 

from the multiple major procedure claims made available to us. 
CMS-1589-FC 69 

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

the proposed “pseudo” single claims process and the final CY 2013 bypass list of 480 

HCPCS codes, as displayed in Addendum N of this final rule with comment period 

(available via the Internet on the CMS Web site). Table 1 below contains the list of 

codes that we are removing from the CY 2013 bypass list because these codes were either 

deleted from the HCPCS before CY 2011 (and therefore were not covered OPD services 

in CY 2011) or were not separately payable codes under the CY 2013 OPPS because 

these codes are not used for ratesetting (and therefore would not need to be bypassed). 

None of these deleted codes are “overlap bypass” codes. 

TABLE 1.—HCPCS CODES REMOVED FROM THE CY 2013 BYPASS LIST 

HCPCS 

Code HCPCS Short Descriptor 

76880 Us exam, extremity 

86903 Blood typing, antigen screen 

92135 Ophth dx imaging post seg 

93231 Ecg monitor/record, 24 hrs 

93232 ECG monitor/report, 24 hrs 

93236 ECG monitor/report, 24 hrs 

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

In the CY 2013 OPPS/ASC proposed rule (77 FR 45073), for CY 2013, we 

proposed to continue to use the hospital-specific overall ancillary and departmental 

cost-to-charge ratios (CCRs) to convert charges to estimated costs through application of 

a revenue code-to-cost center crosswalk. To calculate the APC costs on which the 

proposed CY 2013 APC payment rates were based, we calculated hospital-specific 

overall ancillary CCRs and hospital-specific departmental CCRs for each hospital for 
CMS-1589-FC 70 

which we had CY 2011 claims data from the most recent available hospital cost reports, 

in most cases, cost reports beginning in CY 2010. For the CY 2013 OPPS proposed 

rates, we used the set of claims processed during CY 2011. We applied the hospitalspecific CCR to the hospital’s charges at the most detailed level possible, based on a 

revenue code-to-cost center crosswalk that contains a hierarchy of CCRs used to estimate 

costs from charges for each revenue code. That crosswalk is available for review and 

continuous comment on the CMS Web site at: http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/index.html. 

To ensure the completeness of the revenue code-to-cost center crosswalk, we 

reviewed changes to the list of revenue codes for CY 2011 (the year of the claims data we 

used to calculate the proposed CY 2013 OPPS payment rates) and found that the National 

Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 

2011 Data Specifications Manual. 

In accordance with our longstanding policy, we calculated CCRs for the standard 

and nonstandard cost centers accepted by the electronic cost report database. In general, 

the most detailed level at which we calculated CCRs was the hospital-specific 

departmental level. For a discussion of the hospital-specific overall ancillary CCR 

calculation, we refer readers to the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 67983 through 67985). One longstanding exception to this general methodology 

for calculation of CCRs used for converting charges to costs on each claim, as detailed in 

the CY 2007 OPPS/ASC final rule with comment period, is the calculation of blood 
CMS-1589-FC 71 

costs, as discussed in section II.A.2.d.(2) of this final rule with comment period and 

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

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

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

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

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

refer readers to the CY 2007 OPPS/ASC final rule with comment period for more 

information (71 FR 67983 through 67985). We first limited the population of cost 

reports to only those hospitals that filed outpatient claims in CY 2011 before determining 

whether the CCRs for such hospitals were valid. 

We then calculated the CCRs for each cost center and the overall ancillary CCR 

for each hospital for which we had claims data. We did this using hospital-specific data 

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

available cost report data, in most cases, cost reports with cost reporting periods 

beginning in CY 2010. For the proposed rule, we used the most recently submitted cost 

reports to calculate the CCRs to be used to calculate costs for the proposed CY 2013 

OPPS payment rates. If the most recently available cost report was submitted but not 

settled, we looked at the last settled cost report to determine the ratio of submitted to 

settled cost using the overall ancillary CCR, and we then adjusted the most recent 

available submitted, but not settled, cost report using that ratio. We then calculated both 

an overall ancillary CCR and cost center-specific CCRs for each hospital. We used the 

overall ancillary CCR referenced above for all purposes that require use of an overall 
CMS-1589-FC 72 

ancillary CCR. We proposed to continue this longstanding methodology for the 

calculation of costs for CY 2013. 

Since the implementation of the OPPS, some commenters have raised concerns 

about potential bias in the OPPS cost-based weights due to “charge compression,” which 

is the practice of applying a lower charge markup to higher cost services and a higher 

charge markup to lower cost services. As a result, the cost-based weights may reflect 

some aggregation bias, undervaluing high-cost items and overvaluing low-cost items 

when an estimate of average markup, embodied in a single CCR, is applied to items of 

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

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

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

0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf. For a complete 

discussion of the RTI recommendations, public comments, and our responses, we refer 

readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 through 

68527). 

We addressed the RTI finding that there was aggregation bias in both the IPPS 

and the OPPS cost estimation of expensive and inexpensive medical supplies in the 

FY 2009 IPPS final rule (73 FR 48458 through 45467). Specifically, we created one cost 

center for “Medical Supplies Charged to Patients” and one cost center for “Implantable 

Devices Charged to Patients,” essentially splitting the then current cost center for 

“Medical Supplies Charged to Patients” into one cost center for low-cost medical 

supplies and another cost center for high-cost implantable devices in order to mitigate 
CMS-1589-FC 73 

some of the effects of charge compression. In determining the items that should be 

reported in these respective cost centers, we adopted commenters’ recommendations that 

hospitals should use revenue codes established by the AHA’s NUBC to determine the 

items that should be reported in the “Medical Supplies Charged to Patients” and the 

“Implantable Devices Charged to Patients” cost centers. For a complete discussion of the 

rationale for the creation of the new cost center for “Implantable Devices Charged to 

Patients,” public comments, and our responses, 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 beginning on or after May 1, 2009. As discussed in the 

CY 2013 OPPS/ASC proposed rule (77 FR 45074), in order to develop a robust analysis 

regarding the use of cost data from the “Implantable Devices Charged to Patients” cost 

center, we believe that it is necessary to have a critical mass of cost reports filed with data 

in this cost center. In preparation for the CY 2013 proposed rule, we assessed the 

availability of data in the “Implantable Devices Charged to Patients” cost center using 

cost reports in the December 31, 2011 quarter ending update of HCRIS, which was the 

latest upload of the cost report data that we could use for the CY 2013 proposed rule. We 

determined that 2,063 hospitals, out of approximately 3,800 hospitals, utilized the 

“Implantable Devices Charged to Patients” cost center. Because we believe that this is a 

sufficient amount of data from which to generate a meaningful analysis, we proposed to 

use data from the “Implantable Devices Charged to Patients” cost center to create a 

distinct CCR for use in calculating the OPPS relative payment weights for CY 2013. 
CMS-1589-FC 74 

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080), we 

finalized our proposal to create new standard cost centers for “Computed Tomography 

(CT),” “Magnetic Resonance Imaging (MRI),” and “Cardiac Catheterization,” and to 

require that hospitals report the costs and charges for these services under new cost 

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

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

costs and charges of CT scans, MRIs, and cardiac catheterization differ significantly from 

the costs and charges of other services included in the standard associated cost center. 

RTI concluded that both the IPPS and the OPPS relative payment weights would better 

estimate the costs of those services if CMS were to add standard costs centers for CT 

scans, MRIs, and cardiac catheterization in order for hospitals to report separately the 

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

estimate the cost from charges on claims data. We refer readers to the FY 2011 

IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more detailed discussion 

on the reasons for the creation of standard cost centers for CT scans, MRIs, and cardiac 

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

catheterization are effective for cost report periods beginning on or after May 1, 2010, on 

the revised cost report Form CMS-2552-10. However, because cost reports that were 

filed on the revised cost report Form CMS-2552-10 are not currently accessible in the 

HCRIS, we were unable to calculate distinct CCRs for CT scans, MRIs, and cardiac 

catheterization using the new standard cost centers for these services. We believe that we 
CMS-1589-FC 75 

will have cost report data available for an analysis of creating distinct CCRs for CT 

scans, MRIs, and cardiac catheterization for the CY 2014 OPPS rulemaking. 

Comment: Many commenters supported CMS’ proposal to use data from the 

“Implantable Devices Charged to Patients” cost center to create a distinct CCR for use in 

calculating the OPPS relative payment weights for CY 2013. The commenters also 

encouraged CMS to continue to engage in educational efforts related to the use of the 

new cost center so that hospitals understand how to accurately report data in the new cost 

center. In addition, the commenters suggested that the Medicare administrative 

contractors (MACs) develop an audit program that would identify hospitals that have not 

reported data for the new cost center. 

Response: We appreciate the commenters’ support of our proposal to use data 

from the “Implantable Devices Charged to Patients” cost center to create a distinct CCR. 

We agree with commenters that it is important that hospitals understand how to 

accurately report data in the “Implantable Devices Charged to Patients” cost center, and 

we have worked to add more clarity to the cost report instructions under the new 

Medicare cost report form CMS-2552-10. The new cost report form also facilitates 

greater audit scrutiny from the MACs. Line 121 of Worksheet S-2, Part I, of cost report 

form CMS-2552-10 asks “Did this facility incur and report costs for implantable devices 

charged to a patient? Enter in column 1 ‘Y’ for yes and ‘N’ for no.” 

Comment: Two commenters recommended that CMS wait until CY 2014 OPPS 

rulemaking to determine if the “Implantable Devices Charged to Patients” cost center 

should be used to create a distinct CCR. The commenters did not believe that data from 
CMS-1589-FC 76 

2,063 hospitals provide a meaningful representation of all of the hospitals subject to the 

OPPS from which to base the proposal to use the new cost center for CY 2013. 

Response: We disagree with the commenters and believe that data from the 2,063 

hospitals that utilized the “Implantable Devices Charged to Patients” cost center, out of 

approximately 3,800 hospitals, are sufficient and appropriate for creating a distinct CCR 

to use in the calculation of the CY 2013 OPPS relative payment weights. 

Comment: Commenters expressed disappointment that, because the revised cost 

report Form CMS-2552-10 was not accessible in the HCRIS at the time of the proposed 

rule, CMS was not able to create distinct CCRs for CT scans, MRIs, and cardiac 

catheterization services for use in the calculation of the CY 2013 OPPS relative payment 

weights. The commenters urged CMS to analyze the data in the new CT scan, MRI, and 

cardiac catheterization cost centers when the data are available and utilize the new cost 

centers in the development of the OPPS relative payment weights as soon as possible. 

Response: We expect that we will have sufficient and appropriate cost report data 

available for an analysis of creating distinct CCRs for CT scans, MRIs, and cardiac 

catheterization for the CY 2014 rulemaking. If so, as was done for the “Implantable 

Devices Charged to Patients” cost center for the CY 2013 OPPS/ASC proposed rule, we 

expect to provide an impact analysis in the CY 2014 OPPS/ASC proposed rule that will 

enable the public to assess the full impact of the use of the new CCRs specific to CT 

scans, MRIs, and cardiac catheterization on payments for all services. 

Comment: One commenter recommended that CMS require the use of the new 

nonstandard cost center for cardiac rehabilitation instead of making its use optional. 
CMS-1589-FC 77 

Response: We created the new nonstandard cost center for cardiac rehabilitation 

because we believed that this would facilitate more accurate cost reporting for these 

services. The nonstandard cost centers are additional common cost centers available to 

hospitals for reporting when preparing their Medicare hospital cost report. To the extent 

hospitals provide services captured by nonstandard cost centers, they should report the 

relevant nonstandard cost centers as well. However, we do not specify a revenue codeto-cost center crosswalk that hospitals must adopt to prepare the cost report and, 

therefore, we do not believe that we should require hospitals to use the nonstandard cost 

center for cardiac rehabilitation. 

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

proposal to use data from the “Implantable Devices Charged to Patients” cost center to 

create a distinct CCR for use in calculating the OPPS relative payment weights for 

CY 2013. 

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

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

to calculate OPPS payment rates for CY 2013. The Hospital OPPS page on the CMS 

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

(http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in 

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

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

in this section we discuss the file of claims that comprises the data set that is available for 
CMS-1589-FC 78 

purchase under a CMS data use agreement. The CMS Web site, 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html, includes information about purchasing the 

“OPPS Limited Data Set,” which now includes the additional variables previously 

available only in the OPPS Identifiable Data Set, including ICD-9-CM diagnosis codes 

and revenue code payment amounts. This file is derived from the CY 2011 claims that 

were used to calculate the final payment rates for the CY 2013 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 most 

recently described in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74188). However, as discussed in more detail in section II.A.2.f. of this final rule 

with comment period, we proposed to use geometric mean costs to calculate the relative 

weights on which the CY 2013 OPPS payment rates are based. While this policy changes 

the cost metric on which the relative payments are based, the data process in general 

remains the same, under the methodologies that we use to obtain appropriate claims data 

and accurate cost information in determining estimated service cost. 

We used the methodology described in sections II.A.2.a. through II.A.2.e. of this 

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

weights used in calculating the OPPS payment rates for CY 2013 shown in Addenda A 

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

CMS Web site). For the proposed rule, we provided a comparison file so that the public 

could provide meaningful comment on our proposal to base the CY 2013 OPPS relative 
CMS-1589-FC 79 

payment weights on geometric mean costs. We refer readers to section II.A.4. of this 

final rule with comment period for a discussion of the conversion of APC costs to scaled 

payment weights. 

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

OPPS payment rates from year to year. The commenters suggested a “stability policy” 

and suggested that the costs from claims be adjusted to limit changes from year to year 

and asked that CMS limit any decreases in payment compared to the prior year to no 

more than a 5-percent decline. 

Response: As previously discussed in the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74139), there are a number of factors that contribute to cost 

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

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

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

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

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

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

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

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

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

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

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

implementation of composite APCs, may contribute to volatility in payment rates in the 
CMS-1589-FC 80 

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

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

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

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

commenters would make payments less reflective of the true service costs, which would 

be contrary to a purpose of our proposed CY 2013 policy of establishing relative payment 

weights based on geometric mean costs. Limiting decreases to payments across all APCs 

in a budget neutral payment system could unfairly reduce the payments for other services 

due to the effects of the scaling that is necessary to maintain budget neutrality and would 

distort the relativity of payment that is based on the cost of all services. 

a. Claims Preparation 

For this final rule with comment period, we used the CY 2011 hospital outpatient 

claims processed through June 30, 2012, to calculate the geometric mean costs of APCs 

that underpin the relative payment weights for CY 2013. To begin the calculation of the 

relative payment weights for CY 2013, we pulled all claims for outpatient services 

furnished in CY 2011 from the national claims history file. This is not the population of 

claims paid under the OPPS, but all outpatient claims (including, for example, critical 

access hospital (CAH) claims and hospital claims for clinical laboratory services for 

persons who are neither inpatients nor outpatients of the hospital). 

We then excluded claims with condition codes 04, 20, 21, and 77 because these 

are claims that providers submitted to Medicare knowing that no payment would be 

made. For example, providers submit claims with a condition code 21 to elicit an official 
CMS-1589-FC 81 

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

excluded claims for services furnished in Maryland, Guam, the U.S. Virgin Islands, 

American Samoa, and the Northern Mariana Islands because hospitals in those 

geographic areas are not paid under the OPPS, and, therefore, we do not use claims for 

services furnished in these areas in ratesetting. 

We divided the remaining claims into the three groups shown below. 

Groups 2 and 3 comprise the 121 million claims that contain hospital bill types paid 

under the OPPS. 

1. Claims that were not bill types 12X (Hospital Inpatient (Medicare Part B 

only)), 13X (Hospital Outpatient), 14X (Hospital--Laboratory Services Provided to 

Nonpatients), or 76X (Clinic--Community Mental Health Center). Other bill types are 

not paid under the OPPS; therefore, these claims were not used to set OPPS payment. 

2. Claims that were bill types 12X, 13X or 14X. Claims with bill types 12X and 

13X are hospital outpatient claims. Claims with bill type 14X are laboratory specimen 

claims, of which we use a subset for the limited number of services in these claims that 

are paid under the OPPS. 

3. Claims that were bill type 76X (CMHC). 

To convert charges on the claims to estimated cost, we multiplied the charges on 

each claim by the appropriate hospital-specific CCR associated with the revenue code for 

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

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

from hospitals with invalid CCRs. The latter included claims from hospitals without a 
CMS-1589-FC 82 

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

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

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

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

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

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

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

revenue code-to-cost center crosswalk, to match a cost center to every possible revenue 

code appearing in the outpatient claims that is relevant to OPPS services, with the top tier 

being the most common cost center and the last tier being the default CCR. If a 

hospital’s cost center CCR was deleted by trimming, we set the CCR for that cost center 

to “missing” so that another cost center CCR in the revenue center hierarchy could apply. 

If no other cost center CCR could apply to the revenue code on the claim, we used the 

hospital’s overall ancillary CCR for the revenue code in question as the default CCR. For 

example, if a visit was reported under the clinic revenue code but the hospital did not 

have a clinic cost center, we mapped the hospital-specific overall ancillary CCR to the 

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

inspection on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not use 

in establishing relative costs or to model impacts are identified with an “N” in the 

revenue code-to-cost center crosswalk. 
CMS-1589-FC 83 

We applied the CCRs as described above to claims with bill type 12X, 13X, or 

14X, excluding all claims from CAHs and hospitals in Maryland, Guam, the U.S. Virgin 

Islands, American Samoa, and the Northern Mariana Islands and claims from all hospitals 

for which CCRs were flagged as invalid. 

We identified claims with condition code 41 as partial hospitalization services of 

hospitals and moved them to another file. We note that the separate file containing 

partial hospitalization claims is included in the files that are available for purchase as 

discussed above. 

We then excluded claims without a HCPCS code. We moved to another file 

claims that contained only influenza and pneumococcal pneumonia (PPV) vaccines. 

Influenza and PPV vaccines are paid at reasonable cost; therefore, these claims are not 

used to set OPPS rates. 

We next copied line-item costs for drugs, blood, and brachytherapy sources to a 

separate file (the lines stay on the claim, but are copied onto another file). No claims 

were deleted when we copied these lines onto another file. These line-items are used to 

calculate a per unit arithmetic and geometric mean and median cost and a per day 

arithmetic and geometric mean and median cost for drugs and nonimplantable 

biologicals, therapeutic radiopharmaceutical agents, and brachytherapy sources, as well 

as other information used to set payment rates, such as a unit-to-day ratio for drugs. 

In the past several years, we have developed payment policy for nonpass-through 

separately paid drugs and biologicals based on a redistribution methodology that accounts 

for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. 
CMS-1589-FC 84 

This 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, as we proposed, 

we are paying for separately payable drugs and biologicals under the OPPS at ASP+6 

percent, based upon the statutory default described in section 1833(t)(14)(A)(iii)(II) of 

the Act. Therefore, under this policy, we do not redistribute the packaged cost. We refer 

readers to section V.B.3. of this final rule with comment period for a complete discussion 

of our policy to pay for separately paid drugs and biologicals in CY 2013. 

We then removed line-items that were not paid during claim processing, 

presumably for a line-item rejection or denial. The number of edits for valid OPPS 

payment in the Integrated Outpatient Code Editor (I/OCE) and elsewhere has grown 

significantly in the past few years, especially with the implementation of the full 

spectrum of National Correct Coding Initiative (NCCI) edits. To ensure that we are using 

valid claims that represent the cost of payable services to set payment rates, we removed 

line-items with an OPPS status indicator that were not paid during claims processing in 

the claim year, but have a status indicator of “S,” “T,” “V,” or “X” in the prospective 

year’s payment system. This logic preserves charges for services that would not have 

been paid in the claim year but for which some estimate of cost is needed for the 

prospective year, such as services newly removed from the inpatient list for CY 2012 that 

were assigned status indicator “C” in the claim year. It also preserves charges for 

packaged services so that the costs can be included in the cost of the services with which 

they are reported, even if the CPT codes for the packaged services were not paid because 
CMS-1589-FC 85 

the service is part of another service that was reported on the same claim or the code 

otherwise violates claims processing edits. 

For CY 2013, as we proposed, we are continuing the policy we implemented for 

CY 2012 to exclude line-item data for pass-through drugs and biologicals (status 

indicator “G” for CY 2011) and nonpass-through drugs and biologicals (status indicator 

“K” for CY 2011) where the charges reported on the claim for the line were either denied 

or rejected during claims processing. Removing lines that were eligible for payment but 

were not paid ensures that we are using appropriate data. The trim avoids using cost data 

on lines that we believe were defective or invalid because those rejected or denied lines 

did not meet the Medicare requirements for payment. For example, edits may reject a 

line for a separately paid drug because the number of units billed exceeded the number of 

units that would be reasonable and, therefore, is likely a billing error (for example, a line 

reporting 55 units of a drug for which 5 units is known to be a fatal dose). As with our 

trimming in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74141) of 

line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid 

line-items represent services that are invalidly reported and, therefore, should not be used 

for ratesetting. We believe that removing lines with valid status indicators that were 

edited and not paid during claims processing increases the accuracy of the data used for 

ratesetting purposes. 
CMS-1589-FC 86 

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims 

(1) Splitting Claims 

For the CY 2013 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.) For CY 2013, as we 

proposed, we are continuing our current policy of defining major procedures as any 

HCPCS code having a status indicator of “S,” “T,” “V,” or “X”; defining minor 

procedures as any code having a status indicator of “F,” “G,” “H,” “K,” “L,” “R,” “U,” or 

“N”:and classifying “other” procedures as any code having a status indicator other than 

one that we have classified as major or minor. For CY 2013, as we proposed, we are 

continuing to assign status indicator “R” to blood and blood products; status indicator 

“U” to brachytherapy sources; status indicator “Q1” to all “STVX-packaged codes”; 

status indicator “Q2” to all “T-packaged codes”; and status indicator “Q3” to all codes 

that may be paid through a composite APC based on composite-specific criteria or paid 

separately through single code APCs when the criteria are not met. 

As discussed in the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68709), we established status indicators “Q1,” “Q2,” and “Q3” to facilitate 

identification of the different categories of codes. As we proposed, we are treating these 

codes in the same manner for data purposes for CY 2013 as we have treated them since 

CY 2008. Specifically, we are continuing to evaluate whether the criteria for separate 

payment of codes with status indicator “Q1” or “Q2” are met in determining whether they 

are treated as major or minor codes. Codes with status indicator “Q1” or “Q2” are 
CMS-1589-FC 87 

carried through the data either with status indicator “N” as packaged or, if they meet the 

criteria for separate payment, they are given the status indicator of the APC to which they 

are assigned and are considered as “pseudo” single procedure claims for major codes. 

Codes assigned status indicator “Q3” are paid under individual APCs unless they occur in 

the combinations that qualify for payment as composite APCs and, therefore, they carry 

the status indicator of the individual APC to which they are assigned through the data 

process and are treated as major codes during both the split and “pseudo” single creation 

process. The calculation of the geometric mean costs for composite APCs from multiple 

procedure major claims is discussed in section II.A.2.e. of this final rule with comment 

period. 

Specifically, as we proposed, we divided the remaining claims into the following 

five groups: 

1. Single Procedure Major Claims: Claims with a single separately payable 

procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes with 

status indicator “Q3”); claims with one unit of a status indicator “Q1” code 

(“STVX-packaged”) where there was no code with status indicator “S,” “T,” “V,” or “X” 

on the same claim on the same date; or claims with one unit of a status indicator “Q2” 

code (“T-packaged”) where there was no code with a status indicator “T” on the same 

claim on the same date. 

2. Multiple Procedure Major Claims: Claims with more than one separately 

payable procedure (that is, status indicator “S,” “T,” “V,” or “X,” which includes codes 

with status indicator “Q3”), or multiple units of one payable procedure. These claims 
CMS-1589-FC 88 

include those codes with a status indicator “Q2” code (“T-packaged”) where there was no 

procedure with a status indicator “T” on the same claim on the same date of service but 

where there was another separately paid procedure on the same claim with the same date 

of service (that is, another code with status indicator “S,” “V,” or “X”). We also include 

in this set claims that contained one unit of one code when the bilateral modifier was 

appended to the code and the code was conditionally or independently bilateral. In these 

cases, the claims represented more than one unit of the service described by the code, 

notwithstanding that only one unit was billed. 

3. Single Procedure Minor Claims: Claims with a single HCPCS code that was 

assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N” and not status 

indicator “Q1” (“STVX-packaged”) or status indicator “Q2” (“T-packaged”) code. 

4. Multiple Procedure Minor Claims: Claims with multiple HCPCS codes that 

are assigned status indicator “F,” “G,” “H,” “K,” “L,” “R,” “U,” or “N”; claims that 

contain more than one code with status indicator “Q1” (“STVX-packaged”) or more than 

one unit of a code with status indicator “Q1” but no codes with status indicator “S,” “T,” 

“V,” or “X” on the same date of service; or claims that contain more than one code with 

status indicator “Q2” (T-packaged), or “Q2” and “Q1,” or more than one unit of a code 

with status indicator “Q2” but no code with status indicator “T” on the same date of 

service. 

5. Non-OPPS Claims: Claims that contain no services payable under the OPPS 

(that is, all status indicators other than those listed for major or minor status). These 

claims were excluded from the files used for the OPPS. Non-OPPS claims have codes 
CMS-1589-FC 89 

paid under other fee schedules, for example, durable medical equipment or clinical 

laboratory tests, and do not contain a code for a separately payable or packaged OPPS 

service. Non-OPPS claims include claims for therapy services paid sometimes under the 

OPPS but billed, in these non-OPPS cases, with revenue codes indicating that the therapy 

services would be paid under the Medicare Physician Fee Schedule (MPFS). 

The claims listed in numbers 1, 2, 3, and 4 above are included in the data file that 

can be purchased as described above. Claims that contain codes to which we have 

assigned status indicators “Q1” (“STVX-packaged”) and “Q2” (“T-packaged”) appear in 

the data for the single major file, the multiple major file, and the multiple minor file used 

for ratesetting. Claims that contain codes to which we have assigned status indicator 

“Q3” (composite APC members) appear in both the data of the single and multiple major 

files used in this final rule with comment period, depending on the specific composite 

calculation. 

(2) Creation of “Pseudo” Single Procedure Claims 

To develop “pseudo” single procedure claims for this final rule with comment 

period, we examined both the multiple procedure major claims and the multiple 

procedure minor claims. We first examined the multiple major procedure claims for 

dates of service to determine if we could break them into “pseudo” single procedure 

claims using the dates of service for all lines on the claim. If we could create claims with 

single major procedures by using dates of service, we created a single procedure claim 

record for each separately payable procedure on a different date of service (that is, a 

“pseudo” single procedure claim). 
CMS-1589-FC 90 

We also use the bypass codes listed in Addendum N to this final rule with 

comment period (which is available via the Internet on our Web site) and discussed in 

section II.A.1.b. of this final rule with comment period to remove separately payable 

procedures which we determined contained limited or no packaged costs or that were 

otherwise suitable for inclusion on the bypass list from a multiple procedure bill. As 

discussed above, we ignore the “overlap bypass codes,” that is, those HCPCS codes that 

are both on the bypass list and are members of the multiple imaging composite APCs, in 

this initial assessment for “pseudo” single procedure claims. The final CY 2013 “overlap 

bypass codes” are listed in Addendum N to this final rule with comment period (which is 

available via the Internet on the CMS Web site). When one of the two separately payable 

procedures on a multiple procedure claim was on the bypass list, we split the claim into 

two “pseudo” single procedure claim records. The single procedure claim record that 

contained the bypass code did not retain packaged services. The single procedure claim 

record that contained the other separately payable procedure (but no bypass code) 

retained the packaged revenue code charges and the packaged HCPCS code charges. We 

also removed lines that contained multiple units of codes on the bypass list and treated 

them as “pseudo” single procedure claims by dividing the cost for the multiple units by 

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

remained on the claim after removal of the multiple units of the bypass code, we created 

a “pseudo” single procedure claim from that residual claim record, which retained the 

costs of packaged revenue codes and packaged HCPCS codes. This enabled us to use 

claims that would otherwise be multiple procedure claims and could not be used. 
CMS-1589-FC 91 

We then assessed the claims to determine if the criteria for the multiple imaging 

composite APCs, discussed in section II.A.2.e.(5) of this final rule with comment period, 

were met. If the criteria for the imaging composite APCs were met, we created a “single 

session” claim for the applicable imaging composite service and determined whether we 

could use the claim in ratesetting. For HCPCS codes that are both conditionally 

packaged and are members of a multiple imaging composite APC, we first assessed 

whether the code would be packaged and, if so, the code ceased to be available for further 

assessment as part of the composite APC. Because the packaged code would not be a 

separately payable procedure, we considered it to be unavailable for use in setting the 

composite APC costs on which the CY 2013 OPPS payments are based. Having 

identified “single session” claims for the imaging composite APCs, we reassessed the 

claim to determine if, after removal of all lines for bypass codes, including the “overlap 

bypass codes,” a single unit of a single separately payable code remained on the claim. If 

so, we attributed the packaged costs on the claim to the single unit of the single 

remaining separately payable code other than the bypass code to create a “pseudo” single 

procedure claim. We also identified line-items of overlap bypass codes as a “pseudo” 

single procedure claim. This allowed us to use more claims data for ratesetting purposes. 

As we proposed, we also examine the multiple procedure minor claims to 

determine whether we could create “pseudo” single procedure claims. Specifically, 

where the claim contained multiple codes with status indicator “Q1” (“STVX-packaged”) 

on the same date of service or contained multiple units of a single code with status 

indicator “Q1,” we selected the status indicator “Q1” HCPCS code that had the highest 
CMS-1589-FC 92 

CY 2012 relative payment weight, set the units to one on that HCPCS code to reflect our 

policy of paying only one unit of a code with a status indicator of “Q1.” We then 

packaged all costs for the following into a single cost for the “Q1” HCPCS code that had 

the highest CY 2012 relative payment weight to create a “pseudo” single procedure claim 

for that code: additional units of the status indicator “Q1” HCPCS code with the highest 

CY 2012 relative payment weight; other codes with status indicator “Q1”; and all other 

packaged HCPCS codes and packaged revenue code costs. We changed the status 

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

of the APC to which the selected procedure was assigned for further data processing and 

considered this claim as a major procedure claim. We used this claim in the calculation 

of the APC geometric mean cost for the status indicator “Q1” HCPCS code. 

Similarly, if a multiple procedure minor claim contained multiple codes with 

status indicator “Q2” (“T-packaged”) or multiple units of a single code with status 

indicator “Q2,” we selected the status indicator “Q2” HCPCS code that had the highest 

CY 2012 relative payment weight and set the units to one on that HCPCS code to reflect 

our policy of paying only one unit of a code with a status indicator of “Q2.” We then 

packaged all costs for the following into a single cost for the “Q2” HCPCS code that had 

the highest CY 2012 relative payment weight to create a “pseudo” single procedure claim 

for that code: additional units of the status indicator “Q2” HCPCS code with the highest 

CY 2012 relative payment weight; other codes with status indicator “Q2”; and other 

packaged HCPCS codes and packaged revenue code costs. We changed the status 

indicator for the selected code from a data status indicator of “N” to the status indicator 
CMS-1589-FC 93 

of the APC to which the selected code was assigned, and we considered this claim as a 

major procedure claim. 

If a multiple procedure minor claim contained multiple codes with status indicator 

“Q2” (“T-packaged”) and status indicator “Q1” (“STVX-packaged”), we selected the 

T-packaged status indicator “Q2” HCPCS code that had the highest relative payment 

weight for CY 2012 and set the units to one on that HCPCS code to reflect our policy of 

paying only one unit of a code with a status indicator of “Q2.” We then packaged all 

costs for the following into a single cost for the selected (“T packaged”) HCPCS code to 

create a “pseudo” single procedure claim for that code: additional units of the status 

indicator “Q2” HCPCS code with the highest CY 2012 relative payment weight; other 

codes with status indicator “Q2”; codes with status indicator “Q1” (“STVX-packaged”); 

and other packaged HCPCS codes and packaged revenue code costs. We selected status 

indicator “Q2” HCPCS codes instead of “Q1” HCPCS codes because “Q2” HCPCS 

codes have higher CY 2012 relative payment weights. If a status indicator “Q1” HCPCS 

code had a higher CY 2011 relative payment weight, it became the primary code for the 

simulated single bill process. We changed the status indicator for the selected status 

indicator “Q2” (“T-packaged”) code from a data status indicator of “N” to the status 

indicator of the APC to which the selected code was assigned and we considered this 

claim as a major procedure claim. 

We then applied our process for creating “pseudo” single procedure claims to the 

conditionally packaged codes that do not meet the criteria for packaging, which enabled 

us to create single procedure claims from them, if they met the criteria for single 
CMS-1589-FC 94 

procedure claims. Conditionally packaged codes are identified using status indicators 

“Q1” and “Q2,” and are described in section XII.A. of this final rule with comment 

period. 

Lastly, we excluded those claims that we were not able to convert to single 

procedure claims even after applying all of the techniques for creation of “pseudo” single 

procedure claims to multiple procedure major claims and to multiple procedure minor 

claims. As has been our practice in recent years, we also excluded claims that contained 

codes that were viewed as independently or conditionally bilateral and that contained the 

bilateral modifier (Modifier 50 (Bilateral procedure)) because the line-item cost for the 

code represented the cost of two units of the procedure, notwithstanding that hospitals 

billed the code with a unit of one. 

Comment: Commenters supported the proposed process for creating “pseudo” 

single procedure claims. 

Response: We appreciate the commenters’ support and will continue to look for 

ways to refine the process to secure more claims data for use in calculating costs. 

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

proposals to continue to apply the methodology described above for the purpose of 

creating “pseudo” single procedure claims for the CY 2013 OPPS. 

c. Completion of Claim Records and Geometric Mean Cost Calculations 

(1) General Process 

We then packaged the costs of packaged HCPCS codes (codes with status 

indicator “N” listed in Addendum B to this final rule with comment period (which is 
CMS-1589-FC 95 

available via the Internet on the CMS Web site) and the costs of those lines for codes 

with status indicator “Q1” or “Q2” when they are not separately paid), and the costs of 

the services reported under packaged revenue codes in Table 2 below that appeared on 

the claim without a HCPCS code into the cost of the single major procedure remaining on 

the claim. 

As noted in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation that 

CMS should review the final list of packaged revenue codes for consistency with OPPS 

policy and ensure that future versions of the I/OCE edit accordingly. As we have in the 

past, and as we proposed, we are continuing to compare the final list of packaged revenue 

codes that we are adopting for CY 2013 to the revenue codes that the I/OCE will package 

for CY 2013 to ensure consistency. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68531), we 

replaced the NUBC standard abbreviations for the revenue codes listed in Table 2 of the 

CY 2009 OPPS/ASC proposed rule with the most current NUBC descriptions of the 

revenue code categories and subcategories to better articulate the meanings of the 

revenue codes without changing the list of revenue codes. In the CY 2010 OPPS/ASC 

final rule with comment period (74 FR 60362 through 60363), we finalized changes to 

the packaged revenue code list based on our examination of the updated NUBC codes 

and public comment on the CY 2010 proposed list of packaged revenue codes. 

For CY 2013, as we did for CY 2012, we reviewed the changes to revenue codes 

that were effective during CY 2011 for purposes of determining the charges reported with 
CMS-1589-FC 96 

revenue codes but without HCPCS codes that we are packaging for CY 2013. We 

believe that the charges reported under the revenue codes listed in Table 2 below 

continue to reflect ancillary and supportive services for which hospitals report charges 

without HCPCS codes. Therefore, for CY 2013, we proposed to continue to package the 

costs that we derive from the charges reported without HCPCS code under the revenue 

codes displayed in Table 2 below for purposes of calculating the geometric mean costs on 

which the final CY 2013 OPPS/ASC payment rates are based. 

We did not receive any public comments on our proposed list of packaged 

revenue codes. Therefore, for the reasons set forth in the proposed rule (77 FR 45079 

through 45081), we are finalizing the proposed packaged revenue codes for CY 2013, 

without modification, which are identified in Table 2 below. We note that these revenue 

codes include only revenue codes that were in effect in CY 2011, the year of the claims 

data on which the final CY 2013 OPPS payment rates are based. 

TABLE 2.—CY 2013 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 
CMS-1589-FC 97 

Revenue 

Code Description 

0264 IV Therapy; IV Therapy/Supplies 

0269 IV Therapy; Other IV Therapy 

0270 Medical/Surgical Supplies and Devices; General Classification 

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

0272 Medical/Surgical Supplies and Devices; Sterile Supply 

0275 Medical/Surgical Supplies and Devices; Pacemaker 

0276 Medical/Surgical Supplies and Devices; Intraocular Lens 

0278 Medical/Surgical Supplies and Devices; Other Implants 

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

0280 Oncology; General Classification 

0289 Oncology; Other Oncology 

0343 Nuclear Medicine; Diagnostic Radiopharmaceuticals 

0344 Nuclear Medicine; Therapeutic Radiopharmaceuticals 

0370 Anesthesia; General Classification 

0371 Anesthesia; Anesthesia Incident to Radiology 

0372 Anesthesia; Anesthesia Incident to Other DX Services 

0379 Anesthesia; Other Anesthesia 

0390 

Administration, Processing and Storage for Blood and Blood Components; 

General Classification 

0392 

Administration, Processing and Storage for Blood and Blood Components; 

Processing and Storage 

0399 

Administration, Processing and Storage for Blood and Blood Components; 

Other Blood Handling 

0621 

Medical Surgical Supplies – Extension of 027X; Supplies Incident to 

Radiology 

0622 

Medical Surgical Supplies – Extension of 027X; Supplies Incident to Other 

DX Services 

0623 Medical Supplies – Extension of 027X, Surgical Dressings 

0624 Medical Surgical Supplies – Extension of 027X; FDA Investigational Devices

0630 Pharmacy – Extension of 025X; Reserved 

0631 Pharmacy – Extension of 025X; Single Source Drug 

0632 Pharmacy – Extension of 025X; Multiple Source Drug 

0633 Pharmacy – Extension of 025X; Restrictive Prescription 

0681 Trauma Response; Level I Trauma 

0682 Trauma Response; Level II Trauma 

0683 Trauma Response; Level III Trauma 
CMS-1589-FC 98 

Revenue 

Code Description 

0684 Trauma Response; Level IV Trauma 

0689 Trauma Response; Other 

0700 Cast Room; General Classification 

0710 Recovery Room; General Classification 

0720 Labor Room/Delivery; General Classification 

0721 Labor Room/Delivery; Labor 

0732 EKG/ECG (Electrocardiogram); Telemetry 

0762 Specialty services; Observation Hours 

0801 Inpatient Renal Dialysis; Inpatient Hemodialysis 

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

0803 

Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal 

Dialysis (CAPD) 

0804 

Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis 

(CCPD) 

0809 Inpatient Renal Dialysis; Other Inpatient Dialysis 

0810 Acquisition of Body Components; General Classification 

0819 Inpatient Renal Dialysis; Other Donor 

0821 Hemodialysis-Outpatient or Home; Hemodialysis Composite or Other Rate 

0824 Hemodialysis-Outpatient or Home; Maintenance – 100% 

0825 Hemodialysis-Outpatient or Home; Support Services 

0829 Hemodialysis-Outpatient or Home; Other OP Hemodialysis 

0942 

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

Education/Training 

0943 

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

Rehabilitation 

0948 

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

Pulmonary Rehabilitation 

In accordance with our longstanding policy, we proposed to continue to exclude: 

(1) claims that had zero costs after summing all costs on the claim; and (2) claims 

containing packaging flag number 3. Effective for services furnished on or after 

July 1, 2004, the I/OCE assigned packaging flag number 3 to claims on which hospitals 
CMS-1589-FC 99 

submitted token charges less than $1.01 for a service with status indicator “S” or “T” (a 

major separately payable service under the OPPS) for which the fiscal intermediary or 

MAC was required to allocate the sum of charges for services with a status indicator 

equaling “S” or “T” based on the relative payment weight of the APC to which each code 

was assigned. We do not believe that these charges, which were token charges as 

submitted by the hospital, are valid reflections of hospital resources. Therefore, we 

deleted these claims. We also deleted claims for which the charges equaled the revenue 

center payment (that is, the Medicare payment) on the assumption that, where the charge 

equaled the payment, to apply a CCR to the charge would not yield a valid estimate of 

relative provider cost. We proposed to continue these processes for the CY 2013 OPPS. 

For the remaining claims, we then standardized 60 percent of the costs of the 

claim (which we have previously determined to be the labor-related portion) for 

geographic differences in labor input costs. We made this adjustment by determining the 

wage index that applied to the hospital that furnished the service and dividing the cost for 

the separately paid HCPCS code furnished by the hospital by that wage index. The 

claims accounting that we provide for the proposed and final rule contains the formula we 

use to standardize the total cost for the effects of the wage index. As has been our policy 

since the inception of the OPPS, we use the pre-reclassified wage indices for 

standardization because we believe that they better reflect the true costs of items and 

services in the area in which the hospital is located than the post-reclassification wage 

indices and, therefore, would result in the most accurate unadjusted geometric mean 

costs. 
CMS-1589-FC 100 

In accordance with our longstanding practice, we also proposed to exclude single 

and “pseudo” single procedure claims for which the total cost on the claim was outside 

3 standard deviations from the geometric mean of units for each HCPCS code on the 

bypass list (because, as discussed above, we used claims that contain multiple units of the 

bypass codes). 

After removing claims for hospitals with error CCRs, claims without HCPCS 

codes, claims for immunizations not covered under the OPPS, and claims for services not 

paid under the OPPS, approximately 116 million claims were left. Using these 

approximately 116 million claims, we created approximately 120 million single and 

“pseudo” single procedure claims, of which we used slightly more than 120 million 

single bills (after trimming out approximately 1 million claims as discussed in section 

II.A.1.a. of this final rule with comment period) in the CY 2013 geometric mean cost 

development and ratesetting. 

As discussed above, the OPPS has historically developed the relative weights on 

which APC payments are based using APC median costs. For the CY 2013 OPPS, we 

proposed to calculate the APC relative payment weights using geometric mean costs; 

therefore, the following discussion of the 2 times rule violation and the development of 

the relative payment weight refers to geometric means. For more detail about the 

CY 2013 OPPS/ASC policy to calculate relative payment weights based on geometric 

means, we refer readers to section II.A.2.f. of this final rule with comment period. 

We proposed to use these claims to calculate the CY 2013 geometric mean costs 

for each separately payable HCPCS code and each APC. The comparison of HCPCS 
CMS-1589-FC 101 

code-specific and APC geometric mean costs determines the applicability of the 2 times 

rule. Section 1833(t)(2) of the Act provides that, subject to certain exceptions, the items 

and services within an APC group shall not be treated as comparable with respect to the 

use of resources if the highest median cost (or mean cost, if elected by the Secretary) for 

an item or service within the group is more than 2 times greater than the lowest median 

cost (or mean cost, if so elected) for an item or service within the same group (the 2 times 

rule). While we have historically applied the 2 times rule based on median costs, as part 

of the CY 2013 policy to develop the OPPS relative payment weights based on geometric 

mean costs, we also are applying the 2 times rule based on geometric mean costs. For a 

detailed discussion of the CY 2013 policy to develop the APC relative payment weights 

based on geometric mean costs, we refer readers to section II.A.2.f. of this final rule with 

comment period. 

We note that, for purposes of identifying significant HCPCS for examination in 

the 2 times rule, we consider codes that have more than 1,000 single major claims or 

codes that have both greater than 99 single major claims and contribute at least 2 percent 

of the single major claims used to establish the APC geometric mean cost to be 

significant. This longstanding definition of when a HCPCS code is significant for 

purposes of the 2 times rule was selected because we believe that a subset of 1,000 claims 

is negligible within the set of approximately 120 million single procedure or single 

session claims we use for establishing geometric mean costs. Similarly, a HCPCS code 

for which there are fewer than 99 single bills and which comprises less than 2 percent of 

the single major claims within an APC will have a negligible impact on the APC 
CMS-1589-FC 102 

geometric mean. We note that this method of identifying significant HCPCS codes 

within an APC for purposes of the 2 times rule was used in prior years under the 

median-based cost methodology. Under our CY 2013 policy to base the relative payment 

weights on geometric mean costs, we believe that this same consideration for identifying 

significant HCPCS codes should apply because the principles are consistent with their 

use in the median-based cost methodology. Unlisted codes are not used in establishing 

the percent of claims contributing to the APC, nor are their costs used in the calculation 

of the APC geometric mean. Finally, we reviewed the geometric mean costs for the 

services for which we pay separately under this final rule with comment period, and we 

reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and 

resource homogeneity within the APCs. Section III. of this final rule with comment 

period includes a discussion of many of the HCPCS code assignment changes that 

resulted from examination of the geometric mean costs and for other reasons. The APC 

geometric means were recalculated after we reassigned the affected HCPCS codes. Both 

the HCPCS code-specific geometric means and the APC geometric means were weighted 

to account for the inclusion of multiple units of the bypass codes in the creation of 

“pseudo” single procedure claims. 

Comment: Some commenters asked that CMS provide an adjustment for medical 

education costs under the OPPS. These commenters stated that CMS indicated that it 

would study the costs and payment differential among different classes of providers in 

the April 7, 2000 OPPS final rule but has not done so. The commenters requested that 

CMS conduct its own analysis and that, if that analysis showed a difference in their 
CMS-1589-FC 103 

payment to cost ratios (similar to the comparison study performed to calibrate the cancer 

hospital payment adjustment) due to the unique missions of teaching hospitals, CMS 

should add a teaching payment adjustment under the OPPS. 

Response: Unlike payment under the IPPS, the law does not specifically provide 

for payment for direct or indirect graduate medical education costs to be made under the 

OPPS. Section 1833(t)(2)(E) of the Act states that the Secretary shall establish, in a 

budget neutral manner “* * * other adjustments as determined to be necessary to ensure 

equitable payments, such as adjustments for certain classes of hospitals.” We have not 

found such an adjustment to be necessary to ensure equitable payments to teaching 

hospitals and, therefore, have not developed such an adjustment. As the commenters 

recognized, the cancer hospital payment adjustment discussed in section II.F. of this final 

rule with comment period was established based on section 1833(t)(18) of the Act. 

Similarly, those hospitals were permanently held harmless and continued to receive TOPs 

under section 1833(t)(7)(d)(ii) of the Act. Furthermore, in this final rule with comment 

period, we have developed OPPS relative payment weights that we believe provide 

appropriate and adequate payment for the complex medical services, such as new 

technology services and device-dependent procedures, which we understand are 

furnished largely by teaching hospitals. The impacts of the final CY 2013 policies, by 

class of hospital, are displayed in Table 57 in section XXII. of this final rule with 

comment period. 
CMS-1589-FC 104 

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

proposed CY 2013 methodology for calculating the costs upon which the CY 2013 OPPS 

payment rates are based. 

As we discuss in sections II.A.2.d. and II.A.2.e. and in section VIII.B. of this final 

rule with comment period, in some cases, APC geometric mean costs are calculated using 

variations of the process outlined above. Specifically, section II.A.2.d. of this final rule 

with comment period addresses the calculation of single APC criteria-based geometric 

mean costs. Section II.A.2.e. of this final rule with comment period discusses the 

calculation of composite APC criteria-based geometric mean costs. Section VIII.B. of 

this final rule with comment period addresses the methodology for calculating the 

geometric mean costs for partial hospitalization services. 

(2) Recommendations of the Advisory Panel on Hospital Outpatient Payment Regarding 

Data Development 

At the August 27–28, 2012 meeting of the Advisory Panel on Hospital Outpatient 

Payment (the Panel), we provided the Data Subcommittee with a list of all APCs 

fluctuating by greater than 10 percent when comparing the CY 2013 OPPS/ASC 

proposed rule costs based on CY 2011 claims processed through June 30, 2012, to those 

based on CY 2012 OPPS/ASC final rule data (CY 2010 claims processed through 

June 30, 2011). The Data Subcommittee reviewed the fluctuations in the APC costs and 

their respective weights. 
CMS-1589-FC 105 

At the August 27-28, 2012 Panel meeting, the Panel made a number of 

recommendations related to the data process. The Panel’s 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 Traci Rabine serve as the acting 

chair of the Data Subcommittee for the August 2012 HOP Panel meeting. 

CMS Response: We are accepting this recommendation. 

Recommendation: The Panel recommends that CMS continue to provide a list of 

APCs fluctuating by more than 10 percent in costs. 

CMS Response: We are accepting this recommendation. 
CMS-1589-FC 106 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

d. Calculation of Single Procedure APC Criteria-Based Costs 

(1) Device-Dependent APCs 

Device-dependent APCs are populated by HCPCS codes that usually, but not 

always, require that a device be implanted or used to perform the procedure. For a full 

history of how we have calculated payment rates for device-dependent APCs in previous 

years and a detailed discussion of how we developed the standard device-dependent APC 

ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66739 through 66742). Overviews of the procedure-to-device 

edits and device-to-procedure edits used in ratesetting for device-dependent APCs are 

available in the CY 2005 OPPS final rule with comment period (69 FR 65761 through 

65763) and the CY 2007 OPPS/ASC final rule with comment period (71 FR 68070 

through 68071). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45081 through 45082), we 

proposed for CY 2013 to use the standard methodology for calculating costs for 

device-dependent APCs that was finalized in the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74148 through 74151). This methodology utilizes claims data 

that generally represent the full cost of the required device and the most recent cost report 

data. Specifically, we proposed to calculate the costs for device-dependent APCs for 

CY 2013 using only the subset of single procedure claims from CY 2011 claims data that 

pass the procedure-to-device and device-to-procedure edits; do not contain token charges 

(less than $1.01) for devices; do not contain the “FB” modifier signifying that the device 

was furnished without cost to the provider, or where a full credit was received; and do not 
CMS-1589-FC 107 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

contain the “FC” modifier signifying that the hospital received partial credit for the 

device. The procedure-to-device edits require that when a particular procedural HCPCS 

code is billed, the claim must also contain an appropriate device code, while the 

device-to-procedure edits require that a claim that contains one of a specified set of 

device codes also contain an appropriate procedure code. We stated in the proposed rule 

that we continue to believe the standard methodology for calculating costs for devicedependent APCs gives us the most appropriate costs for device-dependent APCs in which 

the hospital incurs the full cost of the device. In Table 4A of the proposed rule, we listed 

the APCs for which we proposed to use our standard device-dependent APC ratesetting 

methodology for CY 2012. 

Subsequent to the publication of the CY 2013 OPPS/ASC proposed rule, the 

AMA’s CPT Editorial Panel created several new CPT codes describing services related to 

device-dependent APCs, to be effective beginning January 1, 2013. Our standard process 

for dealing with new CPT codes effective on January 1 for the upcoming calendar year is 

to assign each code to the APC that we believe contains services that are comparable with 

respect to clinical characteristics and resources required to furnish the service. The new 

CPT code is given a comment indicator of “NI” in Addendum B to the final rule with 

comment period to identify it as a new interim APC assignment for the new year and the 

APC assignment for the new codes is then open to public comment for 60 days following 

the publication of the final rule with comment period. As with all new CPT codes, we 

encourage interested stakeholders to review those codes identified with the “NI” in 
CMS-1589-FC 108 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

Addendum B and assigned to device-dependent APCs and submit public comments on 

those assignments. 

Our interim assignment of some of the new CPT codes for CY 2013 to 

device-dependent APCs prompted us to change the titles of two APCs to reflect more 

accurately the clinical configurations of those APCs for CY 2013. Specifically, we 

assigned, on an interim basis, the following codes to device-dependent APC 0107, 

currently titled “Insertion of Cardioverter-Defibrillator”: CPT code 0319T (Insertion or 

replacement of subcutaneous implantable defibrillator system with subcutaneous 

electrode), 0321T (Insertion of subcutaneous implantable defibrillator pulse generator 

only with existing subcutaneous electrode), and 0323T (Removal of subcutaneous 

implantable defibrillator pulse generator with replacement of subcutaneous implantable 

defibrillator pulse generator only). We note that the title of APC 0108 is currently 

“Insertion/Replacement/Repair of AICD Leads, Generator and Pacing Electrode.” In 

order to streamline and simplify the titles of APCs 0107 and 0108, which both contain 

procedures for the implantation of cardioverter-defibrillator pulse generators, leads, and 

electrodes, we are revising their titles to reflect the insertion of cardioverter-defibrillators 

without specifying the component pieces involved. Specifically, we are revising the title 

of APC 0107 to read “Level I Implantation of Cardioverter-Defibrillator” and the title of 

APC 0108 to read “Level II Implantation of Cardioverter-Defibrillator.” 

The creation of new CPT codes involving intracoronary stent placement 

procedures for CY 2013 also requires us to create nine new HCPCS C-codes and to 

delete two existing HCPCS G-codes in order to maintain the correct implementation of 
CMS-1589-FC 109 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

existing OPPS policy for CY 2013. Specifically, since CY 2003, under the OPPS, we 

assign coronary stent placement procedures to separate APCs based on the use of 

nondrug-eluting or drug-eluting stents (APC 0104 (Transcatheter Placement of 

Intracoronary Stents) or APC 0656 (Transcatheter Placement of Intracoronary 

Drug-Eluting Stents), respectively). In order to effectuate this policy, we created HCPCS 

G-codes G0290 (Transcatheter placement of a drug eluting intracoronary stent(s), 

percutaneous, with or without other therapeutic intervention, any method; single vessel) 

and G0291 (Transcatheter placement of a drug eluting intracoronary stent(s), 

percutaneous, with or without other therapeutic intervention, any method; each additional 

vessel) for drug-eluting intracoronary stent placement procedures that parallel existing 

CPT codes 92980 (Transcatheter placement of an intracoronary stent(s), percutaneous, 

with or without other therapeutic intervention, any method; single vessel) and 92981 

(Transcatheter placement of an intracoronary stent(s), percutaneous, with or without other 

therapeutic intervention, any method; each additional vessel), which are used to describe 

nondrug-eluting intracoronary stent placement procedures. CPT codes 92980 and 92981 

are assigned to APC 0104, while HCPCS codes G0290 and G0291 are assigned to APC 

0656. We refer readers to the CY 2003 OPPS final rule with comment period 

(67 FR 66732 through 66734) for more information regarding the initial implementation 

of this policy. 

Effective January 1, 2013, the AMA’s CPT Editorial Panel is deleting CPT codes 

92980 and 92981 and replacing them with the following new CPT codes: 
CMS-1589-FC 110 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

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● CPT code 92928 (Percutaneous transcatheter placement of intracoronary 

stent(s), with coronary angioplasty when performed; single major coronary artery or 

branch), 92929 (Percutaneous transcatheter placement of intracoronary stent(s), with 

coronary angioplasty when performed; each additional branch of a major coronary artery 

(List separately in addition to code for primary procedure)); 

● CPT code 92933 (Percutaneous transluminal coronary atherectomy, with 

intracoronary stent, with coronary angioplasty when performed; single major coronary 

artery or branch); 

● CPT code 92934 (Percutaneous transluminal coronary atherectomy, with 

intracoronary stent, with coronary angioplasty when performed; each additional branch of 

a major coronary artery (List separately in addition to code for primary procedure)); 

● CPT code 92937 (Percutaneous transluminal revascularization of or through 

coronary artery bypass graft (internal mammary, free arterial, venous), any combination 

of intracoronary stent, atherectomy and angioplasty, including distal protection when 

performed; single vessel); 

● CPT code 92938 (Percutaneous transluminal revascularization of or through 

coronary artery bypass graft (internal mammary, free arterial, venous), any combination 

of intracoronary stent, atherectomy and angioplasty, including distal protection when 

performed; each additional branch subtended by the bypass graft (List separately in 

addition to code for primary procedure)); 

● CPT code 92941 (Percutaneous transluminal revascularization of acute 

total/subtotal occlusion during acute myocardial infarction, coronary artery or coronary 
CMS-1589-FC 111 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

artery bypass graft, any combination of intracoronary stent, atherectomy and angioplasty, 

including aspiration thrombectomy when performed, single vessel); 

● CPT code 92943 (Percutaneous transluminal revascularization of chronic total 

occlusion, coronary artery, coronary artery branch, or coronary artery bypass graft, any 

combination of intracoronary stent, atherectomy and angioplasty; single vessel); and 

● CPT code 92944 (Percutaneous transluminal revascularization of chronic total 

occlusion, coronary artery, coronary artery branch, or coronary artery bypass graft, any 

combination of intracoronary stent, atherectomy and angioplasty; each additional 

coronary artery, coronary artery branch, or bypass graft (List separately in addition to 

code for primary procedure)). 

In order to maintain the existing policy of differentiating payment for 

intracoronary stent placement procedures involving nondrug-eluting and drug-eluting 

stents, we are deleting HCPCS codes G0290 and G0291 and replacing them with the 

following new HCPCS C-codes to parallel the new CPT codes: 

● HCPCS code C9600 (Percutaneous transcatheter placement of drug eluting 

intracoronary stent(s), with coronary angioplasty when performed; single major coronary 

artery or branch); 

● HCPCS code C9601 (Percutaneous transcatheter placement of drug-eluting 

intracoronary stent(s), with coronary angioplasty when performed; each additional 

branch of a major coronary artery (List separately in addition to code for primary 

procedure)); 
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● HCPCS code C9602 (Percutaneous transluminal coronary atherectomy, with 

drug eluting intracoronary stent, with coronary angioplasty when performed; single major 

coronary artery or branch); 

● HCPCS code C9603 (Percutaneous transluminal coronary atherectomy, with 

drug-eluting intracoronary stent, with coronary angioplasty when performed; each 

additional branch of a major coronary artery (List separately in addition to code for 

primary procedure)); 

● HCPCS code C9604 (Percutaneous transluminal revascularization of or 

through coronary artery bypass graft (internal mammary, free arterial, venous), any 

combination of drug-eluting intracoronary stent, atherectomy and angioplasty, including 

distal protection when performed; single vessel); 

● HCPCS code C9605 (Percutaneous transluminal revascularization of or 

through coronary artery bypass graft (internal mammary, free arterial, venous), any 

combination of drug-eluting intracoronary stent, atherectomy and angioplasty, including 

distal protection when performed; each additional branch subtended by the bypass graft 

(List separately in addition to code for primary procedure)); 

● HCPCS code C9606 (Percutaneous transluminal revascularization of acute 

total/subtotal occlusion during acute myocardial infarction, coronary artery or coronary 

artery bypass graft, any combination of drug-eluting intracoronary stent, atherectomy and 

angioplasty, including aspiration thrombectomy when performed, single vessel); 

● HCPCS code C9607 (Percutaneous transluminal revascularization of chronic 

total occlusion, coronary artery, coronary artery branch, or coronary artery bypass graft, 
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any combination of drug-eluting intracoronary stent, atherectomy and angioplasty; single 

vessel); and 

● HCPCS code C9608 (Percutaneous transluminal revascularization of chronic 

total occlusion, coronary artery, coronary artery branch, or coronary artery bypass graft, 

any combination of drug-eluting intracoronary stent, atherectomy and angioplasty; each 

additional coronary artery, coronary artery branch, or bypass graft (List separately in 

addition to code for primary procedure)). 

The interim APC assignment for CPT codes 92928, 92933, 92929, 92934, 92937, 

92938, 92941, 92943, and 92944 is APC 0104, and the interim APC assignment for 

HCPCS codes C9600, C9601, C9602, C9603, C9604, C9605, C9606, C9607, and C9608 

is APC 0656 for CY 2013. 

Comment: One commenter requested that CPT code 0304T (Insertion or removal 

and replacement of intracardiac ischemia monitoring system including imaging 

supervision and interpretation when performed and intra-operative interrogation and 

programming when performed; device only) be placed in APC 0107 (Level I 

Implantation of Cardioverter-Defibrillators (ICDs)), rather than APC 0090 

(Insertion/Replacement of Pacemaker Pulse Generator), because CPT code 0304T 

describes the insertion or removal and replacement of a device, which is similar to other 

CPT codes assigned to APC 0107, such as CPT code 33262 (Removal of pacing 

cardioverter-defibrillator pulse generator with replacement of pacing cardioverterdefibrillator pulse generator; single lead system). The commenter also stated that CPT 

code 33224 (Insertion of pacing electrode, cardiac venous system, for left ventricular 
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pacing, with attachment to previously placed pacemaker or pacing cardioverterdefibrillator pulse generator (including revision of pocket, removal, insertion, and/or 

replacement of existing generator) is better aligned with APC 0107 than with its current 

APC assignment of APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual 

Chamber Pacemaker or Pacing Electrode). 

Response: We disagree with the commenter’s assertion that CPT codes 0304T 

and 33224 should be placed in APC 0107. APC 0107 includes procedures involving the 

insertion of a cardioverter-defibrillator, and CPT codes 0304T and 33224 do not describe 

such procedures. 

Comment: One commenter suggested that CMS consider the assignment of 

different APCs for upgrades to a pacemaker or cardioverter-defibrillator based on the 

number of leads inserted, which can result in cost differences among procedures. 

Response: The commenter did not provide specific CPT codes for pacemaker or 

cardioverter-defibrillator insertion procedures for us to consider. Generally speaking, 

however, we believe that our standard ratesetting methodology for device-dependent 

APCs would appropriately capture hospitals’ varying costs based on the number of leads 

inserted during these procedures because we use data from hospital claims and cost 

reports that would reflect any such differences in costs. 

Comment: Commenters expressed appreciation for the proposed increase in 

payment for the cochlear implant procedure, described by CPT code 69930 (Cochlear 

device implantation, with or without mastoidectomy) which is assigned to APC 0259 

(Level VII ENT Procedures). However, the commenters also expressed concern that the 
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increase does not reflect the actual cost of the procedure and device. The commenters 

indicated potential coding errors by major hospital facilities where claims for less 

expensive osseointegrated auditory device implant procedures (such as those assigned to 

APC 0425 (Level II Arthroplasty or Implantation with Prosthesis)) were included in the 

dataset used for calculation of cochlear implants, and requested that CMS review the 

APC 0259 source data and remove the claims that were inadvertently included as part of 

the original dataset to ensure the appropriate payment. 

Response: We employ procedure-to-device and device-to-procedure edits to 

ensure that the appropriate procedures and devices are correctly billed together and those 

same edits are again used in modeling the OPPS payment rates for the respective 

device-dependent APCs. Only claims containing the appropriate procedure and device 

code pairings are used to model the estimated APC cost for device-dependent APCs. We 

also note that the cochlear implant procedure and the osseointegrated auditory device 

implant procedures are in different APCs; therefore, only single claims containing one of 

these procedures would be used to model the estimated APC cost for their respective 

APCs. Further, claims with multiple major procedures generally are not entered into the 

dataset used for calculating estimated APC costs. Therefore, we do not believe that the 

inclusion of claims containing both cochlear implant procedures and osseointegrated 

auditory device implant procedures would result in inaccurate procedure or APC cost 

estimations. 

Comment: Some commenters pointed out an apparent discrepancy between the 

listed proposed payment rate for APC 0425 in Addendum B to the CY 2013 OPPS/ASC 
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proposed rule when compared to the listed proposed payment rate for APC 0425 in the 

data file entitled “CY 2013 OPPS Comparison Between Proposed Geometric Mean and 

Median-Based Payments.” Commenters requested that CMS review its proposed 

payment rates and determine which proposed payment rate reflects the correct geometric 

mean cost for APC 0425 for use in CY 2013 OPPS ratesetting. 

Some commenters also requested that CMS reconfigure APC 0425 to ensure the 

procedures in the APC are similar from both a cost and clinical cohesion perspective and 

thereby facilitate Medicare hospital outpatient payment rates that are more in line with 

hospitals' actual costs for orthopedic arthroplasty procedures. Specifically, the 

commenters argued that the osseointegrated auditory device implant procedures assigned 

to APC 0425, such as the procedure described by CPT code 69714 (Implantation, 

osseointegrated implant, temporal bone, with percutaneous attachment to external speech 

processor/cochlear stimulator; without mastoidectomy), are not related to the orthopaedic 

joint replacement procedures also assigned to APC 0425. The commenters also stated the 

proposed composition of APC 0425 violated the 2 times rule because CPT code 69717 

(Replacement (including removal of existing device), osseointegrated implant, temporal 

bone, with percutaneous attachment to external speech processor/cochlear stimulator; 

without mastoidectomy) has a proposed mean cost of $5,382 and CPT code 25446 

(Arthroplasty with prosthetic replacement; distal radius and partial or entire carpus (total 

wrist)) has a proposed mean cost of $15,020. 

Response: We recognize the discrepancy between the proposed payment rate for 

APC 0425 in Addendum B to the CY 2013 OPPS/ASC proposed rule and the proposed 
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payment rate for APC 0425 listed in the “CY 2013 OPPS Comparison Between Proposed 

Geometric Mean and Median-Based Payments” data file. The cost statistics used in the 

generation of the “CY 2013 OPPS Comparison Between Proposed Geometric Mean and 

Median-Based Payments” data file did not reflect the final configuration of the proposed 

CY 2013 OPPS relative payment weights; thus, the proposed payment rate reflected in 

that data file was inaccurate. 

We believe that the current configuration of APC 0425 is appropriate as all 

procedures within the APC share clinical and resource similarity. Specifically, we 

disagree with the commenters who asserted that the osseointegrated auditory device 

implant procedures assigned to APC 0425 are not related to the orthopaedic joint 

replacement procedures also assigned to APC 0425. As we have stated in the past 

(73 FR 68539), all procedures assigned to APC 0425, including the osseointegrated 

auditory device implant procedures, involve the implantation of a prosthetic device into 

bone. We also note the assignments of CPT codes 69717 and 25446 to APC 0425 do not 

violate the 2 times rule as the commenters claimed. As discussed in section III.B.2. of 

the proposed rule and this final rule with comment period, we consider only those 

HCPCS codes that are significant, based on the number of claims, in making this 

determination. For purposes of identifying significant HCPCS codes for examination in 

the 2 times rule, we consider codes that have more than 1,000 single major claims or 

codes that have both greater than 99 single major claims and contribute at least 2 percent 

of the single major claims used to establish the APC cost to be significant. CPT codes 
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69717 and 25446 do not meet this criteria and their inclusion in the same APC, therefore, 

does not violate the 2 times rule because they are not considered significant. 

Comment: One commenter stated that CMS should study further the claims for 

any device-dependent APC for which the calculated proposed payment reduction would 

be greater than 10 percent and take action to correct issues that may artificially reduce 

these payments. 

Response: We routinely examine all APCs with a greater than 10 percent 

fluctuation in costs as part of our annual rulemaking process. 

Comment: Commenters supported CMS’ determination that urology procedures 

in APCs 0385 (Level I Prosthetic Urological Procedures), 0386 (Level II Prosthetic 

Urological Procedures), and 0674 (Prostate Cryoablation) should be categorized as 

device-dependent APCs. The commenters also requested the mandatory reporting of all 

HCPCS device C-codes on hospital claims for services involving devices and asserted 

that CMS should require complete and correct coding for packaged services. The 

commenters urged CMS to continue to promote device coding edits, while encouraging 

hospitals to remain vigilant in reporting the costs of performing device related services, 

and educating hospitals on the importance of accurate coding for devices, supplies, and 

other technologies. 

Response: We appreciate the commenters’ support and will continue to promote 

device coding edits, as well as encourage hospitals to report all costs in performing 

device related services. As we have stated in the past (73 FR68535 through 68536 and 

74 FR 60367), we agree that accurate reporting of device, supply, and technology charges 
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will help to ensure that these items are appropriately accounted for in future years’ OPPS 

payment rates. As we stated in the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68575), we strongly encourage hospitals to report a charge for each packaged 

service they furnish, either by billing the packaged HCPCS code and a charge for that 

service if separate reporting is consistent with CPT and CMS instructions, by increasing 

the charge for the separately paid associated service to include the charge for the 

packaged service, or by reporting the charge for the packaged service with an appropriate 

revenue code but without a HCPCS code. Any of these means of charging for the 

packaged service will result in the cost of the packaged service being incorporated into 

the cost we estimate for the separately paid service. If a HCPCS code is not reported 

when a packaged service is provided, we acknowledge that it can be challenging to 

specifically track the utilization patterns and resource cost of the packaged service itself. 

However, we have no reason to believe that hospitals have not considered the cost of the 

packaged service in reporting charges for the independent, separately paid service. 

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

proposed policy to use the standard methodology for calculating costs for 

device-dependent APCs for CY 2013 that was finalized in the CY 2012 OPPS/ASC final 

rule with comment period. 

Table 3 below lists the APCs for which we used our standard device-dependent 

APC ratesetting methodology for CY 2013. We refer readers to Addendum A to this 

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

for the payment rates for these device-dependent APCs for CY 2013. 
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TABLE 3.—CY 2013 DEVICE-DEPENDENT APCs 

CY 2013 

APC 

CY 2013 

Status 

Indicator 

CY 2013 APC Title 

0039 S Level I Implantation of Neurostimulator Generator 

0040 S 

Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes 

0061 S 

Level II Implantation/Revision/Replacement of 

Neurostimulator Electrodes 

0082 T Coronary or Non-Coronary Atherectomy 

0083 T 

Coronary Angioplasty, Valvuloplasty, and Level I 

Endovascular Revascularization of the Lower Extremity 

0084 S Level I Electrophysiologic Procedures 

0085 T Level II Electrophysiologic Procedures 

0086 T Level III Electrophysiologic Procedures 

0089 T 

Insertion/Replacement of Permanent Pacemaker and 

Electrodes 

0090 T Insertion/Replacement of Pacemaker Pulse Generator 

0104 T Transcatheter Placement of Intracoronary Stents 

0106 T 

Insertion/Replacement of Pacemaker Leads and/or 

Electrodes 

0107 T Level I Implantation of Cardioverter-Defibrillator 

0108 T Level II Implantation of Cardioverter-Defibrillator 

0115 T Cannula/Access Device Procedures 

0202 T Level VII Female Reproductive Procedures 

0227 T Implantation of Drug Infusion Device 

0229 T 

Level II Endovascular Revascularization of the Lower 

Extremity 

0259 T Level VII ENT Procedures 

0293 T Level V Anterior Segment Eye Procedures 

0315 S Level II Implantation of Neurostimulator Generator 

0318 S 

Implantation of Cranial Neurostimulator Pulse Generator 

and Electrode 

0319 T 

Level III Endovascular Revascularization of the Lower 

Extremity 

0384 T GI Procedures with Stents 
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CY 2013 

APC 

CY 2013 

Status 

Indicator 

CY 2013 APC Title 

0385 S Level I Prosthetic Urological Procedures 

0386 S Level II Prosthetic Urological Procedures 

0425 T Level II Arthroplasty or Implantation with Prosthesis 

0427 T Level II Tube or Catheter Changes or Repositioning 

0622 T Level II Vascular Access Procedures 

0623 T Level III Vascular Access Procedures 

0648 T Level IV Breast Surgery 

0652 T Insertion of Intraperitoneal and Pleural Catheters 

0653 T Vascular Reconstruction/Fistula Repair with Device 

0654 T 

Insertion/Replacement of a Permanent Dual Chamber 

Pacemaker 

0655 T 

Insertion/Replacement/Conversion of a Permanent Dual 

Chamber Pacemaker or Pacing Electrode 

0656 T 

Transcatheter Placement of Intracoronary Drug-Eluting 

Stents 

0674 T Prostate Cryoablation 

0680 S Insertion of Patient Activated Event Recorders 

(2) Blood and Blood Products 

Since the implementation of the OPPS in August 2000, we have made separate 

payments for blood and blood products through APCs rather than packaging payment for 

them into payments for the procedures with which they are administered. Hospital 

payments for the costs of blood and blood products, as well as for the costs of collecting, 

processing, and storing blood and blood products, are made through the OPPS payments 

for specific blood product APCs. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45082 through 45083), we 

proposed to continue for CY 2013 to establish payment rates for blood and blood 
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products using our blood-specific CCR methodology, which utilizes actual or simulated 

CCRs from the most recently available hospital cost reports to convert hospital charges 

for blood and blood products to costs. This methodology has been our standard 

ratesetting methodology for blood and blood products since CY 2005. It was developed 

in response to data analysis indicating that there was a significant difference in CCRs for 

those hospitals with and without blood-specific cost centers, and past public comments 

indicating that the former OPPS policy of defaulting to the overall hospital CCR for 

hospitals not reporting a blood-specific cost center often resulted in an underestimation of 

the true hospital costs for blood and blood products. Specifically, in order to address the 

differences in CCRs and to better reflect hospitals’ costs, we proposed to continue to 

simulate blood CCRs for each hospital that does not report a blood cost center by 

calculating the ratio of the blood-specific CCRs to hospitals’ overall CCRs for those 

hospitals that do report costs and charges for blood cost centers. We would then apply 

this mean ratio to the overall CCRs of hospitals not reporting costs and charges for blood 

cost centers on their cost reports in order to simulate blood-specific CCRs for those 

hospitals. We calculated the costs upon which the proposed CY 2013 payment rates for 

blood and blood products were based using the actual blood-specific CCR for hospitals 

that reported costs and charges for a blood cost center and a hospital-specific simulated 

blood-specific CCR for hospitals that did not report costs and charges for a blood cost 

center. We noted that we used geometric mean unit costs for each blood and blood 

product to calculate the proposed payment rates, consistent with the methodology we 
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proposed for other items and services, discussed in section II.A.2.f. of the proposed rule 

and this final rule with comment period. 

We stated in the proposed rule that we continue to believe the hospital-specific, 

blood-specific CCR methodology best responds to the absence of a blood-specific CCR 

for a hospital than alternative methodologies, such as defaulting to the overall hospital 

CCR or applying an average blood-specific CCR across hospitals. Because this 

methodology takes into account the unique charging and cost accounting structure of 

each hospital, we stated in the proposed rule that we believe that it yields more accurate 

estimated costs for these products. 

Comment: Some commenters expressed concern that the proposed APC payment 

rates for some blood products are less than the acquisition costs of those products, citing 

a published study of a national survey of blood acquisition and overhead costs. 

According to the commenters, the safety and availability of blood may be jeopardized 

without adequate payment. The commenters asked that CMS formally consider and 

evaluate potential alternative methodologies for setting APC payment rates for blood 

products, preferably by seeking input from affected stakeholders. The commenters also 

stated that the use of the geometric mean methodology to calculate blood costs would 

result in lower payment rates compared to the use of median costs to calculate the 

payment rates for blood and blood products and urged CMS to use the median cost 

instead. 

Response: As we have stated in the past (75 FR 71838 through 71839 and 

76 FR 74152), we continue to believe that using blood-specific CCRs applied to hospital 
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claims data results in payment that appropriately reflect hospitals’ relative costs of 

providing blood and blood products as reported to us by hospitals. We will consider any 

information presented to us from affected stakeholders regarding alternative ratesetting 

methodologies. We address the use of geometric mean costs to calculate blood payment 

rates in section II.A.2.c. of this final rule with comment period. 

Comment: One commenter expressed concern regarding coding and payment for 

pre-storage pooled, leukocyte reduced platelets. According to the commenter, hospitals 

currently bill for pre-storage pooled, leukocyte reduced platelets using HCPCS code 

P9031 (Platelets, leukocytes reduced, each unit) based on the number of platelet 

concentrates (PCs) that are combined to create one unit of the blood product. The 

commenter stated that because the number of PC units used to make a therapeutic dose of 

pre-storage pooled, leukocyte reduced platelets is variable, blood centers must notify 

hospitals of the number of PCs in each therapeutic dose for the hospital’s billing 

purposes, even though it does not affect the cost of the product to the hospital. 

According to the commenter, a new technology exists that can make a unit of prestorage pooled, leukocyte reduced platelets out of fewer PCs. However, the commenter 

expressed concern that the current coding and payment based on the use of HCPCS code 

P9031 unfairly and inappropriately disadvantages the use of this technology. The 

commenter indicated that where a greater number of PCs are needed to make a unit of 

pre-storage pooled, leukocyte reduced platelets, the hospital may end up being paid at a 

rate that significantly exceeds the cost of the product. However, according to the 

commenter, where the blood center can make the pre-storage pooled, leukocyte reduced 
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platelets using fewer PCs, the hospital may end up receiving payment that is not 

sufficient to cover the cost of the product. 

The commenter stated that a separate code will be necessary to differentiate 

pre-storage pooled, leukocyte reduced platelets from other platelet products, and that an 

application for a unique HCPCS code is currently pending. The commenter urged CMS, 

for OPPS purposes, to take action to ensure appropriate payment for pre-storage pooled, 

leukocyte reduced platelets, regardless of whether a new HCPCS code is created. 

Response: The outcome of the commenter’s application for a unique HCPCS 

code for pre-storage pooled, leukocyte reduced platelets is beyond the scope of OPPS 

rulemaking. We note that it is an expected and appropriate outcome of a prospective 

payment system that hospitals would receive payments that are less than their costs in 

some cases and exceed their costs in other cases, as the commenter described is occurring 

in the case of pre-storage pooled, leukocyte reduced platelets. Therefore, we do not 

believe that it is necessary for us to take action to ensure appropriate payment for prestorage pooled, leukocyte reduced platelets at this time. However, we are interested in 

hearing from other stakeholders regarding the current incentives and disincentives that 

exist in the marketplace for pre-storage pooled, leukocyte reduced platelets and invite 

public comment on payment for the blood product described by HCPCS code P9031 in 

this final rule with comment period. 

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

proposed policy, without modification, to continue to establish payment rates for blood 

and blood products using our blood-specific CCR methodology, which utilizes actual or 
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simulated CCRs from the most recently available hospital cost reports to convert hospital 

charges for blood and blood products to costs, for CY 2013. We continue to believe that 

this methodology in CY 2013 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 refer readers to Addendum B to this final rule with comment period (which is 

available via the Internet on the CMS Web site) for the final CY 2013 payment rates for 

blood and blood products (which are identified with status indicator “R”). For a more 

detailed discussion of the blood-specific CCR methodology, we refer readers to the 

CY 2005 OPPS proposed rule (69 FR 50524 through 50525). For a full history of OPPS 

payment for blood and blood products, we refer readers to the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 66807 through 66810). 

(3) Brachytherapy Sources 

Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) of 

Pub. L. 108-173 (MMA), mandated the creation of additional groups of covered OPD 

services that classify devices of brachytherapy consisting of a seed or seeds (or 

radioactive source) (“brachytherapy sources”) separately from other services or groups of 

services. The additional groups must reflect the number, isotope, and radioactive 

intensity of the brachytherapy sources furnished and must include separate groups for 

palladium-103 and iodine-125 sources. For the history of OPPS payment for 

brachytherapy sources, we refer readers to prior OPPS proposed and final rules. As we 

have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533 through 60534, 
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75 FR 71978, and 76 FR 74160), we believe that adopting the general OPPS prospective 

payment methodology for brachytherapy sources is appropriate for a number of reasons. 

The general OPPS payment methodology uses costs based on claims data to set the 

relative payment weights for hospital outpatient services. This payment methodology 

results in more consistent, predictable, and equitable payment amounts per source across 

hospitals by 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’ charges adjusted to cost, has 

provided 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. 

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45087), we proposed 

to use the costs from CY 2011 claims data for setting the proposed CY 2013 payment 

rates for brachytherapy sources, as we proposed for most other items and services that 

will be paid under the CY 2013 OPPS. We based the proposed rates for brachytherapy 

sources using geometric mean unit costs for each source, consistent with the 

methodology proposed for other items and services, discussed in section II.A.2.f. of the 

proposed rule. We proposed to continue the other payment policies for brachytherapy 

sources we finalized and first implemented in the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60537). We proposed to pay for the stranded and non-stranded 

NOS codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest stranded or 

non-stranded prospective payment rate for such sources, respectively, on a per source 
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government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

basis (as opposed, for example, to a per mCi), which is based on the policy we 

established in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66785). 

We also proposed to continue the policy we first implemented in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60537) regarding payment for new 

brachytherapy sources for which we have no claims data, based on the same reasons we 

discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786; 

which was superseded for a period of time by section 142 of Pub. L. 110-275). That 

policy is intended to enable us to assign new HCPCS codes for new brachytherapy 

sources to their own APCs, with prospective payment rates set based on our consideration 

of external data and other relevant information regarding the expected costs of the 

sources to hospitals. 

Consistent with our policy regarding APC payments made on a prospective basis, 

as we did for CY 2011 and CY 2012, we proposed to subject brachytherapy sources to 

outlier payments under section 1833(t)(5) of the Act, and also to subject brachytherapy 

source payment weights to scaling for purposes of budget neutrality. Hospitals can 

receive outlier payments for brachytherapy sources if the costs of furnishing 

brachytherapy sources meet the criteria for outlier payment specified at 

42 CFR 419.43(d). In addition, implementation of prospective payment for 

brachytherapy sources provides opportunities for eligible hospitals to receive additional 

payments in CY 2013 under certain circumstances through the 7.1 percent rural 

adjustment, as described in section II.E. of the proposed rule and this final rule with 

comment period. 
CMS-1589-FC 129 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

We referred readers to Addendum B to the proposed rule (which was available via 

the Internet on the CMS Web site) for the proposed CY 2013 payment rates for 

brachytherapy sources, identified with status indicator “U.” We invited public comment 

on this proposed policy and also requested recommendations for new HCPCS codes to 

describe new brachytherapy sources consisting of a radioactive isotope, including a 

detailed rationale to support recommended new sources. In the proposed rule, we 

provided an appropriate address for receipt of these recommendations; the address is 

repeated at the end of this section. We indicated that we will continue to add new 

brachytherapy source codes and descriptors to our systems for payment on a quarterly 

basis. 

Comment: A number of commenters opposed our proposal to base the payment 

for brachytherapy sources on geometric mean costs, while other commenters supported 

the proposal. Commenters also addressed other payment issues related to brachytherapy: 

First, some commenters claimed that there are longstanding problems with OPPS 

claims data for brachytherapy source payment. For example, commenters stated that high 

dose rate (HDR) sources can be used to treat multiple patients because they decay over a 

90-day period. The commenters stated that, as a result, the per source cost depends on 

the number of patients treated as well as the number of treatments and the intensity of the 

treatments within the 90-day period, making adequate payment for all hospitals difficult. 

Commenters asserted, as further examples of problems with our claims data, that our 

claims data continue to show a huge variation in unit costs on claims across hospitals; 

that more than half of the brachytherapy APCs have proposed payment rates based on 50 
CMS-1589-FC 130 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

or fewer hospitals; and that our claims data contain rank order anomalies between 

high-activity palladium-103 (HCPCS code C2635) and low-activity palladium-103 

sources (HCPCS codes 2640 and C2641), claiming that high-activity palladium-103 

always costs more than low-activity palladium-103. 

Second, commenters stated that brachytherapy source payments proposed for 

CY 2013 are unstable and fluctuate significantly from CY 2012 levels. They expressed 

concern about unpredictable changes in payment rates for brachytherapy sources from 

year to year, stating that proposed rates for some sources would change significantly, 

ranging from a decrease of 14.2 percent for HCPCS code C2643 (Brachytherapy source, 

non-stranded, cesium-131, per source) to an increase of 216 percent for HCPCS code 

C1716 (Brachytherapy source, non-stranded, gold-198, per source). 

Response: In response to the commenters’ concerns regarding the proposal to 

base payment for brachytherapy sources on geometric mean cost, we refer readers to 

section II.A.2.f. of this final rule with comment period, where we address the use of the 

geometric means methodology for determining OPPS payments for brachytherapy 

sources for CY 2013. 

We disagree with the commenters who stated that the CY 2013 proposed payment 

rates for brachytherapy sources based on geometric mean cost would change payment 

levels significantly from the CY 2012 payment rates. While the commenters are correct 

that the proposed CY 2013 payment rate changes range from -14.2 to 216 percent, when 

we compare the CY 2013 proposed payment rates to the CY 2012 final payment rates, we 

find that 10 of the 16 brachytherapy source codes will receive increases or decreases of 
CMS-1589-FC 131 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

less than 10 percent, indicating stability for the majority of the brachytherapy sources. 

Moreover, when we compare the CY 2013 proposed payment rates to the CY 2012 final 

payment rates, we find that 10 of the 16 brachytherapy source codes will receive 

increased payment amounts per source, while 6 of the 16 codes will receive decreased 

payments per source. 

With regard to the commenters who articulated concerns about perceived 

longstanding problems such as variability of brachytherapy source payment rates (which 

they have repeatedly opined in prior years), we are pleased that, unlike in past years, the 

commenters did not express objection to prospective payment for brachytherapy sources. 

As we stated previously (72 FR 66782, 74 FR 60534, 75 FR 71979, and 76 FR 74161), 

we believe that our per-source payment methodology specific to each source’s 

radioisotope, radioactive intensity, and stranded or non-stranded configuration, 

supplemented by payment based on the number of sources used in a specific clinical case, 

adequately accounts for the major expected sources of variability across treatments. As 

we also explained previously (72 FR 66782, 74 FR 60535, and 75 FR 71979), a 

prospective payment system such as the OPPS relies on the concept of averaging, where 

the payment may be more or less than the estimated cost of providing a service for a 

particular patient, but with the exception of outlier cases, it is adequate to ensure access 

to appropriate care. In the case of brachytherapy sources for which the law requires 

separate payment groups, without packaging, the costs of these individual items could be 

expected to show greater variation than some other APCs under the OPPS because higher 

variability in costs for some component items and services is not balanced with lower 
CMS-1589-FC 132 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

variability in costs for other component items and services and because relative weights 

are typically estimated using a smaller set of claims. 

As we have stated previously (75 FR 71979 and 76 FR 74161), under the budget 

neutral provision for the OPPS, it is the relativity of costs of services, not their absolute 

costs, that is important, and we believe that brachytherapy sources are appropriately paid 

according to the standard OPPS payment approach. Furthermore, some sources may 

have costs and payment rates based on 50 or fewer hospitals because it is not uncommon 

for OPPS prospective payment rates to be based on claims from a relatively small number 

of hospitals that furnished the service in the year of claims data available for the OPPS 

update year. Fifty hospitals may report hundreds of brachytherapy source claims for 

many cases and comprise the universe of hospitals using particular low-volume sources, 

for which we are required to pay separately by statute. Further, our methodology for 

estimating costs for brachytherapy sources utilizes all line-item charges for those sources, 

which allows us to use all hospital reported charge and estimated cost information to set 

payment rates for these items. Therefore, no brachytherapy source claims are lost. We 

believe that prospective payment rates based on claims from those hospitals furnishing a 

particular source appropriately reflect the cost of that source for hospitals. 

In the case of high and low activity iodine-125 sources, our claims data show that 

the hospitals’ relative costs for the high activity source as reported on hospital claims and 

in cost report data are greater than the low activity sources, as we have noticed in the 

past. However, this relationship is reversed for palladium-103 sources, as a few 

commenters pointed out. As we have stated in the past (75 FR 71979 and 76 FR 74162), 
CMS-1589-FC 133 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

we do not have any information about the expected cost differential between high and 

low activity sources of various isotopes other than what is available in our claims and 

hospital cost report data. For high activity palladium-103, only 8 hospitals reported this 

service in CY 2010, compared to 139 and 203 hospitals for low-activity palladium-103 

sources described by HCPCS codes C2640 and C2641, respectively. As we stated 

regarding this issue in the CYs 2010, 2011, and 2012 OPPS/ASC final rules with 

comment period (74 FR 60535, 75 FR 71979, and 76 FR 74162, respectively), it is clear 

that fewer hospitals furnished high-activity palladium-103 sources than low-activity 

palladium-103 sources, and we expect that the hospital cost distribution for those 

hospitals could be different than the cost distribution of the large number of hospitals 

reporting the low-activity sources. These varied cost distributions clearly contribute to 

the observed relationship in costs between the different types of sources. However, we 

see no reason why our standard ratesetting methodology for brachytherapy sources that 

relies on all claims from all hospitals furnishing brachytherapy sources will not yield 

valid costs for those hospitals furnishing the different brachytherapy sources upon which 

CY 2013 prospective payments rates are based. 

As we indicated in the CYs 2011 and 2012 OPPS/ASC final rules with comment 

period (75 FR 71980 and 76 FR 74162, respectively), we agree that high dose rate (HDR) 

brachytherapy sources such as HDR irirdium-192 have a fixed active life and must be 

replaced every 90 days; as a result, hospitals’ per-treatment cost for the source would be 

dependent on the number of treatments furnished per source. The source cost must be 

amortized over the life of the source. Therefore, in establishing their charges for HDR 
CMS-1589-FC 134 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

iridium-192, we expect hospitals to project the number of treatments that would be 

provided over the life of the source and establish their charges for the source accordingly, 

as we have stated previously (72 FR 66783, 74 FR 60535, 75 FR 71980, and 

76 FR 74162). For most of these OPPS services, our practice is to establish prospective 

payment rates based on the costs from hospitals’ claims data to provide incentives for 

efficient and cost effective delivery of these services. 

Comment: One commenter requested that CMS establish appropriate payment for 

HCPCS code A9527 (Iodine, I-125, sodium iodide solution, therapeutic, per millicurie 

(mCi)), claiming that the source has not been available for patients from June 2010 to 

July 2012, when it became available for purchase by providers. The commenter stated 

that the claims from two hospitals that reported HCPCS code A9527 are erroneous. The 

commenter requested that CMS use external data based upon actual hospital invoices to 

assign payment for HCPCS code A9527, which, according to the commenter, cost 

hospitals in CY 2012 $28.00 per millicurie (mCi), which is above the proposed payment 

rate of $20.86. 

Response: We have been paying for I-125 brachytherapy solution since 2003, 

both as HCPCS code A9527 and its predecessor code in the OPPS, C2632 

(Brachytherapy solution, iodine-125, per mCi). Our claims data over the period of 2004 

through 2011 show a consistent range of costs of $16.83 to $29.42 per mCi, with several 

thousand units of claims in most of those years. The claims data for HCPCS code A9527 

reflect claims for 8 providers, rather than 2 as indicated by the commenter. Therefore, we 

believe that we are obtaining adequate and consistent data on HCPCS code A9527. We 
CMS-1589-FC 135 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

will maintain our use of claims data for HCPCS code A9527 in our OPPS ratesetting for 

CY 2013. 

Comment: One commenter requested that CMS add a new C-code and APC for a 

high-activity cesium-131 brachytherapy source, which is designed to generate isotropic 

emission of therapeutic radiation and to be used primarily for the treatment of head and 

neck and eye cancer. 

Response: We appreciate the commenter informing us of a new high-activity 

cesium-131 source. However, our evaluation process of new sources for addition to our 

set of codes is beyond the scope of this rulemaking. As we state elsewhere in this final 

rule with comment period, and in previous rules, such as the CY 2012 OPPS/ASC final 

rule with comment period (76 FR 74163), we ask parties to submit recommendations to 

us for new HCPCS codes to describe new brachytherapy sources consisting of a 

radioactive isotope, including a detailed rationale to support recommended new sources. 

We suggest to the commenter to send its recommendation for this new brachytherapy 

source, along with the detailed rationale to support the new source, to the address 

provided at the end of this section. We will continue to add new brachytherapy source 

codes and descriptors to our systems on a quarterly basis. 

Comment: One commenter supported CMS’ proposal to continue the policy of 

paying for new sources for which we have no claims data, with prospective payment rates 

based on the consideration of external data as well as other relevant information. The 

commenter expressed appreciation for CMS’ efforts to establish appropriate payment 
CMS-1589-FC 136 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

rates for brachytherapy sources in a timely manner, and recommended that CMS finalize 

this proposal. 

Response: We appreciate the support and recognition of our efforts to provide 

appropriate and timely payment. We are finalizing our proposal to pay for new sources 

using external data and other relevant information. 

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

proposal to pay for brachytherapy sources at prospective payment rates based on their 

source-specific geometric mean costs for CY 2013. We refer readers to Addendum B to 

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

site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html) for the final CY 2013 payment rates for 

brachytherapy sources, identified with status indicator “U.” We also are finalizing our 

proposals to continue our policies regarding payment for NOS codes for stranded and 

non-stranded sources and new brachytherapy sources for which we have no claims data. 

Specifically, we are finalizing our proposals to continue payment for stranded and nonstranded NOS codes, HCPCS codes C2698 and C2699, at a rate equal to the lowest 

stranded or non-stranded prospective payment for such sources, respectively, as discussed 

in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66786); and our 

proposal to assign HCPCS codes for new brachytherapy sources to their own APCs, with 

payment rates based on consideration of external data and other relevant information, in 

the absence of claims data. Once claims data are available, our standard ratemaking 

process will be applied to the calculation of the cost for the new brachytherapy source. 
CMS-1589-FC 137 

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: 

This information has not been publicly disclosed and may be privileged and confidential. It is for internal 

government use only and must not be disseminated, distributed, or copied to persons not authorized to 

receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law. 

Consistent with our policy regarding APC payments made on a prospective basis, 

we are finalizing our proposal to subject the cost of brachytherapy sources to the outlier 

provision of section 1833(t)(5) of the Act, and also to subject brachytherapy source 

payment relative weights to scaling for purposes of budget neutrality. 

As stated in the proposed rule (77 FR 45087), we continue to invite hospitals and 

other parties to submit recommendations to us for new HCPCS codes to describe new 

brachytherapy sources consisting of a radioactive isotope, including a detailed rationale 

to support recommended new sources. Such recommendations should be directed to the 

Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare and Medicaid 

Services, 7500 Security Boulevard, Baltimore, MD 21244. We will continue to add new 

brachytherapy source codes and descriptors to our systems for payment on a quarterly 

basis. 
CMS-1589-FC 138 

e. Calculation of Composite APC Criteria-Based Costs 

As discussed in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals 

to provide necessary, high quality care and as efficiently as possible. For CY 2008, we 

developed composite APCs to provide a single payment for groups of services that are 

typically performed together during a single clinical encounter and that result in the 

provision of a complete service. Combining payment for multiple, independent services 

into a single OPPS payment in this way enables hospitals to manage their resources with 

maximum flexibility by monitoring and adjusting the volume and efficiency of services 

themselves. An additional advantage to the composite APC model is that we can use data 

from correctly coded multiple procedure claims to calculate payment rates for the 

specified combinations of services, rather than relying upon single procedure claims 

which may be low in volume and/or incorrectly coded. Under the OPPS, we currently 

have composite policies for extended assessment and management services, low dose rate 

(LDR) prostate brachytherapy, cardiac electrophysiologic evaluation and ablation 

services, mental health services, multiple imaging services, and cardiac resynchronization 

therapy services. We refer readers to the CY 2008 OPPS/ASC final rule with comment 

period for a full discussion of the development of the composite APC methodology 

(72 FR 66611 through 66614 and 66650 through 66652) and the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 74163) for more recent background. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45087 through 45094), we 

proposed for CY 2013 to continue our composite policies for extended assessment and 
CMS-1589-FC 139 

management services, LDR prostate brachytherapy, cardiac electrophysiologic evaluation 

and ablation services, mental health services, multiple imaging services, and cardiac 

resynchronization therapy services, as discussed in sections II.A.2.e.(1), II.A.2.e.(2), 

II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6), respectively, of the proposed rule. 

Comment: One commenter encouraged CMS to create payments that drive 

hospitals to develop low cost deliveries of care instead of rewarding them for excess 

deliveries of care, such as beneficiaries receiving up to three CT scans in a single 

emergency department visit. 

Response: We agree with the commenter that it is important to create payment 

methodologies that encourage efficiency. As we have stated in the past, we believe that 

composite APCs enable hospitals to manage their resources with maximum flexibility by 

monitoring and adjusting the volume and efficiency of services themselves. With respect 

to CT scans in particular, as we discuss in section II.A.2.e.(5) of this final rule with 

comment period, we provide a single payment each time a hospital bills more than one 

CT on the same date of service. 

The final composite policies for extended assessment and management services, 

LDR prostate brachytherapy, cardiac electrophysiologic evaluation and ablation services, 

mental health services, multiple imaging services, and cardiac resynchronization therapy 

services are discussed in the following sections (II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), 

II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6), respectively) of this final rule with comment 

period. 
CMS-1589-FC 140 

(1) Extended Assessment and Management Composite APCs (APCs 8002 and 8003) 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45088), we proposed to 

continue to include composite APC 8002 (Level I Extended Assessment and 

Management Composite) and composite APC 8003 (Level II Extended Assessment and 

Management Composite) in the OPPS for CY 2013. Beginning in CY 2008, we created 

these two composite APCs to provide payment to hospitals in certain circumstances when 

extended assessment and management of a patient occur (an extended visit). In most 

circumstances, observation services are supportive and ancillary to the other services 

provided to a patient. In the circumstances when observation care is provided in 

conjunction with a high level visit or direct referral and is an integral part of a patient’s 

extended encounter of care, payment is made for the entire care encounter through one of 

the two composite APCs as appropriate. We refer readers to the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 74163 through 74165) for a full discussion of this 

longstanding policy. 

For CY 2013, we proposed to continue the extended assessment and management 

composite APC payment methodology and criteria for APCs 8002 and 8003 that we 

finalized for CYs 2009 through 2012. We continue to believe that the composite APCs 

8002 and 8003 and related policies provide the most appropriate means of paying for 

these services. We also proposed to calculate the costs for APCs 8002 and 8003 using 

the same methodology that we used to calculate the costs for composite APCs 8002 and 

8003 for the CY 2008 OPPS (72 FR 66649). That is, we proposed to use all single and 

“pseudo” single procedure claims from CY 2011 that met the criteria for payment of each 
CMS-1589-FC 141 

composite APC and apply the standard packaging and trimming rules to the claims before 

calculating the CY 2013 costs. The proposed CY 2013 cost resulting from this 

methodology for composite APC 8002 was approximately $446, which was calculated 

from 17,072 single and “pseudo” single claims that met the required criteria. The 

proposed CY 2013 cost for composite APC 8003 was approximately $813, which was 

calculated from 255,231 single and “pseudo” single claims that met the required criteria. 

We did not receive any public comments on this proposal. We are finalizing our 

proposed policy, without modification, to calculate the costs for APCs 8002 and 8003 

using the same methodology that we used to calculate the costs for composite APCs 8002 

and 8003 for the CY 2008 OPPS (72 FR 66649). The final CY 2013 cost resulting from 

this methodology for composite APC 8002 is approximately $453, which was calculated 

from 19,028 single and “pseudo” single claims that met the required criteria. The final 

CY 2013 cost for composite APC 8003 is approximately $821, which was calculated 

from 284,861 single and “pseudo” single claims that met the required criteria. 

At its August 2012 meeting, the Advisory Panel on Hospital Outpatient Payment 

(the Panel) recommended that CMS continue to report clinic/emergency department visit 

and observation claims data and, if CMS identifies changes in patterns of utilization or 

cost, that CMS bring those issues to the Visits and Observation Subcommittee. 

Additionally, the Panel recommended that CMS examine the costs and frequency for 

Level I and Level II Extended Assessment and Management Composite APCs associated 

with greater than 24 hours of observation, if available, and report the findings to the 

Visits and Observation Subcommittee. The Panel recommended that Scott Manaker, 
CMS-1589-FC 142 

M.D., Ph.D., be named the chair of the Visits and Observation Subcommittee. The Panel 

recommended that the work of the Visits and Observation Subcommittee continue. We 

are accepting these recommendations and will provide the requested data to the Panel at a 

future meeting. 

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

LDR prostate brachytherapy is a treatment for prostate cancer in which hollow 

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

radioactive sources into the prostate through the needles/catheters. At least two CPT 

codes are used to report the composite treatment service because there are separate codes 

that describe placement of the needles/catheters and the application of the brachytherapy 

sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate 

for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 

(Interstitial radiation source application; complex), which are generally present together 

on claims for the same date of service in the same operative session. In order to base 

payment on claims for the most common clinical scenario, and to further our goal of 

providing payment under the OPPS for a larger bundle of component services provided in 

a single hospital encounter, beginning in CY 2008, we began providing a single payment 

for LDR prostate brachytherapy when the composite service, reported as CPT codes 

55875 and 77778, is furnished in a single hospital encounter. We based the payment for 

composite APC 8001 (LDR Prostate Brachytherapy Composite) on the cost derived from 

claims for the same date of service that contain both CPT codes 55875 and 77778 and 

that do not contain other separately paid codes that are not on the bypass list. We refer 
CMS-1589-FC 143 

readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66652 through 

66655) for a full history of OPPS payment for LDR prostate brachytherapy and a detailed 

description of how we developed the LDR prostate brachytherapy composite APC. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45088 through 45089), we 

proposed for CY 2013 to continue to pay for LDR prostate brachytherapy services using 

the composite APC methodology proposed and implemented for CY 2008 through 

CY 2012. That is, we proposed to use CY 2011 claims on which both CPT codes 55875 

and 77778 were billed on the same date of service with no other separately paid 

procedure codes (other than those on the bypass list) to calculate the payment rate for 

composite APC 8001. Consistent with our CY 2008 through CY 2012 practice, we 

proposed not to use the claims that met these criteria in the calculation of the costs for 

APC 0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 

0651 (Complex Interstitial Radiation Source Application), the APCs to which CPT codes 

55875 and 77778 are assigned, respectively. We proposed to continue to calculate the 

costs for APCs 0163 and 0651 using single and “pseudo” single procedure claims. We 

stated that we believe that this composite APC contributes to our goal of creating hospital 

incentives for efficiency and cost containment, while providing hospitals with the most 

flexibility to manage their resources. We also stated that we continue to believe that data 

from claims reporting both services required for LDR prostate brachytherapy provide the 

most accurate cost upon which to base the composite APC payment rate. 

Using a partial year of CY 2011 claims data available for the CY 2013 proposed 

rule, we were able to use 650 claims that contained both CPT codes 55875 and 77778 to 
CMS-1589-FC 144 

calculate the cost upon which the proposed CY 2013 payment for composite APC 8001 

was based. The proposed cost for composite APC 8001 for CY 2013 was approximately 

$3,362. 

Comment: A few commenters supported the proposed payment methodology and 

policy for APC 8001. The commenters also supported the continued use of the LDR 

prostate brachytherapy composite APC methodology and the proposed increase in 

payment for CY 2013. 

Response: We appreciate the commenters’ support. 

We are finalizing, without modification, our proposed policy for composite 

APC 8001. Using a full year of CY 2011 claims data available for this CY 2013 final 

rule with comment period, we were able to use 677 claims that contained both CPT codes 

55875 and 77778 to calculate the cost upon which the final CY 2013 payment for 

composite APC 8001 is based. The final cost for composite APC 8001 for CY 2013 is 

approximately $3,348. 

(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC (APC 8000) 

Effective January 1, 2008, we established APC 8000 (Cardiac Electrophysiologic 

Evaluation and Ablation Composite) to pay for a composite service made up of at least 

one specified electrophysiologic evaluation service and one specified electrophysiologic 

ablation service. Correctly coded claims for these services often include multiple codes 

for component services that are reported with different CPT codes and that, prior to 

CY 2008, were always paid separately through different APCs (specifically, APC 0085 

(Level II Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm Focus), 
CMS-1589-FC 145 

and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). Calculating a 

composite APC for these services allowed us to utilize many more claims than were 

available to establish the individual APC costs for these services, and advanced our stated 

goal of promoting hospital efficiency through larger payment bundles. In order to 

calculate the cost upon which the payment rate for composite APC 8000 is based, we 

used multiple procedure claims that contained at least one CPT code from Group A for 

evaluation services and at least one CPT code from Group B for ablation services 

reported on the same date of service on an individual claim. Table 9 in the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66656) identified the CPT codes that 

are assigned to Groups A and B. For a full discussion of how we identified the Group A 

and Group B procedures and established the payment rate for the cardiac 

electrophysiologic evaluation and ablation composite APC, we refer readers to the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66655 through 66659). 

Where a service in Group A is furnished on a date of service that is different from the 

date of service for a CPT code in Group B for the same beneficiary, payments are made 

under the appropriate single procedure APCs and the composite APC does not apply. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45089), we proposed for 

CY 2013 to continue to pay for cardiac electrophysiologic evaluation and ablation 

services using the composite APC methodology proposed and implemented for CY 2008 

through CY 2012. We stated that we continue to believe that the cost for these services 

calculated from a high volume of correctly coded multiple procedure claims would result 

in an accurate and appropriate proposed payment for cardiac electrophysiologic 
CMS-1589-FC 146 

evaluation and ablation services when at least one evaluation service is furnished during 

the same clinical encounter as at least one ablation service. Consistent with our practice 

since CY 2008, we proposed not to use the claims that met the composite payment 

criteria in the calculation of the costs for APCs 0085 and 0086, to which the CPT codes 

in both Groups A and B for composite APC 8000 are otherwise assigned. We proposed 

that the costs for APCs 0085 and 0086 would continue to be calculated using single 

procedure claims. For CY 2013, using a partial year of CY 2011 claims data available 

for the proposed rule we were able to use 11,358 claims containing a combination of 

Group A and Group B CPT codes to calculate a proposed cost of approximately $11,458 

for composite APC 8000. 

Subsequent to the publication of the CY 2013 OPPS/ASC proposed rule, the 

AMA’s CPT Editorial Panel created five new CPT codes describing cardiac 

electrophysiologic evaluation and ablation services, to be effective January 1, 2013. 

These five new codes are: 

● CPT code 93653 (Comprehensive electrophysiologic evaluation including 

insertion and repositioning of multiple electrode catheters with induction or attempted 

induction of an arrhythmia with right atrial pacing and recording, right ventricular pacing 

and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; 

with treatment of supraventricular tachycardia by ablation of fast or slow atrioventricular 

pathway, accessory atrioventricular connection, cavo-tricuspid isthmus or other single 

atrial focus or source of atrial re-entry); 
CMS-1589-FC 147 

● CPT code 93654 (Comprehensive electrophysiologic evaluation including 

insertion and repositioning of multiple electrode catheters with induction or attempted 

induction of an arrhythmia with right atrial pacing and recording, right ventricular pacing 

and recording, His recording with intracardiac catheter ablation of arrhythmogenic focus; 

with treatment of ventricular tachycardia or focus of ventricular ectopy including 

intracardiac electrophysiologic 3D mapping, when performed, and left ventricular pacing 

and recording, when performed); 

● CPT code 93655 (Intracardiac catheter ablation of a discrete mechanism of 

arrhythmia which is distinct from the primary ablated mechanism, including repeat 

diagnostic maneuvers, to treat a spontaneous or induced arrhythmia (List separately in 

addition to code for primary procedure)); 

● CPT code 93656 (Comprehensive electrophysiologic evaluation including 

transseptal catheterizations, insertion and repositioning of multiple electrode catheters 

with induction or attempted induction of an arrhythmia with atrial recording and pacing, 

when possible, right ventricular pacing and recording, His bundle recording with 

intracardiac catheter ablation of arrhythmogenic focus, with treatment of atrial fibrillation 

by ablation by pulmonary vein isolation); and 

● CPT code 93657 (Additional linear or focal intracardiac catheter ablation of the 

left or right atrium for treatment of atrial fibrillation remaining after completion of 

pulmonary vein isolation (List separately in addition to code for primary procedure)). 

The CPT Editorial Panel also deleted two electrophysiologic ablation codes, CPT 

code 93651 (Intracardiac catheter ablation of arrhythmogenic focus; for treatment of 
CMS-1589-FC 148 

supraventricular tachycardia by ablation of fast or slow atrioventricular pathways, 

accessory atrioventricular connections or other atrial foci, singly or in combination) and 

CPT code 93652 (Intracardiac catheter ablation of arrhythmogenic focus; for treatment of 

ventricular tachycardia), effective January 1, 2013. 

Our standard process for dealing with new CPT codes effective on January 1 for 

the upcoming calendar year is to assign each code to the APC that we believe contains 

services that are comparable with respect to clinical characteristics and resources required 

to furnish the service. The new CPT code is given a comment indicator of ‘‘NI’’ in 

Addendum B to the final rule with comment period to identify it as a new interim APC 

assignment for the new year and the APC assignment for the new CPT codes is then open 

to public comment for 60 days following the publication of the final rule with comment 

period. 

New CPT codes 93653, 93654, and 93656 are primary electrophysiologic services 

that encompass evaluation as well as ablation, while new CPT codes 93655 and 93657 

are add-on codes. Because CPT codes 93653, 93654, and 93656 already encompass both 

evaluation and ablation services, we are assigning them to composite APC 8000 with no 

further requirement to have another electrophysiologic service from either Group A or 

Group B furnished on the same date of service, and we are assigning them interim status 

indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B to 

this final rule with comment period. To facilitate implementing this policy, we are 

assigning CPT codes 93653, 93654, and 93656 to a new Group C, which will be paid at 

the composite APC 8000 payment rate. (We note that we will use single and “pseudo” 
CMS-1589-FC 149 

single claims for CPT codes 93653, 93654, and 93656 when they become available for 

calculating the costs upon which the payment rate for APC 8000 will be based in future 

ratesetting.) Because CPT codes 93655 and 93657 are dependent services that may only 

be performed as ancillary services to the primary CPT codes 93653, 93654, and 93656, 

we believe that packaging CPT codes 93655 and 93657 with the primary procedures is 

appropriate, and we are assigning them interim status indicator “N.” Because the CPT 

Editorial Panel deleted CPT codes 93651 and 93652, effective January 1, 2013, we are 

deleting them from the Group B code list, leaving only CPT 93650 (Intracardiac catheter 

ablation of atrioventricular node function, atrioventricular conduction for creation of 

complete heart block, with or without temporary pacemaker placement) in Group B at 

this time. 

As is our usual practice for new CPT codes that were not available at the time of 

the proposed rule, our treatment of new CPT codes 93653, 93654, 93655, 93656, and 

93657 is open to public comment for a period of 60 days following the publication of this 

final rule with comment period. 

We did not receive any public comments on our proposal to continue to pay for 

cardiac electrophysiologic evaluation and ablation services using the composite APC 

methodology. We are finalizing our proposed policy for CY 2013 to continue to pay for 

cardiac electrophysiologic evaluation and ablation services using the composite APC 

methodology proposed and implemented for CY 2008 through CY 2012. We note that 

we are modifying our proposal for CY 2013 to reflect the CPT coding changes as 

discussed above. For CY 2013, using a full year of CY 2011 claims data available for 
CMS-1589-FC 150 

this final rule with comment period, we were able to use 12,235 claims containing a 

combination of Group A and Group B CPT codes to calculate a final cost of 

approximately $11,466 for composite APC 8000. 

Table 4 below lists the groups of procedures upon which we will base composite 

APC 8000 for CY 2013. 

TABLE 4.—GROUPS OF CARDIAC ELECTROPHYSIOLOGIC 

EVALUATION AND ABLATION PROCEDURES UPON WHICH COMPOSITE 

APC 8000 IS BASED 

Codes Used in Combinations: At Least 

One in Group A and One in Group B, or 

At Least One in Group C 

CY 2013 

CPT Code 

Single Code 

CY 2013 

APC 

CY 2013 SI 

(Composite) 

Group A

Comprehensive electrophysiologic 

evaluation with right atrial pacing and 

recording, right ventricular pacing and 

recording, His bundle recording, including 

insertion and repositioning of multiple 

electrode catheters, without induction or 

attempted induction of arrhythmia 93619 0085 Q3 

Comprehensive electrophysiologic 

evaluation including insertion and 

repositioning of multiple electrode catheters 

with induction or attempted induction of 

arrhythmia; with right atrial pacing and 

recording, right ventricular pacing and 

recording, His bundle recording 93620 0085 Q3 

Group B

Intracardiac catheter ablation of 

atrioventricular node function, 

atrioventricular conduction for creation of 

complete heart block, with or without 

temporary pacemaker placement 93650 0085 Q3 

Group C 
CMS-1589-FC 151 

Comprehensive electrophysiologic 

evaluation including insertion and 

repositioning of multiple electrode catheters 

with induction or attempted induction of an 

arrhythmia with right atrial pacing and 

recording, right ventricular pacing and 

recording, His recording with intracardiac 

catheter ablation of arrhythmogenic focus; 

with treatment of supraventricular 

tachycardia by ablation of fast or slow 

atrioventricular pathway, accessory 

atrioventricular connection, cavo-tricuspid 

isthmus or other single atrial focus or source 

of atrial re-entry 93653 8000 Q3 

Comprehensive electrophysiologic 

evaluation including insertion and 

repositioning of multiple electrode catheters 

with induction or attempted induction of an 

arrhythmia with right atrial pacing and 

recording, right ventricular pacing and 

recording, His recording with intracardiac 

catheter ablation of arrhythmogenic focus; 

with treatment of ventricular tachycardia or 

focus of ventricular ectopy including 

intracardiac electrophysiologic 3D mapping, 

when performed, and left ventricular pacing 

and recording, when performed 93654 8000 Q3 

Comprehensive electrophysiologic 

evaluation including transseptal 

catheterizations, insertion and repositioning 

of multiple electrode catheters with 

induction or attempted induction of an 

arrhythmia with atrial recording and pacing, 

when possible, right ventricular pacing and 

recording, His bundle recording with 

intracardiac catheter ablation of 

arrhythmogenic focus, with treatment of 

atrial fibrillation by ablation by pulmonary 

vein isolation 93656 8000 Q3 

(4) Mental Health Services Composite APC (APC 0034) 

(a) Mental Health Services Composite Policy 
CMS-1589-FC 152 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45090), we proposed for 

CY 2013 to continue our longstanding policy of limiting the aggregate payment for 

specified less resource-intensive mental health services furnished on the same date to the 

payment for a day of partial hospitalization provided by a hospital, which we consider to 

be the most resource-intensive of all outpatient mental health treatments for CY 2013. 

We refer readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18452 

to 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 proposed that when the aggregate payment for specified mental 

health services provided by one hospital to a single beneficiary on one date of service 

based on the payment rates associated with the APCs for the individual services exceeds 

the maximum per diem partial hospitalization payment for a hospital, those specified 

mental health services would be assigned to APC 0034 (Mental Health Services 

Composite). We proposed to continue to set the payment rate for APC 0034 at the same 

rate as we pay for APC 0176 (Level II Partial Hospitalization (4 or more services) for 

Hospital-Based PHPs), which is the maximum partial hospitalization per diem payment 

for a hospital, and that the hospital would continue to be paid one unit of APC 0034. 

Under this policy, the I/OCE would continue to determine whether to pay for these 

specified mental health services individually or make a single payment at the same rate as 

the APC 0176 per diem rate for partial hospitalization for all of the specified mental 

health services furnished by the hospital on that single date of service. 
CMS-1589-FC 153 

We did not receive any public comments on this proposal. Therefore, we are 

finalizing our CY 2013 proposal, without modification, to continue our longstanding 

policy of limiting the aggregate payment for specified less resource-intensive mental 

health services furnished on the same date by a hospital to the payment for APC 0176, 

which is the maximum partial hospitalization per diem payment for a hospital for 

CY 2013. 

(b) Coding Changes 

Subsequent to the publication of the CY 2013 OPPS/ASC proposed rule, the 

AMA’s CPT Editorial Panel deleted 16 psychotherapy and psychiatric diagnostic 

evaluation CPT codes to which the mental health services composite APC methodology 

applies, and replaced them with 12 new CPT codes, to be effective January 1, 2013. The 

new and deleted CPT codes are included in Table 5 below. Our standard process for 

addressing new CPT codes effective on January 1 for the upcoming calendar year is to 

assign each code to the APC that we believe contains services that are comparable with 

respect to clinical characteristics and resources required to furnish the service. The new 

CPT code is given a comment indicator of “NI” in Addendum B to the final rule with 

comment period to identify it as a new interim APC assignment for the new year and the 

APC assignment for the new codes is then open to public comment for 60 days following 

the publication of the final rule with comment period. 

Because the new mental health CPT codes in Table 5 replace CPT codes that are 

subject to the mental health composite APC, and because all of the HCPCS codes in the 

respective APCs to which these codes are assigned for CY 2013 are subject to the mental 
CMS-1589-FC 154 

health composite APC, the new separately payable mental health CPT codes also will be 

assigned to composite APC 0034 with an interim status indicator of “Q3” (Codes that 

may be paid through a composite APC) in Addendum B to this final rule with comment 

period. The single code APC assignment, the composite APC assignment, and the 

interim status indicator assignment for each of these new CPT codes are included in 

Table 5 below. As discussed above for new CPT codes that were not available at the 

time of the proposed rule, our treatment of these new mental health CPT codes is open to 

public comment for a period of 60 days following the publication of this final rule with 

comment period. The current single code APC assignments for all of the HCPCS codes 

to which the mental health composite APC policy applies, along with their composite 

APC assignment and their APC assignments when the composite methodology does not 

apply, can be found in Addendum M to this final rule with comment period (which is 

available via the Internet on the CMS Web site). 
CMS-1589-FC 155 

TABLE 5.--NEW AND DELETED PSYCHOTHERAPY AND 

PSYCHIATRIC DIAGNOSTIC EVALUATION CPT CODES FOR CY 2013 

Deleted CY 2012 Psychotherapy and Psychiatric Diagnostic Evaluation CPT Codes 

HCPCS 

Code 

CY 2012 Short Descriptor CY 

2012 

CI 

CY 

2012 

SI 

CY 2012 

Single 

Code APC 

Assignment 

CY 2012 

Composite 

APC 

Assignment

90801 Psy dx interview Q3 0323 0034 

90802 Intac psy dx interview Q3 0323 0034 

90804 Psytx office 20-30 min Q3 0322 0034 

90805 Psytx off 20-30 min w/e&m Q3 0322 0034 

90806 Psytx off 45-50 min Q3 0323 0034 

90807 Psytx off 45-50 min w/e&m Q3 0323 0034 

90808 Psytx office 75-80 min Q3 0323 0034 

90809 Psytx off 75-80 w/e&m Q3 0323 0034 

90810 Intac psytx off 20-30 min Q3 0322 0034 

90811 Intac psytx 20-30 w/e&m Q3 0322 0034 

90812 Intac psytx off 45-50 min Q3 0323 0034 

90813 Intac psytx 45-50 min 

w/e&m Q3 0323 0034 

90814 Intac psytx off 75-80 min Q3 0323 0034 

90815 Intac psytx 75-80 w/e&m Q3 0323 0034 

90857 Intac group psytx Q3 0325 0034 

90862 Medication management Q3 0605 0034 

New CY 2013 Psychotherapy And Psychiatric Diagnostic Evaluation CPT Codes 

HCPCS 

Code 

CY 2013 Short Descriptor CY 

2013 

CI 

CY 

2013 

SI 

CY 2013 

Single 

Code APC 

Assignment 

CY 2013 

Composite 

APC 

Assignment

90785 Psytx complex interactive NI N N n/a 

90791 Psych diagnostic evaluation NI Q3 0323 0034 

90792 Psych diag eval w/med srvcs NI Q3 0323 0034 

90832 Psytx pt&/family 30 minutes NI Q3 0322 0034 

90833 

Psytx pt&/fam w/e&m 30 

min NI N n/a n/a 
CMS-1589-FC 156 

90834 Psytx pt&/family 45 minutes NI Q3 0323 0034 

90836 

Psytx pt&/fam w/e&m 45 

min NI N n/a n/a 

90837 Psytx pt&/family 60 minutes NI Q3 0323 0034 

90838 

Psytx pt&/fam w/e&m 60 

min NI N n/a n/a 

90839 Psytx crisis initial 60 min NI Q3 0323 0034 

90840 Psytx crisis ea addl 30 min NI N n/a n/a 

90863 

Pharmacologic mgmt 

w/psytx NI N n/a n/a 

(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) 

Effective January 1, 2009, we provide a single payment each time a hospital bills 

more than one imaging procedure within an imaging family on the same date of service, 

in order to reflect and promote the efficiencies hospitals can achieve when performing 

multiple imaging procedures during a single session (73 FR 41448 through 41450). We 

utilize three imaging families based on imaging modality for purposes of this 

methodology: (1) ultrasound; (2) computed tomography (CT) and computed 

tomographic angiography (CTA); and (3) magnetic resonance imaging (MRI) and 

magnetic resonance angiography (MRA). The HCPCS codes subject to the multiple 

imaging composite policy and their respective families are listed in Table 8 of the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74171 through 74175). 

While there are three imaging families, there are five multiple imaging composite 

APCs due to the statutory requirement under section 1833(t)(2)(G) of the Act that we 

differentiate payment for OPPS imaging services provided with and without contrast. 

While the ultrasound procedures included in the policy do not involve contrast, both 
CMS-1589-FC 157 

CT/CTA and MRI/MRA scans can be provided either with or without contrast. The five 

multiple imaging composite APCs established in CY 2009 are: 

● APC 8004 (Ultrasound Composite); 

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

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

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

● APC 8008 (MRI and MRA with Contrast Composite). 

We define the single imaging session for the “with contrast” composite APCs as 

having at least one or more imaging procedures from the same family performed with 

contrast on the same date of service. For example, if the hospital performs an MRI 

without contrast during the same session as at least one other MRI with contrast, the 

hospital will receive payment for APC 8008, the “with contrast” composite APC. 

We make a single payment for those imaging procedures that qualify for 

composite APC payment, as well as any packaged services furnished on the same date of 

service. The standard (noncomposite) APC assignments continue to apply for single 

imaging procedures and multiple imaging procedures performed across families. For a 

full discussion of the development of the multiple imaging composite APC methodology, 

we refer readers to the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68559 through 68569). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45090), we proposed to 

continue for CY 2013 to pay for all multiple imaging procedures within an imaging 

family performed on the same date of service using the multiple imaging composite APC 
CMS-1589-FC 158 

payment methodology. We stated that we continue to believe that this policy would 

reflect and promote the efficiencies hospitals can achieve when performing multiple 

imaging procedures during a single session. The proposed CY 2013 payment rates for 

the five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 

8007, and APC 8008) were based on costs calculated from a year of CY 2011 claims 

available for the CY 2013 OPPS/ASC proposed rule that qualified for composite payment 

under the current policy (that is, those claims with more than one procedure within the 

same family on a single date of service). To calculate the proposed costs, we used the 

same methodology that we used to calculate the final CY 2012 costs for these composite 

APCs, as described in the CY 2012 OPPS/ASC final rule with comment period (76 FR 

74169). The imaging HCPCS codes that we removed from the bypass list for purposes of 

calculating the proposed multiple imaging composite APC costs, pursuant to our 

established methodology (76 FR 74169), appeared in Table 11 of the proposed rule. 

We were able to identify approximately 1.0 million “single session”' claims out of 

an estimated 1.5 million potential composite cases from our ratesetting claims data, more 

than half of all eligible claims, to calculate the proposed CY 2013 costs for the multiple 

imaging composite APCs. 

Comment: One commenter supported the proposed payment rate for APC 8004, 

while acknowledging the increased proposed payment rate for the ultrasound composite 

and for other standard (non-composite) ultrasound procedures. 

Response: We appreciate the commenter’s support. 
CMS-1589-FC 159 

Comment: Several commenters supported CMS’ decision not to propose any new 

multiple imaging composite APCs, and requested that CMS analyze the potential impact 

on utilization and access for any newly proposed multiple imaging composite APCs, and 

to provide notice and seek comment for any new proposals. 

Response: We appreciate the feedback regarding the multiple imaging composite 

APCs. As is our usual practice, we will analyze our claims data and provide public notice 

and seek comment for any new proposals through our annual rulemaking process. 

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

proposed policy, without modification, to calculate multiple imaging composite APC 

costs for CY 2013 pursuant to our established methodology. For this final rule with 

comment period, we were able to identify approximately 1.0 million “single session” 

claims out of an estimated 1.6 million potential composite cases from our ratesetting 

claims data, more than half of all eligible claims, to calculate the final CY 2013 costs for 

the multiple imaging composite APCs. 

Table 6 below lists the HCPCS codes that will be subject to the multiple imaging 

composite policy and their respective families and approximate composite APC costs for 

CY 2013. Table 7 below lists the OPPS imaging family services that overlap with 

HCPCS codes on the CY 2013 bypass list. We note that we mistakenly did not include 

CPT code 70547 (Magnetic resonance angiography, neck; without contrast material(s)) 

on this list in the proposed rule. We are adding it to this list for the final rule with 

comment period because it is part of the MRI and MRA with and without contrast 

imaging family and is also on the CY 2013 bypass list. 
CMS-1589-FC 160 

TABLE 6.—OPPS IMAGING FAMILIES AND MULTIPLE IMAGING 

PROCEDURE COMPOSITE APCs 

Family 1 – Ultrasound 

CY 2013 APC 8004 (Ultrasound Composite) CY 2013 Approximate APC Cost = 

$202 

76604 Us exam, chest 

76700 Us exam, abdom, complete 

76705 Echo exam of abdomen 

76770 Us exam abdo back wall, comp 

76775 Us exam abdo back wall, lim 

76776 Us exam k transpl w/Doppler 

76831 Echo exam, uterus 

76856 Us exam, pelvic, complete 

76870 Us exam, scrotum 

76857 Us exam, pelvic, limited 

Family 2 - CT and CTA with and without Contrast 

CY 2013 APC 8005 (CT and CTA without 

Contrast Composite)* 

CY 2013 Approximate APC Cost = 

$412 

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 2013 APC 8006 (CT and CTA with 

Contrast Composite) 

CY 2013 Approximate APC Cost = 

$702 

70487 Ct maxillofacial w/dye 
CMS-1589-FC 161 

70460 Ct head/brain w/dye 

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

70481 Ct orbit/ear/fossa w/dye 

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

70488 Ct maxillofacial w/o & w/dye 

70491 Ct soft tissue neck w/dye 

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

70496 Ct angiography, head 

70498 Ct angiography, neck 

71260 Ct thorax w/dye 

71270 Ct thorax w/o & w/dye 

71275 Ct angiography, chest 

72126 Ct neck spine w/dye 

72127 Ct neck spine w/o & w/dye 

72129 Ct chest spine w/dye 

72130 Ct chest spine w/o & w/dye 

72132 Ct lumbar spine w/dye 

72133 Ct lumbar spine w/o & w/dye 

72191 Ct angiograph pelv w/o&w/dye 

72193 Ct pelvis w/dye 

72194 Ct pelvis w/o & w/dye 

73201 Ct upper extremity w/dye 

73202 Ct uppr extremity w/o&w/dye 

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

73701 Ct lower extremity w/dye 

73702 Ct lwr extremity w/o&w/dye 

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

74160 Ct abdomen w/dye 

74170 Ct abdomen w/o & w/dye 

74175 Ct angio abdom w/o & w/dye 

74262 Ct colonography, w/dye 

75635 Ct angio abdominal arteries 

74177 Ct angio abd&pelv w/contrast 

74178 Ct angio abd & pelv 1+ regns 

* If a “without contrast” CT or CTA procedure is performed during the same session as a 

“with contrast” CT or CTA procedure, the I/OCE will assign APC 8006 rather than 

APC 8005. 
CMS-1589-FC 162 

Family 3 - MRI and MRA with and without Contrast 

CY 2013 APC 8007 (MRI and MRA without 

Contrast Composite)* 

CY 2013 Approximate 

APC Cost = $727 

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 2013 APC 8008 (MRI and MRA with 

Contrast Composite) 

CY 2013 Approximate 

APC Cost = $1,069 

70549 Mr angiograph neck w/o&w/dye 

70542 Mri orbit/face/neck w/dye 

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

70545 Mr angiography head w/dye 

70546 Mr angiograph head w/o&w/dye 
CMS-1589-FC 163 

70547 Mr angiography neck w/o dye 

70548 Mr angiography neck w/dye 

70552 Mri brain w/dye 

70553 Mri brain w/o & w/dye 

71551 Mri chest w/dye 

71552 Mri chest w/o & w/dye 

72142 Mri neck spine w/dye 

72147 Mri chest spine w/dye 

72149 Mri lumbar spine w/dye 

72156 Mri neck spine w/o & w/dye 

72157 Mri chest spine w/o & w/dye 

72158 Mri lumbar spine w/o & w/dye 

72196 Mri pelvis w/dye 

72197 Mri pelvis w/o & w/dye 

73219 Mri upper extremity w/dye 

73220 Mri uppr extremity w/o&w/dye 

73222 Mri joint upr extrem w/dye 

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

73719 Mri lower extremity w/dye 

73720 Mri lwr extremity w/o&w/dye 

73722 Mri joint of lwr extr w/dye 

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

74182 Mri abdomen w/dye 

74183 Mri abdomen w/o & w/dye 

75561 Cardiac mri for morph w/dye 

75563 Card mri w/stress img & dye 

C8900 MRA w/cont, abd 

C8902 MRA w/o fol w/cont, abd 

C8903 MRI w/cont, breast, uni 

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

C8906 MRI w/cont, breast, bi 

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

C8909 MRA w/cont, chest 

C8911 MRA w/o fol w/cont, chest 

C8912 MRA w/cont, lwr ext 

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

C8918 MRA w/cont, pelvis 
CMS-1589-FC 164 

C8920 MRA w/o fol w/cont, pelvis 

C8931 MRA, w/dye, spinal canal 

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

C8934 MRA, w/dye, upper extremity 

C8936 MRA, w/o&w/dye, upper extr 

* If a “without contrast” MRI or MRA procedure is performed during the same session as a 

“with contrast” MRI or MRA procedure, the I/OCE will assign APC 8008 rather than APC 

8007. 

TABLE 7.-OPPS IMAGING FAMILY SERVICES OVERLAPPING WITH 

HCPCS CODES ON THE CY 2013 BYPASS LIST 

Family 1 – Ultrasound 

76700 Us exam, abdom, complete 

76705 Echo exam of abdomen 

76770 Us exam abdo back wall, comp 

76775 Us exam abdo back wall, lim 

76776 Us exam k transpl w/Doppler 

76856 Us exam, pelvic, complete 

76870 Us exam, scrotum 

76857 Us exam, pelvic, limited 

Family 2 - CT and CTA with and without Contrast 

70450 Ct head/brain w/o dye 

70480 Ct orbit/ear/fossa w/o dye 

70486 Ct maxillofacial w/o dye 

70490 Ct soft tissue neck w/o dye 

71250 Ct thorax w/o dye 

72125 Ct neck spine w/o dye 

72128 Ct chest spine w/o dye 

72131 Ct lumbar spine w/o dye 

72192 Ct pelvis w/o dye 

73200 Ct upper extremity w/o dye 

73700 Ct lower extremity w/o dye 

74150 Ct abdomen w/o dye 

Family 3 - MRI and MRA with and without Contrast 

70336 Magnetic image, jaw joint 

70544 Mr angiography head w/o dye 
CMS-1589-FC 165 

70547 Mr angiography neck w/o dye 

70551 Mri brain w/o dye 

71550 Mri chest w/o dye 

72141 Mri neck spine w/o dye 

72146 Mri chest spine w/o dye 

72148 Mri lumbar spine w/o dye 

73218 Mri upper extremity w/o dye 

73221 Mri joint upr extrem w/o dye 

73718 Mri lower extremity w/o dye 

73721 Mri jnt of lwr extre w/o dye 

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

Cardiac resynchronization therapy (CRT) uses electronic devices to sequentially 

pace both sides of the heart to improve its output. CRT utilizing a pacing electrode 

implanted in combination with an implantable cardioverter defibrillator (ICD) is known 

as CRT-D. Hospitals commonly report the implantation of a CRT-D system using CPT 

code 33225 (Insertion of pacing electrode, cardiac venous system, for left ventricular 

pacing, at time of insertion of pacing cardioverter-defibrillator or pacemaker pulse 

generator (including upgrade to dual chamber system) (List separately in addition to code 

for primary procedure)) and CPT code 33249 (Insertion or repositioning of electrode 

lead(s) for single or dual chamber pacing cardioverter-defibrillator and insertion of pulse 

generator). As described in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74176), over the past several years, stakeholders have pointed out significant 

fluctuations in the payment rate for CPT code 33225 and that, because the definition of 

CPT code 33225 specifies that the pacing electrode is inserted at the same time as an ICD 

or pacemaker, CMS would not have many valid claims upon which to calculate an 

accurate cost. In response to these concerns, we established a policy beginning in 
CMS-1589-FC 166 

CY 2012 to recognize CPT codes 33225 and 33249 as a single, composite service when 

the procedures are performed on the same day and to assign them to APC 0108 

(Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes) when 

they appear together on a claim with the same date of service. We refer readers to the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74176 through 74182) for a 

full description of how we developed this policy. 

As described in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74182), hospitals continue to use the same CPT codes to report CRT-D 

implantation services, and the I/OCE will identify when the combination of CPT codes 

33225 and 33249 on the same day qualify for composite service payment. We make a 

single composite payment for such cases. When not performed on the same day as the 

service described by CPT code 33225, the service described by CPT code 33249 is also 

assigned to APC 0108. When not performed on the same day as the service described by 

CPT code 33249, the service described by CPT code 33225 is assigned to APC 0655. 

In order to ensure that hospitals correctly code for CRT services in the future, we 

also finalized a policy in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74182) to implement claims processing edits that will return to providers 

incorrectly coded claims on which a pacing electrode insertion (the procedure described 

by CPT code 33225) is billed without one of the following procedures to insert an ICD or 

pacemaker, as specified by the AMA in the CPT codebook: 

● 33206 (Insertion or replacement of permanent pacemaker with transvenous 

electrode(s); atrial); 
CMS-1589-FC 167 

● 33207 (Insertion or replacement of permanent pacemaker with transvenous 

electrode(s); ventricular); 

● 33208 (Insertion or replacement of permanent pacemaker with transvenous 

electrode(s); atrial and ventricular); 

● 33212 (Insertion or replacement of pacemaker pulse generator only; single 

chamber, atrial or ventricular); 

● 33213 (Insertion or replacement of pacemaker pulse generator only; dual 

chamber, atrial or ventricular); 

● 33214 (Upgrade of implanted pacemaker system, conversion of single chamber 

system to dual chamber system (includes removal of previously placed pulse generator, 

testing of existing lead, insertion of new lead, insertion of new pulse generator)); 

● 33216 (Insertion of a single transvenous electrode, permanent pacemaker or 

cardioverter-defibrillator); 

● 33217 (Insertion of 2 transvenous electrodes, permanent pacemaker or 

cardioverter-defibrillator); 

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

● 33233 (Removal of permanent pacemaker pulse generator); 

● 33234 (Removal of transvenous pacemaker electrode(s); single lead system, 

atrial or ventricular); 

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

atrial or ventricular); 
CMS-1589-FC 168 

● 33240 (Insertion of single or dual chamber pacing cardioverter-defibrillator 

pulse generator); or 

● 33249 (Insertion or repositioning of electrode lead(s) for single or dual 

chamber pacing cardioverter-defibrillator and insertion of pulse generator). 

In the CY 2013 OPPS/ASC proposed rule (77 FR45094), we proposed to continue 

for CY 2013 to recognize CRT-D as a single, composite service as described above and 

finalized in the CY 2012 OPPS/ASC final rule with comment period. By continuing to 

recognize these procedures as a single, composite service, we are able to use a higher 

volume of correctly coded claims for CPT code 33225, which, because of its add-on code 

status, is always performed in conjunction with another procedure and, therefore, to 

address the inherent ratesetting challenges associated with CPT code 33225. We also 

noted that this policy is consistent with the principles of a prospective payment system, 

specifically to place similar services that utilize technologies with varying costs in the 

same APC in order to promote efficiency and decision making based on individual 

patient’s clinical needs rather than financial considerations. In calculating the costs upon 

which the proposed payment rate for APC 0108 was based for CY 2013, for the proposed 

rule, we included single procedure claims for the individual services assigned to 

APC 0108, as well as single procedure claims that contain the composite CRT-D service, 

defined as the combination of CPT codes 33225 and 33249 with the same date of service. 

We were able to use 9,790 single claims from the CY 2013 proposed rule claims data to 

calculate a proposed cost of approximately $31,491 for APC 0108. Because CPT codes 

33225 and 33249 may be treated as a composite service for payment purposes, we 
CMS-1589-FC 169 

proposed to continue to assign them status indicator “Q3” (Codes that may be paid 

through a composite APC) in Addendum B to the proposed rule. The assignment of CPT 

codes 33225 and 33249 to APC 0108 when treated as a composite service was also 

reflected in Addendum M to the proposed rule (which is available via the Internet on the 

CMS Web site). 

As we noted in the proposed rule (77 FR 45094), we revised the claims 

processing edits in place for CPT code 33225 due to revised guidance from the AMA in 

the CPT code book specifying the codes that should be used in conjunction with CPT 

code 33225. Specifically, on February 27, 2012, the AMA posted a correction as errata 

to the CY 2012 CPT code book on the AMA Web site at http://www.amaassn.org/resources/doc/cpt/cpt-corrections.pdf. This correction removed CPT code 33222 

(Revision or relocation of skin pocket for pacemaker) as a service that should be provided 

in conjunction with CPT code 33225, and added CPT codes 33228 (Removal of 

permanent pacemaker pulse generator with replacement of pacemaker pulse generator; 

dual lead system), 33229 (Removal of permanent pacemaker pulse generator with 

replacement of pacemaker pulse generator; multiple lead system), 33263 (Removal of 

pacing cardioverter-defibrillator pulse generator with replacement of pacing cardioverterdefibrillator pulse generator; dual lead system), and 33264 (Removal of pacing 

cardioverter-defibrillator pulse generator with replacement of pacing cardioverterdefibrillator pulse generator; multiple lead system). In accordance with this revised 

guidance, we deleted CPT code 33222 as a code that can satisfy the claims processing 
CMS-1589-FC 170 

edit for CPT code 33225, and added CPT codes 33228, 33229, 33263, and 33264 as 

codes that can satisfy this edit beginning in CY 2012. 

Comment: One commenter requested that CMS delay the status indicator change 

from “T” to “Q3” for CPT code 33225, stating that CMS does not have sufficient cost 

data to allow a composite payment for this procedure. The commenter also asked that 

CPT code 33225 be assigned to APC 0655 while CMS carries out further analysis. 

Response: We disagree with the commenter that we do not have sufficient cost 

data to allow a composite payment for the procedure described by CPT code 33225. For 

this final rule with comment period, we were able to use 3,413 single claims containing 

the CRT-D composite service, defined as the combination of CPT codes 33225 and 

33249 with the same date of service, to calculate the cost of APC 0108. We note that we 

did not propose to change the status indicator for CPT code 33225 from “T” to “Q3” for 

CY 2013 as the commenter indicated; rather, we proposed to continue to apply the “Q3” 

status indicator to CPT code 33225 in accordance with the status indicator and policy for 

this code finalized in the CY 2012 OPPS/ASC final rule with comment period. We also 

note that, when not performed on the same day as the service described by CPT code 

33249, the service described by CPT code 33225 is assigned to APC 0655 and not paid as 

a composite service. 

After consideration of the public comment we received, we are finalizing our 

proposed policy, without modification, to continue to recognize CRT-D as a single, 

composite service as described above and finalized in the CY 2012 OPPS/ASC final rule 

with comment period. In calculating the costs upon which the final payment rate for 
CMS-1589-FC 171 

APC 0108 is based for CY 2013, for this final rule with comment period, we included 

single procedure claims for the individual services assigned to APC 0108, as well as 

single procedure claims that contain the composite CRT-D service, defined as the 

combination of CPT codes 33225 and 33249 with the same date of service. We were 

able to use 11,251 single claims from the CY 2013 final rule claims data to calculate a 

final cost of approximately $31,561 for APC 0108. Because CPT codes 33225 and 

33249 may be treated as a composite service for payment purposes, we are continuing to 

assign them status indicator “Q3” (Codes that may be paid through a composite APC) in 

Addendum B to this final rule with comment period. 
CMS-1589-FC 172 

f. Geometric Mean-Based Relative Payment Weights 

As we discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45094 through 

45098), when the Medicare program was first implemented, payment for hospital 

services (inpatient and outpatient) was based on hospital-specific reasonable costs 

attributable to furnishing services to Medicare beneficiaries. Although payment for most 

Medicare hospital inpatient services became subject to a PPS under section 1886(d) of 

the Act in 1983, Medicare hospital outpatient services continued to be paid based on 

hospital-specific costs. This methodology for payment provided little incentive for 

hospitals to furnish such outpatient services efficiently and in a cost effective manner. At 

the same time, advances in medical technology and changes in practice patterns were 

bringing about a shift in the site of medical care from the inpatient setting to the 

outpatient setting. 

In the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) (Pub. L. 

99-509), the Congress paved the way for development of a PPS for hospital outpatient 

services. Section 9343(g) of OBRA 1986 mandated that fiscal intermediaries require 

hospitals to report claims for services under the Healthcare Common Procedure Coding 

System (HCPCS). Section 9343(c) of OBRA 1986 extended the prohibition against 

unbundling of hospital services under section 1862(a)(14) of the Act to include outpatient 

services as well as inpatient services. The codes under the HCPCS enabled us to 

determine which specific procedures and services were billed, while the extension of the 

prohibition against unbundling ensured that all nonphysician services provided to hospital 
CMS-1589-FC 173 

outpatients were reported on hospital bills and captured in the hospital outpatient data 

that were used to develop an outpatient PPS. 

The brisk increase in hospital outpatient services further led to an interest in 

creating payment incentives to promote more efficient delivery of hospital outpatient 

services through a Medicare outpatient PPS. Section 9343(f) of OBRA 1986 and section 

4151(b)(2) of the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) (Pub. L. 

101-508) required that we develop a proposal to replace the hospital outpatient payment 

system with a PPS and submit a report to the Congress on the proposed system. The 

statutory framework for the OPPS was established by the Balanced Budget Act (BBA) of 

1997 (Pub. L. 105-33) with section 4523 amending section 1833 of the Act by adding 

subsection (t), which provides for a PPS for hospital outpatient department services and 

the BBRA of 1999 (Pub. L. 106-113), with section 201 further amending section 1833(t) 

of the Act. The implementing regulations for these statutory authorities were codified at 

42 CFR Part 419, effective for services furnished on or after August 1, 2000. 

Section 1833 of the Act sets forth the methodological requirements for developing 

the PPS for hospital outpatient services (the OPPS). At the onset of the OPPS, there was 

significant concern over observed increases in the volume of outpatient services and 

corresponding rapidly growing beneficiary coinsurance. Accordingly, much of the focus 

was on finding ways to address those issues. Section 1833(t)(2)(C) of the Act initially 

provided that relative payment weights for covered outpatient department services be 

established based on median costs under section 4523(a) of the BBA of 1997. Later, 

section 201(f) of the BBRA of 1999 amended section 1833(t)(2)(C) of the Act to allow 
CMS-1589-FC 174 

the Secretary the discretion to base the establishment of relative payment weights on 

either median or mean hospital costs. Since the OPPS was initially implemented, we 

have established relative payment weights based on the median hospital costs for both 

statistical reasons and timely implementation concerns. The proposed rule for the OPPS 

was published prior to the passage of the BBRA of 1999, which amended the Act to 

permit the use of mean costs. At that time, we noted that making payment for hospital 

outpatient services based on the median cost of each APC was a way of discouraging 

upcoding that occurs when individual services that are similar have disparate median 

costs, as well as associating services for which there are low claims volume into the 

appropriate classifications based on clinical patterns and their resource consumption (63 

FR 47562). 

As discussed in the CY 2000 OPPS final rule with comment period (65 FR 18482 

through 18483), initial implementation of the payment system for hospital outpatient 

services was delayed due to multiple extensions of the proposed rule comment period, 

Year 2000 (Y2K) system concerns, and other systems challenges in developing the 

OPPS. Even though the BBRA of 1999 passed during that period of time, and provided 

the Secretary with the discretion to establish relative payment weights under the OPPS 

based on mean hospital costs, we determined that reconstructing the database to evaluate 

the impact of using mean costs would have postponed implementation of the OPPS 

further. There were important challenges at the time, including being responsive to 

stakeholder comments regarding the initial OPPS and addressing implementation issues 

so that the payment and claims processing systems would work correctly. To do so in a 
CMS-1589-FC 175 

timely manner was critical; therefore, median costs were selected as an appropriate 

metric on which to base payment relativity, both based on the statistical reasons noted 

above and practical implementation concerns. 

In addition to the reasons discussed above, developing relative payment weights 

based on median costs was a way of attenuating the impact of cost outlier cases. In an 

environment where facility coding practices were still in their infancy, median costs 

served to minimize the impact of any coding errors. Using median costs to establish 

service cost relativity served the same function as any measure of central tendency 

(including means), ensuring that the relative payment weights used in the OPPS would, in 

general, account for the variety of costs associated with providing a service. 

Since the beginning of the OPPS and throughout its development, we have striven 

to find ways to improve our methods for estimating the costs associated with providing 

services. The dialogue with the public regarding these issues, the meaningful information 

and recommendations that the Panel (previously the APC Panel) has provided, and the 

policies we have established to better derive the costs on which OPPS payment is 

calculated have contributed to improving cost estimation. However, challenges remain in 

our continuing effort to better estimate the costs associated with providing services. 

These challenges include our limited ability to obtain more meaningful information from 

the claims and cost report data available and ensuring that the approach used to calculate 

the payments for services accurately captures the relative costs associated with providing 

the services. Over the years, we have implemented many changes to the OPPS cost 

modeling process to help address these challenges. 
CMS-1589-FC 176 

To obtain more information from the claims data we have available, we first 

began bypassing codes from the standard process to develop “pseudo” single claims in 

CY 2003 (67 FR 66746). In CY 2006, this concept later evolved into the bypass list (and 

its corresponding criteria for addition) which allows us to extract more cost information 

from claims that would otherwise be unusable for modeling service cost (70 FR 68525). 

In CY 2008, we examined clinical areas where packaging of services was appropriate, 

which allows us to use more claims in modeling the payments for primary procedures and 

encourage providers to make cost efficient choices where possible (72 FR 66610 through 

66649). In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590), we 

noted that this packaging approach increased the number of “natural” single bills, while 

simultaneously reducing the universe of codes requiring single bills for ratesetting. 

Beginning in CY 2008, we also established composite APCs for services that are 

typically provided together in the same encounter, allowing us to use even more 

previously unusable claims (due to containing multiple separately payable major codes) 

for modeling service cost, as well as develop APCs that reflect the combined encounter 

(72 FR 66650 through 66658). We have implemented many steps to obtain more 

information from the claims and cost report data available to us, and continue to examine 

ways in which we can derive more meaningful information on service costs for use in 

ratesetting. 

In our experience in working with the OPPS, we also have implemented many 

processes to ensure that the cost information we derive from cost reports and claims data 

is accurate. In the beginning of the OPPS, we implemented a cost trim of three standard 
CMS-1589-FC 177 

deviations outside the geometric mean cost, similar to the cost data trim in the IPPS, 

because it would ensure that the most aberrant data were removed from ratesetting 

(65 FR 18484). We also have implemented similar trims to the hospital departmental 

CCR and claims based unit data related to the services (71 FR 67985 through 67987). 

During the CY 2008 rulemaking cycle, we contracted with Research Triangle 

Institute, International (RTI) to examine possible improvements to the OPPS cost 

estimation process after RTI had investigated similar issues in the IPPS setting 

(72 FR 66659 through 66602). There was significant concern that charge compression, 

which results from the hospital practice of attaching a higher mark-up to charges for low 

cost supplies and a lower mark-up to charges for higher cost supplies, was influencing the 

cost estimates on which the OPPS relative payment weights are based. Based on RTI’s 

recommendations in its July 2008 report, available on the Web site at: 

http://www.rti.org/reports/cms/HHSM-500-2005-

0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf, in CY 2009, we 

finalized modifications to the Medicare cost report form to create an “Implantable 

Medical Devices Charged to Patients” cost center to address public commenters’ 

concerns related to charge compression in the “Medical Supplies Charged to Patients” 

cost center (73 FR 48458 through 48467). These modifications helped to address 

potential issues related to hospital mark-up practices and how they are reflected in the 

CCRs on the Medicare hospital cost reporting form. 

In CY 2010, we incorporated a line item trim into our data process that removed 

lines that were eligible for OPPS payment in the claim year but received no payment, 
CMS-1589-FC 178 

presumably because of a line item rejection or denial due to claims processing edits 

(74 FR 60359). This line item trim was developed with the goal of using additional lines 

to model prospective payment. 

In addition to these process changes that were designed to include more accurate 

cost data in ratesetting, we have developed a number of nonstandard modeling processes 

to support service or APC specific changes. For example, in the device-dependent APCs, 

we have incorporated edits into the cost estimation process to ensure that the full cost of 

the device is incorporated into the primary procedure. 

While we have already implemented numerous changes to the data process in 

order to obtain accurate resource cost estimates associated with providing a procedure, 

we continue to examine possible areas of improvement. In the past, commenters have 

expressed concern over the degree to which payment rates reflect the costs associated 

with providing a service, believing that, in some cases, high cost items or services that 

might be packaged are not accordingly reflected in the payment weights (72 FR 66629 

through 66630 and 66767). As mentioned above, in the CY 2008 OPPS/ASC final rule 

with comment period, we developed a packaging policy that identified a number of 

clinical areas where services would be commonly performed in a manner that was 

typically ancillary and supportive to other primary procedures. Packaging for appropriate 

clinical areas provides an incentive for efficient and cost-effective delivery of services. 

In that final rule with comment period, we recognized that there were strengths and 

weaknesses associated with using median costs as the metric for developing the OPPS 

relative payment weights (72 FR 66615). Medians are generally more stable than means 
CMS-1589-FC 179 

because they are less sensitive to extreme observations, but they also do not reflect subtle 

changes in cost distributions. As a result, the use of medians rather than means under the 

OPPS usually results in relative payment weight estimates being less sensitive to 

packaging decisions, as well as changes in the cost model due to factors such as the 

additional claims processed between the proposed rule and the final rule. 

The OPPS, like other prospective payment systems, relies on the concept of 

averaging, where the payment may be more or less than the estimated costs of providing 

a service or package of services for a particular patient (73 FR 68570). Establishing the 

cost-based relative payment weights based on a measure of central tendency, such as 

means or medians, ensures that the payments for the package of services should generally 

account for the variety of costs associated with providing those services. Prospective 

payments are ultimately adjusted for budget neutrality and updated by an OPD update 

factor, which affects the calculated payments, but the accuracy of the cost-based weights 

is critical in ensuring that the relative payment weights are adjusted appropriately. 

We recognize that median costs have historically served and may continue to 

serve as an appropriate measure on which to establish relative payment weights. 

However, as discussed above, the metric’s resistance to outlier observations is balanced 

by its limited ability to be reflective of changes to the dataset used to model cost or 

changes beyond the center of the dataset. While there was significant concern in the 

initial years of the OPPS regarding outlier cost values and the possible introduction of 

potentially aberrant values in the cost modeling, hospital experience in coding under the 

system, the data modeling improvements we have made to obtain more accurate cost 
CMS-1589-FC 180 

information while removing erroneous data, and other changes in our experience with the 

system have all lessened the potential impact of error values (rather than actual, accurate 

cost outliers). As noted above, over the history of the OPPS, we have made multiple 

refinements to the data process to better capture service costs, respond to commenter 

concerns regarding the degree to which OPPS relative payment weights accurately reflect 

service cost and APC payment volatility from year to year, and better capture the variety 

of resource cost associated with providing a service as provided under section 

1833(t)(2)(C) of the Act. In the CY 2013 OPPS/ASC proposed rule (77 FR 45098), we 

proposed for CY 2013 to shift the basis for the CY 2013 APC relative payment weights 

that underpin the OPPS from median costs to geometric mean-based costs. 

Geometric means better encompass the variation in costs that occur when 

providing a service because, in addition to the individual cost values that are reflected by 

medians, geometric means reflect the magnitude of the cost measurements, and are thus 

more sensitive to changes in the data. We believe developing the OPPS relative payment 

weights based on geometric mean costs would better capture the range of costs associated 

with providing services, including those cases involving high-cost packaged services, and 

those cases where very efficient hospitals have provided services at much lower costs. 

The use of geometric mean-based costs also would allow us to detect changes in the cost 

of services earlier, because changes in cost often diffuse into the industry over time as 

opposed to impacting all hospitals equally at the same time. Medians and geometric 

means both capture the impact of uniform changes, that is, those changes that influence 
CMS-1589-FC 181 

all providers, but only geometric means capture cost changes that are introduced slowly 

into the system on a case-by-case or hospital-by-hospital basis. 

We stated that an additional benefit of this proposed policy relates to the 2 times 

rule, described in section III.B. of the proposed rule, which is our primary tool for 

identifying clinically similar services that have begun to deviate in terms of their 

financial resource requirements. We stated that basing HCPCS projections on geometric 

mean costs would increase the sensitivity of this tool as we configure the APC mappings 

because it would allow us to detect differences when higher costs occur in a subset of 

services even if the number of services does not change. This information would allow 

us to better ensure that the practice patterns associated with all the component codes 

appropriately belong in the same APC. 

In addition to better incorporating those cost values that surround the median and, 

therefore, describing a broader range of clinical practice patterns, we stated in the 

proposed rule that basing the relative payment weights on geometric mean costs may also 

promote better stability in the payment system. In the short term, geometric mean-based 

relative payment weights would make the relative payment weights more reflective of the 

service costs. Making this change also may promote more payment stability in the long 

term by including a broader range of observations in the relative payment weights, 

making them less susceptible to gaps in estimated cost near the median observation and 

also making changes in the relative payment weight a better function of changes in 

estimated service costs. 
CMS-1589-FC 182 

We noted that this proposed change would bring the OPPS in line with the IPPS, 

which utilizes hospital costs derived from claims and cost report data to calculate 

prospective payments, and specifically, mean costs rather than median costs to form the 

basis of the relative payment weights associated with each of the payment classification 

groups. We stated in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74181) our intent to explore methods to ensure our payment systems do not 

provide inappropriate payment incentives to provide services in one setting of care as 

opposed to another setting of care based on financial considerations rather than clinical 

needs. By adopting a means cost-based approach to calculating relative payment weights 

under the OPPS, we stated that we expect to achieve greater consistency between the 

methodologies used to calculate payment rates under the IPPS and the OPPS, which 

would put us in a better position from an analytic perspective to make cross-system 

comparisons and examine issues of payment parity. 

For the reasons described above, in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45098), we proposed to establish the CY 2013 OPPS relative payment weights 

based on geometric mean costs. While this would involve a change to the metric used to 

develop the relative payment weights, the use of claims would not be affected. We 

proposed to continue to subset claims using the data processes for modeling the standard 

APCs and the criteria-based APCs described in section II.A.2. of the proposed rule, 

where appropriate. The reasoning behind implementing modeling edits or changes in the 

criteria-based APCs would not be affected because the process of developing the relative 
CMS-1589-FC 183 

payment weights based on a measure of central tendency is the last step of the modeling 

process, and occurs only once the set of claims used in ratesetting has been established. 

One important step that occurs after the development of relative payment weights 

is the assignment of individual HCPCS codes (services) to APCs. In our analysis of the 

impacts of a process conversion to geometric means, we determined that the change to 

means would not significantly influence the application of the 2 times rule. Very few 

services would need to be shifted to new APCs because of 2 times rule violations because 

the use of geometric means would resolve some violations that would exist under the use 

of medians, even as it creates other violations due to new cost projections. The net 

impact of the proposed change results in seven more violations of the 2 times rule created 

by the entire rebasing process than would exist if median-based values were used. 

During the development of this proposed policy, we also determined that the 

cumulative effect of data shifts over the 12 years of OPPS introduced a number of 

inconsistencies in the APC groupings based on clinical and resource homogeneity. We 

believe that a shift to payments derived from geometric means would improve our ability 

to identify resource distinctions between previously homogenous services, and we intend 

to use this information over the next year to reexamine our APC structure and 

assignments to consider further ways of increasing the stability of payments for 

individual services over time. 

We noted that this proposed policy to establish all OPPS relative payment weights 

using geometric mean costs would apply to all APCs that would have previously been 

paid based on median costs. In addition, we proposed to calculate the relative payment 
CMS-1589-FC 184 

weights for line item based payments such as brachytherapy sources, which were 

discussed in section II.A.2.d.(6) of the proposed rule, as well as blood and blood 

products, which were discussed in section II.A.2.d.(2) of the proposed rule, based on their 

proposed geometric mean costs for the CY 2013 OPPS. 

We indicated that the CY 2013 proposed policy to base relative payment weights 

on geometric mean costs would specifically include the CMHC and hospital-based partial 

hospitalization program APCs, which were previously based on median per diem costs. 

Their estimated payments would continue to be included in the budget neutral weight 

scaling process, and their treatment is similar to other nonstandard APCs discussed in 

section II.A. of the proposed rule. The process for developing a set of claims that is 

appropriate for modeling these APCs would continue to be the same as in recent years, 

with the only proposed difference being that a geometric mean per diem cost would be 

calculated rather than a median per diem cost. The proposed CY 2013 partial 

hospitalization payment policies were described in section VIII. of the proposed rule. 

In the proposed rule, we stated that we believe it is important to make the 

transition from medians to means across all APCs in order to capture the complete range 

of costs associated with all services, and to ensure that the relative payment weights of 

the various APCs are properly aligned. If some OPPS payments calculated using relative 

payment weights are based on means while others are based on medians, the ratio of the 

two payments will not accurately reflect the ratio of the relative costs reported by the 

hospitals. This is of particular significance in the process of establishing the budget 

neutral weight scaler, discussed in section II.A.4. of the proposed rule. 
CMS-1589-FC 185 

We noted that the few exceptions to the applications of the geometric mean-based 

relative payment weights would be the same exceptions that exist when median-based 

weights are applied, including codes paid under different payment systems or not paid 

under the OPPS, items and services not paid by Medicare, items or services paid at 

reasonable cost or charges reduced to cost, among others. For more information about 

the various proposed payment status indicators for CY 2013, we referred readers to 

Addendum D1 to the proposed rule (which was available via the Internet on the CMS 

Web site). 

We proposed for CY 2013 that payment for nonpass-through separately payable 

drugs and biologicals will continue to be developed through its own separate process. 

Payments for drugs and biologicals are included in the budget neutrality adjustments, 

under the requirements in section 1833(t)(9)(B) of the Act, but the budget neutral weight 

scaler is not applied to their payments because they are developed through a separate 

methodology, outside the relative payment weight based process. We noted that, for 

CY 2013, we proposed to pay for nonpass-through separately payable drugs and 

biologicals under the OPPS at ASP+6 percent, based upon the statutory default described 

in section 1833(t)(14)(A)(iii)(II) of the Act. Also, as is our standard methodology, for 

CY 2013, we proposed to use payment rates based on the ASP data from the fourth 

quarter of CY 2011 for budget neutrality estimates, packaging determinations, and the 

impact analyses. For items that did not have an ASP-based payment rate, such as some 

therapeutic radiopharmaceuticals, we proposed to use their mean unit cost derived from 

the CY 2011 hospital claims data to determine their per day cost. The nonpass-through 
CMS-1589-FC 186 

separately payable drug and biological payment policy for CY 2013 is described in 

greater detail in section V.B. of the proposed rule and this final rule with comment 

period. 

Comment: Many commenters expressed cautious support for the proposal to 

calculate the relative payment weights based on geometric mean costs. The commenters 

believed that the inclusion of additional cost data in developing the APC relative payment 

weights would represent an improvement to the ratesetting process, while the generally 

limited provider impacts and enhanced sensitivity to cost changes in calibrating the 2 

times rule would be appropriate. While the commenters supported improvements in the 

accuracy of the OPPS relative payment weights and the goals of the proposed policy, 

they requested that CMS proceed with caution and transparency in this process to avoid 

unintended consequences on beneficiaries and hospitals. The commenters also suggested 

that CMS monitor changes in frequency and cost distributions for services for several 

years to ensure that no access to care issues develop as a result of the geometric meansbased payment policy. Several commenters requested a transitional approach to relative 

payment weights based on geometric mean costs to mitigate any potentially negative 

payment effects. 

Response: We appreciate the commenters’ support. As discussed in the CY 2013 

OPPS/ASC proposed rule, we believe that using geometric mean costs to calculate the 

APC relative payment weights will make them more reflective of the range of service 

costs, introduce greater sensitivity to the 2 times rule, as well as potentially allow for 

cross-system payment comparisons (77 FR 45094). We believe that the numerous 
CMS-1589-FC 187 

changes we have made to the data process to obtain additional information from the 

available cost report and claims data and ensure the accuracy of the cost estimation, in 

addition to hospital experience with the OPPS, have prepared us to make this incremental 

change. We agree that the change to base the relative payment weights on geometric 

mean costs is appropriate. 

We recognize the concerns that commenters have regarding a transitional process 

towards geometric mean-based APC payment and the possibility that payment 

fluctuations based on both the naturally occurring variation from year to year and those 

variations associated with basing the relative payment weights on geometric mean costs 

may occur. However, we do not believe that an approach to geometric mean-based OPPS 

relative payment weights beyond the changes we have proposed for the CY 2013 OPPS is 

necessary or appropriate. Prior to proposing this change, we evaluated the last 4 years of 

OPPS claims data to model the fluctuations that would have resulted from geometric or 

arithmetic means in comparison to our traditional medians. We determined that there 

was no significant difference in the degree of fluctuation with geometric means or with 

medians, and we also believe that the one-time differences created by the switch are 

typically small; therefore, we do not believe that a transition period is necessary. In the 

CY 2013 OPPS/ASC proposed rule, we noted that we made limited changes in APC 

assignments except where necessary as a result of the proposal to base the relative 

payment weights on geometric mean costs and stated our intention to further examine 

appropriate OPPS reconfigurations in the future to resolve potential clinical or resource 

homogeneity inconsistencies in the future to promote stability (77 FR 45097). Geometric 
CMS-1589-FC 188 

mean costs more fully encompass the range of costs, including packaged costs, associated 

with providing a service and, therefore, may result in payments that are more reflective of 

actual cost. Transitioning into a geometric mean-based system would not be practical, as 

one of the overarching goals of using geometric mean costs is better relativity across the 

OPPS. Applying a phased-in approach would potentially distort the relativity of the 

OPPS payment weights. As we discuss in section II.A.2 of this final rule with comment 

period, there are various reasons that contribute to cost fluctuation from year to year. We 

believe that artificially introducing stability into the payment system could potentially 

distort the relativity of the payment system, especially when doing so could potentially 

dampen both decreases and increases. 

We agree that continued monitoring of changes in cost distributions and the 

frequency of services is important in understanding the impact of basing the APC relative 

payment weights on geometric mean costs. However, we note that the frequency of 

services may change from year to year based on a variety of factors, issues unrelated to 

OPPS payment, and situations where APC overpayment may have potentially led to 

inappropriate incentives to provide care. Despite the consideration of the many reasons 

that may cause service frequency and cost structures to change over time, we will 

continue to monitor these data, as well as make that information available online through 

the cost statistics files associated with each rulemaking cycle. 

Comment: A number of commenters disagreed with the proposal to base the 

CY 2013 OPPS/ASC relative payment weights on geometric mean costs. Many of these 

commenters preferred continued use of median costs in the ratesetting process. Several 
CMS-1589-FC 189 

commenters believed that the geometric mean costs were inappropriate for OPPS 

ratesetting for statistical reasons, including their heightened sensitivity to lower cost 

inliers and lowered sensitivity for high-cost outliers relative to arithmetic means. Other 

commenters were concerned about the range between minimum and maximum cost 

values for each APC, and believed them to be implausible. A few commenters stated that 

while there have been advances in coding practice over the past decade, the same 

problems of upcoding and outliers will continue to exist, and that the original selection of 

median costs would continue to be appropriate. One commenter suggested that, beyond 

the initial years of the OPPS, there have been no cost reporting and coding practice 

improvements over the years. 

Response: We noted in the CY 2013 OPPS/ASC proposed rule that median costs 

have historically served and may continue to serve as an appropriate measure on which to 

base the relative payment weights (77 FR 45096). However, we believe that a policy of 

developing the relative payment weights based on geometric mean costs would represent 

an improvement beyond our current use of the cost information available to us. 

In our discussion in the CY 2013 OPPS/ASC proposed rule relating to basing the 

relative payment weights on geometric mean costs, we stated that there are a variety of 

reasons that one metric might be more appropriate than the other. However, the 

reasoning for selecting one metric relative to any others must be considered in the context 

of the issues at that time. In our discussion of our proposal to develop the relative 

payment weights based on geometric mean costs, we described the issues at the initial 

development of the OPPS and our original reasons for selecting median costs as the 
CMS-1589-FC 190 

preferred metric. We also described in the proposed rule the many data process changes 

that we made over the history of the OPPS, including various trimming methodologies, 

processes to generate more information from the claims and cost report data available to 

us, steps to address charge compression, modeling and payment edits, modeling 

configurations to make payment more reflective of the service or services provided, and 

others (77 FR 45095 through 45096). In addition, we discussed our belief that CMS and 

hospital experience with the OPPS as well as the coding methodologies for payment 

would have improved over the past decade. Finally, we discussed various aspects of the 

geometric means proposal that would affect other policy areas, such as ASC payment, 

application of the 2 times rule, and other payment methodologies under the OPPS. For 

these reasons, we established the CY 2013 OPPS/ASC proposal to base the relative 

payment weights using geometric mean costs (77 FR 45094 through 45098). 

We recognize that there are different aspects of each statistical metric that may 

make any of them preferable to the others. Means-based methodologies, whether 

arithmetic means or geometric means, incorporate a broader range of estimated cost 

values into the relative payment weights, whereas medians are less sensitive to that range 

of costs as well as any changes in them. Depending on whether sensitivity towards 

changes in service costs is viewed as a relevant objective or not may guide whether 

selecting means or medians is a preferable alternative. As described above, several 

commenters have suggested that the lack of sensitivity towards cost changes is precisely 

why medians remain the preferable option. However, in the CY 2013 OPPS/ASC 

proposed rule, we noted comments in the past expressing concern regarding the degree to 
CMS-1589-FC 191 

which payment rates failed to reflect the costs associated with providing a service 

(77 FR 45096). In light of those concerns, we believe that geometric means and their 

ability to better reflect packaging patterns and ranges in cost represent an improvement in 

our cost estimation process. 

With regards to the varying level of sensitivity towards cost outliers that 

geometric means represent, as described above, there are various benefits and drawbacks 

to each selected metric. Accordingly, the relative payment weights associated with any 

service may rise or fall, depending on the specific distribution of reported costs, and 

where the geometric mean appears not only relative to the median but also that of APC 

606 (Level 3 Hospital Clinic Visits). While commenters have suggested that there is a 

systemic risk for “implausible” values, we believe that many of the outlier values present 

in the data represent actual cost outliers rather than errors, with different accounting 

assumptions creating different populations of values. At the low-cost and high-cost ends 

of the cost spectrum for each APC, there is thus the potential for both “spurious” 

(atypical and/or incorrect) data as well as accurate data to appear. Furthermore, while the 

minimum and maximum values identify the most extreme outlier values, they do not 

necessarily reflect the distribution of costs within the model; the minimum and maximum 

values may not accurately represent the range of costs describing the codes with greatest 

representation within an APC. 

While commenters suggested that there has not been much of an improvement we 

believe the possibility exists that conditions and circumstances have stabilized to a certain 

degree over the past decade. Part of the argument for medians at the inception of the 
CMS-1589-FC 192 

OPPS was that the coding system was still new, as was our use of claims data to calculate 

prospective payments. Given the many improvements we have made to our internal 

process of modeling and using data, we would expect that coding and cost reporting 

practices have improved over that time period as both CMS and hospitals have had the 

opportunity to develop more experience with the system. 

Comment: Some commenters believed that aligning the OPPS relative payment 

weights on geometric mean costs would hamper hospitals’ ability to plan budgets for 

each year, given the degree to which payments might fluctuate. The commenters also 

believed that geometric mean costs would lead to greater instability of OPPS payment. 

Some commenters were concerned about the negative impacts of APC payments 

declining due to use of geometric mean costs, believing that those changes hindered 

hospitals’ ability to provide high quality health care. 

Response: We do not believe that the policy of calculating relative payment 

weights based on geometric mean costs will inevitably lead to greater payment 

instability. There are a variety of factors that may contribute to payment volatility from 

year to year, as we have previously described in section II.A.2. of this final rule with 

comment period. While there may be some interim fluctuation in the short term as we 

realign the OPPS to be based on geometric mean costs, we expect many of those issues to 

stabilize over time. When discussing payment stability, the natural inclination is to view 

stability as a fixed numerical value that stays the same over time. We evaluated this 

numerical definition of stability and determined that it was not significantly greater when 

geometric means were used. However, another view of payment stability is through the 
CMS-1589-FC 193 

relationship between costs and the degree to which they are reflected in payments. We 

believe that a policy of using geometric mean costs to develop the APC relative payment 

weights will make them more reflective of the costs associated with providing services. 

Further, using geometric mean costs helps ensure that the relative payment weights 

accurately reflect the distribution of costs associated with providing services, and 

mitigates the possibility that any fluctuation occurs due to gaps in the distribution of the 

model, rather than any material changes to the service costs. 

We also disagree with the commenter’s belief that use of geometric mean costs in 

calculating the relative payment weights will lead to hospitals being unable to provide 

access to high-quality health care. Geometric mean costs encompass a broader range of 

costs, and will result in payments that more fully reflect the range of costs both on the 

low and high ends, than median-based costs. We believe that this will ultimately be an 

improvement in the data process as well as OPPS payment policy. Although, as 

commenters have noted, there are many APC payment rates that decline as a result of the 

alignment of relative payments weights based on geometric mean costs, we note that a 

number of APC payment rates also increase as a result of this policy. We believe that, 

for most provider classes that furnish a mixed array of services to meet the various needs 

of their patients, the financial impacts from the changes in APC payment rates will be 

relatively limited. In consideration of all of those factors, we believe that the use of 

geometric mean costs will result in APC payments that are more reflective of the range of 

service costs. 
CMS-1589-FC 194 

Comment: One commenter believed that median costs and the fact that they do 

not reflect subtle changes in cost distributions was appropriate to use to determine the 

OPPS payment rates, given aberrant coding, billing, and charging practices by hospitals. 

The commenter also believed that OPPS outlier payments would address issues where 

high-cost services did not have those costs reflected in their APC payments. Several 

commenters suggested that lack of sensitivity towards packaging patterns when using 

median cost was why median costs would be a more appropriate metric. Other 

commenters believed that the hospital claims do not provide reliable data and that the 

Medicare cost report data at the departmental level are not accurate because there is no 

financial incentive to report accurate data. Commenters also stated that RTI identified 

flawed cost data and pointed out that charges on hospital claims do not match those on 

the cost reports. One commenter requested that CMS delay the proposal to use geometric 

mean costs in ratesetting until it can verify that the data are not flawed. 

Response: We appreciate the need for accurate and reliable cost information for 

use in the OPPS ratesetting process. Many of the changes we have made to our data 

process over the past decade have arisen with consideration of the need for accurate and 

reliable cost information. To a certain extent, we can mitigate the issues raised by those 

concerns through data process changes like trimming methodologies, such as those for 

the line items as well as cost and unit outliers, and modeling changes, such as those for 

composite and device-dependent methodologies, to more accurately estimate cost. 

However, more broadly, we rely on OPPS providers to submit accurate cost and charge 

information to establish the relativity in the OPPS on which APC payments are based. 
CMS-1589-FC 195 

We value the comments that stakeholders provide with regards to potential data 

improvements as well as methods by which we can obtain more accurate data. In 

situations such as the proton beam APCs for the CY 2013 OPPS/ASC proposed rule and 

subsequent information about cost report revisions and inaccurate coding, we must 

balance our reliance on information from OPPS providers with the complementing goal 

of obtaining accurate cost information. As we described in the CY 2013 OPPS/ASC 

proposed rule, we have taken steps to address issues such as charge compression in areas 

such as the former “Medical Supplies Charged to Patients” cost center by establishing a 

new standard cost center for “Implantable Medical Devices Charged to Patients.” 

In the case of calculating relative payment weights based on geometric mean 

costs, we believe that such a change, while affecting the OPPS very broadly, would not 

involve much manipulation of the data. Although several commenters have suggested 

that the lack of sensitivity towards cost outliers is appropriate, we also have received 

comments and HOP Panel presentations in the past regarding the degree to which APC 

relative payments fail to reflect high-cost packaged services. Calculating relative 

payment weights based on geometric mean cost is one way of being responsive to those 

concerns regarding the degree to which correctly reported claims with unusually high 

costs are incorporated into the relative payment weights. While we agree that OPPS 

outliers do help mitigate the financial risk associated with performing certain services 

that require additional complexity or resources, we also believe that developing the 

relative payment weights based on geometric mean-based costs will help ensure that 

payments are more reflective of the range of service cost. 
CMS-1589-FC 196 

In the CY 2013 OPPS/ASC proposed rule, in our proposal to base the CY 2013 

relative payments weights on geometric mean costs, we described the many changes we 

have made since the inception of the OPPS to improve upon our data process. These 

improvements have helped us obtain more information from the claims and cost report 

data we have available to us, in addition to ensuring the accuracy of the resource cost 

estimates we use to model the APC relative payment weights. While we continue to look 

for ways in which we can improve the OPPS and our modeling of the estimated costs 

used to develop the relative payment weights, we do not believe that the cost information 

and methods through which we establish the relative payment weights are inherently 

flawed. Aligning the relative payment weights based on geometric mean costs may be a 

significant change in how the relative payment weights are calculated; however, the 

change can be viewed as incremental based on the other data improvements throughout 

the history of the OPPS, as described earlier in this section. 

We believe that incentives exist for accurate cost reporting beyond direct financial 

incentives. We believe that external perceptions of incorrect reporting are based 

primarily on the failure to consider limitations of the data collection methodology when 

making assumptions and conclusions. The Medicare cost report form allows hospitals to 

report in a manner that is consistent with their own financial accounting systems and, 

therefore, should be accurate for each individual hospital. 

The regulations at 42 CFR 413.24(f)(4)(iv) specify the certification statement on 

the first page of the Medicare cost report (Hospital and Hospital Heath Care Complex 

Cost Report, Form CMS-2552-10) that must be signed by the hospital’s administrator or 
CMS-1589-FC 197 

chief financial officer certifying that the data contained in the cost report are true and 

accurate. Also included on the certification page is a “penalty statement” which conveys 

to the hospital official signing the cost report that misrepresentation or falsification of any 

information contained in the cost report is punishable by criminal, civil, and 

administrative action, fine, and/or imprisonment under Federal law. Further, the “penalty 

statement” also states that if services identified in the cost report were provided or 

procured through the payment directly or indirectly of a kickback or were otherwise 

illegal, then criminal, civil, and administrative action, fine, and/or imprisonment may 

result. We believe that the possibility of mandatory cost report adjustments by fiscal 

intermediaries or MACs where erroneous amounts are found to exist and the possibility 

of Federal prosecution where potentially false claims and/or fraudulent conduct are found 

to exist act as reasonable incentives to complete the cost report accurately. Further, the 

cost report data and their use in the OPPS cost estimation and payment rate development 

process, combined with potential penalties for inaccurate reporting, provide financial 

incentive for reporting costs accurately. 

We recognize that hospitals are complex entities, each having their own 

accounting systems and reporting methodology. As such, the cost and charge data that 

they provide through the Medicare cost report forms are structured in a way that reflects 

their own internal accounting systems. Although we would obtain the most accurate 

information by using a highly structured reporting format across hospitals, in using these 

data for OPPS ratesetting, we must balance between our use of these data for the cost 

estimation process and the burden associated with forcing hospitals to convert to a 
CMS-1589-FC 198 

government-mandated standardized financial management system. The current 

mechanism allows us to collect information that is accurate in the aggregate and that 

further, at a granular level, reflects the relative allocation of costs to departments and 

services by the industry as a whole without creating additional burden. 

We note that while the RTI investigation into charge compression and the 

calculation of the relative payment weights yielded areas where the cost estimation 

process could be improved, there was no suggestion that the process or data itself were 

fundamentally flawed. We also note that we have tried to be responsive to the concerns 

raised in the RTI report regarding charge compression and the accuracy of the relative 

payment weights, for example, through the creation of the new “Implantable Medical 

Devices Charged to Patients” standard cost center or through the packaged cost 

redistribution to account for pharmacy overhead in the past several years. Regarding the 

concern about the matching process between the data used to calculate the CCRs on the 

Medicare cost report and the claims-based charges, we note that we use the most updated 

accurate information made available to us and match them to the degree possible to 

accurately calculate estimated costs. In the revenue code-to-cost center modeling 

crosswalk that we use to estimate cost, the hierarchy of cost center CCRs is based on our 

best assumption of where those revenue code charges would be placed even though it 

may not necessarily reflect every hospitals’ individual cost report structure. 

As discussed earlier in this section, we have made many improvements to the 

OPPS data process over the course of the past decade. Many of those changes were 

intended to either derive more information from the claims and cost report data we have 
CMS-1589-FC 199 

available to us, while others were intended to estimate cost in a way that more accurately 

represented the provision of the service and associated resources. We believe that basing 

the relative payment weights on geometric mean costs will improve the degree to which 

our APC payments reflect the range of resource costs associated with providing services, 

and represents an incremental data improvement. Therefore, we do not believe it is 

appropriate to postpone the use of geometric mean costs in establishing the CY 2013 

OPPS/ASC relative payment weights. 

Comment: Several commenters requested clarification regarding why CMS 

selected geometric mean costs as the metric for our proposed policy for calculating the 

CY 2013 OPPS/ASC relative payment weights rather than arithmetic mean costs. Other 

commenters noted that using arithmetic means would bring the OPPS even further in line 

with the IPPS ratesetting methodology. 

Response: While developing the proposal to establish the CY 2013 OPPS/ASC 

relative payment weights using geometric mean costs, we also reviewed the volatility 

associated and impact of an OPPS based on arithmetic mean costs. We also considered 

many of the same issues that commenters described with respect to the use of arithmetic 

means, including whether their ability to more sensitively consider the variety of cost 

patterns, provide a better reflection of total costs, and to synchronize the OPPS system 

with the IPPS methodology, would be a preferable option among the three metrics. 

We noted that because only natural and “pseudo” single major claims would be 

used to model the relativity of the OPPS, arithmetic means would not truly reflect total 

cost in the system. Although arithmetic mean costs would be more sensitive towards 
CMS-1589-FC 200 

outlier values than both geometric mean costs and median costs, there would also be 

greater volatility associated with the use of them due to their sensitivity towards outlier 

values. Similarly, the short-term transition from medians to arithmetic means would also 

include a greater range of both positive and negative provider payment impacts and 

would result in the need for more reconfiguration of the APCs to resolve 2 times rule 

violations than geometric mean costs. While we have discussed our intention to perform 

a thorough review of the OPPS in the future that may involve more significant 

reconfiguration, that review would be performed with the goal of developing more 

accurate and stable payment rates, to the extent that they reflect the range of service 

costs. Although we stated the possibility of using these geometric mean based payments 

for exploring cross-system payment comparisons, we recognize that there may be aspects 

of each payment system data methodology that may be unique. While using arithmetic 

mean costs would potentially capture the full range of costs better than both geometric 

means and medians, that benefit has limited value in a relative system such as the OPPS, 

where all total costs are reduced to relative rates. Conversely, it also would potentially 

allow an inappropriate impact due to aberrant values because there would be no 

mitigation of the influence of outlier costs, which could be accurate or aberrant values. 

Therefore, we viewed the use of geometric mean costs as a balanced approach between 

both the strengths and weaknesses of using medians and arithmetic means. 

Comment: Several commenters expressed concern with regard to the decline in 

APC payment to CMHCs due to use of the geometric mean cost for calculating the OPPS 
CMS-1589-FC 201 

relative payment weights, and recommended that CMS continue to monitor the impact of 

its payment policies on CMHCs. 

Response: Over the past several years, we have made changes to the calculation 

of PHP relative payment weights to more accurately align their PHP APC payments to 

their specific costs. These changes to PHP relative payment weights have included 

establishing a separate cost estimation process based on provider type as well as a 

two-tiered APC payment system under which we pay one amount for days with 3 

services and a higher amount for days with 4 or more services for both CMHC and 

hospital-based PHPs. As discussed in the CY 2013 OPPS/ASC proposed rule, we believe 

that the use of geometric mean costs rather than median costs in the ratesetting process is 

one such improvement because it allows the payment metric to consider a broader range 

of service costs (77 FR 45097). We will continue to monitor the impact of our payment 

policies on OPPS providers, including CMHCs. 

Comment: One commenter was concerned with the minimum and maximum 

values associated with APCs 0690 (Level I Electronic Analysis of Devices) and 0105 

(Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices). In the case of 

APC 0690, the commenter suggested that the APC payment rate be set to the median cost 

and not allowed to drop below the payment that CMS would have calculated using 

medians. For CPT 0307T (Removal of intracardiac ischemia monitoring device), the 

commenter also believed that its placement in APC 0105 was appropriate. However, the 

commenter requested that CMS perform an analysis to determine whether some of the 

procedures might be more appropriately placed in a different APC. 
CMS-1589-FC 202 

Response: In the case of both of these APCs, the presence of high-cost, 

low-volume services in the claims used to model each APC creates outliers that foster the 

perception that the services spread more evenly across the range between the minimum 

and maximum values than actually is the case. Those minimum and maximum values 

represent individual points at the most extreme ends of the model, and include service 

cost estimations that do not contribute significantly enough to the APC weight to be 

considered in the application of the 2 times rule. In that sense, those values can be 

misleading because the minimum and maximum should be considered as the most 

extreme outlier cases; we evaluate the range through the application of the 2 times rule, 

which only considers services that have sufficient volume to demonstrate stability and 

reliability and which significantly contribute to the relative payment weight of the APC. 

Both medians and means are measures of central tendency and have strengths and 

weaknesses when considering the degree to which they accurately represent the dataset. 

Similarly, the minimum and maximum values are informative in identifying the most 

extreme outliers of a dataset but do not necessarily reflect the bulk of the distribution. 

For CPT codes 0305T and 0306T which are assigned to APC 0690, we note that 

the geometric mean cost ($34.78) was slightly higher than the median cost ($33.71) for 

the APC in the data used for the CY 2013 OPPS/ASC proposed rule. In addition, after 

calculation of budget neutrality and other adjustments, the national unadjusted payment 

rate for a geometric mean cost-based APC payment was proposed to be higher than a 

median cost-based one for CY 2013. Finally, for prospective APC payment rates which 

are calculated through the standard process, we would not pay using the cost as a rate but 
CMS-1589-FC 203 

we would use the estimated costs to establish the relative payment weights on which 

OPPS payments are based. Therefore, we are not setting the payment rate for APC 0690 

at the median cost. 

We appreciate the commenters’ support regarding the placement of CPT code 

0307T in APC 0105. We do not agree that having a wide distribution of costs in an APC 

necessarily implies that a problem in the construction of the APC exists, particularly in 

cases where we believe the clinical placement and resource use is appropriate. As 

described above, the minimum and maximum values identified within each CPT or APC 

are the most extreme outliers, and may not necessarily reflect where the majority of the 

cost estimates are within each code. For application of the 2 times rule discussed in 

section III.B. of this final rule with comment period, we only consider codes that are 

“significant” in their contribution towards the cost estimates in the APC as being useful 

in the identification of how similar the services within an APC are to each other, from a 

cost perspective. However, this does not eliminate the need to consider clinical factors 

when constructing the APC assignments. We do not believe that differences in the 

distribution of costs for a service automatically creates the need for further study, 

especially because the purpose of geometric mean costs is to more fully include those 

cost observations. Similarly, the APC configurations are intended to group together 

services with clinical and resource homogeneity. However, in the CY 2013 OPPS/ASC 

proposed rule, we stated our intention of using the information we have available to us to 

reexamine the APC structure and assignments to consider further ways of increasing the 

stability of payments over time, and will consider these issues as we do so in the future. 
CMS-1589-FC 204 

Comment: Commenters expressed concern with regard to the impact of the use of 

geometric mean-based costs for other specific APCs as well as certain clinical areas. 

APCs that commenters requested specific detail about included APCs 0690 (Level I 

Electronic Analysis of Devices); 0105 (Repair/Revision/Removal of Pacemakers, AICDs, 

or Vascular Devices); 0331 (Combined Abdomen and Pelvis CT without Contrast); 0334 

(Combined Abdomen and Pelvis CT with Contrast); 0383 (Cardiac Computed 

Tomographic Imaging); 0336 (Magnetic Resonance Imaging and Magnetic Resonance 

Angiography without Contrast); 0337 (Magnetic Resonance Imaging and Magnetic 

Resonance Angiography without Contrast followed by Contrast); 0308 (Positron 

Emission Tomography (PET) imaging); 0402 (Level II Nervous System Imaging); 0408 

(Level III Tumor/Infection Imaging); 0169 (Lithotripsy); 0385 (Level I Prosthetic 

Urological Procedures); 0386 (Level II Prosthetic Urological Procedures); and 0674 

(Prostate Cryoablation). Other clinical areas that commenters expressed concern about 

included otolaryngological and orthopaedic procedures. One commenter requested that 

CMS ensure that there was no disproportionate impact to any given medical specialty. 

Response: In the case of these APCs, generally the issue is that the geometric 

mean costs reflect lower cost values than otherwise indicated by the median value. We 

have identified numerous other data issues or policies beyond the use of geometric mean 

costs that may attribute to potential declines in the relative payment weight. 

For APCs 0331 and 0334, this is the first year where actual data are available for 

ratesetting based on the new CY 2011 computed tomography of abdomen/pelvis codes: 

CPT codes 74176 (Computed tomography, abdomen and pelvis; without contrast 
CMS-1589-FC 205 

material); 74177 (Computed tomography, abdomen and pelvis; with contrast material(s)); 

and 74178 (Computed tomography, abdomen and pelvis, without contrast material in one 

or both body regions, followed by contrast material(s) and further sections in one or both 

body regions). For more discussion on the Computed Tomography of Abdomen/Pelvis 

APCs, we refer readers to section II.A.7.c. of this final rule with comment period. 

Another influencing factor may be the use of the new standard cost center for 

“Implantable Devices Charged to Patient”. For device-dependent APCs 0385, 0386, and 

0674, there may be effects based on use of the new standard cost center CCR being 

mapped to revenues codes where appropriate. For a discussion of the cost report CCRs 

used to estimate service cost, we refer readers to section II.A.1.c. of this final rule with 

comment period. 

For APC 0169, the estimated costs of the APC may have changed based on 

corrections to the revenue code-to-cost center crosswalk described in the second 

correction notice to the CY 2012 OPPS/ASC final rule with comment period 

(77 FR 24409). Further, because CPT code 50590 (Lithotripsy, extracorporeal shock 

wave) is the only code used to model the APC, any variation with the estimated costs for 

the CPT code will directly affect the APC relative payment weight. 

For all the APCs referenced by commenters, the relative payment weights based 

on using geometric mean costs now include a greater range of resource costs associated 

with furnishing the services. Declines in their APC relative payment weights can 

partially be attributable to these changes in the degree to which the relative payment are 

reflective of costs. As we have noted, there also may be additional influencing factors 
CMS-1589-FC 206 

that have led to those changes, including use of actual rather than simulated claims data, 

the use of the new “Implantable Medical Devices Charged to Patients” standard cost 

center, the corrections we made to our revenue code-to-cost center modeling crosswalk in 

our data process, and others. We also note that, because of budget neutrality, for each 

APC that commenters identified as having decreased payments, there are other APCs that 

have increased payments. As a general matter, we believe that, in their totality, the newly 

based APC payment rates better reflect the underlying costs in both cases. 

We have typically analyzed the impacts of any proposals at the CPT code, APC, 

and provider levels of granularity, as most hospitals furnish a variety of services to 

Medicare beneficiaries. We do not believe that observed declines or increases in the 

payments for codes are typically associated with any individual specialty because, as we 

have noted, there are both increases and decreases in relative payment weight associated 

with this proposal. Additionally, changes generally are due to the degree to which 

medians were insensitive to the range of service costs. 

Comment: One commenter expressed concern regarding the impact of geometric 

means-based payment on blood products because many of the blood product APCs would 

experience declines in payment. The commenter recommended that blood products 

continue to be separately paid based on simulated median costs or that a CY 2013 

payment floor be set at the CY 2012 APC payment rates. 

Response: While we appreciate the concerns expressed by the commenter, we do 

not believe that it is appropriate to establish the relative payment weights using different 

cost metrics for various APC categories. Doing so would potentially distort the cost 
CMS-1589-FC 207 

relativity and APC payments of services paid through the OPPS. We note that, to ensure 

that the cost estimation process for blood products is as accurate as possible, we have 

continued to use simulated CCRs where appropriate, as discussed under section II.A.d.2. 

of this final rule with comment period. Similarly, we do not believe that setting a 

payment floor for a specific set of services is appropriate. The estimated resource costs 

associated with providing a service change from year to year and establishing arbitrary 

payment floors would decrease the degree to which APC payments reflect the range of 

costs associated with providing a service. 

Comment: Commenters also expressed concern regarding the use of geometric 

mean costs as the basis for APC relative payment weights for brachytherapy sources and 

recommended that they not be used in establishing the relative payment weights. The 

commenters believed that geometric mean costs would be inappropriate for use in 

ratesetting, in particular for the case of brachytherapy sources. 

One commenter stated that the geometric mean is inappropriate for use in 

determining payment levels under the OPPS because it will overemphasize the weight of 

low and potentially spurious values in the data. The commenter had other statistical 

concerns regarding the extent to which there were high-cost and low-cost outliers that 

they believed were not plausible values as well as variation in estimated costs for 

brachytherapy relative to other OPPS services. The commenter attributed that variation 

as being due to hospital reporting practices, and contrasted that variation in the OPPS to 

the IPPS, where the commenter believed the main concern was high-cost outliers and 

high-cost values. Under the commenter’s belief that geometric means would pay 
CMS-1589-FC 208 

inadequately for brachytherapy, the commenter also believed it would create a 

disincentive to use brachytherapy in the treatment of cancer and create access to care 

issues. The commenter stated that CMS would be acting contrary to the intent of the 

cost-based payment extensions for brachytherapy payment from CY 2004 through 

CY 2009. Further, the commenter stated that CMS did not provide sufficient warning to 

other policymakers in CYs 2010 and 2011 regarding the likelihood that it might 

potentially change the cost metric used to establish relative payment weights. The 

commenter believed that geometric mean costs should not be used to develop the relative 

payment weights of brachytherapy sources. 

Response: As with all other OPPS services that would be affected by the 

proposed policy, we do not believe that the use of geometric mean costs in establishing 

the APC relative payment weights for brachytherapy sources is inappropriate. While the 

use of geometric mean costs will include the weight of low values in the data, we note 

that it also better incorporates cost observations from the higher values in the data. This 

can be seen in the increases in the relative payment weight for certain brachytherapy 

sources based on using geometric mean costs. As discussed earlier in this section, the 

values now being included could potentially include spurious values on both ends of the 

dataset, as well as legitimate and accurate data. We believe that encompassing a broader 

range of service costs in establishing the relative payment weights is a technical 

improvement and may increase the degree to which payments reflect the range of costs 

associated with providing a service. 
CMS-1589-FC 209 

 Both the IPPS and OPPS contain reporting variations due to the different charging 

practices among hospitals. While we agree that some of the variations in cost outlier 

values may be due to the fact that brachytherapy sources rely on charges and costs 

associated with a CCR, that does not imply that they are necessarily inappropriate, as all 

OPPS payments rely on charges and CCRs. As we have noted earlier in this section, as 

long as providers are using generally acceptable accounting practices (GAAP), and the 

cost report structure reflects their charging practices, we believe that this results in 

accurate calculations. While the commenter has suggested that the variation in the costs 

of brachytherapy sources is inappropriate, this can be attributed to both accounting and 

real cost differences among the various providers that furnish the service in addition to 

low frequency of line items which may be used to model cost. Although medians may be 

less sensitive to cost outliers, or even the range of costs, we believe that is both a strength 

and a weakness of that metric, but is not a reflection of greater or lesser accuracy. While 

commenters have provided examples with a sample size of three values to illustrate their 

point regarding sensitivity to low cost values, we note that cases with this order of 

extreme observations used to model the relative payment weights would be exceptionally 

rare. For example, the commenter posited a reported charge of $0.01 which is not only 

extremely unlikely but also is not supported by institutional claims processing. In 

situations where there are few claims available to model the service costs, the basic issue 

is the claims volume and their use in establishing the relative payment weights, and not 

necessarily the fact that medians or geometric means are used. We can address small 

claim volumes in some cases through assigning similar services based on resource costs 
CMS-1589-FC 210 

or clinical similarity to the same APCs. However, this method of addressing variability 

based on low claims volume is unavailable as a tool for line item cost-based APCs. 

We do not believe that changes in payment based on the use of geometric mean 

costs will create a disincentive towards using brachytherapy as a viable option in the 

treatment of cancer. As we noted earlier in this section, there is variation even among the 

brachytherapy APCs, which suggests that some of those APC payment rates may now 

better reflect the range of costs associated with them. There also is extreme variation in 

the costs reported by individual hospitals for each service within the APC. In considering 

whether a median cost-based system or a geometric mean-based system is more 

appropriate at this juncture, the inclination is to view declines in payments as aberrant, 

without consideration of increases in payment. However, it is equally possible that 

medians and their lack of sensitivity towards outliers may have led to more payments 

based on overstated costs than would have been appropriate when considering the 

broader range of service costs. As discussed in an earlier response, we will continue to 

monitor the impact of this proposal to base the relative payment weights on geometric 

mean costs. 

With respect to the comments regarding the process through which we establish 

payment policy for each prospective payment year, we note that the OPPS rulemaking 

process occurs annually, and is intended to give providers notice as well as the 

opportunity to inform rulemaking and express their stances regarding various policy 

proposals. While being able to prepare for each rulemaking cycle so that each 

prospective payment policy proposal is known years in advance may be preferred by 
CMS-1589-FC 211 

commenters, it is not operationally feasible. As we have discussed in this section, as well 

as in the CY 2013 OPPS/ASC proposed rule, the situations that were pressing during the 

inception of the initial OPPS, and the changes we have made since then, have allowed us 

to consider different issues as well as areas for improvement. We believe that basing the 

relative payment weights on geometric mean costs is one such improvement. Although 

Congress did extend the prior cost-based methodology for brachytherapy sources from 

CYs 2004 through 2009, we note that no such additional extension has been enacted. 

Further, the discretion to use a median-based or mean-based system in establishing the 

OPPS relative payment weights predates those extensions, as authorized by section 201(f) 

of the BBRA of 1999. 

While we recognize the concerns regarding the payments for brachytherapy 

sources based on geometric mean costs, we continue to believe that this change will 

result in more accuracy in the cost estimation. We do not believe that paying for some 

services based on median costs while using geometric mean costs for other services is 

appropriate, equitable, or consistent with statute. Further, using different cost metrics for 

different services could distort the relativity of services within the system and increase 

the inaccuracy and instability of service payment. 

Comment: Several commenters noted that they had difficulty modeling the 

budget neutrality and impact calculations, and suggested that CMS provide a more 

thorough explanation before proceeding with the proposal to establish OPPS relative 

payment weights based on geometric mean costs. The commenters stated that lack of a 

study, in particular one that studies the effect of using geometric mean costs as the basis 
CMS-1589-FC 212 

for the relative payment weights over time, made it difficult for them to make an 

informed decision. The commenters also stated that an explanation regarding the impacts 

was necessary before proceeding, with several commenters noting that the effect of 

basing the relative payment weights on geometric mean costs was not evenly distributed 

by provider types. One commenter disagreed that there would generally be limited 

financial impact to hospitals, due to the fluctuations in certain APCs. Some commenters 

claimed that the proposal to base the relative payment weights on geometric mean costs 

disproportionately affected teaching hospitals. Other commenters asked CMS to provide 

a list of APCs whose costs fluctuated above a certain threshold each year, so that those 

APCs could be identified through rulemaking for public comment and to allow for 

presentations before the HOP Panel. A few commenters expressed concern in using 

geometric mean costs for small sample sizes, as was the case with those associated with 

proton beam therapy. 

Response: For the past several years, each OPPS/ASC rule has included a 

discussion summarizing both our data process, as well as the calculations associated with 

budget neutrality and hospital impacts. However, we also make available online a claims 

accounting document that summarizes in great detail the claims manipulation that goes 

into modeling the costs used to develop the relative payment weights, as well as the 

calculations and data processes used to model budget neutrality and the hospital impacts 

each cycle. The budget neutrality and hospital impacts portions of this document were 

developed beginning with the CY 2007 OPPS proposed rule, and have been available for 

every OPPS rulemaking cycle thereafter. 
CMS-1589-FC 213 

While we appreciate the concerns that commenters have with regard to studying 

the effects over time, we believe that any increased fluctuations due to geometric 

mean-based payments are generally not significant enough to create cause for concern. 

This data process change applied to the cost metric used to develop the relative payment 

weights more fully captures the range of costs associated with providing a service. 

However, service costs and APC payments fluctuate over time for a variety of reasons, as 

we have previously discussed in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74139). As we have discussed earlier in this section, we will continue to monitor 

the impact of using geometric mean costs to establish the APC relative payment weights 

and any changes in service frequency or beneficiary access. Our investigation into the 

impact of using geometric mean costs to establish the relative payment weights also 

suggest that there should be limited volatility in the payment rates after this initial 

change. We note that some services do have payment decreases associated with using 

geometric mean-based relative weights. However, many services also experience 

payment increases as a result of the geometric mean-based calculation, presumably 

because the relative payment weights more accurately reflect higher costs associated with 

provisions of those services. Finally, we note that the one-time effect of converting from 

medians to means this year is not to be confused with the much less significant effect of 

year-to-year variation associated with means. 

We agree with the commenters’ concern regarding the issue of APCs with small 

sample sizes. However, our concern has less to do with the use of geometric mean costs 

being used to model the relative payment weights where they are appropriate, but more 
CMS-1589-FC 214 

with the degree to which a substantive cost baseline can be established. In general, APCs 

with relatively low service costs or those where there is low claims volume tend to be 

more vulnerable to cost and payment volatility. We continue to examine methods and 

APC configurations, such as larger bundles, to mitigate any concerns related to those 

issues. As the commenter discussed regarding the case of proton beam therapy, there are 

situations where the costs of the service reflect only provision from a small number of 

providers and, therefore, may not establish a broad baseline as is the case for most APCs. 

However, in the case of the proton beam APCs, a sufficiently large volume of claims had 

been provided and the geometric means helped carry out our intention of capturing the 

full range of costs. As discussed in the APC-specific policy section of this final rule with 

comment period, section II.D., the issues relayed by the commenter primarily were due to 

presumed idiosyncrasies and errors in the submission of the cost reports, which, in turn, 

affected the estimation of costs, and was further impacted by the coding practices at an 

individual provider. We note that the potential of these issues to affect the relative 

payment weights would occur both under a median-based system, provided there was 

enough significant volume, as well as under geometric mean costs. 

In both the CY 2013 OPPS/ASC proposed rule and in this CY 2013 OPPS/ASC 

final rule with comment period, we have included a column in the impact tables that 

separately shows the effects of the use of geometric mean costs on the APC relative 

payment weights. At a very basic level, provider categories that experienced more 

significant negative or positive payment impacts did so because of the mix of services 

furnished by those providers based on our claims data. We note that the OPPS provider 
CMS-1589-FC 215 

payment impacts identified in section XXIII. of this CY 2013 OPPS/ASC final rule are 

relatively limited. Some commenters have stated that the policy of developing relative 

payment weights using geometric mean costs disproportionately affects teaching 

hospitals; other commenters have noted that the impacts are not identical based on the 

provider categories. That differential in the impacts is to be expected based on this 

policy, just as any estimated payment impact based on the mix of services that a hospital 

provides will vary from year to year. Because this policy affects the calculation of the 

relative payment weights and does not affect the relative payment weights uniformly, it is 

natural for the changes in those weights to have corresponding variation reflected in the 

provider impacts based on the mix of services furnished by providers. In the provider 

impact table in this CY 2013 OPPS/ASC final rule with comment period, we note that, 

even among major and minor teaching hospitals, there are different estimated impacts 

based on this policy. We further note that, while the payment category may reflect an 

increase or decrease in total estimated payment, even among the hospitals in that 

category, there may be differential impacts that may not necessarily be in the same 

direction. As discussed earlier in this section, we will continue to monitor any changes 

that may be associated with the policy of calculating the relative payment weights using 

geometric mean costs. 

We make available with each proposed rule and final rule cost statistics files that 

include information about costs by CPT code and APC, as well as modeling and total 

frequency information for each code. Addenda A and B which show the payment rates 

associated with each rule, also are made available on the CMS Web site. Therefore, the 
CMS-1589-FC 216 

information to continue monitoring changes in APC payment, code frequency, and cost 

are made available to the public. 

Comment: One commenter supported the goal of making cross-system payment 

comparison of payment parity. Two commenters cautioned against using OPPS 

payments based on geometric mean costs as a basis for examining payment parity across 

the prospective payment systems. They noted that other factors may be involved that 

would cause those comparisons to potentially be inappropriate, including the acuity of the 

patients, case- mix, ratesetting methodologies, and resource use in different care settings, 

as well as different payment adjustments in each system. 

Response: While we believe that each of the payment systems has an internally 

consistent methodology, we recognize the value of including useful information in 

making potential payment comparisons. We note that we already implement 

cross-system payment and utilization comparisons in cases such as the MPFS DRA 

imaging cap, the ASC cap on separately payable radiology services, the cap on ASC 

office-based covered surgical procedures, and the comparison of service provision across 

settings for purposes of the inpatient list. The goal in making any potential payment 

comparisons is to analyze the differences and similarities in as appropriate a manner as 

possible. 

As we discussed in the CY 2012 OPPS/ASC final rule with comment period, in 

the context of the proposed Cardiac Resynchronization Therapy composite APC, there 

are various goals associated with making cross-system payment comparisons, including 

ensuring that we do not create an inappropriate payment incentive to provide services in 
CMS-1589-FC 217 

one setting of care as opposed to another, using more accurate information where it is 

available, and constructing the payment groups to be more clinically and resource similar 

to each other where appropriate, among others (76 FR 74179 through 74182). We 

specifically noted that there could be many payment approaches that could be chosen for 

comparison purposes for any given item or service (76 FR 74181). 

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

proposal to develop the APC relative payment weights using geometric mean costs in the 

manner described above. 

As we also discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45097), 

under the revised ASC payment system that was effective January 1, 2008, we 

established a standard ASC ratesetting methodology that bases payment for most ASC 

covered surgical procedures and some covered ancillary services on the OPPS relative 

payment weights (72 FR 42491 through 42493). Therefore, because we proposed to 

calculate CY 2013 OPPS relative payment weights using geometric mean costs, we also 

proposed that CY 2013 ASC payment rates under the standard ASC ratesetting 

methodology would be calculated using the OPPS relative payment weights that are 

based on geometric mean costs. We noted that basing the relative payment weights on 

geometric mean costs rather than median costs affects the proposed CY 2013 payment 

rates. We stated that differences in the proposed payment rates, as with any changes 

from year to year, affect other parts of the OPPS, including the copayments described in 

section II.I. of the proposed rule as well as the fixed-dollar outlier threshold described in 

section II.G. of the proposed rule. 
CMS-1589-FC 218 

We did not receive any public comments on the adoption of OPPS relative 

payment weights based on geometric means in the ASC system. For a more detailed 

discussion of the ASC ratesetting methodology, we refer readers to section XIV. of this 

final rule with comment period. 

Under the CY 2013 proposed policy to base the relative payment weights on 

geometric mean costs, we also proposed to revise the related regulations that currently 

reflect a median cost-based OPPS to instead reflect a geometric mean cost-based OPPS. 

Specifically, we proposed to revise 42 CFR 419.31, which describes the 2 times rule 

discussed in section III.B. of the proposed rule and this final rule with comment period 

and the development of relative payment weights based on the cost metrics discussed in 

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

Comment: One commenter stated that CMS did not address why it did not apply 

the 2 times rule based on geometric means while continuing to use medians for 

calculating the relative weights because the commenter believed that it would improve 

the detection of changes in service cost while basing relative payment weights on the less 

volatile median. 

Response: In the CY 2013 OPPS/ASC proposed rule, we discussed the impact of 

evaluating the 2 times rule based on geometric mean costs rather than median costs, 

noting that while doing so did not significantly affect the application of the rule, it created 

several additional 2 times rule violations in the rebasing process (77 FR 45097). Similar 

to the IPPS and since the inception of the OPPS, we have used a statistical outlier trim of 

three standard deviations beyond the geometric mean cost, even though we have 
CMS-1589-FC 219 

historically used median costs as the metric on which to base the relative payment 

weights. The application of the 2 times rule is inherently tied to the configuration of the 

APCs and, therefore, how individual codes are paid. To apply the 2 times rule based on 

geometric mean cost and reconfigure the APCs based on that metric, while calculating 

relative payment weights based on medians, would be an inconsistency in the data 

process in the same way that using geometric mean costs for some services and median 

costs for others would be. Further, section 1833(t)(2) of the Act states that the 

application of the 2 times rule should be based on the metric selected in section 

1833(t)(2)(C) of the Act. 

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

proposal to apply the 2 times rule based on geometric mean costs and the corresponding 

changes in 42 CFR 419.31. 

In section XXII. of this final rule with comment period, which discusses the 

regulatory impact analysis, we are providing an additional column in the impact tables for 

the OPPS that identifies the estimated impact due to APC recalibration of a geometric 

means-based OPPS as well as a column that estimates the impact of recalibration based 

on CY 2011 claims and historical cost report data. As depicted in the impact tables, 

many provider categories will experience limited impacts under the final policy to base 

the OPPS relative payment weights on geometric means. We note that the impact tables 

only estimate the OPPS payment impact based on the most current available claims and 

cost report data, and that providers’ actual payments may vary, depending on the mix of 

services provided in the actual claims year. Also, the budget neutral payment 
CMS-1589-FC 220 

adjustments ensure that, under a geometric mean-based system or a median cost-based 

system, aggregate OPPS payments will remain the same. 

Section XXII. of this final rule with comment period contains an OPPS provider 

impact table that estimates the effect of policy changes and budget neutrality adjustments 

on provider payment under the CY 2013 OPPS. Column 3 of the impact table shows the 

estimated impact by provider category of calculating the CY 2013 OPPS payments based 

on geometric mean costs rather than median costs. While the policy to shift the basis for 

relative payment weights to geometric mean costs may involve some changes to the 

relative weights on which OPPS payments are based, providers will generally experience 

limited impacts to payment as a result of the CY 2013 final policy. Those provider 

categories that are estimated to experience increased payments as a result of the policy to 

base the CY 2013 relative payment weights on geometric mean costs generally included 

non-IPPS hospitals that provided psychiatric, hospital-based PHPs, and other services 

whose relative payment weights increased based on geometric mean costs. As noted 

above, we recognize that there may be fluctuations in the relative payment weights based 

on this CY 2013 final policy, but we believe that this policy represents an improvement 

that more accurately estimates the costs associated with providing services. 

In our experience developing the OPPS, we have implemented many changes to obtain 

more cost information from the claims and cost report data available to us, in an effort to 

arrive at more accurate estimates of service cost. Many of those changes are described 

above and in prior OPPS final rules. Despite the challenges created by the complexity of 

the data and the diversity of facility accounting systems, we continue to examine possible 
CMS-1589-FC 221 

process and data changes that may further improve precision, validity, and utility. 

Commenters have historically expressed concerns about the degree to which OPPS 

relative payment weights are reflective of the service costs associated with providing 

them, APC payment rate volatility from year to year, and other cost modeling related 

issues. We recognize that some of those issues will remain because they are related to 

naturally occurring changes in the economic environment, clinical practice, and the 

nature of payment systems, among other reasons. However, we believe that basing the 

OPPS relative payment weights on geometric means better captures the range of costs 

associated with providing services, improves payment accuracy while limiting 

year-to-year volatility, and allows reconfigurations in the APC environment using a 

metric that provides greater computational depth. For these reasons, and those discussed 

above, we are basing the CY 2013 OPPS/ASC final relative payment weights on 

geometric mean costs. 

3. Changes to Packaged Services 

a. Background 

Like other prospective payment systems, the OPPS relies on the concept of 

averaging, where the payment may be more or less than the estimated cost of providing a 

specific service or bundle of specific services for a particular patient. However, with the 

exception of outlier cases, overall payment is adequate to ensure access to appropriate 

care. The OPPS packages payment for multiple interrelated services into a single 

payment to create incentives for providers to furnish services in the most efficient way by 

enabling hospitals to manage their resources with maximum flexibility, thereby 
CMS-1589-FC 222 

encouraging long-term cost containment. For example, where there are a variety of 

supplies that could be used to furnish a service, some which are more expensive than 

others, packaging encourages hospitals to use the most cost-efficient item that meets the 

patient’s needs, rather than to routinely use a more expensive item, which could result if 

separate payment is provided for the items. Packaging also encourages hospitals to 

negotiate with manufacturers and suppliers to reduce the purchase price of items and 

services or to explore alternative group purchasing arrangements, thereby encouraging 

the most economical health care. Similarly, packaging encourages hospitals to establish 

protocols that ensure that necessary services are furnished, while scrutinizing the services 

ordered by practitioners to maximize the efficient use of hospital resources. Packaging 

payments into larger payment bundles promotes the predictability and accuracy of 

payment for services over time. Finally, packaging may reduce the importance of 

refining service-specific payment because packaged payments include costs associated 

with higher cost cases requiring many ancillary services and lower cost cases requiring 

fewer ancillary services. For these reasons, packaging payment for items and services 

that are typically ancillary and supportive to a primary service has been a fundamental 

part of the OPPS since its implementation in August 2000. 

We use the term “dependent service” to refer to the HCPCS codes that represent 

services that are typically ancillary and supportive to a primary diagnostic or therapeutic 

modality. We use the term “independent service” to refer to the HCPCS codes that 

represent the primary therapeutic or diagnostic modality into which we package payment 

for the dependent service. In future years, as we consider the development of larger 
CMS-1589-FC 223 

payment groups that more broadly reflect services provided in an encounter or episode of 

care, it is possible that we might propose to bundle payment for a service that we now 

refer to as “independent.” 

We assign status indicator “N” to those HCPCS codes of dependent services that 

we believe are always integral to the performance of the primary modality; therefore, we 

always package their costs into the costs of the separately paid primary services with 

which they are billed. Services assigned to status indicator “N” are unconditionally 

packaged. 

We assign status indicator “Q1” (STVX-Packaged Codes), “Q2” (T-Packaged 

Codes), or “Q3” (Codes that may be paid through a composite APC) to each 

conditionally packaged HCPCS code. An STVX-packaged code describes a HCPCS 

code whose payment is packaged with one or more separately paid primary services with 

the status indicator of “S,” “T,” “V,” or “X” furnished in the hospital outpatient 

encounter. A T-packaged code describes a code whose payment is only packaged with 

one or more separately paid surgical procedures with the status indicator of “T” are 

provided during the hospital outpatient encounter. STVX-packaged codes and 

T-packaged codes are paid separately in those uncommon cases when they do not meet 

their respective criteria for packaged payment. STVX-packaged codes and T-packaged 

codes are conditionally packaged. We refer readers to section XII.A.1. of this final rule 

with comment period and Addendum D1, which is available via the Internet on the CMS 

Web site with other Addenda, for a complete listing of status indicators and the meaning 

of each status indicator. 
CMS-1589-FC 224 

Hospitals include HCPCS codes and charges for packaged services on their 

claims, and the estimated costs associated with those packaged services are then added to 

the costs of separately payable procedures on the same claims to establish prospective 

payment rates. We encourage hospitals to report all HCPCS codes that describe 

packaged services provided, unless the CPT Editorial Panel or CMS provides other 

guidance. The appropriateness of the OPPS payment rates depends on the quality and 

completeness of the claims data that hospitals submit for the services they furnish to 

Medicare beneficiaries. 

In addition to the packaged items and services listed in 42 CFR 419.2(b), in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66610 through 66659), we 

adopted the packaging of payment for items and services in seven categories with the 

primary diagnostic or therapeutic modality to which we believe these items and services 

are typically ancillary and supportive. The seven categories are: (1) guidance services; 

(2) image processing services; (3) intraoperative services; (4) imaging supervision and 

interpretation services; (5) diagnostic radiopharmaceuticals; (6) contrast media; and 

(7) observation services. We specifically chose these categories of HCPCS codes for 

packaging because we believe that the items and services described by the codes in these 

categories are typically ancillary and supportive to a primary diagnostic or therapeutic 

modality and, in those cases, are an integral part of the primary service they support. 

Packaging under the OPPS also includes composite APCs, which are described in section 

II.A.2.e. of this final rule with comment period. 
CMS-1589-FC 225 

We recognize that decisions about packaging and bundling payment involve a 

balance between ensuring that payment is adequate to enable the hospital to provide 

quality care and establishing incentives for efficiency through larger units of payment. 

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45098 through 45101), we 

invited public comments regarding our packaging proposal for the CY 2013 OPPS. 

b. Clarification of the Regulations at 42 CFR 419.2(b) 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45099), we proposed to clarify 

the regulatory language at 42 CFR 419.2(b) to make explicit that the OPPS payments for 

the included costs of the nonexclusive list of items and services covered under the OPPS 

referred to in this paragraph are packaged into the payments for the related procedures or 

services with which such items and services are provided. We stated that this proposed 

clarification is consistent with our interpretation and application of 42 CFR 419.2(b) 

since the inception of the OPPS. We invited public comments on this clarification. 

Comment: One commenter objected to the proposed clarification of the 

regulatory language at 42 CFR 419.2(b). The commenter expressed concern that the 

proposed changes to the regulatory language are ambiguous and may result in confusion 

for hospitals and contractors. The commenter believed that Medicare audit contractors 

will try to assert that all services furnished during a particular encounter, such as E/M 

visits, drug administration, X-rays, or other ancillary tests, are all related to the main 

procedure or service received. The commenter further stated that this may lead to 

payment denials or monies taken during audits and/or post-payment reviews based on the 

proposed clarification. Therefore, the commenter recommended that CMS abandon this 
CMS-1589-FC 226 

proposal because the current regulatory language is clear and instructs all entities about 

CMS’ packaging principles. 

Another commenter did not object to the proposed wording change from 

“included costs” to “packaged costs” because, the commenter stated, CMS did not 

propose to add or alter any of the examples of packaged items and services, and the 

language used already notes that the list provided is not an inclusive one. However, the 

commenter was concerned that the proposed addition of the phrase “the payments for 

which are packaged into the payment for the related procedures or services” introduces a 

new concept that may lead to a broad interpretation of the regulatory text. The 

commenter expressed concern that when audits of OPPS accounts occur, the proposed 

regulatory text may be used to broaden the packaging concept beyond accurate CPT 

coding by using a subjective interpretation of the term “related”. Therefore, the 

commenter requested that CMS not add the phrase “the payments for which are packaged 

into the payment for the related procedures or services”. 

Response: We disagree with the commenters’ assertion that the proposed 

clarification of the regulatory text at 42 CFR 419.2 (b) is ambiguous or confusing. We 

note our proposal simply clarifies our longstanding policy of packaging, which is a 

fundamental concept of the OPPS. Specifying that included costs are packaged under the 

OPPS and that the payment for these packaged costs is packaged into the payment of the 

related procedures or services is consistent with our longstanding policies related to 

packaging. In addition, we disagree with the commenter’s statement that the proposed 

addition to 42 CFR 419.2 (b) of the phrase “the payment for which are packaged into the 
CMS-1589-FC 227 

payment for the related procedures or services” introduces a new concept into the current 

regulation text. 

As we have repeatedly stated, since the inception of the OPPS, packaging 

payment for items and services that are typically ancillary and supportive to a primary 

service has been a fundamental part of the OPPS. The concept of packaging entails that 

the costs for packaged services that are billed with a status indicator of “N” are packaged 

into the costs of the separately paid primary service with which they are billed. This then 

means that no separate APC payment is made for the packaged service alone but payment 

is instead included in the payment for the service or procedure with which the packaged 

service has been billed. 

We believe that our clarification of the regulations at 42 CFR 419.2(b) is 

consistent with the concept of packaging under the OPPS and does not deviate in any 

way from our current and longstanding policies regarding packaging under the OPPS. 

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

proposed policy, without modification, to clarify 42 CFR 419.2(b) to make explicit that 

the OPPS payments for the included costs of the nonexclusive list of items and services 

covered under the OPPS referred to in this paragraph are packaged into the payments for 

the related procedures or services with which such items and services are provided. 

c. Packaging Recommendations of the HOP Panel (“The Panel”) at its February 2012 

Meeting 

During its February 2012 meeting, the Panel made five recommendations related 

to packaging and to the function of the subcommittee. One additional recommendation 
CMS-1589-FC 228 

that originated from the APC Groups and Status Indicator (SI) Assignment Subcommittee 

about observation services is discussed in section II.A.2.e. of this final rule with comment 

period. The report of the February 2012 meeting of the Panel may be found on the CMS 

Web site at: 

http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp. 

Below we present each of the Panel’s five packaging recommendations and our 

responses to those recommendations. 

Panel Recommendation: CMS should delete HCPCS code G0259 (Injection 

procedure for sacroiliac joint; arthrography) and HCPCS code G0260 (Injection 

procedure for sacroiliac joint; provision of anesthetic, steroid and/or other therapeutic 

agent, with or without arthrography), and instead use CPT code 27096 (Injection 

procedure for sacroiliac joint, anesthetic/steroid, with image guidance (fluoroscopy or 

CT) including arthrography, when performed) with a status indicator of “T,” and assign 

CPT code 27096 to APC 0207 (Level III Nerve Injections). 

Response: In the CY 2013 OPPS/ASC proposed rule, we did not accept the 

Panel’s recommendation to delete HCPCS code G0259 and G0260 and instead use CPT 

code 27096 with a status indicator of “T’ and assign CPT code 27096 to APC 0207. For 

CY 2012, we assigned CPT code 27096 to status indicator “B,” meaning that this code is 

not payable under the OPPS. In order to receive payment for procedures performed on 

the sacroiliac joint with or without arthrography or with image guidance under the OPPS, 

hospitals must use either HCPCS code G0259, which is assigned to status indicator “N” 
CMS-1589-FC 229 

for CY 2012, or HCPCS code G0260, which is assigned to status indicator “T” for 

CY 2012, as appropriate. CMS created HCPCS codes G0259 and G0260 to separate and 

distinguish the image guidance procedure from the therapeutic injection procedure for the 

sacroiliac joint. As stated above, guidance procedures are packaged under the OPPS 

because we believe that they are typically ancillary and supportive to a primary 

diagnostic or therapeutic modality and are an integral part of the primary service they 

support. 

We believe that the existence of HCPCS codes G0259 and G0260 is necessary to 

assign appropriate packaged payment for the image guidance procedure, according to our 

established packaging policy, and separate payment for the therapeutic injection 

procedure. Therefore, we did not accept the Panel’s recommendation and followed the 

previously established policy to continue to assign HCPCS code G0259 to status 

indicator “N,” HCPCS code G0260 to status indicator “T,” and CPT code 27096 to status 

indicator “B” for CY 2013. 

Comment: Several commenters disagreed with CMS’ proposal to not accept the 

Panel’s recommendation on HCPCS codes G0259 and G0260 and to continue to assign a 

status indicator of “B” for CPT code 27096. One commenter expressed concern that the 

continued use of HCPCS codes G0259 and G0260 instead of the CPT code 27096 is 

administratively burdensome to hospitals because it does not allow standardized code 

reporting among all payers. 

Another commenter stated that there is no CPT code that would describe the 

radiological portion of the procedure to be reported in addition to HCPCS code G0259 
CMS-1589-FC 230 

because the AMA deleted CPT code 73054. As of January 1, 2012, the commenter stated 

that CPT code 27096 is always a complete procedure that includes the injection of a 

diagnostic or therapeutic agent and the associated imaging. The commenter 

recommended that CMS recognize CPT code 27096 and assign the appropriate APC code 

to this CPT code based on the CY 2011 claims data for HCPCS code G0259 with CPT 

code 73542 and HCPCS code G0260 or modify the descriptor of HCPCS code G0259 to 

include the radiological portion of the procedure and assign the appropriate status 

indicator and APC for the complete procedure. 

One commenter stated that CPT codes 77003 (Fluoroscopic guidance and 

localization of needle or catheter tip for spine or paraspinous diagnostic or therapeutic 

injection procedures (epidural or subarachnoid)) and 77012 (Computed tomography 

guidance for needle placement (eg, biopsy, aspiration, injection, localization device), 

radiological supervision and interpretation) that are billed with HCPCS code G0260 have 

a NCCI edit with an indicator of “1.” Therefore, the commenter stated that CPT codes 

77003 and 77012 cannot be reported with modifier “59” because the imaging guidance is 

not separate and distinct and it is instead part of the procedure. The commenter stated 

that providers cannot accurately report the cost of the imaging guidance (either 

fluoroscopy or CT) due to the CCI edits and the fact that the HCPCS code G0260 

descriptor does not indicate if either fluoroscopy or CT imaging is bundled into the 

procedure code. Therefore, the commenter asked that CMS establish a new HCPCS code 

to describe the sacroiliac injection procedure performed with imaging (fluoroscopy or 
CMS-1589-FC 231 

CT) or allow the reporting of CPT code 27096 and revise the status indicator from “B” to 

“T.” 

Response: We continue to believe that assigning HCPCS codes G0259 to status 

indicator “N” is necessary in order to designate appropriate packaged payment for the 

image guidance procedure, according to our established packaging policy, and separate 

payment for the therapeutic injection procedure. However, we will reevaluate the 

descriptors for HCPCS code G0259 and G0260 for CY 2014 in light of the commenter’s 

concerns on the AMA’s modification of the descriptor for CPT code 27096 in CY 2012 

to include the arthrography services described by CPT code 73542. 

After consideration of the public comments we received, for CY 2013, we are 

continuing to assign a status indicator of “N” to HCPCS code G0259, a status indicator of 

“T” to HCPCS code G0260, which is assigned to APC 0207 with a final CY 2013 

geometric mean cost of approximately $582, and a status indicator of “B” to CPT code 

27096. 

Panel Recommendation: CMS provide data to the APC Groups and SI 

Subcommittee on the following arthrography services, so that the Subcommittee can 

consider whether the SI for these services should be changed from “N” to “S”: 

● HCPCS code 21116 (Injection procedure for temporomandibular joint 

arthrography); 

● HCPCS code 23350 (Injection procedure for shoulder arthrography or 

enhanced CT/MRI shoulder arthrography); 

● HCPCS code 24220 (Injection procedure for elbow arthrography); 
CMS-1589-FC 232 

● HCPCS code 25246 (Injection procedure for wrist arthrography); 

● HCPCS code 27093 (Injection procedure for hip arthrography; without 

anesthesia); 

● HCPCS code 27095 (Injection procedure for hip arthrography; with 

anesthesia); 

● HCPSC code 27096 (Injection procedure for sacroiliac joint, anesthetic/steroid 

with image guidance (fluoroscopy or CT) including arthrography when performed); 

● HCPCS code 27370 (Injection procedure for knee arthrography); and 

● HCPCS code 27648 (Injection procedure for ankle arthrography). 

CMS Response: In the CY 2013 OPPS/ASC proposed rule, we accepted the 

Panel’s recommendation that CMS provide data to the APC Groups and SI Assignment 

Subcommittee on CPT codes 21116, 23350, 24220, 25246, 27093, 27095, 27096, 27370, 

and 27648 at a future Panel meeting. 

We did not receive any public comments on this recommendation. 

Panel Recommendation: CMS change the status indicator for HCPCS code 

19290 (Preoperative placement of needle localization wire, breast) from “N” to “Q1” and 

continue to monitor the frequency of the code when used in isolation. 

CMS Response: In the CY 2013 OPPS/ASC proposed rule, we agreed with the 

Panel that a status indicator of “Q1” is appropriate for CPT code 19290. This status 

indicator will allow for separate payment when this procedure is performed alone or 

packaged payment when this procedure is performed with an associated surgical 

procedure. Therefore, as we proposed, we are accepting the Panel’s recommendation and 
CMS-1589-FC 233 

assigning CPT code 19290 to APC 0340 (Minor Ancillary Procedures) and status 

indicator “Q1” for the CY 2013 OPPS. APC 0340 has a final geometric mean cost of 

approximately $51 (as compared to approximately $50 calculated for the proposed rule) 

for CY 2013. 

Comment: Several commenters supported CMS’ proposal to reassign HCPCS 

code 19290 from “N” to “Q1”. However, one commenter recommended that CMS 

review the APC assignments for HCPCS codes 19290 and 19295 (Image guided 

placement, metallic localization clip, percutaneous, during breast biopsy/aspiration (list 

separately in addition to code for primary procedure) during the CY 2014 rulemaking 

cycle and propose a more appropriate and higher paying APC for these services. 

Response: We appreciate the commenters’ support. For CY 2013, we are 

accepting the Panel’s recommendation and finalizing our proposal to assign a status 

indicator of “Q1” to HCPCS code 19290, which is assigned to APC 0340 with a CY 2013 

final payment rate of approximately $51. As has been our practice since the 

implementation of the OPPS in 2000, we review, on an annual basis, the APC 

assignments for the procedures and services paid under the OPPS. We will continue to 

review, on an annual basis, the APC assignments for CPT codes 19290 and 19295. 

Panel Recommendation: Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the 

chair of the APC Groups and SI Subcommittee. 

CMS Response: In the CY 2013 OPPS/ASC proposed rule, we indicated that we 

accepted the Panel’s recommendation that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., 

continue to chair the APC Groups and SI Assignment Subcommittee. 
CMS-1589-FC 234 

We did not receive any public comments on this recommendation. We appreciate 

the services of Ms. Kelly as chair of the Subcommittee for CY 2012. 

Panel Recommendation: The work of the APC Groups and SI Assignment 

Subcommittee continue. 

CMS Response: In the CY 2013 OPPS/ASC proposed rule, we indicated that we 

accepted the Panel’s recommendation that the work of the APC Groups and SI 

Assignment Subcommittee continue. 

We did not receive any public comments on this recommendation. 

d. Packaging Recommendations of the HOP Panel (“The Panel”) at its August 2012 

Meeting 

During its August 2012 meeting, the Panel accepted the report of the 

Subcommittee for APC Groups and Status Indicator (SI) Assignments, heard several 

public presentations related to packaged services and APC grouping and status indicator 

assignments, and made two recommendations related to the function of the 

subcommittee. The subcommittee also made recommendations with regard to APC 

assignment of specific services that are discussed in section III.D. of this final rule with 

comment period. The report for the August 2012 meeting of the Panel may be found on 

the CMS Web site at: 

http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp. 

Below we present the two recommendations related to the function of the 

subcommittee. Recommendations that evolved from the discussions of the 
CMS-1589-FC 235 

Subcommittee on APC Groups and SI Assignments that are specific to the APC 

assignment of HCPCS codes and the removal of HCPCS codes from the inpatient list are 

discussed in section III. and IX., respectively, of this final rule with comment period. 

Panel Recommendation: The Panel recommends that Jacqueline Phillips be 

named chair of the APC Groups and SI Assignments Subcommittee. 

CMS Response: We accept the Panel’s recommendation that Jacqueline Phillips 

be named chair of the APC Groups and SI Assignments Subcommittee. We thank 

Ms. Judith Kelly for her service as chair of the APC Groups and SI Assignments 

Subcommittee, and we welcome Ms. Phillips as chair of the APC Groups and SI 

Assignments Subcommittee. 

Panel Recommendation: The Panel recommends that the work of the APC 

Groups and SI Assignments Subcommittee continue. 

CMS Response: We are accepting the APC Panel’s recommendation that the 

work of the APC Groups and SI Assignments Subcommittee continue. 

e. Other Packaging Proposals and Policies for CY 2013 

The HCPCS codes that we proposed to be packaged either unconditionally (for 

which we continue to assign status indicator “N”), or conditionally (for which we 

continue to assign status indicator “Q1”, “Q2”, or “Q3”), were displayed in Addendum B 

of the CY 2013 OPPS/ASC proposed rule. The supporting documents for the CY 2013 

OPPS/ASC proposed rule, including but not limited to Addendum B, are available at the 

CMS Webs site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. To view the status indicators by HCPCS 
CMS-1589-FC 236 

code in Addendum B, select “CMS 1589” and then select the folder labeled “2013 OPPS 

Proposed Rule Addenda” or “2013 OPPS Final Rule with Comment Period Addenda” 

from the list of supporting files. Open the zipped file and select Addendum B, which is 

available as both an Excel file and a text file. 

Comment: Commenters stated that CMS’ packaging policies would likely lead to 

less efficient use of resources, limited access to innovative treatment options, and greater 

instability in payment because the policies are based on several flawed assumptions. The 

commenters believed that, to the extent that hospitals control the array of services they 

provide, CMS’ packaging policies assume that the same incentives apply to services 

furnished in HOPDs as to inpatient services. One commenter stated that, under the IPPS, 

hospitals have an incentive to provide care in an efficient manner to ensure the lowest 

cost for the patient’s diagnosis. In contrast, in HOPDs, because Medicare payment is 

based on procedures rather than diagnoses, the commenter believed that hospitals have an 

incentive to provide the lowest cost item or service included in an APC. The commenter 

further believed that if that service does not fully address the patient’s needs, the hospital 

would receive better payment by bringing the patient back for a second visit or admitting 

the patient for inpatient care than by providing a more costly option within the same 

APC. 

Moreover, the commenters believed that when an APC’s payment rate is 

significantly less than the cost of a technology, hospitals have a strong disincentive to use 

that technology, even if it could reduce the costs of care at a later date. The commenters 

believed that CMS’ use of expanded packaging has the risk of encouraging hospitals to 
CMS-1589-FC 237 

forego performing needed services and using new technologies that may be more 

resource intensive during one visit, but could save the patient future outpatient 

department visits or inpatient care. 

Response: As we stated in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74186), packaging payment for items and services that are ancillary to and 

dependent on the major procedure for which a payment rate is established is a 

fundamental concept of the OPPS, based in regulation in the definition of costs that are 

included in the national payment rate for a service (42 CFR 419.2(b)) and in place since 

the inception of the OPPS (65 FR 18447). We continue to believe that packaging creates 

incentives for hospitals and their practitioner partners to work together to establish 

appropriate protocols that eliminate unnecessary services where they exist and 

institutionalize approaches to providing necessary services more efficiently. With respect 

to new services or new applications of existing technology, we believe that packaging 

payment for ancillary and dependent services creates appropriate incentives for hospitals 

to consider whether a new service or a new technology offers a benefit that is sufficient to 

justify the cost of the new service or new technology. Whether this review results in 

reductions in services that are only marginally beneficial or influences hospitals’ choices 

to not utilize certain technologies, we believe that these changes could improve, rather 

than harm, the quality of care for Medicare beneficiaries because every service furnished 

in a hospital carries some level of risk to the patient and the beneficiary would be spared 

the risk associated with the additional service or different technology. Moreover, we 

believe that hospitals strive to provide the best care they can to the patients they service 
CMS-1589-FC 238 

so that when new technologies are proven to improve the quality of care, their utilization 

will increase appropriately, whether the payment for them is packaged or not. While we 

believe hospitals are committed to provide optimal care to their patients, we are aware 

that there are financial pressures on hospitals that might motivate some hospitals to split 

services among different hospital encounters in such a way as to maximize payments. 

While we do not expect that hospitals would routinely change the way they furnish 

services or the way they bill for services in order to maximize payment, we recognize that 

it would be possible and we consider that possibility as we annually review hospital 

claims data. We will continue to examine claims data for patterns of fragmented care, 

and if we find a pattern in which a hospital appears to be dividing care across multiple 

days, we will refer it for investigation to the QIO or to the Program Safeguard Contractor, 

as appropriate to the circumstances we find. 

Comment: One commenter stated that continued reporting by CMS on utilization 

of all packaged services and access to care will be essential to ensure that Medicare’s 

payment policies do not restrict beneficiaries’ access to necessary care. The commenter 

asked that CMS make annual reports to the HOP Panel on reporting of services subject to 

CMS’ expanded packaging services. 

Response: Each year, we make available an extensive amount of OPPS data that 

can be used for any data analysis an interested party would care to perform. Specifically, 

we make available a considerable amount of data for public analysis each year through 

the supporting data files that are posted on the CMS Web site in association with the 

proposed and final rules. In addition, as we discuss in detail in section II.A.2. of this final 
CMS-1589-FC 239 

rule with comment period, we make available the public use files of claims, including, for 

CY 2008 and later, supplemental line item cost data for every HCPCS code under the 

OPPS, and a detailed narrative description of our data process for the annual OPPS/ASC 

proposed and final rules that the public can use to perform any desired analyses. 

Therefore, stakeholders are able to examine and analyze these data to develop specific 

information to assess the impact and effect of packaging for the services of interest to 

them. This information is available to support public requests for changes to payments 

under the OPPS, whether with regard to separate payment for a packaged service or other 

issues. We understand that the OPPS is a complex payment system and that it may be 

difficult to determine the quantitative amount of packaged cost included in the cost for 

every independent service. However, stakeholders routinely provide us with meaningful 

analyses at a very detailed and service-specific level based on the claims data we make 

available. We routinely receive complex and detailed public comments, including 

extensive code-specific data analysis on packaged and separately paid codes, using the 

data from current and prior proposed and final rules. 

Furthermore, we are not required, nor do we intend, to make annual reports to the 

Panel regarding services that are subject to CMS’ packaging policies. We note that the 

Panel did not recommend at either the February 2012 meeting or the August 2012 

meeting that CMS present annual reports on services subject to CMS’ packaging 

services. 

Comment: Commenters stated that CMS assumes that its packaging policies will 

allow it to continue to collect the data it needs to set appropriate, stable payment rates in 
CMS-1589-FC 240 

the future. The commenters stated that CMS’ past experience with packaging payment 

for ancillary items indicates that hospitals do not submit codes for services that do not 

directly affect calculations of future payment rates for that Medicare Severity-Diagnosis 

Related Group (MS-DRG). The commenters further stated that, under the IPPS, hospitals 

report only the data required to assign a case to the highest paying appropriate MS-DRG, 

even though other data might affect payment in the long term. The commenters stated 

that they saw no reason to believe that the current approach would have a different 

outcome unless CMS gives clear instruction to continue coding for all items and services 

provided and provides some incentive to do so. The commenters asked that CMS require 

complete and correct coding for packaged services. 

Response: We do not believe that there has been or will be a significant change in 

what hospitals report and charge for the outpatient service they furnish to Medicare 

beneficiaries and other patients as a result of our current packaging methodology. 

Medicare cost reporting standards specify that hospitals must impose the same charges 

for Medicare patients as for other patients. We are often told by hospitals that many 

private payers pay based on a percentage of charges and that, in accordance with 

Medicare cost reporting rules and generally accepted accounting principles, hospital 

chargemasters do not differentiate between the charges to Medicare patients and other 

patients. Therefore, we have no reason to believe that hospitals will stop reporting 

HCPCS codes and charges for packaged services they provide to Medicare beneficiaries. 

As we stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68575), 

we strongly encourage hospitals to report a charge for each packaged service they 
CMS-1589-FC 241 

furnish, either by billing the packaged HCPCS code and a charge for that service if 

separate reporting is consistent with CPT and CMS instructions, by increasing the charge 

for the separately paid associated service to include the charge for the packaged service, 

or by reporting the charge for the packaged service with an appropriate revenue code but 

without a HCPCS code. Any of these means of charging for the packaged service will 

result in the cost of the packaged service being incorporated into the cost we estimate for 

the separately paid service. If a HCPCS code is not reported when a packaged service is 

provided, we acknowledge that it can be challenging to specifically track the utilization 

patterns and resource cost of the packaged service itself. However, we have no reason to 

believe that hospitals have not considered the cost of the packaged service in reporting 

charges for the independent, separately paid service. We expect that hospitals, as other 

prudent businesses, have a quality review process that ensures that they accurately and 

completely report the services they furnish, with appropriate charges for that service to 

Medicare and all other payers. We encourage hospitals to report on their claim for 

payment all HCPCS codes that describe packaged service that were furnished, unless the 

CPT Editorial Panel or CMS provides other guidance. To the extent that hospitals 

include separate charges for packaged services on their claims, the estimated costs of 

those packaged services are then added to the costs of separately paid procedures on the 

same claims and used in establishing payment rates for the separately paid services. It is 

impossible to know with certainty whether hospitals are failing to report HCPCS codes 

and charges for service for which the payment is packaged into payment for the 

independent service with which the packaged service is furnished. Moreover, if a 
CMS-1589-FC 242 

hospital fails to report the HCPCS codes and charges for packaged services, the reason 

may be that the hospital has chosen to package the charge for the ancillary and dependent 

service into the charge for the service with which it is furnished. Although we prefer that 

hospitals report HCPCS codes and charges for all service they furnish, if the hospital’s 

charge for the independent services also reflects the charge for all ancillary and 

supportive service it typically provides, the absence of HCPCS codes and separate 

charges would not result in inappropriately low cost for the independent service, although 

CMS would not know which specific ancillary and supportive services were being 

furnished. If a hospital is no longer providing a service, there may be many reasons that 

a hospital chooses not to provide a particular service or chooses to cease providing a 

particular service, including, but not limited to, because the hospital has determined that 

it is no longer cost effective for the hospital to furnish the service and that there may be 

other hospitals in the community that can furnish the service more efficiently. 

Comment: One commenter asked that CMS reinstate separate payment for 

radiation oncology guidance procedures because these services are vital to the safe 

provision of radiation therapy and unconditionally packaging payment for them may 

discourage hospitals from providing them. 

Response: As we stated in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74188), we recognize that radiation oncology guidance services, like most 

packaged services, are important to providing safe and high quality care to patients. 

However, we continue to believe that hospitals will invest in services that represent 

genuinely increased value to patient care. We will continue to pay separately for 
CMS-1589-FC 243 

innovative technologies if a device meets the conditions for separate payment as a 

pass-through device or if a new procedure meets the criteria for payment as a new 

technology APC. 

Comment: One commenter expressed concern over a statement made in the 

proposed rule that indicated that CMS might propose to bundle payment for [services] 

that [it] now refers to as “independent [services”]. The commenter stated that CMS did 

not provide any statutory authority that would allow it to move away from a fundamental 

OPPS policy, that only “dependent services” are potentially considered as part of a 

bundled reimbursement methodology. The commenter further stated that packaging 

payment for multiple services that are not interrelated presents no efficiency or resource 

management incentives, because, by definition, these services are not related, meaning 

there are no efficiencies to be gained and no overlap in resources expended. 

Response: In the CY 2013 OPPS/ASC proposed rule (77 FR 45089), we noted 

that we use the term “independent service” to refer to the HCPCS codes that represent the 

primary therapeutic or diagnostic modality into which we package payment for the 

dependent service. We also noted that, in future years, as we consider the development 

of larger payment groups that more broadly reflect services provided in an encounter or 

episode of care, it is possible that we might propose to bundle payment for a service that 

we now refer to as “independent.” We disagree with the commenter that we do not have 

the statutory authority to consider larger payment bundles that more broadly reflect 

services provided in an encounter or episode of care. Our statutory authority is defined in 
CMS-1589-FC 244 

section 1833(t)(2)(B) of the Act, which allows the OPPS to establish groups of covered 

HOPD services, namely APC groups, and use them as the basic unit of payment. 

Furthermore, for CY 2008, we expanded packaging to services that were once 

considered independent services and items, such as nonpass-through contrast agents and 

observation services. We now consider these services to be ancillary and supportive to a 

primary diagnostic or therapeutic modality and have assigned these services an 

unconditionally packaged status indicator of “N.” It follows then that items or services 

that are currently considered to be “independent” services within this final rule with 

comment period may be packaged where appropriate in future years, after taking into 

consideration the clinical nature of the item or service and then determining whether or 

not that item or service is considered ancillary and supportive to a primary diagnostic or 

therapeutic modality. 

We note that we did not make any new proposals to develop additional payment 

bundles for CY 2013, but that we will likely do so in future rulemaking. For CY 2013, 

we proposed to continue to package the payment for items and services in seven 

categories with the primary diagnostic or therapeutic modality to which we believe that 

these items and services are typically ancillary and supportive. Because the commenter 

does not question the appropriateness of these seven categories of packaged payment 

given in the proposed rule nor does the commenter question the appropriateness of a 

specific APC assignment for a packaged HCPCS or CPT code, we cannot fully address 

the commenter’s concerns about bundling multiple services that are not interrelated and 

that may or may not present efficiency or resource management incentives. We continue 
CMS-1589-FC 245 

to believe that the seven categories of packaged services and items are appropriate to 

encourage hospital efficiency, flexibility, and ultimately cost containment. 

Comment: One commenter requested that CMS change the status indicator for 

HCPCS code L8604 (Injectable bulking agent, dextranomer/hyaluronic acid copolymer 

implant, urinary tract, 1 ml, includes shipping and necessary supplies) from “N” to “A.” 

The commenter argued that this would allow HCPCS code L8604 to be paid under a 

different fee schedule and would allow for access to the product SOLESTA® in the 

HOPD. The commenter also asked that CMS cover and pay for SOLESTA® in the same 

manner as other hyaluronic acid products and assign SOLESTA® a separate and unique 

HCPCS code. 

Response: HCPCS code L8604 describes several products that are implantable 

prosthetic devices. According to 42 CFR 419.2(b)(11), implantable prosthetic devices 

are packaged under the OPPS. Therefore, status indicator “N” is the correct status 

indicator for HCPCS code L8604. We also note that any coverage, reclassification, or 

HCPCS code change requests for SOLESTA® are outside the scope of this final rule 

with comment period. Such issues are addressed by processes outside the OPPS/ASC 

rule by either CMS’ HCPCS Workgroup or CMS’ Coverage and Analysis Group. 

Comment: One commenter requested that CMS assign HCPCS code J7665 

(Mannitol, administered through an inhaler, 5 mg) to a status indicator of “K” for 

CY 2013. The commenter stated that the product that is described by HCPCS code J7665 

is a drug indicated for the assessment of bronchial hyperresponsiveness in individuals at 

least six years of age without clinically apparent asthma and that, consistent with its FDA 
CMS-1589-FC 246 

labeling, the product that is described by HCPCS code J7665 can only be used in an 

institutional setting or a physician’s office. The commenter argued that HCPCS code 

J7665 was incorrectly assigned a status indicator of “N” because this product is approved 

as a drug through the NDA process and should be paid under the OPPS as a separately 

paid drug as opposed to a supply under the OPPS. 

Response: We agree with the commenter that HCPCS code J7665 can be 

administered in the HOPD. However, we do not believe that the product described by 

HCPCS code J7665 is a separately payable drug as we have described here within this 

final rule with comment period, and is instead a supply with costs included in the 

payment under the OPPS as described in 42 CFR 419.2(b). Mannitol (HCPCS code 

J7665), when administered through an inhaler, is always used as a supply in bronchial 

challenge testing. Therefore, for CY 2013, we are assigning a status indicator of “N” to 

HCPCS code J7665. 

After consideration of the public comments we received, for CY 2013, we are 

finalizing our proposed policy to continue to package payment for the services for which 

we proposed unconditional or conditional packaged payment in the proposed rule for the 

reasons set forth above. 

f. Packaging of Drugs, Biologicals, and Radiopharmaceuticals 

(1) Existing Packaging Policies 

In the OPPS, we currently package five categories of drugs, biologicals, and 

radiopharmaceuticals (unless temporary pass-through status applies): (1) those with per 

day costs at or below the packaging threshold; (2) diagnostic radiopharmaceuticals; 
CMS-1589-FC 247 

(3) contrast agents; (4) anesthesia drugs; and (5) drugs treated as surgical supplies. 

Anesthesia drugs are discussed further in section II.A.3.c.(2) of this final rule with 

comment period. For detailed discussions of the established packaging policies for 

diagnostic radiopharmaceuticals and contrast agents, we refer readers to the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66765 through 66768). For further 

details on drugs treated as surgical supplies, we refer readers to the CY 2003 OPPS final 

rule (67 FR 66767) and Chapter 15, Section 50.2 of the Medicare Benefit Policy Manual. 

(2) Clarification of Packaging Policy for Anesthesia Drugs 

It has been longstanding OPPS policy to package “anesthesia” and “supplies and 

equipment for administering and monitoring anesthesia or sedation,” as described in 

42 CFR 419.2(b)(4) and (b)(5). As described above, items and services paid under the 

OPPS that are typically ancillary and supportive to a primary diagnostic or therapeutic 

modality and, in those cases, are considered dependent items and services are packaged 

into the payment of their accompanying independent primary service. In accordance with 

our current policy on packaging items and services, drugs that are used to produce 

anesthesia in all forms are ancillary and supportive to a primary diagnostic or therapeutic 

modality, and are included in our definition of “anesthesia” as described in § 419.2(b)(4) 

and (b)(5). However, we recognize that some anesthesia drugs may qualify for 

transitional pass-through status under section 1833(t)(6) of the Act. Therefore, in the 

CY 2013 OPPS/ASC proposed rule (77 FR45100), we proposed to clarify that our 

general policy is to package drugs used to produce anesthesia, and that those anesthesia 

drugs with pass-through status will be packaged upon the expiration of pass-through 
CMS-1589-FC 248 

status. We invited public comment on our clarification of the existing packaging policies 

for anesthesia drugs under § 419.2(b)(4) and (b)(5). 

Comment: Commenters objected to the proposed clarification of the OPPS policy 

on anesthesia and all future policies that expand the packaging of drugs, through the 

increase of the drug packaging threshold or otherwise. The commenters expressed their 

concern over the increase in packaging for drugs in general and urged CMS not to 

finalize this policy. The commenters also stated their concern that the CMS drug 

packaging polices used in the HOPD could encourage hospitals to under utilize critically 

important drugs and ultimately compromise beneficiary’s access to care and undercut 

CMS’ work to improve the quality of care. The commenters urged CMS not to finalize 

this proposal, to conduct a careful review to assess the effect of packaging on quality of 

care, and to forego any new packaging policies as a whole. 

One commenter expressed support for the clarification of this policy. The 

commenter further encouraged CMS to continue to monitor packaged drugs and 

biologicals to ensure they are appropriately paid. 

Response: For the CY 2013 OPPS/ASC proposed rule (77 FR 45100), we 

proposed to clarify the existing policies related to nonpass-through and pass-through 

anesthesia drugs. It has been our longstanding policy to package anesthesia drugs, which 

are drugs that are used to produce anesthesia in all forms and are ancillary and supportive 

to a primary diagnostic or therapeutic modality, that are not on pass-through status as 

included costs under the OPPS, as described in 42 CFR 419.2(b)(4) and (b)(5). However, 

we also clarified in the proposed rule that anesthesia drugs are eligible for transitional 
CMS-1589-FC 249 

pass-through status as a drug, as provided in section 1833(t)(6) of the Act. Therefore, we 

noted that we were not finalizing a new policy to package nonpass-through anesthesia 

drugs but were clarifying in our preamble language our currently existing policies. 

In addition, as we stated above, we continue to believe that packaging payment 

for items and services that are ancillary to and dependent on the major procedure for 

which a payment rate is established is a fundamental concept of the OPPS. We address 

additional comments on packaging for drugs, biologicals, diagnostic 

radiopharmaceuticals, and contrast agents below in section II.A.3.f. and section V.A. of 

this final rule with comment period. 

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

proposed clarification for CY 2013. Anesthesia drugs that are used to produce anesthesia 

in all forms are ancillary and supportive to a primary diagnostic or therapeutic modality 

under 42 CFR 419.2(b)(4) and (b)(5). Therefore, nonpass-through anesthesia drugs are 

packaged under the OPPS. New anesthesia drugs that were not being paid for as an 

HOPD service as of December 31, 1996, and whose cost is “not insignificant” in relation 

to the OPPS payment for the procedures or services associated with the new anesthesia 

drug are eligible for transitional pass-through status as a drug or biological, as described 

in section 1833 (t)(6) of the Act. We discuss OPPS transitional pass-through payment for 

additional costs of drugs, biologicals, and radiopharmaceuticals in section V.A. of this 

final rule with comment period. 
CMS-1589-FC 250 

g. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast Agents, and 

Implantable Biologicals (“Policy-Packaged” Drugs and Devices) 

Prior to CY 2008, the methodology of calculating a product’s estimated per day 

cost and comparing it to the annual OPPS drug packaging threshold was used to 

determine the packaging status of drugs, biologicals, and radiopharmaceuticals under the 

OPPS (except for the CYs 2005 through 2009 exemption for 5-HT3 antiemetics). 

However, as established in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66766 through 66768), we began packaging payment for all diagnostic 

radiopharmaceuticals and contrast agents into the payment for the associated procedure, 

regardless of their per day costs. In addition, in CY 2009, we adopted a policy that 

packaged the payment for nonpass-through implantable biologicals into payment for the 

associated surgical procedure on the claim, regardless of their per day cost (73 FR 68633 

through 68636). We refer to diagnostic radiopharmaceuticals and contrast agents 

collectively as “policy-packaged” drugs. We refer to implantable biologicals as 

“devices” because, in CY 2010, we finalized a policy to treat implantable biologicals as 

devices for OPPS payment purposes (74 FR 60471 through 60477). 

As set forth at § 419.2(b), as a prospective payment system, the OPPS establishes 

a national payment rate, standardized for geographical wage differences, that includes 

operating and capital-related costs that are directly related and integral to performing a 

procedure or furnishing a service on an outpatient basis, and in general, these costs 

include, but are not limited to, implantable prosthetics, implantable durable medical 

equipment, and medical and surgical supplies. Packaging costs into a single aggregate 
CMS-1589-FC 251 

payment for a service, encounter, or episode-of-care is a fundamental principle that 

distinguishes a prospective payment system from a fee schedule. In general, packaging 

the costs of items and services into the payment for the primary procedure or service with 

which they are associated encourages hospital efficiency and also enables hospitals to 

manage their resources with maximum flexibility. 

Prior to CY 2008, we noted that the proportion of drugs, biologicals, and 

radiopharmaceuticals that were separately paid under the OPPS had increased in recent 

years, a pattern that we also observed for procedural services under the OPPS. Our final 

CY 2008 policy that packaged payment for all nonpass-through diagnostic 

radiopharmaceuticals and contrast agents, regardless of their per day costs, contributed 

significantly to expanding the size of the OPPS payment bundles and is consistent with 

the principles of a prospective payment system. 

As discussed in more detail in the CY 2009 OPPS/ASC final rule with comment 

period (73 FR 68645 through 68649), we presented several reasons supporting our initial 

policy to package payment of diagnostic radiopharmaceuticals and contrast agents into 

their associated procedures on a claim. Specifically, we stated that we believed 

packaging was appropriate because: (1) the statutorily required OPPS drug packaging 

threshold had expired; (2) diagnostic radiopharmaceuticals and contrast agents function 

effectively as supplies that enable the provision of an independent service, rather than 

serving themselves as a therapeutic modality; and (3) section 1833 (t)(14)(A)(iii) of the 

Act required that payment for specified covered outpatient drugs (SCODs) be set 

prospectively based on a measure of average hospital acquisition cost (76 FR 74307). 
CMS-1589-FC 252 

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR45100), we stated 

that we believe it is appropriate to continue to treat diagnostic radiopharmaceuticals and 

contrast agents differently from specified covered outpatient drugs (SCODs) for 

CY 2013. Therefore, we proposed to continue packaging payment for all contrast agents 

and diagnostic radiopharmaceuticals, collectively referred to as “policy-packaged” drugs, 

regardless of their per day costs, for CY 2013. We also proposed to continue to package 

the payment for diagnostic radiopharmaceuticals into the payment for the associated 

nuclear medicine procedure and to package the payment for contrast agents into the 

payment for the associated echocardiography imaging procedure, regardless of whether 

the agent met the OPPS drug packaging threshold. We refer readers to the CY 2010 

OPPS/ASC final rule with comment period for a detailed discussion of nuclear medicine 

and echocardiography services (74 FR 35269 through 35277). 

Comment: Commenters objected to CMS’ proposal to package payment of all 

nonpass-through diagnostic radiopharmaceuticals and contrast agents in CY 2013. A 

number of commenters stated that diagnostic radiopharmaceuticals and contrast agents 

with per day costs over the proposed OPPS drug packaging threshold are defined as 

SCODs and, therefore, should be assigned separate APC payments. In particular, the 

commenters questioned CMS’ authority to classify groups of drugs, such as diagnostic 

radiopharmaceuticals and contrast agents, and implement packaging and payment 

policies that do not reflect their status as SCODs. Several commenters disagreed with 

CMS’ labeling of radiopharmaceuticals as supplies and stated instead that they should be 

treated as other SCODs. The commenters recommended that diagnostic 
CMS-1589-FC 253 

radiopharmaceuticals should be subject to the same per day cost drug packaging 

threshold that applies to other drugs, in order to determine whether their payment would 

be packaged or made separately. 

One commenter supported CMS’ continued packaging policy for diagnostic 

radiopharmaceuticals and contrast agents that do not have pass-through status. The 

commenter noted that diagnostic radiopharmaceuticals are supplies that are necessary to 

the provision of the service in which they are used and, like other supplies, payment for 

them should be part of the payment for the service. 

Response: As discussed in the CY 2008 OPPS/ASC final rule with comment 

period (72 FR 66766), the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68645), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60497), 

the CY 2011 OPPS/ASC final rule with comment period (75 FR 71949), and the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74307), we continue to 

believe that diagnostic radiopharmaceuticals and contrast agents are different from other 

drugs and biologicals for several reasons. We note that the statutorily required OPPS 

drug packaging threshold, as described in section 1833(t)(16)(B) of the Act, has expired, 

and we continue to believe that diagnostic radiopharmaceuticals and contrast agents 

function effectively as supplies that enable the provision of an independent service and 

are always ancillary and supportive to an independent service, rather than themselves 

serving as the therapeutic modality. We packaged their payment in CYs 2008, 2009, 

2010, 2011, and 2012 as ancillary and supportive services in order to provide incentives 

for greater efficiency and to provide hospitals with additional flexibility in managing 
CMS-1589-FC 254 

their resources. In order for payment to be packaged, it is not necessary that all products 

be interchangeable in every case, and we recognized that, in some cases, hospitals may 

utilize higher cost products and, in some cases, lower cost products, taking into 

consideration the clinical needs of the patient and the efficient use of hospital resources. 

While we recognize this variability from case to case, on average under a prospective 

payment system, we expect payment to cover the costs for the services furnished. In the 

past, we have classified different groups of drugs for specific payment purposes, as 

evidenced by our CY 2005 through CY 2009 policy regarding 5-HT3 anti-emetics and 

their exemption from the drug packaging threshold. We note that we treat diagnostic 

radiopharmaceuticals and contrast agents as “policy-packaged” drugs because our policy 

is to package payment for all of the products in this category. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we 

also began packaging the payment for all nonpass-through implantable biologicals into 

payment for the associated surgical procedure because we consider these products to 

always be ancillary and supportive to an independent service, similar to implantable nonbiological devices that are always packaged. Therefore, we currently package payment 

of nonpass-through implantable biologicals, also known as devices that are surgically 

inserted or implanted (through a surgical incision or a natural orifice) into the body. As 

we stated in the CY 2013 OPPS/ASC proposed (77 FR 45101), we continue to believe 

that payment should be packaged for nonpass-through implantable biologicals for 

CY 2013. 
CMS-1589-FC 255 

We are continuing our CY 2009 policy for CY 2013 as discussed below, which 

packages payment for all nonpass-through diagnostic radiopharmaceuticals, contrast 

agents, and implantable biologicals into the payment for their associated procedures. We 

also continue to believe that the line-item estimated cost for nonpass-through diagnostic 

radiopharmaceuticals, contrast agents, or implantable biologicals in our claims data is a 

reasonable approximation of average acquisition and preparation and handling costs for 

nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable 

biologicals, respectively. As we discussed in the CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68645), we believe that hospitals have adapted to the CY 2006 

coding changes for nonpass-through diagnostic radiopharmaceuticals and responded to 

our instructions to include charges for diagnostic radiopharmaceutical handling in their 

charges for the diagnostic radiopharmaceutical products. Further, because the standard 

OPPS packaging methodology packages the total estimated cost of each nonpass-through 

diagnostic radiopharmaceutical, contrast agent, or nonimplantable biological on each 

claim (including the full range of costs observed on the claims) with the cost of 

associated procedures for ratesetting, this packaging approach is consistent with 

considering the average cost for nonpass-through diagnostic radiopharmaceuticals, 

contrast agents, or implantable biologicals, rather than the cost. In addition, as we noted 

in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68646), these drugs, 

biologicals, or diagnostic radiopharmaceuticals for which we have not established a 

separate APC and, therefore, for which payment would be packaged rather than 

separately provided under the OPPS are not considered to be SCODs. Similarly, drugs 
CMS-1589-FC 256 

and biologicals with per day costs of less than the drug packaging threshold for CY 2013, 

which is discussed in section V.B. of this final rule with comment period, that are 

packaged and for which a separate APC has not been established also are not SCODs. 

This reading is consistent with our final packaging payment policy, as discussed in this 

section, whereby we package payment for nonpass-through diagnostic 

radiopharmaceuticals, contrast agents, and implantable biologicals and provide payment 

for these products through payment for their associated procedures. 

Comment: Several commenters disagreed with the proposal to distinguish 

between diagnostic and therapeutic radiopharmaceuticals for payment purposes under the 

OPPS. Some commenters noted that CMS’ identification of HCPCS code A0544 (Iodine 

I-131 tositumomab, diagnostic, per study dose) as a diagnostic radiopharmaceutical is 

inappropriate because this radiopharmaceutical functions as a dosimetric 

radiopharmaceutical and not as a diagnostic radiopharmaceutical. A few commenters 

explained that this particular radiopharmaceutical product is used as part of a therapeutic 

regimen and, therefore, should be considered therapeutic for OPPS payment purposes. 

Furthermore, many commenters urged CMS to classify dosimetric doses used in 

radiopharmaceutical procedures as therapeutic in nature, and allow for separate payment 

for that dosimetric dose. 

Response: As discussed above and in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66641), the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68645), the CY 2010 OPPS/ASC final rule with comment period (74 FR 60498), 

the CY 2011 OPPS/ASC final rule with comment period (75 FR 71949), and the 
CMS-1589-FC 257 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74308), we classified each 

radiopharmaceutical into one of the two groups according to whether its long descriptor 

contained the term “diagnostic” or “therapeutic.” HCPCS code A9544 contains the term 

“diagnostic” in its long code descriptor. Therefore, according to our established 

methodology, we continued to classify it as diagnostic for the purposes of CY 2012 

OPPS payment. While we understand that this item is provided in conjunction with 

additional supplies, imaging tests, and therapeutic radiopharmaceuticals for patients 

already diagnosed with cancer, we continue to believe that the purpose of administering 

the product described by HCPCS code A9544 is diagnostic in nature. As we first stated 

in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66641), we continue 

to believe that the product described by HCPSC code A9544 is a diagnostic 

radiopharmaceutical. While it is not used to necessarily diagnose a general disease state, 

we understand that it is used to determine whether future therapeutic services would be 

beneficial to the patient and to determine how to proceed with therapy. We note that this 

is not different than the use of a laboratory test to guide therapy; the fact that the 

diagnostic test, a service which provides information, is used to guide therapy does not 

make it a therapeutic service, on which its intent is to improve a patient’s clinical 

condition. While a group of associated services may be considered a therapeutic regimen 

by some commenters, HCPCS code A9544 is provided in conjunction with a series of 

nuclear medicine imaging scans. Many nuclear medicine studies using diagnostic 

radiopharmaceuticals are provided to patients who already have an established diagnosis. 

We continue to consider HCPCS code A9544 to be diagnostic because this item is 
CMS-1589-FC 258 

provided for the purpose of conducting a diagnostic imaging procedure and is used to 

identify the proposed dose of the therapeutic agent to be provided at a later time. 

Comment: Commenters recommended using the ASP methodology and the 

proposed statutory default rate of ASP+6 percent to make payment for nonpass-through 

diagnostic radiopharmaceuticals and contrast agents. The commenters noted that it would 

be inconsistent for CMS to treat diagnostic radiopharmaceuticals and contrast agents as 

“drugs” for pass-through payment purposes and provide payment for diagnostic 

radiopharmaceuticals and contrast agents that have pass-through status based on the ASP 

methodology, and, then, after the diagnostic radiopharmaceutical’s or contrast agent’s 

pass-through payment status expires, package the costs included in historical hospital 

claims data, rather than use the ASP methodology to pay for the product and treat the 

drug as a supply. A few commenters suggested that diagnostic radiopharmaceuticals 

could be paid separately as therapeutic radiopharmaceuticals are paid, which would allow 

manufacturer to voluntarily submit ASP data, and then default to the mean unit cost when 

ASP data are unavailable. Some commenters recommended that CMS use ASP data as a 

benchmark for determining costs for diagnostic radiopharmaceuticals that are packaged. 

One commenter stated that payment for diagnostic radiopharmaceuticals should 

not be paid at ASP+6 percent for the reasons commenters provided when CMS proposed 

to make payment at ASP+6 percent in prior years. Specifically, the commenter noted that 

the ASP statute excludes reporting of the ASP for diagnostic radiopharmaceuticals and, 

therefore, such reporting would need to be voluntary. However, in terms of voluntary 

reporting of diagnostic radiopharmaceuticals, the commenter further noted that CMS 
CMS-1589-FC 259 

could never be confident that it would receive reports from all manufacturers of any 

particular diagnostic radiopharmaceutical. Moreover, the commenter stated, high volume 

diagnostic radiopharmaceuticals are furnished using generators that hospitals use for up 

to 28 days to provide doses of diagnostic radiopharmaceuticals as needed and therefore 

the manufacturer, who would report the ASP under penalty of perjury, would never be 

able to certify the actual number of doses furnished with confidence. The commenter 

finally noted that packaging is consistent with the general principles of a prospective 

payment system, one goal of which is to encourage hospital cost containment. 

Response: As we stated above, the statutorily required OPPS drug packaging 

threshold has expired, and we continue to believe that nonpass-through diagnostic 

radiopharmaceuticals and contrast agents are always ancillary and supportive to an 

independent service, rather than services themselves as the therapeutic modality. We 

disagree with commenters who suggest that nonpass-through diagnostic 

radiopharmaceuticals and contrast agents should be paid under the ASP methodology, 

that nonpass-through diagnostic radiopharmaceuticals and contrast agents should be paid 

as pass-through drugs and biologicals, or that nonpass-through diagnostic 

radiopharmaceuticals should be paid similarly to therapeutic radiopharmaceuticals. We 

continue to believe that nonpass-through diagnostic radiopharmaceuticals, contrast 

agents, and implantable biologicals function effectively as supplies that enable the 

provision of an independent service. As we noted in the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68646) and restate above, drugs, biologicals, or 

radiopharmaceuticals for which we have not established a separate APC will receive 
CMS-1589-FC 260 

packaged payment under the OPPS, and are considered not to be SCODs. We continue 

to believe that the line-item estimated cost for nonpass-through diagnostic 

radiopharmaceuticals, contrast agents, and implantable biologicals in our claims data is a 

reasonable approximation of average acquisition and preparation and handling costs for 

diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals, 

respectively. 

Further, as we have stated above, we believe that packaging costs into a single 

aggregate payment for a service, encounter, or episode-of-care is a fundamental principle 

that distinguishes a prospective payment system from a fee schedule. Our policy of 

packaging payment for nonpass-through diagnostic radiopharmaceuticals, contrast 

agents, and implantable biologicals into the payment for the primary procedure or service 

with which they are associated encourages hospital efficiencies and also enables hospitals 

to manage their resources with maximum flexibility. Paying separately for 

nonpass-through diagnostic radiopharmaceuticals, contrast agents, and implantable 

biologicals, when each of these items is ancillary or supportive to an independent service, 

is contrary to this principle of a prospective payment system. 

Finally, we do not agree with the commenter’s assertion that separate payment for 

diagnostic radiopharmaceuticals would result in more accurate payment for these 

products. When CMS discussed possible ASP-based payment for diagnostic 

radiopharmaceuticals in the CY 2006 OPPS final rule with comment period 

(70 FR 68653 through 68657), numerous commenters advised CMS that diagnostic 

radiopharmaceuticals are formulated, distributed, compounded, and administered in 
CMS-1589-FC 261 

unique distribution channels that preclude the determination of ASP relevant to a 

diagnostic radiopharmaceutical HCPCS codes. Further, commenters advised CMS that 

the manufacturer has no way to calculate the ASP of the end product patient dose and, 

consequently, could not supply CMS with accurate ASP data. In the intervening period 

between the CY 2006 final rule with comment period and the present, diagnostic 

radiopharmaceutical use has become more widespread and its formulation more complex. 

Moreover, we believe that the phenomena described by commenters (including 

radiopharmaceutical manufacturers) in the comment period preceding the CY 2006 OPPS 

final rule with comment period, including the many preparatory and compounding steps 

between manufacturer and the patient’s bedside, remain an impediment to manufacturers’ 

calculations of accurate ASP and thus accurate payment for these products. Therefore, 

we do not believe that diagnostic radiopharmaceuticals (or contrast agents or implantable 

biologicals) should be paid separately under the OPPS such that manufactures voluntarily 

can submit ASP data and then default to mean unit cost when ASP data are unavailable. 

We believe they are appropriately packaged into a single aggregate payment for the 

accompanying services. 

Comment: Commenters recommended that CMS modify the way that it applies 

the “2 times” rule for nuclear medicine APCs by including the cost of the packaged 

diagnostic radiopharmaceutical drugs in its analysis and not just the cost of services. The 

commenters argued that this is mandated by the statute, which provides that an APC 

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

cost for an item or service in the APC group is more than two times greater than the 
CMS-1589-FC 262 

lowest cost for an item or service within the same APC group. Therefore, the 

commenters believed that it is logical that as long as CMS views the packaged nuclear 

medicine service and the radiopharmaceutical as one unit for APC payment purposes, it 

should consider both components together in applying the 2 times rule and analysis to 

APC payment. 

Response: While the language in section 1833(t)(2) of the Act regarding the 

2 times rule describes consideration of both items and services for purposes of identifying 

exceptions to the rule, it does so within the context of services that belong to an APC 

group. Unconditionally packaged items and services, being associated with the particular 

item or service being modeled for separate payment, would not individually belong to 

any APC group. However, these unconditionally packaged costs would be incorporated 

into the system through the separately paid items or services with which they appear on 

the claim, and would thus be factored into the ultimate consideration of the 2 times rule. 

Therefore, consideration of items and services within each APC only applies to the 

separately paid HCPCS and CPT codes assigned to each APC and would thus not include 

any discrete calculation for packaged costs with regards to the two times rule. 

Comment: One commenter recommended that CMS establish a threshold for 

radiopharmaceutical drugs that would trigger separate payment when the cost of the 

radiopharmaceutical is greater than the total APC payment or over another threshold 

value. 

Response: Consistent with the CY 2013 OPPS/ASC proposed rule, for this final 

rule with comment period, we continue to believe that diagnostic radiopharmaceuticals 
CMS-1589-FC 263 

are ancillary and supportive to the nuclear medicine procedures in which they are used 

and that their costs should be packaged into the primary procedures with which they are 

associated. We do not believe it would be appropriate to set a cost threshold for 

packaging diagnostic radiopharmaceuticals because, regardless of their per day cost, they 

are always supportive of an independent procedure that is the basis for administration of 

the diagnostic radiopharmaceutical. We also do not believe that it is appropriate to 

consider alternate packaging criteria for nonpass-through diagnostic 

radiopharmaceuticals because we continue to believe that, regardless of their per-day 

cost, these items are always supportive of an independent procedure that is the basis for 

administration of the diagnostic radiopharmaceutical. Therefore, our policy of packaging 

costs for these products into an associated APC continues to be the approach best suited 

for use in this prospective payment system. 

Further, we note that the OPPS, as a prospective payment system, already 

includes the costs associated with diagnostic radiopharmaceuticals into the APCs for 

which the product is ancillary and supportive. We believe that the cost associated with a 

given product at a given point in time is immaterial because the OPPS, as a prospective 

payment system with payments based on average costs associated with a covered 

procedure, already takes into account both higher and lower input costs associated with 

that procedure. We also note that the OPPS, like many of Medicare’s prospective 

payment systems, has polices in place to provide hospitals with additional outlier 

payments for certain high-cost cases whose costs exceed certain thresholds. This system 

of outliers already provides hospitals (or, in the case of partial hospitalization services, 
CMS-1589-FC 264 

community mental health centers) with additional reimbursement to offset costs that are 

high relative to the prospective payment amount, regardless of whether the costs are 

associated with diagnostic radiopharmaceuticals or another relatively high cost element in 

the patient’s course of care. 

Comment: One commenter requested that CMS present additional, detailed 

information regarding how the agency ensures that the full cost of diagnostic 

radiopharmaceuticals are captured in the associated packaged APC procedural payments, 

including the validation methods used by the agency. 

Response: The data that CMS used to calculate, propose, and finalize APC 

assignments and rates, including costs associated with diagnostic radiopharmaceuticals, 

for the CY 2013 OPPS, are available for purchase under a CMS data use agreement 

through the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatinetPPS/index.html. This Web site includes information about 

purchasing the “OPPS Limited Data Set,” which now includes the additional variable 

previously available only in the OPPS Identifiable Data set, including ICD-9-CMS 

diagnosis codes and revenue code payment amounts. 

As we state above, we discuss in detail in section II.A.2. of this final rule with 

comment period the availability to the public of the use of files of claims, including, for 

CY 2008 and later, supplemental line item cost data for every HCPCS code under the 

OPPS, and a detailed narrative description of our data process for the annual OPPS/ASC 

proposed and final rules that the public can use to perform any desired analyses. 
CMS-1589-FC 265 

We continue to believe that the cost of a diagnostic radiopharmaceutical is 

captured into the associated packaged APC procedural payment. We see no need at this 

time to provide further data analyses. 

For CY 2013, we proposed to make an additional payment of $10 for diagnostic 

radiopharmaceuticals that utilize the Tc-99m radioisotope produced by non-HEU 

methods (77 FR 45121). We proposed to base this payment on the best available 

estimations of the marginal costs associated with non-HEU radioisotope production, 

pursuant to our authority described in section 1833(t)(2)(E) of the Act which allows us to 

establish “other adjustments as determined to be necessary to ensure equitable payments” 

under the OPPS. We described this policy in further detail in section III.C.3. of the 

proposed rule. 

We received numerous comments on this proposal, including comments that 

suggested that separate payment for diagnostic radiopharmaceuticals is the most effective 

way to encourage hospital conversion from HEU to non-HEU sources that utilize 

Tc-99m. We have addressed these comments on the proposed payment for non-HEU 

sources that recommended separate payment for diagnostic radiopharmaceuticals above 

and in section III.C.3. of this final rule with comment period. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we 

began packaging the payment for all nonpass-through implantable biologicals into 

payment for the associated surgical procedure because we consider these products to 

always be ancillary and supportive to independent services, similar to implantable 

nonbiological devices that are always packaged. We continued to follow this policy in 
CMS-1589-FC 266 

CY 2012 (76 FR 74306 through 74310). Specifically, we continue to package payment 

for nonpass-through implantable biologicals, also known as devices that are surgically 

inserted or implanted (through a surgical incision or a natural orifice) into the body. In 

the CY 2013 OPPS/ASC proposed rule (77 FR45101), for CY 2013, we proposed to 

continue to apply the policies finalized in CY 2012, to package payment for 

nonpass-through implantable biologicals (“devices”) that are surgically inserted or 

implanted (through a surgical incision or a natural orifice) into the body. 

Comment: One commenter requested that HCPCS code Q4130 (Strattice tm, per 

square centimeter) be assigned status indicator “K” for CY 2013 because, the commenter 

argued, HCPCS code Q4130 is a skin substitute graft for chronic wounds and a surgical 

biological implant for breast reconstruction and hernia repair procedures. The 

commenter stated that assigning HCPCS code Q4130 to a status indicator of “K” would 

signify its use as a biological skin substitute graft for which separate payment is 

available. 

The commenter further noted that Transmittal 2418 of the Medicare Claims 

Processing Manual lists HCPCS code Q4130 in table 5 of the transmittal, along with 

other biologicals with “dual” use. 

Response: HCPCS code Q4130 was assigned a status indicator of “N” in the 

CY 2013 OPPS/ASC proposed rule, signifying that the product that is represented by this 

code is an implantable biological device. We continue to believe that the product 

described by HCPCS code Q4130 is an implantable biological device, as evidenced by 

language within the 510(k) FDA clearance which lists the product described by HCPCS 
CMS-1589-FC 267 

code Q4130 as a surgical mesh intended for the reinforcement of soft tissue repaired by 

sutures or suture anchors during tendon repair surgery including reinforcement of rotator 

cuff, patella, Achilles, biceps, quadriceps, or other tendons. Further indications of use 

include the repair of body wall defects which require the use of reinforcing or bridging 

material to obtain the desired surgical outcome. As we stated above, the payment for 

nonpass-through implantable biologicals, or implanted devices, is packaged into the 

payment for the primary procedure. Therefore, we are continuing to assign a status 

indicator of “N” to HCPCS code Q4130 for CY 2013. Additionally, we are correcting 

the table within Transmittal 2418 which contains a list of skin substitutes only. 

Comment: One commenter who responded to the CY 2012 OPPS/ASC final rule 

with comment period expressed concern that Medicare contractors had been inadvertently 

making separate payment for nonpass-through biological implants as they process OPPS 

claims for breast reconstruction and hernia repair procedures. The commenter stated that 

these procedure claims included claims for biological implants, including HCPCS codes 

Q4100 through Q4130. The commenter noted that HCPCS code Q4116 (Alloderm, per 

square centimeter) in particular was paid separately on several occasions. Therefore, the 

commenter recommended that CMS take several steps to prevent further billing errors 

with respect to the OPPS payment policy for implantable biologicals. 

Response: For the April 2012 quarterly update, we installed logic changes in the 

I/OCE to allow for separate payment for separately payable skin substitute HCPCS codes 

that are coded with skin substitute procedure CPT codes only. We reminded hospitals 

that HCPCS codes describing skin substitutes should only be separately reported when 
CMS-1589-FC 268 

used with one of the CPT codes describing the application of a skin substitute (CPT 

codes 15271 through 15278). Therefore, we have previously addressed the commenters’ 

concerns. 

Under the OPPS, HCPCS codes that describe skin substitute products, with a 

separately payable status indicator of “K” or “G” that are billed with a skin substitute 

application procedure, will receive separate payment for both the skin substitute product 

and the procedure. Payment for skin substitute HCPCS codes that are billed with other 

procedures will be packaged into the payment for the corresponding procedure. 

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

proposals, without modification, to continue to package payment for all nonpass-through 

diagnostic radiopharmaceuticals and contrast agents, and implantable biologicals that are 

surgically inserted or implanted into the body through a surgical incision or a natural 

orifice, regardless of their per day costs. Given the inherent function of diagnostic 

radiopharmaceuticals and contrast agents as ancillary and supportive to the performance 

of an independent procedure and the similar functions of implantable biologicals and 

nonbiological devices as integral to and supportive of the separately paid surgical 

procedures in which either may be used, we continue to view the packaging of payment 

for diagnostic radiopharmaceuticals, contrast agents, and implantable biologicals as a 

logical expansion of packaging payment for drugs and biologicals. In addition, as we 

initially established in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66768), we will continue to identify diagnostic radiopharmaceuticals specifically 

as those Level II HCPCS codes that include the term “diagnostic” alone with a 
CMS-1589-FC 269 

radiopharmaceutical in their long code descriptors, and therapeutic radiopharmaceuticals 

as those Level II HCPCS codes that include the term “therapeutic” along with a 

radiopharmaceuticals in their long code descriptors. We believe that the current 

descriptors accurately discriminate between those radiopharmaceuticals that are used to 

gather information and those which are intended to improve the patient’s medical 

condition. 

In addition, any new biological lacking pass-through status that is surgically 

inserted or implanted through a surgical incision or natural orifice will be packaged in 

CY 2013. 

We refer reader to section III.D.1.f. of this final rule with comment period for a 

discussion of comments related to echocardiography services furnished with and without 

contrast. For more information on how we set CY 2013 payment rates for nuclear 

medicine procedures in which diagnostic radiopharmaceuticals are used an 

echocardiography services provided with and without contrast agents, we refer readers to 

the CY 2010 OPPS/ASC final rule with comment period for a detailed discussion of 

nuclear medicine and echocardiography services (74 FR 35269 through 35277). 

h. Summary of Proposals 

As we proposed, we are finalizing, for this final rule with comment period, the 

HCPCS codes that we unconditionally packaged (for which we continue to assign status 

indicator “N”), or conditionally packaged (for which we continue to assign status 

indicators “Q1,” “Q2,” or “Q3”), and those codes are displayed in Addendum B of this 

final rule with comment period (which is available via the Internet on the CMS Web site). 
CMS-1589-FC 270 

The supporting documents for this CY 2013 OPPS/ASC final rule with comment period, 

including, but not limited to, Addendum B, are available on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. To view the status indicators by HCPCS 

code in Addendum B, select “CMS 1589-FC” and then select the folder labeled “2013 

OPPS Final Rule Addenda” from the list of supporting files. Open the zipped file and 

select Addendum B, which is available as both an Excel file and a text file. 

4. Calculation of OPPS Scaled Payment Weights 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45101), we proposed for 

CY 2013 to calculate the relative payment weights for each APC for CY 2013 shown in 

Addenda A and B to the proposed rule (which were available via the Internet on the CMS 

Web site) using the APC costs discussed in sections II.A.1. and II.A.2. of the proposed 

rule. In years prior to CY 2007, we standardized all the relative payment weights to 

APC 0601 (Mid-Level Clinic Visit) because mid-level clinic visits were among the most 

frequently performed services in the hospital outpatient setting. We assigned APC 0601 

a relative payment weight of 1.00 and divided the median cost for each APC by the 

median cost for APC 0601 to derive the relative payment weight for each APC. 

Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all of the 

relative payment weights for APC 0606 (Level 3 Clinic Visits) because we deleted 

APC 0601 as part of the reconfiguration of the clinic visit APCs. We selected APC 0606 

as the base because APC 0606 was the mid-level clinic visit APC (that is, Level 3 of five 

levels). For CY 2013, we proposed to base the relative payment weights on which OPPS 
CMS-1589-FC 271 

payments will be made by using geometric mean costs, as described in section II.A.2.f. of 

the proposed rule. However, in an effort to maintain consistency in calculating unscaled 

weights that represent the cost of some of the most frequently provided services, we 

proposed to continue to use the cost of the mid-level clinic visit APC (APC 0606) in 

calculating unscaled weights. Following our general methodology for establishing 

relative payment weights derived from APC costs, but using the proposed CY 2013 

geometric mean cost for APC 0606, for CY 2013, we proposed to assign APC 0606 a 

relative payment weight of 1.00 and to divide the geometric mean cost of each APC by 

the proposed geometric mean cost for APC 0606 to derive the proposed unscaled relative 

payment weight for each APC. We stated that the choice of the APC on which to base 

the proposed relative payment weights for all other APCs does not affect the payments 

made under the OPPS because we scale the weights for budget neutrality. 

Section 1833(t)(9)(B) of the Act requires that APC reclassification and 

recalibration changes, wage index changes, and other adjustments be made in a budget 

neutral manner. Budget neutrality ensures that the estimated aggregate weight under the 

OPPS for CY 2013 is neither greater than nor less than the estimated aggregate weight 

that would have been made without the changes. To comply with this requirement 

concerning the APC changes, we proposed to compare the estimated aggregate weight 

using the CY 2012 scaled relative payment weights to the estimated aggregate weight 

using the CY 2013 unscaled relative payment weights. For CY 2012, we multiplied the 

CY 2012 scaled APC relative weight applicable to a service paid under the OPPS by the 

volume of that service from CY 2011 claims to calculate the total weight for each service. 
CMS-1589-FC 272 

We then added together the total weight for each of these services in order to calculate an 

estimated aggregate weight for the year. For CY 2013, as we proposed, we performed 

the same process using the CY 2013 unscaled relative payment weights rather than scaled 

relative payment weights. We then calculated the weight scaler by dividing the CY 2012 

estimated aggregate weight by the CY 2013 estimated aggregate weight. The 

service-mix is the same in the current and prospective years because we use the same set 

of claims for service volume in calculating the aggregate weight for each year. For a 

detailed discussion of the weight scaler calculation, we refer readers to the OPPS claims 

accounting document available on the CMS Web site at: 

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

As we proposed, in this final rule with comment period, we include estimated 

payments to CMHCs in our comparison of estimated unscaled weights in CY 2013 to 

estimated total weights in CY 2012 using CY 2011 claims data, holding all other 

components of the payment system constant to isolate changes in total weight. Based on 

this comparison, we adjusted the unscaled relative payment weights for purposes of 

budget neutrality. The CY 2013 unscaled relative payment weights were adjusted by 

multiplying them by a weight scaler of 1.3596 to ensure that the CY 2013 relative 

payment weights are budget neutral. 

Section 1833(t)(14) of the Act provides the payment rates for certain SCODs. 

Section 1833(t)(14)(H) of the Act states that “Additional expenditures resulting from this 

paragraph shall not be taken into account in establishing the conversion factor, weighting, 
CMS-1589-FC 273 

and other adjustment factors for 2004 and 2005 under paragraph (9), but shall be taken 

into account for subsequent years.” Therefore, the cost of those SCODs (as discussed in 

section V.B.3. of this final rule) was included in the budget neutrality calculations for the 

CY 2013 OPPS. 

We did not receive any public comments on the proposed methodology for 

calculating scaled weights based on the geometric mean costs for the CY 2013 OPPS. 

Therefore, for the reasons set forth in the proposed rule (77 FR 45101), we are finalizing 

our proposed methodology without modification, including updating of the budget 

neutrality scaler for this final rule with comment period as we proposed. Under this 

methodology, the final unscaled relative payment weights were adjusted by a weight 

scaler of 1.3596 for this final rule with comment period. The final scaled relative 

payment weights listed in Addenda A and B to this final rule with comment period 

(which are available via the Internet on the CMS Web site) incorporate the final 

recalibration adjustments discussed in sections II.A.1. and II.A.2. of this final rule with 

comment period. 

We noted in the proposed rule that we were providing additional information, in 

association with the proposed rule, so that the public could provide meaningful comment 

on our proposed policy to base the CY 2013 OPPS relative payment weights on 

geometric mean costs. The scaled relative payment weights listed in Addenda A and B to 

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

Web site) incorporate the recalibration adjustments discussed in sections II.A.1. and 

II.A.2. of this final rule with comment period. 
CMS-1589-FC 274 

B. Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to update the 

conversion factor used to determine the payment rates under the OPPS on an annual basis 

by applying the OPD fee schedule increase factor. For purposes of section 

1833(t)(3)(C)(iv) of the Act, subject to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, 

the OPD fee schedule increase factor is equal to the hospital inpatient market basket 

percentage increase applicable to hospital discharges under section 1886(b)(3)(B)(iii) of 

the Act. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53414), consistent with 

current law, based on IHS Global Insight, Inc.’s second quarter 2012 forecast of the 

FY 2013 market basket increase, the FY 2013 IPPS market basket update is 2.6 percent. 

However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) of the Act, as added by section 

3401(i) of Pub. L. 111-148 and as amended by section 10319(g) of that law and further 

amended by section 1105(e) of Pub. L. 111-152, provide adjustments to the OPD fee 

schedule increase factor for CY 2013. 

Specifically, section 1833(t)(3)(F)(i) of the Act requires that, for 2012 and 

subsequent years, the OPD fee schedule increase factor under subparagraph (C)(iv) be 

reduced by the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the 

Act. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as 

equal to the 10-year moving average of changes in annual economy-wide, private 

nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 

10-year period ending with the applicable fiscal year, year, cost reporting period, or other 

annual period) (the “MFP adjustment”). In the FY 2012 IPPS/LTCH PPS final rule 
CMS-1589-FC 275 

(76 FR 51689 through 51692), we finalized our methodology for calculating and 

applying the MFP adjustment. In the FY 2013 IPPS/LTCH PPS proposed rule 

(77 FR 27975 through 27976), we discussed the calculation of the proposed MFP 

adjustment for FY 2013, which was 0.8 percentage point. 

We proposed that if more recent data became subsequently available after the 

publication of the proposed rule (for example, a more recent estimate of the market 

basket increase and the MFP adjustment), we would use such data, if appropriate, to 

determine the CY 2013 market basket update and the MFP adjustment, components in 

calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and (F) 

of the Act, in this CY 2013 OPPS/ASC final rule with comment period. In the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53414), we discussed the calculation of the final MFP 

adjustment for FY 2013, which is 0.7 percentage point. 

In addition, section 1833(t)(3)(F)(ii) of the Act requires that for each of year 2010 

through 2019, the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the 

Act be reduced by the adjustment described in section 1833(t)(3)(G) of the Act. For 

CY 2013, section 1833(t)(3)(G)(ii) of the Act provides a 0.1 percentage point reduction 

to the OPD fee schedule increase factor under section 1833(t)(3)(C)(iv) of the Act. 

Therefore, in accordance with sections 1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the Act, 

in the CY 2013 OPPS/ASC proposed rule (77 FR 45102), we proposed to apply a 0.1 

percentage point reduction to the OPD fee schedule increase factor for CY 2013. 

We note that section 1833(t)(3)(F) of the Act provides that application of this 

subparagraph may result in the OPD fee schedule increase factor under section 
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1833(t)(3)(C)(iv) of the Act being less than 0.0 for a year, and may result in payment 

rates under the OPPS for a year being less than such payment rates for the preceding 

year. As described in further detail below, using the final methodology and more recent 

data would result in an OPD fee schedule increase factor of 1.8 percent for the CY 2013 

OPPS (2.6 percent, which is the final estimate of the hospital inpatient market basket 

percentage increase, less the final 0.7 percentage point MFP adjustment, less the 0.1 

percentage point additional adjustment). 

We note that hospitals that fail to meet the Hospital OQR Program reporting 

requirements are subject to an additional reduction of 2.0 percentage points from the 

OPD fee schedule increase factor adjustment to the conversion factor that would be used 

to calculate the OPPS payment rates for their services, as required by section 1833(t)(17) 

of the Act. As a result, using the final methodology and more recent data, those hospitals 

failing to meet the Hospital OQR Program reporting requirements will receive an OPD 

fee schedule increase factor of -0.2 (2.6 percent, which is the final estimate of the hospital 

inpatient market basket percentage increase, less the final 0.7 percentage point MFP 

adjustment, less the 0.1 percentage point additional adjustment, less 2.0 percentage points 

for the Hospital OQR Program reduction). For further discussion of the Hospital OQR 

Program, we refer readers to section XV.F. of this final rule with comment period. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45103), we proposed to amend 

42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the requirement in 

section 1833(t)(3)(F)(i) of the Act that, for CY 2013, we reduce the OPD fee schedule 

increase factor by the MFP adjustment as determined by CMS, and to reflect the 
CMS-1589-FC 277 

requirement in section 1833(t)(3)(G)(ii) of the Act, as required by section 

1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule increase factor by an 

additional 0.1 percentage point for CY 2013. 

Comment: Several commenters expressed support for the OPD fee schedule 

increase factor because they believed it would better align payment with hospital costs. 

Response: We appreciate the commenters’ support. 

We did not receive any public comments on the proposed amendment to 

42 CFR 419.32(b)(1)(iv)(B) to add a new paragraph (4) to reflect the requirements in 

section 1833(t)(3)(F) of the Act. For the reasons discussed above, we are adjusting the 

OPD fee schedule increase factor and adopting as final the amendment to 

42 CFR 419.32(b)(1)(iv)(B), as proposed. 

We did not receive any public comments on our proposed methodology for 

calculating the CY 2013 conversion factor. Therefore, we are finalizing our proposed 

methodology for calculating the budget neutrality adjustment factors, as described in the 

following discussion. 

As we proposed, to set the OPPS conversion factor for CY 2013, we are 

increasing the CY 2012 conversion factor of $70.016 by 1.8 percent. In accordance with 

section 1833(t)(9)(B) of the Act, we are further adjusting the conversion factor for 

CY 2013 to ensure that any revisions made to the updates for a revised wage index and 

rural adjustment are made on a budget neutral basis (77 FR 45103). We are calculating 

an overall budget neutrality factor of 0.9998 for wage index changes by comparing total 

estimated payments from our simulation model using the final FY 2013 IPPS wage 
CMS-1589-FC 278 

indices to those payments using the current (FY 2012) IPPS wage indices, as adopted on 

a calendar year basis for the OPPS. 

For CY 2013, we did not propose to make a change to our rural adjustment 

policy, and as discussed in section II.E. of this final rule with comment period, we are not 

making any changes to the rural adjustment policy. Therefore, the budget neutrality 

factor for the rural adjustment is 1.0000. 

For CY 2013, we are finalizing our proposal to continue previously established 

policies for implementing the cancer hospital payment adjustment described in section 

1833(t)(18) of the Act, as discussed in section II.F. of this final rule with comment 

period. We are calculating a CY 2013 budget neutrality adjustment factor for the cancer 

hospital payment adjustment by comparing the estimated total CY 2013 payments under 

section 1833(t) of the Act including the CY 2013 cancer hospital payment adjustment to 

the estimated CY 2013 total payments using the CY 2012 final cancer hospital payment 

adjustment under sections 1833(t)(18)(B) and 1833(t)(2)(E) of the Act. The difference in 

the CY 2013 estimated payments as a result of applying the CY 2013 cancer hospital 

payment adjustment relative to the CY 2012 final cancer hospital payment adjustment 

does not have a significant impact on the budget neutrality calculation. Therefore, we are 

applying a budget neutrality adjustment factor of 1.0000 to the conversion factor to 

ensure that the cancer hospital payment adjustment is budget neutral. 

For this final rule with comment period, we estimate that pass-through spending 

for both drugs and biologicals and devices for CY 2013 would equal approximately $74 

million, which represents 0.15 percent of total projected CY 2013 OPPS spending. 
CMS-1589-FC 279 

Therefore, the conversion factor is also adjusted by the difference between the 

0.22 percent estimate of pass-through spending for CY 2012 and the 0.15 percent 

estimate of CY 2013 pass-through spending, resulting in an adjustment for CY 2013 of 

-0.07 percent. Finally, estimated payments for outliers remain at 1.0 percent of total 

OPPS payments for CY 2013. 

The OPD fee schedule increase factor of 1.8 percent for CY 2013 (that is, the 

estimate of the hospital inpatient market basket percentage increase of 2.6 percent less the 

0.7 percentage point MFP adjustment and less the 0.1 percentage point required under 

section 1833(t)(3)(F) of the Act), the required wage index budget neutrality adjustment of 

approximately 0.9998, the cancer hospital payment adjustment of 1.0000, and the 

adjustment of –0.07 percent of projected OPPS spending for the difference in the 

pass-through spending result in a conversion factor for CY 2013 of $71.313. 

As we stated in the proposed rule, hospitals that fail to meet the reporting 

requirements of the Hospital OQR Program will continue to be subject to a further 

reduction of 2.0 percentage points to the OPD fee schedule increase factor adjustment to 

the conversion factor that would be used to calculate the OPPS payment rates made for 

their services as required by section 1833(t)(17) of the Act. For a complete discussion of 

the Hospital OQR Program requirements and the payment reduction for hospitals that fail 

to meet those requirements, we refer readers to section XV.F. of this final rule with 

comment period. To calculate the CY 2013 reduced market basket conversion factor for 

those hospitals that fail to meet the requirements of the Hospital OQR Program for the 

full CY 2013 payment update, we are making all other adjustments discussed above, but 
CMS-1589-FC 280 

using a reduced OPD fee schedule update factor of -0.2 percent (that is, the OPD fee 

schedule increase factor of 1.8 percent further reduced by 2.0 percentage points as 

required by section 1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital 

OQR requirements). This results in a reduced conversion factor for CY 2013 of $69.887 

for those hospitals that fail to meet the Hospital OQR requirements (a difference of 

-$1.426 in the conversion factor relative to those hospitals that met the Hospital OQR 

requirements). 

In summary, for CY 2013, we are using a final conversion factor of $71.313 in the 

calculation of the national unadjusted payment rates for those items and services for 

which payment rates are calculated using geometric mean costs. For further discussion 

regarding our final policy to base the CY 2013 OPPS relative payment weights on 

geometric mean costs, we refer readers to section II.A.2.f. of this final rule with comment 

period. We are finalizing our proposed amendment to § 419.32(b)(1)(iv)(B) by adding a 

new paragraph (4) to reflect the reductions to the OPD fee schedule increase factor that 

are required for CY 2013 in order to satisfy the statutory requirements of sections 

1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We also are using a reduced conversion factor 

of $69.887 in the calculation of payments for hospitals that fail to comply with the 

Hospital OQR Program requirements to reflect the reduction to the OPD fee schedule 

increase factor that is required by section 1833(t)(17) of the Act. 

C. Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage 

adjustment factor to account for geographic wage differences in a portion of the OPPS 
CMS-1589-FC 281 

payment rate, which includes the copayment standardized amount and is attributable to 

labor and labor-related costs. This portion of the OPPS payment rate is called the OPPS 

labor-related share. This adjustment must be made in a budget neutral manner and 

budget neutrality is discussed in section II.B. of this final rule with comment period. 

The OPPS labor-related share is 60 percent of the national OPPS payment. This 

labor-related share is based on a regression analysis that determined that, for all hospitals, 

approximately 60 percent of the costs of services paid under the OPPS were attributable 

to wage costs. We confirmed that this labor-related share for outpatient services is 

appropriate during our regression analysis for the payment adjustment for rural hospitals 

in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, as we 

proposed, we are not revising this policy for the CY 2013 OPPS. We refer readers to 

section II.H. of this final rule with comment period for a description and example of how 

the wage index for a particular hospital is used to determine the payment for the hospital. 

As discussed in section II.A.2.c. of this final rule with comment period, for 

estimating APC costs, we standardize 60 percent of estimated claims costs for geographic 

area wage variation using the same FY 2013 pre-reclassified wage index that the IPPS 

uses to standardize costs. This standardization process removes the effects of differences 

in area wage levels from the determination of a national unadjusted OPPS payment rate 

and the copayment amount 

As published in the original OPPS April 7, 2000 final rule with comment period 

(65 FR 18545), the OPPS has consistently adopted the final fiscal year IPPS wage index 

as the calendar year wage index for adjusting the OPPS standard payment amounts for 
CMS-1589-FC 282 

labor market differences. Thus, the wage index that applies to a particular acute care 

short-stay hospital under the IPPS also applies to that hospital under the OPPS. As 

initially explained in the September 8, 1998 OPPS proposed rule (63 FR 47576), we 

believed that using the IPPS wage index as the source of an adjustment factor for the 

OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD 

within the hospital overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS 

wage index is updated annually 

The Affordable Care Act contained provisions affecting the wage index. These 

provisions were discussed in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74191). As discussed in that final rule with comment period, section 10324 of the 

Affordable Care Act requires a “frontier State” wage index floor of 1.00 in certain cases. 

For the CY 2013 OPPS, as we proposed, we are implementing this provision in the same 

manner as we did for CY 2012. That is, frontier State hospitals will receive a wage index 

of 1.00 if the otherwise applicable wage index (including reclassification, rural floor, and 

rural floor budget neutrality) is less than 1.00. Similar to our current policy for HOPDs 

that are affiliated with multicampus hospital systems, the HOPD will receive a wage 

index based on the geographic location of the specific inpatient hospital with which it is 

associated. Therefore, if the associated hospital is located in a frontier State, the wage 

index adjustment applicable for the hospital will also apply for the affiliated HOPD. We 

refer readers to the FY 2011 and FY 2012 IPPS/LTCH PPS final rules (75 FR 50160 

through 50161 and 76 FR 51586, respectively) and the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53369 through 53370) for a detailed discussion regarding this provision, 
CMS-1589-FC 283 

including our methodology for identifying which areas meet the definition of frontier 

States as provided for in section 1886(d)(3)(E)(iii)(II) of the Act 

In addition to the changes required by the Affordable Care Act, we note that the 

final FY 2013 IPPS wage indices continue to reflect a number of adjustments 

implemented over the past few years, including, but not limited to, reclassification of 

hospitals to different geographic areas, the rural floor provisions, an adjustment for 

occupational mix, and an adjustment to the wage index based on commuting patterns of 

employees (the out-migration adjustment). We refer readers to the FY 2013 IPPS/LTCH 

PPS final rule (77 FR 53365 through 53374) for a detailed discussion of all changes to 

the FY 2013 IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS final 

rule with comment period (69 FR 65842 through 65844) and subsequent OPPS rules for a 

detailed discussion of the history of these wage index adjustments as applied under the 

OPPS. 

Section 102 of the Medicare and Medicaid Extender Act extended, through 

FY 2011, section 508 reclassifications as well as certain special exceptions. The most 

recent extension of these special wage indices was included in section 302 of the 

Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L. 112-78), as amended by 

section 3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 

112-96). These legislative provisions extended certain section 508 reclassifications and 

special exception wage indices for a 6-month period during FY 2012, from 

October 1, 2011 through March 31, 2012. We implemented this extension in a notice 

(CMS-1442-N) published in the Federal Register on April 20, 2012 (77 FR 23722). As 
CMS-1589-FC 284 

we did for CY 2010, we revised wage index values for certain special exception hospitals 

from January 1, 2012 through June 30, 2012, under the OPPS, in order to give these 

hospitals the special exception wage indices under the OPPS for the same time period as 

under the IPPS. In addition, because the OPPS pays on a calendar year basis, the end 

date under the OPPS for certain nonsection 508 and nonspecial exception providers to 

receive special wage indices was June 30, 2012, instead of March 31, 2012, so that these 

providers also received a full 6 months of payment under the revised wage index 

comparable to the IPPS. However, section 508 reclassifications and special exceptions 

have not been reauthorized since their expiration under Pub. L. 112-96 and, therefore, are 

no longer applicable. 

For purposes of the OPPS, as we proposed, we are continuing our policy in 

CY 2013 of allowing non-IPPS hospitals paid under the OPPS to qualify for the 

out-migration adjustment if they are located in a section 505 out-migration county 

(section 505 of the Medicare Prescription Drug, Improvement, and Modernization Act of 

2003 (MMA)). We note that, because non-IPPS hospitals cannot reclassify, they are 

eligible for the out-migration wage adjustment. Table 4J listed in the FY 2013 

IPPS/LTCH PPS final rule (available via the Internet on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html) identifies counties eligible for the out-migration 

adjustment and hospitals that will receive the adjustment for FY 2013. We note that, 

beginning with FY 2012, under the IPPS, an eligible hospital that waives its Lugar status 

in order to receive the out-migration adjustment has effectively waived its deemed urban 
CMS-1589-FC 285 

status and, thus, is rural for all purposes under the IPPS, including being considered rural 

for the disproportionate share hospital (DSH) payment adjustment, effective for the fiscal 

year in which the hospital receives the out-migration adjustment. We refer readers to the 

FY 2013 IPPS/LTCH PPS final rule (77 FR 53371) for a more detailed discussion on the 

Lugar redesignation waiver for the out-migration adjustment). As we have done in prior 

years, we are including Table 4J from the FY 2013 IPPS/LTCH PPS final rule as 

Addendum L to this final rule with comment period with the addition of non-IPPS 

hospitals that will receive the section 505 out-migration adjustment under the CY 2013 

OPPS. Addendum L is available via the Internet on the CMS Web site. 

In response to concerns frequently expressed by providers and other relevant 

parties that the current wage index system does not effectively reflect the true variation in 

labor costs for a large cross-section of hospitals, two studies were undertaken by the 

Department. First, section 3137(b) of the Affordable Care Act required the Secretary to 

submit to Congress a report that includes a plan to comprehensively reform the Medicare 

wage index applied under section 1886(d) of the Act. In developing the plan, the 

Secretary was directed to take into consideration the goals for reforming the wage index 

that were set forth by the Medicare Payment Advisory Commission (MedPAC) in its 

June 2007 report entitled “Report to Congress: Promoting Greater Efficiency in 

Medicare” and to “consult with relevant affected parties.” Second, the Secretary 

commissioned the Institute of Medicine (IOM) to “evaluate hospital and physician 

geographic payment adjustments, the validity of the adjustment factors, measures and 

methodologies used in those factors, and sources of data used in those factors.” Reports 
CMS-1589-FC 286 

on both of these studies for geographic adjustment to hospital payments recently have 

been released. For summaries of the studies, their findings, and recommendations on 

reforming the wage index system, we refer readers to section IX.B. of the preamble of the 

FY 2013 IPPS/LTCH PPS final rule (77 FR 53660 through 53664). 

Comment: Several commenters expressed disappointment that CMS did not set 

forth a proposal in the CY 2013 OPPS/ASC proposed rule to begin reform of the wage 

index process and simply proposed to continue adopting the IPPS fiscal year wage 

indexes. Several commenters encouraged CMS to expedite wage index reform to create a 

more equitable system that adequately pays hospitals for care provided to Medicare 

beneficiaries. A few commenters supported the continuation of the current wage index 

system; one commenter suggested that, as more comprehensive reforms continue to be 

developed, they encompass the goals of minimizing volatility, discouraging manipulation 

of the system, and limiting adverse effects on high wage area markets. 

Response: In the CY 2012 OPPS/ASC proposed rule, we solicited comment on 

possible alternative wage index systems under the OPPS (76 FR 42212 through 42213). 

However, in the CY 2012 OPPS/ASC final rule with comment period, we stated our 

belief that maintaining the current policy of adopting the fiscal year IPPS wage index and 

adopting it in the OPPS on a calendar year basis would continue to be appropriate, given 

our longstanding use of the fiscal year IPPS wage index in the OPPS on a calendar year 

basis (76 FR 74192) and the broader wage index reform currently under development and 

consideration (76 FR 74193). In the CY 2013 OPPS/ASC proposed rule, we proposed 

that continuing to use the IPPS wage index as the source of an adjustment factor for the 
CMS-1589-FC 287 

OPPS is reasonable and logical, given the inseparable, subordinate status of the HOPD 

within the hospital overall (77 FR 45105). As discussed above, the FY 2013 IPPS/LTCH 

PPS final rule contains a discussion of a MedPAC report and an IOM study focused on 

potential models for wage index reform (77 FR 53660 through 53664). 

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

policy to adopt the FY 2013 IPPS wage index for the CY 2013 OPPS in its entirety, 

including the rural floor, geographic reclassifications, and all other wage index 

adjustments. As stated earlier in this section, we continue to believe that using the IPPS 

wage index as the source of an adjustment factor for the OPPS is reasonable and logical, 

given the inseparable, subordinate status of the HOPD within the hospital overall. 

Therefore, we are using the final FY 2013 IPPS wage indices for calculating OPPS 

payments in CY 2013. With the exception of the out-migration wage adjustment table 

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

on the CMS Web site), which includes non-IPPS hospitals paid under the OPPS, we are 

not reprinting the final FY 2013 IPPS wage indices referenced in this discussion of the 

wage index. We refer readers to the CMS Web site for the OPPS at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the 

final FY 2013 IPPS wage index tables. 

D. Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims for ratesetting, 

CMS uses overall hospital-specific CCRs calculated from the hospital’s most recent cost 
CMS-1589-FC 288 

report to determine outlier payments, payments for pass-through devices, and monthly 

interim transitional corridor payments under the OPPS during the PPS year. Medicare 

contractors cannot calculate a CCR for some hospitals because there is no cost report 

available. For these hospitals, CMS uses the statewide average default CCRs to 

determine the payments mentioned above until a hospital’s Medicare contractor is able to 

calculate the hospital’s actual CCR from its most recently submitted Medicare cost 

report. These hospitals include, but are not limited to, hospitals that are new, have not 

accepted assignment of an existing hospital’s provider agreement, and have not yet 

submitted a cost report. CMS also uses the statewide average default CCRs to determine 

payments for hospitals that appear to have a biased CCR (that is, the CCR falls outside 

the predetermined ceiling threshold for a valid CCR) or for hospitals in which the most 

recent cost report reflects an all-inclusive rate status (Medicare Claims Processing 

Manual (Pub. 100-04), Chapter 4, Section 10.11). We discuss our policy for using 

default CCRs, including setting the ceiling threshold for a valid CCR, in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in the context 

of our adoption of an outlier reconciliation policy for cost reports beginning on or after 

January 1, 2009. 

For CY 2013, we proposed to continue to use our standard methodology of 

calculating the statewide average default CCRs using the same hospital overall CCRs that 

we use to adjust charges to costs on claims data for setting the proposed CY 2013 OPPS 

relative payment weights. Table 12 published in the proposed rule (77 FR 45106) listed 

the proposed CY 2013 default urban and rural CCRs by State and compared them to last 
CMS-1589-FC 289 

year’s default CCRs. These proposed CCRs represented the ratio of total costs to total 

charges for those cost centers relevant to outpatient services from each hospital’s most 

recently submitted cost report, weighted by Medicare Part B charges. We also proposed 

to adjust ratios from submitted cost reports to reflect the final settled status by applying 

the differential between settled to submitted overall CCRs for the cost centers relevant to 

outpatient services from the most recent pair of final settled and submitted cost reports. 

We then proposed to weight each hospital’s CCR by the volume of separately paid lineitems on hospital claims corresponding to the year of the majority of cost reports used to 

calculate the overall CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66680 through 66682) and prior OPPS rules for a more detailed 

discussion of our established methodology for calculating the statewide average default 

CCRs, including the hospitals used in our calculations and our trimming criteria. 

Comment: One commenter expressed concern that Florida has the lowest CCR in 

the United States for both rural and urban areas. The commenter suggested that the 

statewide average default CCRs for Florida are “significantly skewed” due to cost report 

information submitted by hospitals in the Miami area and recommended that CMS 

evaluate the data used to calculate the CCRs in order to validate this assumption. 

Response: As detailed in the CY 2008 OPPS/ASC final rule with comment 

period (72 FR 66680 through 66682), we use only valid CCRs to calculate the default 

ratios. That is, we remove the CCRs for all-inclusive hospitals and CAHs, we identify 

and remove any obvious error CCRs, and we trim any outliers. The Florida statewide 

average default CCRs have been very stable over the last several years. Contrary to the 
CMS-1589-FC 290 

commenter’s belief that we use statewide average default CCRs to estimate the costs 

(from charges on claims) that are used to calculate the OPPS relative weights, Medicare 

contractors use statewide average default CCRs to determine outlier payments, payments 

for pass-through devices, and monthly interim transitional corridor payments for 

hospitals with no available cost report. 

After consideration of the public comment we received on our CY 2013 proposal, 

we are finalizing our proposal to apply our standard methodology of calculating the 

statewide average default CCRs using the same hospital overall CCRs that we used to 

adjust charges to costs on claims data for setting the CY 2013 OPPS relative weights. 

We used this methodology to calculate the statewide average default CCRs listed in 

Table 8 below. 

For this CY 2013 OPPS/ASC final rule with comment period, approximately 

62 percent of the submitted cost reports utilized in the default ratio calculations 

represented data for cost reporting periods ending in CY 2010, and approximately 38 

percent were for cost reporting periods ending in CY 2009. For Maryland, we used an 

overall weighted average CCR for all hospitals in the Nation as a substitute for Maryland 

CCRs. Few hospitals in Maryland are eligible to receive payment under the OPPS, which 

limits the data available to calculate an accurate and representative CCR. The weighted 

CCR is used for Maryland because it takes into account each hospital’s volume, rather 

than treating each hospital equally. We refer readers to the CY 2005 OPPS final rule 

with comment period (69 FR 65822) for further discussion and the rationale for our 

longstanding policy of using the national average CCR for Maryland. In general, 
CMS-1589-FC 291 

observed changes in the statewide average default CCRs between CY 2012 and CY 2013 

are modest and the few significant changes are associated with areas that have a small 

number of hospitals. 

Table 8 below lists the finalized statewide average default CCRs for OPPS 

services furnished on or after January 1, 2013. 

TABLE 8.–CY 2013 STATEWIDE AVERAGE CCRs 

State Urban/Rural 

CY 2013 Default 

CCR 

Previous Default 

CCR (CY 2012 

OPPS Final Rule)

ALASKA RURAL 0.489 0.487

ALASKA URBAN 0.307 0.305

ALABAMA RURAL 0.209 0.210

ALABAMA URBAN 0.193 0.194

ARKANSAS RURAL 0.219 0.221

ARKANSAS URBAN 0.234 0.245

ARIZONA RURAL 0.238 0.237

ARIZONA URBAN 0.190 0.190

CALIFORNIA RURAL 0.192 0.193

CALIFORNIA URBAN 0.202 0.201

COLORADO RURAL 0.331 0.342

COLORADO URBAN 0.226 0.226

CONNECTICUT RURAL 0.364 0.365

CONNECTICUT URBAN 0.287 0.288

DISTRICT OF 

COLUMBIA URBAN 0.302 0.302

DELAWARE RURAL 0.282 0.280

DELAWARE URBAN 0.353 0.347

FLORIDA RURAL 0.182 0.182

FLORIDA URBAN 0.167 0.164

GEORGIA RURAL 0.237 0.238

GEORGIA URBAN 0.214 0.214

HAWAII RURAL 0.323 0.321
CMS-1589-FC 292 

State Urban/Rural 

CY 2013 Default 

CCR 

Previous Default 

CCR (CY 2012 

OPPS Final Rule)

HAWAII URBAN 0.306 0.306

IOWA RURAL 0.296 0.296

IOWA URBAN 0.269 0.269

IDAHO RURAL 0.417 0.417

IDAHO URBAN 0.357 0.353

ILLINOIS RURAL 0.240 0.238

ILLINOIS URBAN 0.230 0.230

INDIANA RURAL 0.285 0.292

INDIANA URBAN 0.256 0.262

KANSAS RURAL 0.290 0.279

KANSAS URBAN 0.210 0.208

KENTUCKY RURAL 0.217 0.217

KENTUCKY URBAN 0.241 0.239

LOUISIANA RURAL 0.242 0.247

LOUISIANA URBAN 0.225 0.224

MARYLAND RURAL 0.275 0.276

MARYLAND URBAN 0.246 0.246

MASSACHUSETTS RURAL 0.427 0.427

MASSACHUSETTS URBAN 0.323 0.322

MAINE RURAL 0.445 0.438

MAINE URBAN 0.449 0.453

MICHIGAN RURAL 0.303 0.305

MICHIGAN URBAN 0.303 0.305

MINNESOTA RURAL 0.469 0.482

MINNESOTA URBAN 0.321 0.320

MISSOURI RURAL 0.241 0.243

MISSOURI URBAN 0.262 0.260

MISSISSIPPI RURAL 0.226 0.224

MISSISSIPPI URBAN 0.182 0.189

MONTANA RURAL 0.431 0.434

MONTANA URBAN 0.384 0.386

NORTH CAROLINA RURAL 0.253 0.251

NORTH CAROLINA URBAN 0.254 0.257

NORTH DAKOTA RURAL 0.322 0.322
CMS-1589-FC 293 

State Urban/Rural 

CY 2013 Default 

CCR 

Previous Default 

CCR (CY 2012 

OPPS Final Rule)

NORTH DAKOTA URBAN 0.414 0.421

NEBRASKA RURAL 0.318 0.318

NEBRASKA URBAN 0.254 0.252

NEW HAMPSHIRE RURAL 0.317 0.323

NEW HAMPSHIRE URBAN 0.292 0.291

NEW JERSEY URBAN 0.207 0.212

NEW MEXICO RURAL 0.256 0.264

NEW MEXICO URBAN 0.279 0.288

NEVADA RURAL 0.234 0.233

NEVADA URBAN 0.162 0.167

NEW YORK RURAL 0.420 0.419

NEW YORK URBAN 0.369 0.356

OHIO RURAL 0.321 0.320

OHIO URBAN 0.237 0.234

OKLAHOMA RURAL 0.239 0.239

OKLAHOMA URBAN 0.212 0.217

OREGON RURAL 0.314 0.311

OREGON URBAN 0.335 0.328

PENNSYLVANIA RURAL 0.267 0.270

PENNSYLVANIA URBAN 0.200 0.199

PUERTO RICO URBAN 0.504 0.492

RHODE ISLAND URBAN 0.264 0.270

SOUTH CAROLINA RURAL 0.211 0.211

SOUTH CAROLINA URBAN 0.214 0.214

SOUTH DAKOTA RURAL 0.307 0.307

SOUTH DAKOTA URBAN 0.218 0.252

TENNESSEE RURAL 0.209 0.211

TENNESSEE URBAN 0.195 0.199

TEXAS RURAL 0.235 0.236

TEXAS URBAN 0.206 0.196

UTAH RURAL 0.374 0.379

UTAH URBAN 0.359 0.359

VIRGINIA RURAL 0.227 0.226

VIRGINIA URBAN 0.237 0.239
CMS-1589-FC 294 

State Urban/Rural 

CY 2013 Default 

CCR 

Previous Default 

CCR (CY 2012 

OPPS Final Rule)

VERMONT RURAL 0.408 0.407

VERMONT URBAN 0.384 0.384

WASHINGTON RURAL 0.366 0.368

WASHINGTON URBAN 0.301 0.298

WISCONSIN RURAL 0.345 0.351

WISCONSIN URBAN 0.307 0.311

WEST VIRGINIA RURAL 0.277 0.280

WEST VIRGINIA URBAN 0.338 0.337

WYOMING RURAL 0.379 0.386

WYOMING URBAN 0.301 0.302

E. OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes 

The OPPS was implemented in CY 2000 under the Balanced Budget Act of 1997 

(BBA) (Pub. L. 105-33). The Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act of 1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital 

OPPS, including adding a new paragraph (7) to section 1833(t) of the Act, effective as if 

included in the enactment of the BBA. Section 1833(t)(7) of the Act sets forth that every 

provider was eligible to receive an additional payment adjustment (called either 

transitional corridor payments or transitional outpatient payments (TOPs)) if the 

payments it received for covered OPD services under the OPPS were less than the 

payments it would have received for the same services under the prior reasonable costbased system (referred to as the pre-BBA amount), and that the TOPs were temporary 

payments for most providers and intended to ease their transition from the prior 
CMS-1589-FC 295 

reasonable cost-based payment system to the OPPS system. There are two types of 

hospitals excepted from the policy described above, cancer hospitals and children’s 

hospitals. Specifically, such a hospital could receive TOPs to the extent its PPS amount 

was less than its pre-BBA amount in the applicable year. Section 1833(t)(7)(D)(i) of the 

Act originally provided for TOPs to all hospitals for covered OPD services furnished 

before January 1, 2004. However, section 411 of Pub. L. 108-173 (the Medicare 

Prescription Drug, Improvement, and Modernization Act of 2003) amended 

section 1833(t)(7)(D)(i) of the Act to extend these payments through December 31, 2005, 

for rural hospitals with 100 or fewer beds. Section 411 also extended the TOPs to sole 

community hospitals (SCHs) located in rural areas for services furnished during the 

period that began with the provider’s first cost reporting period beginning on or after 

January 1, 2004, and ending on December 31, 2005. Accordingly, the authority for 

making TOPs under section 1833(t)(7)(D)(i) of the Act, as amended by section 411 of 

Pub. L. 108-173, for rural hospitals having 100 or fewer beds and SCHs located in rural 

areas expired on December 31, 2005. 

Section 5105 of Pub. L. 109-171 (the Deficit Reduction Act of 2005) extended the 

TOPs for covered OPD services furnished on or after January 1, 2006, and before 

January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. Section 

5105 of Pub. L. 109-171 also reduced the TOPs to rural hospitals from 100 percent of the 

difference between the provider’s OPPS payments and the pre-BBA amount. This 

provision provided that, in cases in which the OPPS payment was less than the provider’s 

pre-BBA amount, the amount of payment would be increased by 95 percent of the 
CMS-1589-FC 296 

amount of the difference between the two amounts for CY 2006, by 90 percent of the 

amount of that difference for CY 2007, and by 85 percent of the amount of that 

difference for CY 2008. 

For CY 2006, we implemented section 5105 of Pub. L. 109-171 through 

Transmittal 877, issued on February 24, 2006. In Transmittal 877, we did not specifically 

address whether TOPs applied to essential access community hospitals (EACHs), which 

are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, 

by law, EACHs are treated as SCHs. In the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68010), we stated that EACHs were not eligible for TOPs under 

Pub. L. 109-171. However, we stated they were eligible for the adjustment for rural 

SCHs authorized under section 411 of Pub. L. 108-173. In the CY 2007 OPPS/ASC final 

rule with comment period (71 FR 68010 and 68228), we updated § 419.70(d) of our 

regulations to reflect the requirements of Pub. L. 109-171. 

In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated that, effective 

for services provided on or after January 1, 2009, rural hospitals with 100 or fewer beds 

that are not SCHs would no longer be eligible for TOPs, in accordance with section 5105 

of Pub. L. 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 

proposed rule, section 147 of Pub. L. 110-275 (the Medicare Improvements for Patients 

and Providers Act of 2008) amended section 1833(t)(7)(D)(i) of the Act by extending the 

period of TOPs to rural hospitals with 100 beds or fewer for 1 year, for services provided 

before January 1, 2010. Section 147 of Pub. L. 110-275 also extended TOPs to SCHs 

(including EACHs) with 100 or fewer beds for covered OPD services provided on or 
CMS-1589-FC 297 

after January 1, 2009, and before January 1, 2010. In accordance with section 147 of 

Pub. L. 110-275, when the OPPS payment is less than the provider’s pre-BBA amount, 

the amount of payment is increased by 85 percent of the amount of the difference 

between the two payment amounts for CY 2009. 

For CY 2009, we revised our regulations at §§ 419.70(d)(2) and (d)(4) and added 

paragraph (d)(5) to incorporate the provisions of section 147 of Pub. L. 110-275. In 

addition, we made other technical changes to § 419.70(d)(2) to more precisely capture 

our existing policy and to correct an inaccurate cross-reference. We also made technical 

corrections to the cross-references in paragraphs (e), (g), and (i) of § 419.70. 

For CY 2010, we made a technical correction to the heading of § 419.70(d)(5) to 

correctly identify the policy as described in the subsequent regulation text. The 

paragraph heading now indicates that the adjustment applies to small SCHs, rather than to 

rural SCHs. 

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60425), we 

stated that, effective for services provided on or after January 1, 2010, rural hospitals and 

SCHs (including EACHs) having 100 or fewer beds would no longer be eligible for 

TOPs, in accordance with section 147 of Pub. L. 110-275. However, subsequent to the 

issuance of the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) of 

the Affordable Care Act (Pub. L. 111-148) amended section 1833(t)(7)(D)(i)(III) of the 

Act by extending the period of TOPs to rural hospitals that are not SCHs with 100 beds 

or fewer for 1 year, for services provided before January 1, 2011. Section 3121(a) of the 

Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act and extended the 
CMS-1589-FC 298 

period of TOPs to SCHs (including EACHs) for 1 year, for services provided before 

January 1, 2011, and section 3121(b) of the Affordable Care Act removed the 100-bed 

limitation applicable to such SCHs for covered OPD services furnished on or after 

January 1, 2010, and before January 1, 2011. In accordance with section 3121 of the 

Affordable Care Act, when the OPPS payment is less than the provider’s pre-BBA 

amount, the amount of payment is increased by 85 percent of the amount of the 

difference between the two payment amounts for CY 2010. Accordingly, in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 71882), we updated § 419.70(d) of the 

regulations to reflect the self-implementing TOPs extensions and amendments described 

in section 3121 of the Affordable Care Act. 

Section 108 of the Medicare and Medicaid Extenders Act of 2010 (MMEA) 

(Pub. L. 111-309) extended for 1 year the hold harmless provision for a rural hospital 

with 100 or fewer beds that is not an SCH (as defined in section 1886(d)(5)(D)(iii) of the 

Act). Therefore, for such a hospital, for services furnished before January 1, 2012, when 

the PPS amount is less than the provider’s pre-BBA amount, the amount of payment to 

the hospital is increased by 85 percent of the amount of the difference between the two 

payments. In addition, section 108 of the MMEA also extended for 1 year the hold 

harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act 

(including EACHs) and the removal of the 100-bed limit applicable to such SCHs for 

covered OPD services furnished on or after January 1, 2010, and before January 1, 2012. 

Therefore, for such hospitals, for services furnished before January 1, 2012, when the 

PPS amount is less than the provider’s pre-BBA amount, the amount of payment to the 
CMS-1589-FC 299 

hospital is increased by 85 percent of the amount of the difference between the two 

payments. Effective for services provided on or after January 1, 2012, a rural hospital 

with 100 or fewer beds that is not an SCH and an SCH (including EACHs) are no longer 

eligible for TOPs, in accordance with section 108 of the MMEA. In the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74199), we revised our regulations 

§ 419.70(d) to conform the regulation text to the self-implementing provisions of section 

108 of the MMEA described above. 

Subsequent to the issuance of the CY 2012 OPPS/ASC final rule with comment 

period, section 308 of the Temporary Payroll Tax Cut Continuation Act of CY 2011 

(Pub. L. 112-78), as amended by section 3002 of the Middle Class Tax Relief and Jobs 

Creation Act (Pub. L. 112-96), extended through December 31, 2012, the hold harmless 

provision for a rural hospital with 100 or fewer beds that is not an SCH (as defined in 

section 1886(d)(5)(D)(iii) of the Act). Therefore, for such a hospital, for services 

furnished before January 1, 2013, when the PPS amount is less than the provider’s 

pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the 

difference between the two payments. 

Section 308 of Pub. L. 112-78 also extended through February 29, 2012, the hold 

harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act), 

including an EACH, without the bed size limitation. Therefore, for such hospitals, for 

services furnished before March 1, 2012, when the PPS amount is less than the provider’s 

pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the 

difference between the two payments. However, section 3002 of Pub. L. 112-96 
CMS-1589-FC 300 

extended through December 31, 2012, the hold harmless provision for an SCH (as 

defined in section 1886(d)(5)(D)(iii) of the Act), including an EACH, that has no more 

than 100 beds. Therefore, for such hospitals, for services furnished before 

January 1, 2013, when the PPS amount is less than the provider’s pre-BBA amount, the 

amount of payment is increased by 85 percent of the amount of the difference between 

the two payments. Accordingly, as we proposed in the CY 2013 OPPS/ASC proposed 

rule (77 FR 45108), we are revising § 419.70(d) of the regulations to reflect the TOPs 

extensions and amendments described in section 308 of Pub. L. 112-78 and section 3002 

of Pub. L. 112-96. 

Effective for services provided on or after March 1, 2012, SCHs (including 

EACHs) with greater than 100 beds are no longer eligible for TOPs, in accordance with 

section 308 of Pub. L. 112-78. Effective for services provided on or after 

January 1, 2013, a rural hospital with 100 or fewer beds that is not an SCH and an SCH 

(including an EACH) are no longer eligible for TOPs, in accordance with section 3002 of 

Pub. L. 112-96. 

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

In the CY 2006 OPPS final rule with comment period (70 FR 68556), we 

finalized a payment increase for rural SCHs of 7.1 percent for all services and procedures 

paid under the OPPS, excluding drugs, biologicals, brachytherapy sources, and devices 

paid under the pass-through payment policy in accordance with section 1833(t)(13)(B) of 

the Act, as added by section 411 of Pub. L. 108-173. Section 411 gave the Secretary the 

authority to make an adjustment to OPPS payments for rural hospitals, effective 
CMS-1589-FC 301 

January 1, 2006, if justified by a study of the difference in costs by APC between 

hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in 

costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment 

adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the 

OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, and 

devices paid under the pass-through payment policy, in accordance with section 

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

In CY 2007, we became aware that we did not specifically address whether the 

adjustment applies to EACHs, which are considered to be SCHs under section 

1886(d)(5)(D)(iii)(III) of the Act. Thus, under the statute, EACHs are treated as SCHs. 

Therefore, in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68010 and 

68227), for purposes of receiving this rural adjustment, we revised § 419.43(g) to clarify 

that EACHs are also eligible to receive the rural SCH adjustment, assuming these entities 

otherwise meet the rural adjustment criteria. Currently, three hospitals are classified as 

EACHs, and as of CY 1998, under section 4201(c) of Pub. L. 105-33, a hospital can no 

longer become newly classified as an EACH. 

This adjustment for rural SCHs is budget neutral and applied before calculating 

outlier payments and copayments. We stated in the CY 2006 OPPS final rule with 

comment period (70 FR 68560) that we would not reestablish the adjustment amount on 

an annual basis, but we may review the adjustment in the future and, if appropriate, 

would revise the adjustment. We provided the same 7.1 percent adjustment to rural 

SCHs, including EACHs, again in CYs 2008 through 2012. Further, in the CY 2009 
CMS-1589-FC 302 

OPPS/ASC final rule with comment period (73 FR 68590), we updated the regulations at 

§ 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by 

application of a hospital-specific CCR are excluded from the 7.1 percent payment 

adjustment. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45109), we proposed to 

continue for CY 2013 our policy of a budget neutral 7.1 percent payment adjustment for 

rural SCHs, including EACHs, for all services and procedures paid under the OPPS, 

excluding separately payable drugs and biologicals, devices paid under the pass-through 

payment policy, and items paid at charges reduced to costs. We indicated in the proposed 

rule that we intend to reassess the 7.1 percent adjustment in the future by examining 

differences between urban hospitals’ costs and rural hospitals’ costs using updated claims 

data, cost reports, and provider information. 

Comment: Several commenters expressed support for the proposed continuation 

of the 7.1 percent rural SCH adjustment. A few commenters also suggested that the rural 

SCH adjustment also apply to urban SCHs. One commenter suggested that the 7.1 

percent payment adjustment also be applied to MDHs, given that their inpatient 

classification was set to expire in October 2012. 

Response: We agree that it is appropriate to continue the 7.1 percent adjustment 

for rural SCHs (including EACHs) as we proposed for CY 2013. We note that the rural 

SCH adjustment was developed under the authority described in section 1833(t)(13) of 

the Act, which applies specifically to rural hospitals. Although commenters have 

suggested that the rural SCH adjustment also apply to urban SCHs, the study authorized 
CMS-1589-FC 303 

under section 1833(t)(13)(A) of the Act specifically focuses on APC costs incurred by 

rural hospitals, as they exceed those costs incurred by hospitals in urban areas. 

Moreover, the Secretary’s authority to make an adjustment based on that study was with 

respect to a determination that costs incurred by rural hospitals exceed those costs 

incurred by urban hospitals and to reflect those higher costs. Therefore, the authority to 

make any such adjustment was limited to reflect the higher costs incurred by such 

applicable rural hospitals. Although the MDH classification is currently set to expire, we 

note that the definition of a MDH at 1886(d)(5)(G)(iv)(III) of the Act specifically 

excludes sole community hospitals, to which the rural adjustment applies. Further, as we 

discussed in the CY 2006 OPPS final rule, our analysis of urban SCHs as well as rural 

MDHs did not support the application of a rural adjustment (70 FR 68560 through 

68561). 

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

CY 2013 proposal, without modification, to apply the 7.1 percent payment adjustment to 

rural SCHs, including EACHs, for all services and procedures paid under the OPPS in 

CY 2013, excluding separately payable drugs and biologicals, devices paid under the 

pass-through payment policy, and items paid at charges reduced to costs. We continue to 

believe that the adjustment is appropriate for application in CY 2013. 
CMS-1589-FC 304 

F. 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), Medicare has paid cancer hospitals identified in section 

1886(d)(1)(B)(v) of the Act (cancer hospitals) under the OPPS for covered outpatient 

hospital services. There are 11 cancer hospitals that meet the classification criteria in 

section 1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted from 

payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget 

Refinement Act of 1999, Congress created section 1833(t)(7) of the Act, “Transitional 

Adjustment to Limit Decline in Payment,” to serve as a permanent payment floor by 

limiting cancer hospitals’ potential losses under the OPPS. Through section 

1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full amount of the difference 

between payments for covered outpatient services under the OPPS and a “pre-BBA” 

amount. That is, cancer hospitals are permanently held harmless to their “pre-BBA” 

amount, and they receive TOPs to ensure that they do not receive a payment that is lower 

under the OPPS than the payment they would have received before implementation of the 

OPPS, as set forth in section 1833(t)(7)(F) of the Act. The “pre-BBA” payment amount 

is an amount equal to the product of the reasonable cost of the hospital for covered 

outpatient services for the portions of the hospital’s cost reporting period (or periods) 

occurring in the current year and the base payment-to-cost ratio (PCR) for the hospital. 

The “pre-BBA” amount, including the determination of the base PCR, are defined at 
CMS-1589-FC 305 

42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the Hospital and 

Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-2552-10, 

as applicable) each year. Section 1833(t)(7)(I) of the Act exempts TOPs from budget 

neutrality calculations. 

Section 3138 of the Affordable Care Act amended section 1833(t) of the Act by 

adding a new paragraph (18), which instructs the Secretary to conduct a study to 

determine if, under the OPPS, outpatient costs incurred by cancer hospitals described in 

section 1886(d)(1)(B)(v) of the Act with respect to APC groups exceed the costs incurred 

by other hospitals furnishing services under section 1833(t) of the Act, as determined 

appropriate by the Secretary. In addition, section 3138 of the Affordable Care Act 

requires the Secretary to take into consideration the cost of drugs and biologicals incurred 

by such hospitals when studying cancer hospital costliness. Further, section 3138 of the 

Affordable Care Act provides that if the Secretary determines that cancer hospitals’ costs 

with respect to APC groups are determined to be greater than the costs of other hospitals 

furnishing services under section 1833(t) of the Act, the Secretary shall provide an 

appropriate adjustment under section 1833(t)(2)(E) of the Act to reflect these higher 

costs. After conducting the study required by section 3138, we determined in 2012 that 

outpatient costs incurred by the 11 specified cancer hospitals were greater than the costs 

incurred by other OPPS hospitals. For a complete discussion regarding the cancer 

hospital cost study, we refer readers to the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74200 through 74201). 
CMS-1589-FC 306 

Based on our findings that costs incurred by cancer hospitals were greater than the 

costs incurred by other OPPS hospitals, we finalized a policy to provide a payment 

adjustment to the 11 specified cancer hospitals that reflects the higher outpatient costs as 

discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74202 

through 74206). Specifically, we adopted a policy to provide additional payments to 

each of the 11 cancer hospitals so that each cancer hospital’s final PCR for services 

provided in a given calendar year is equal to the weighted average PCR (which we refer 

to as the “target PCR”) for other hospitals paid under the OPPS. The target PCR is set in 

advance of the calendar year and is calculated using the most recent submitted or settled 

cost report data that are available at the time of final rulemaking for the calendar year. 

The amount of the payment adjustment is made on an aggregate basis at cost report 

settlement. We note that the changes made by section 1833(t)(18) of the Act do not 

affect the existing statutory provisions that provide for TOPs for cancer hospitals. The 

TOPs are assessed as usual after all payments, including the cancer hospital payment 

adjustment, have been made for a cost reporting period. For CY 2012, the target PCR for 

purposes of the cancer hospital payment adjustment is 0.91. 

2. Payment Adjustment for Certain Cancer Hospitals for CY 2013 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45110), we proposed to 

continue our policy to provide additional payments to cancer hospitals so that each cancer 

hospital’s final PCR is equal to the weighted average PCR (or “target PCR”) for the other 

OPPS hospitals using the most recent submitted or settled cost report data that were 

available at the time of the proposed rule. To calculate the proposed CY 2013 target 
CMS-1589-FC 307 

PCR, we used the same extract of cost report data from HCRIS, as discussed in section 

II.A. of the proposed rule, used to estimate costs for the CY 2013 OPPS. Using these 

cost report data, we included data from Worksheet E, Part B, for each hospital, using data 

from each hospital’s most recent cost report, whether as submitted or settled. We 

estimated that, on average, the OPPS payments to other hospitals furnishing services 

under the OPPS were approximately 91 percent of reasonable cost (weighted average 

PCR of 0.91). Based on these data, we proposed a target PCR of 0.91 that would be used 

to determine the CY 2013 cancer hospital payment adjustment that would be paid at cost 

report settlement. Therefore, we proposed that the payment amount associated with the 

cancer hospital payment adjustment to be determined at cost report settlement would be 

the additional payment needed to result in a proposed target PCR equal to 0.91 for each 

cancer hospital. 

Comment: Some commenters suggested that the PCR is only one component of 

the adjustment needed to account for the differences in providing cancer care. The 

commenters suggested that CMS utilize a methodology that they stated would ensure that 

the 11 cancer hospitals’ losses (on a per unit PCR basis) equal the losses (on a per unit 

PCR basis) of the other PPS hospitals. The commenters provided details of this 

“equivalent loss per unit” methodology which they indicate would result in a target PCR 

equal to 0.94 for CY 2013. 

Response: Section 3138 of the Affordable Care Act provides that if the Secretary 

determines under section 1833(t)(18)(A) of the Act that costs incurred by cancer hospitals 

exceed those costs of other hospitals furnishing services under section 1833(t), the 
CMS-1589-FC 308 

Secretary shall provide for an appropriate adjustment under section 1833(t)(2)(E) of the 

Act, to reflect the higher costs. Because the statute requires that we provide a cancer 

hospital payment adjustment to reflect the higher costs, not losses, incurred at cancer 

hospitals, we believe that it would be inappropriate to revise our cancer hospital payment 

adjustment policy so that the target PCR is calculated based on the cancer hospitals’ 

losses per unit PCR compared to the other OPPS hospitals’ losses per unit PCR. 

Comment: Commenters stated that CMS should not recalculate the target PCR 

annually because the cancer hospitals require payment stability and predictability in order 

to provide services to Medicare beneficiaries. 

Response: We believe that annual recalculation of the target PCR will provide a 

timely assessment of the changes in OPPS payments relative to costs and, therefore, will 

enable us to provide payment adjustments to cancer hospitals that are accurate and 

equitable. In addition, it is unlikely that the target PCR (the weighted average PCR for 

the other OPPS hospitals) would fluctuate significantly from year to year. The target 

PCR is 0.91 for purposes of the CY 2012 cancer hospital payment adjustment and 

remained at 0.91 when recalculated for the CY 2013 OPPS/ASC proposed rule and this 

final rule with comment period. In addition to the apparent stability of the target PCR, 

because the target PCR is set in advance of each calendar year, cancer hospitals can 

easily predict the amount of their hospital-specific payment adjustment associated with 

the target PCR for the following year and budget accordingly. 
CMS-1589-FC 309 

Comment: Commenters stated that CMS must make the cancer hospital payment 

adjustment effective for services furnished on or after January 1, 2011, in order to comply 

with section 3138 of the Affordable Care Act. 

Response: As explained in the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 71886 through 71887), we did not finalize the proposed cancer hospital 

adjustment for CY 2011 for a variety of reasons, including, ultimately, a determination 

that further study and deliberation of the issues were necessary. The obligation to provide 

a cancer hospital payment adjustment is triggered only insofar as the Secretary 

determines under section 1833(t)(18)(A) of the Act that costs incurred by hospitals 

described in section 1886(d)(1)(B)(v) of the Act exceed those costs incurred by other 

hospitals furnishing services under that subsection. Several commenters on the CY 2011 

OPPS/ASC proposed rule raised concerns about the agency’s study of costliness 

conducted under section 1833(t)(18)(A) of the Act; for example, one commenter 

suggested that the CMS analysis was inadequate to conclude that costs are higher in 

cancer hospitals and that an adjustment was warranted. Given the uncertainty 

surrounding these issues, public comments arguing against implementing a cancer 

hospital payment adjustment for CY 2011, and our determination that further study and 

deliberation were necessary, we decided to not finalize a cancer hospital payment 

adjustment for CY 2011. We note that, because the cancer hospital payment adjustment 

is budget neutral, the lack of a cancer hospital payment adjustment for CY 2011 also 

meant that other payments were not reduced for CY 2011 to offset the increased 

payments from the adjustment. 
CMS-1589-FC 310 

Comment: One commenter noted that, although CMS indicated the estimated 

percent by which each cancer hospital’s OPPS payments would be increased under the 

cancer hospital payment adjustment policy in the CY 2012 OPPS/ASC proposed and 

final rules, CMS did not include this information in the CY 2013 OPPS/ASC proposed 

rule. The commenter requested that CMS include this information in the CY 2013 

OPPS/ASC final rule with comment period. 

Response: We agree with the commenter that it would be informative to provide 

the estimated percentage increase in CY 2013 OPPS payments to each cancer hospital 

due to the cancer hospital payment adjustment policy. Therefore, we are including that 

information in the last column of Table 9 below. 

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

proposal to continue our policy to provide additional payments to cancer hospitals so that 

each cancer hospital’s final PCR is equal to the weighted average PCR for the other 

OPPS hospitals using the most recent submitted or settled cost report data that were 

available at the time of this final rule with comment period. To calculate the final 

CY 2013 target PCR, we used the same extract of cost report data from HCRIS, as 

discussed in section II.A. of this final rule with comment period, used to estimate costs 

for the CY 2013 OPPS. Using these cost report data, we included data from Worksheet 

E, Part B, for each hospital, using data from each hospital’s most recent cost report, 

whether as submitted or settled. We then limited the dataset to the hospitals with 

CY 2011 claims data that we used to model the impact of the final CY 2013 APC relative 

weights (4,026 hospitals) because it is appropriate to use the same set of hospitals that we 
CMS-1589-FC 311 

are using to calibrate the modeled CY 2013 OPPS. The cost report data for the hospitals 

in this dataset were from cost report periods with fiscal year ends ranging from 2010 to 

2011. We then removed the cost report data of the 48 hospitals located in Puerto Rico 

from our dataset because we do not believe that their cost structure reflects the costs of 

most hospitals paid under the OPPS and, therefore, their inclusion may bias the 

calculation of hospital-weighted statistics. We also removed the cost report data of 182 

hospitals because the cost report data that were not complete (missing aggregate OPPS 

payments, missing aggregate cost data, or missing both), so that all cost reports in the 

study would have both the payment and cost data necessary to calculate a PCR for each 

hospital, leading to an analytic file of 3,796 hospitals with cost report data. 

Using this smaller dataset of cost report data, we estimated that, on average, the 

OPPS payments to other hospitals furnishing services under the OPPS are approximately 

91 percent of reasonable cost (weighted average PCR of 0.91). Based on these data, we 

will use a target PCR of 0.91 to determine the CY 2013 cancer hospital payment 

adjustment to be paid at cost report settlement. Therefore, the payment amount 

associated with the cancer hospital payment adjustment to be determined at cost report 

settlement will be the additional payment needed to result in a PCR equal to 0.91 for each 

cancer hospital. 

Table 9 below indicates the estimated percentage increase in OPPS payments to 

each cancer hospital for CY 2013 due to the cancer hospital payment adjustment policy. 

The actual amount of the CY 2013 cancer hospital payment adjustment for each cancer 

hospital will be determined at cost report settlement and will depend on each hospital’s 
CMS-1589-FC 312 

CY 2013 payments and costs. We note that the changes made by section 1833(t)(18) of 

the Act do not affect the existing statutory provisions that provide for TOPs for cancer 

hospitals. The TOPs will be assessed as usual after all payments, including the cancer 

hospital payment adjustment, have been made for a cost reporting period. 
CMS-1589-FC 313 

TABLE 9.—ESTIMATED CY 2013 HOSPITAL-SPECIFIC PAYMENT 

ADJUSTMENT FOR CANCER HOSPITALS (WITHOUT REGARD TO TOPS) 

TO BE PROVIDED AT COST REPORT SETTLEMENT 

Provider 

Number Hospital Name 

Estimated 

Percentage 

Increase in 

OPPS Payments 

for CY 2013 

050146 City of Hope Helford Clinical Research Hospital 15.8% 

050660 USC Kenneth Norris Jr. Cancer Hospital 32.8% 

100079 University of Miami Hospital & Clinic 28.2% 

100271 H. Lee Moffitt Cancer Center & Research Institute 21.2% 

220162 Dana-Farber Cancer Institute 44.9% 

330154 Memorial Hospital for Cancer and Allied Diseases 39.5% 

330354 Roswell Park Cancer Institute 30.7% 

360242 James Cancer Hospital & Solove Research Institute 33.7% 

390196 Hospital of the Fox Chase Cancer Center 10.0% 

450076 University of Texas M. D. Anderson Cancer Center 42.0% 

500138 Seattle Cancer Care Alliance 44.7% 

G. Hospital Outpatient Outlier Payments

1. Background 

Currently, the OPPS provides outlier payments on a service-by-service basis. In 

CY 2011, the outlier threshold was determined to be met when the cost of furnishing a 

service or procedure by a hospital exceeds 1.75 times the APC payment amount and 

exceeds the APC payment rate plus a $2,025 fixed-dollar threshold. We introduced a 

fixed-dollar threshold in CY 2005, in addition to the traditional multiple threshold, in 

order to better target outlier payments to those high-cost and complex procedures where a 

very costly service could present a hospital with significant financial loss. If the cost of a 
CMS-1589-FC 314 

service meets both of these conditions, the multiple threshold and the fixed-dollar 

threshold, the outlier payment is calculated as 50 percent of the amount by which the cost 

of furnishing the service exceeds 1.75 times the APC payment rate. Before CY 2009, this 

outlier payment had historically been considered a final payment by longstanding OPPS 

policy. However, we implemented a reconciliation process similar to the IPPS outlier 

reconciliation process for cost reports with cost reporting periods beginning on or after 

January 1, 2009, in our CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68594 through 68599). 

It has been our policy for the past several years to report the actual amount of 

outlier payments as a percent of total spending in the claims being used to model the 

proposed OPPS. Our current estimate of total outlier payments as a percent of total 

CY 2011 OPPS payment, using available CY 2011 claims and the revised OPPS 

expenditure estimate for the 2012 Trustee’s Report, is approximately 1.2 percent of the 

total aggregated OPPS payments. Therefore, for CY 2011, we estimate that we paid 

0.2 percent above the CY 2011 outlier target of 1.0 percent of total aggregated OPPS 

payments. 

As explained in the CY 2012 OPPS/ASC final rule with comment period 

(77 FR 74207 through 74209), we set our projected target for aggregate outlier payments 

at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2012. 

The outlier thresholds were set so that estimated CY 2012 aggregate outlier payments 

would equal 1.0 percent of the total estimated aggregate payments under the OPPS. 

Using CY 2011 claims data and CY 2012 payment rates, we currently estimate that the 
CMS-1589-FC 315 

aggregate outlier payments for CY 2012 will be approximately 0.9 percent of the total 

CY 2012 OPPS payments. The difference between 1.0 percent and 0.9 percent is 

reflected in the regulatory impact analysis in section XXII. of this final rule with 

comment period. We note that we provide estimated CY 2013 outlier payments for 

hospitals and CMHCs with claims included in the claims data that we used to model 

impacts in the Hospital–Specific Impacts - Provider-Specific Data file on the CMS Web 

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

2. Proposed Outlier Calculation 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45110), we proposed to 

continue for CY 2013 our policy of estimating outlier payments to be 1.0 percent of the 

estimated aggregate total payments under the OPPS for outlier payments. We proposed 

that a portion of that 1.0 percent, an amount equal to 0.12 percent of outlier payments (or 

0.0012 percent of total OPPS payments) would be allocated to CMHCs for PHP outlier 

payments. This is the amount of estimated outlier payments that would result from the 

proposed CMHC outlier threshold as a proportion of total estimated OPPS outlier 

payments. As discussed in section VIII.C. of the CY 2013 OPPS/ASC proposed rule, for 

CMHCs, we proposed to continue our longstanding policy that if a CMHC’s cost for 

partial hospitalization services, paid under either APC 0172 (Level I Partial 

Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial Hospitalization (4 

or more services) for CMHCs), exceeds 3.40 times the payment rate for APC 0173, the 

outlier payment would be calculated as 50 percent of the amount by which the cost 
CMS-1589-FC 316 

exceeds 3.40 times the APC 0173 payment rate. For further discussion of CMHC outlier 

payments, we refer readers to section VIII.C. of this final rule with comment period. 

To ensure that the estimated CY 2013 aggregate outlier payments would equal 

1.0 percent of estimated aggregate total payments under the OPPS, we proposed that the 

hospital outlier threshold be set so that outlier payments would be triggered when the cost 

of furnishing a service or procedure by a hospital exceeds 1.75 times the APC payment 

amount and exceeds the APC payment rate plus a $2,400 fixed-dollar threshold. 

We proposed to calculate the fixed-dollar threshold using largely the same 

methodology as we did in CYs 2011 and 2012 (75 FR 71887 through 71889 and 

76 FR 74207 through 74209). For purposes of estimating outlier payments for the 

proposed rule, we used the hospital-specific overall ancillary CCRs available in the 

April 2012 update to the Outpatient Provider-Specific File (OPSF). The OPSF contains 

provider-specific data, such as the most current CCR, which are maintained by the 

Medicare contractors and used by the OPPS Pricer to pay claims. The claims that we use 

to model each OPPS update lag by 2 years. 

In order to estimate the CY 2013 hospital outlier payments for the proposed rule, 

we inflated the charges on the CY 2011 claims using the same inflation factor of 1.1406 

that we used to estimate the IPPS fixed-dollar outlier threshold for the FY 2013 

IPPS/LTCH PPS proposed rule (77 FR 28142). We used an inflation factor of 1.0680 to 

estimate CY 2012 charges from the CY 2011 charges reported on CY 2011 claims. The 

methodology for determining this charge inflation factor is discussed in the FY 2013 

IPPS/LTCH PPS proposed rule (77 FR 28142). As we stated in the CY 2005 OPPS final 
CMS-1589-FC 317 

rule with comment period (69 FR 65845), we believe that the use of these charge 

inflation factors are appropriate for the OPPS because, with the exception of the inpatient 

routine service cost centers, hospitals use the same ancillary and outpatient cost centers to 

capture costs and charges for inpatient and outpatient services. 

As noted in the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 68011), we are concerned that we could systematically overestimate the OPPS 

hospital outlier threshold if we did not apply a CCR inflation adjustment factor. 

Therefore, we proposed in the CY 2013 OPPS/ASC proposed rule to apply the same 

CCR inflation adjustment factor that we applied for the FY 2013 IPPS outlier calculation 

to the CCRs used to simulate the CY 2013 OPPS outlier payments to determine the 

fixed-dollar threshold. Specifically, for CY 2013, we proposed to apply an adjustment 

factor of 0.9790 to the CCRs that were in the April 2012 OPSF to trend them forward 

from CY 2012 to CY 2013. The methodology for calculating this proposed adjustment 

was discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142 through 

28144). We note that, due to the issue described in the IPPS proposed rule correction 

notice published on June 11, 2012, the operating and capital CCR inflation factors were 

reversed (77 FR 34326). In estimating the proposed CY 2013 OPPS fixed-dollar outlier 

threshold, we applied the corrected CCR inflation factor. 

Therefore, to model hospital outlier payments for the proposed rule, we applied 

the overall CCRs from the April 2012 OPSF file after adjustment (using the proposed 

CCR inflation adjustment factor of 0.9790 to approximate CY 2013 CCRs) to charges on 

CY 2011 claims that were adjusted (using the charge inflation factor of 1.1406 to 
CMS-1589-FC 318 

approximate CY 2013 charges). We simulated aggregated CY 2013 hospital outlier 

payments using these costs for several different fixed-dollar thresholds, holding the 

1.75 multiple threshold constant and assuming that outlier payments would continue to be 

made at 50 percent of the amount by which the cost of furnishing the service would 

exceed 1.75 times the APC payment amount, until the total outlier payments equaled 

1.0 percent of aggregated estimated total CY 2013 OPPS payments. We estimated that a 

proposed fixed-dollar threshold of $2,400, combined with the multiple threshold of 1.75 

times the APC payment rate, would allocate 1.0 percent of aggregated total OPPS 

payments to outlier payments. We proposed to continue to make an outlier payment that 

equals 50 percent of the amount by which the cost of furnishing the service exceeds 

1.75 times the APC payment amount when both the 1.75 multiple threshold and the 

proposed fixed-dollar threshold of $2,400 were met. For CMHCs, we proposed that, if a 

CMHC’s cost for partial hospitalization services, paid under either APC 0172 or APC 

0173, exceeds 3.40 times the payment rate for APC 0173, the outlier payment would be 

calculated as 50 percent of the amount by which the cost exceeds 3.40 times the APC 

0173 payment rate. 

Section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under 

section 1886(d)(1)(B) of the Act, requires that hospitals that fail to report data required 

for the quality measures selected by the Secretary, in the form and manner required by 

the Secretary under 1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to 

their OPD fee schedule increase factor, that is, the annual payment update factor. The 

application of a reduced OPD fee schedule increase factor results in reduced national 
CMS-1589-FC 319 

unadjusted payment rates that will apply to certain outpatient items and services 

furnished by hospitals that are required to report outpatient quality data and that fail to 

meet the Hospital OQR Program requirements. For hospitals that fail to meet the 

Hospital OQR Program requirements, we proposed to continue the policy that we 

implemented in CY 2010 that the hospitals' costs will be compared to the reduced 

payments for purposes of outlier eligibility and payment calculation. For more 

information on the Hospital OQR Program, we refer readers to section XV. of this final 

rule with comment period. 

Comment: Several commenters expressed concern with respect to the relative 

increase in the proposed CY 2013 OPPS fixed-dollar outlier threshold of $2,400. The 

commenters believed that the increase in the fixed-dollar threshold would bring about a 

drastic reduction in outlier payments as well as the ability to furnish services to 

beneficiaries. Commenters also suggested CMS to reconsider the fixed-dollar threshold 

value, confirm that the data used to develop the threshold were accurate, and provide data 

to support the increase in the threshold. Commenters also suggested alternative fixeddollar threshold setting methodologies such as a 3-year transition to the threshold or a 

calculation based on prior year estimated percent OPPS outlier spending. 

Response: As indicated above, we introduced a fixed-dollar threshold in order to 

better target outlier payments to those high-cost and complex procedures where a very 

costly service could present a hospital with significant financial loss. We maintain the 

target outlier percentage of 1.0 percent of estimated aggregate total payment under the 

OPPS and have a fixed-dollar threshold so that OPPS outlier payments are made only 
CMS-1589-FC 320 

when the hospital would experience a significant loss for supplying a particular service. 

While commenters have expressed concern based on the assumption that OPPS outlier 

payments made under an increased fixed-dollar threshold would decrease, we note that 

the threshold may increase or decrease from year to year, to maintain the 1.0 percent 

outlier spending target. While we described issues related to the charge and CCR 

inflation factors in the CY 2013 OPPS/ASC proposed rule, there were no other errors in 

the methodology (77 FR 45111). The methodology for determining the OPPS 

fixed-dollar threshold is described in this section, the LDS files used to model the 

threshold that are available for public purchase, and a detailed claims accounting 

document that is available online, which all support the determination of the fixed-dollar 

threshold. We do not believe that a transitional methodology to determine the outlier 

threshold or a methodology that takes into account prior spending is appropriate because 

the relationship between a hospital’s costs and the APC payment rates changes each year. 

3. Final Outlier Calculation 

Consistent with historical practice, we use updated data for this final rule with 

comment period for our outlier calculation. For CY 2013, we are applying the overall 

CCRs from the July 2012 OPSF with a CCR adjustment factor of 0.9880 to approximate 

CY 2013 CCRs to charges on the final CY 2011 claims that were adjusted to approximate 

CY 2013 charges (using the final 2-year charge inflation factor of 1.0894). These are the 

same CCR adjustment and charge inflation factors that were used to set the IPPS fixeddollar threshold for the FY 2013 IPPS/LTCH PPS final rule (77 FR 53695 through 

53696). We simulated aggregated CY 2013 hospital outlier payments using these costs 
CMS-1589-FC 321 

for several different fixed-dollar thresholds, holding the 1.75 multiple threshold constant 

and assuming that outlier payment would continue to be made at 50 percent of the 

amount by which the cost of furnishing the service would exceed 1.75 times the APC 

payment amount, until the total outlier payments equaled 1.0 percent of aggregated 

estimated total CY 2013 OPPS payments. We estimate that a fixed-dollar threshold of 

$2,025, combined with the multiple threshold of 1.75 times the APC payment rate, will 

allocate 1.0 percent of estimated aggregated total OPPS payments to outlier payments. 

In summary, for CY 2013, we will continue to make an outlier payment that 

equals 50 percent of the amount by which the cost of furnishing the service exceeds 1.75 

times the APC payment amount when both the 1.75 multiple threshold and the final 

fixed-dollar threshold of $2,025 are met. For CMHCs, if a CMHC’s cost for partial 

hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times 

the payment rate for APC 0173, the outlier payment is calculated as 50 percent of the 

amount by which the cost exceeds 3.40 times the APC 0173 payment rate. We estimate 

that this threshold will allocate 0.12 percent of outlier payments to CMHCs for PHP 

outlier payments. 

4. Outlier Reconciliation 

In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 68599), we 

adopted as final policy a process to reconcile hospital or CMHC outlier payments at cost 

report settlement for services furnished during cost reporting periods beginning in 

CY 2009. OPPS outlier reconciliation more fully ensures accurate outlier payments for 

those facilities that have CCRs that fluctuate significantly relative to the CCRs of other 
CMS-1589-FC 322 

facilities, and that receive a significant amount of outlier payments (73 FR 68598). As 

under the IPPS, we do not adjust the fixed-dollar threshold or the amount of total OPPS 

payments set aside for outlier payments for reconciliation activity because such action 

would be contrary to the prospective nature of the system. Our outlier threshold 

calculation assumes that overall ancillary CCRs accurately estimate hospital costs based 

on the information available to us at the time we set the prospective fixed-dollar outlier 

threshold. For these reasons, and as we have previously discussed in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68596), and as we proposed for 

CY 2013, we are not incorporating any assumptions about the effects of reconciliation 

into our calculation of the OPPS fixed-dollar outlier threshold in this final rule with 

comment period. 
CMS-1589-FC 323 

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

Medicare Payment

The basic methodology for determining prospective payment rates for HOPD 

services under the OPPS is set forth in existing regulations at 42 CFR Part 419, subparts 

C and D. For this final rule with comment period, the payment rate for most services and 

procedures for which payment is made under the OPPS is the product of the conversion 

factor calculated in accordance with section II.B. of this final rule with comment period 

and the relative payment weight determined under section II.A. of this final rule with 

comment period. Therefore, the national unadjusted payment rate for most APCs 

contained in Addendum A to this final rule with comment period (which is available via 

the Internet on the CMS Web site) and for most HCPCS codes to which separate payment 

under the OPPS has been assigned in Addendum B to this final rule with comment period 

(which is available via the Internet on the CMS Web site) was calculated by multiplying 

the CY 2013 scaled weight for the APC by the CY 2013 conversion factor. 

We note that section 1833(t)(17) of the Act, which applies to hospitals as defined 

under section 1886(d)(1)(B) of the Act, requires that hospitals that fail to submit data 

required to be submitted on quality measures selected by the Secretary, in the form and 

manner and at a time specified by the Secretary, incur a reduction of 2.0 percentage 

points to their OPD fee schedule increase factor, that is, the annual payment update 

factor. The application of a reduced OPD fee schedule increase factor results in reduced 

national unadjusted payment rates that apply to certain outpatient items and services 

provided by hospitals that are required to report outpatient quality data and that fail to 
CMS-1589-FC 324 

meet the Hospital OQR Program (formerly referred to as the Hospital Outpatient Quality 

Data Reporting Program (HOP QDRP)) requirements. For further discussion of the 

payment reduction for hospitals that fail to meet the requirements of the Hospital OQR 

Program, we refer readers to section XV. of this final rule with comment period. 

We demonstrate in the steps below how to determine the APC payments that will 

be made in a calendar year under the OPPS to a hospital that fulfills the Hospital OQR 

Program requirements and to a hospital that fails to meet the Hospital OQR Program 

requirements for a service that has any of the following status indicator assignments: 

“P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “U,” “V,” or “X” (as defined in Addendum D1 to 

this final rule with comment period), in a circumstance in which the multiple procedure 

discount does not apply, the procedure is not bilateral, and conditionally packaged 

services (status indicator of “Q1” and “Q2”) qualify for separate payment. We note that, 

although blood and blood products with status indicator “R” and brachytherapy sources 

with status indicator “U” are not subject to wage adjustment, they are subject to reduced 

payments when a hospital fails to meet the Hospital OQR Program requirements. 

We did not receive any public comments on the proposed calculation of an 

adjusted Medicare payment. Therefore, we are finalizing the calculation of an adjusted 

Medicare payment, where appropriate, in the manner described as follows. Individual 

providers interested in calculating the payment amount that they will receive for a 

specific service from the national unadjusted payment rates presented in Addenda A and 

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

Web site) should follow the formulas presented in the following steps. For purposes of 
CMS-1589-FC 325 

the payment calculations below, we refer to the national unadjusted payment rate for 

hospitals that meet the requirements of the Hospital OQR Program as the “full” national 

unadjusted payment rate. We refer to the national unadjusted payment rate for hospitals 

that fail to meet the requirements of the Hospital OQR Program as the “reduced” national 

unadjusted payment rate. The reduced national unadjusted payment rate is calculated by 

multiplying the reporting ratio of 0.980 times the “full” national unadjusted payment rate. 

The national unadjusted payment rate used in the calculations below is either the full 

national unadjusted payment rate or the reduced national unadjusted payment rate, 

depending on whether the hospital met its Hospital OQR Program requirements in order 

to receive the full CY 2013 OPPS fee schedule increase factor of 1.8 percent. 

Step 1. Calculate 60 percent (the labor-related portion) of the national unadjusted 

payment rate. Since the initial implementation of the OPPS, we have used 60 percent to 

represent our estimate of that portion of costs attributable, on average, to labor. We refer 

readers to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 through 

18497) for a detailed discussion of how we derived this percentage. We confirmed that 

this labor-related share for hospital outpatient services is appropriate during our 

regression analysis for the payment adjustment for rural hospitals in the CY 2006 OPPS 

final rule with comment period (70 FR 68553). 

The formula below is a mathematical representation of Step 1 and identifies the 

labor-related portion of a specific payment rate for a specific service. 

X is the labor-related portion of the national unadjusted payment rate. 

X = .60 * (national unadjusted payment rate) 
CMS-1589-FC 326 

Step 2. Determine the wage index area in which the hospital is located and 

identify the wage index level that applies to the specific hospital. The wage index values 

assigned to each area reflect the geographic statistical areas (which are based upon OMB 

standards) to which hospitals are assigned for FY 2013 under the IPPS, reclassifications 

through the MGCRB, section 1886(d)(8)(B) “Lugar” hospitals, reclassifications under 

section 1886(d)(8)(E) of the Act, as defined in § 412.103 of the regulations, and hospitals 

designated as urban under section 601(g) of Pub. L. 98-21. We note that the 

reclassifications of hospitals under section 508 of Pub. L. 108-173, as extended by 

sections 3137 and 10317 of the Affordable Care Act, expired on September 30, 2010. 

Section 102 of the Medicare and Medicaid Extenders Act of 2010 extended section 508 

and certain additional special exception hospital reclassifications from October 1, 2010 

through September 30, 2011. Section 302 of the Temporary Payroll Tax Cut 

Continuation Act of 2011 (Pub. L. 112-78) as amended by section 3001 of the Middle 

Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96) extended section 508 

and certain additional special exception hospital reclassifications from October 1, 2011 

through March 31, 2012. Therefore, these reclassifications will not apply to the CY 2013 

OPPS. (For further discussion of the changes to the FY 2013 IPPS wage indices, as 

applied to the CY 2013 OPPS, we refer readers to section II.C. of this final rule with 

comment period). We proposed to continue to apply a wage index floor of 1.00 to 

frontier States, in accordance with section 10324 of the Affordable Care Act. 

Step 3. Adjust the wage index of hospitals located in certain qualifying counties 

that have a relatively high percentage of hospital employees who reside in the county, but 
CMS-1589-FC 327 

who work in a different county with a higher wage index, in accordance with section 505 

of Pub. L. 108-173. Addendum L to this final rule with comment period (which is 

available via the Internet on the CMS Web site) contains the qualifying counties and the 

associated wage index increase developed for the FY 2013 IPPS and listed as Table 4J in 

the FY 2013 IPPS/LTCH PPS final rule and available via the Internet on the CMS Web 

site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html. This step is to be followed only if the hospital is 

not reclassified or redesignated under section 1886(d)(8) or section 1886(d)(10) of the 

Act. 

Step 4. Multiply the applicable wage index determined under Steps 2 and 3 by 

the amount determined under Step 1 that represents the labor-related portion of the 

national unadjusted payment rate. 

The formula below is a mathematical representation of Step 4 and adjusts the 

labor-related portion of the national unadjusted payment rate for the specific service by 

the wage index. 

Xa

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

Xa = .60 * (national unadjusted payment rate) * applicable wage index. 

Step 5. Calculate 40 percent (the nonlabor-related portion) of the national 

unadjusted payment rate and add that amount to the resulting product of Step 4. The 

result is the wage index adjusted payment rate for the relevant wage index area.
CMS-1589-FC 328 

The formula below is a mathematical representation of Step 5 and calculates the 

remaining portion of the national payment rate, the amount not attributable to labor, and 

the adjusted payment for the specific service.

Y is the nonlabor-related portion of the national unadjusted payment rate. 

Y = .40 * (national unadjusted payment rate) 

Adjusted Medicare Payment = Y + Xa 

Step 6. If a provider is an SCH, set forth in the regulations at § 412.92, or an 

EACH, which is considered to be an SCH under section 1886(d)(5)(D)(iii)(III) of the 

Act, and located in a rural area, as defined in § 412.64(b), or is treated as being located in 

a rural area under § 412.103, multiply the wage index adjusted payment rate by 1.071 to 

calculate the total payment. 

The formula below is a mathematical representation of Step 6 and applies the 

rural adjustment for rural SCHs. 

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 1.071 

We have provided examples below of the calculation of both the full and reduced 

national unadjusted payment rates that will apply to certain outpatient items and services 

performed by hospitals that meet and that fail to meet the Hospital OQR Program 

requirements, using the steps outlined above. For purposes of this example, we used a 

provider that is located in Brooklyn, New York that is assigned to CBSA 35644. This 

provider bills one service that is assigned to APC 0019 (Level I Excision/Biopsy). The 

CY 2013 full national unadjusted payment rate for APC 0019 is $336.38. The reduced 

national unadjusted payment rate for a hospital that fails to meet the Hospital OQR 
CMS-1589-FC 329 

Program requirements is $329.65. This reduced rate is calculated by multiplying the 

reporting ratio of 0.980 by the full unadjusted payment rate for APC 0019. 

The FY 2013 wage index for a provider located in CBSA 35644 in New York is 

1.2971. The labor-related portion of the full national unadjusted payment is $261.79 

(.60 * $336.38 * 1.2971). The labor-related portion of the reduced national unadjusted 

payment is $256.55 (.60 * $329.65 * 1.2971). The nonlabor-related portion of the full 

national unadjusted payment is $134.55 (.40 * $336.38). The nonlabor-related portion of 

the reduced national unadjusted payment is $131.86 (.40 * $329.65). The sum of the 

labor-related and nonlabor-related portions of the full national adjusted payment is 

$396.34 ($261.79 + $134.55). The sum of the reduced national adjusted payment is 

$388.41 ($256.55 + $131.86). 

I. Beneficiary Copayments

1. Background 

Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining 

the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. 

Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national 

unadjusted copayment amount for a covered OPD service (or group of such services) 

furnished in a year in a manner so that the effective copayment rate (determined on a 

national unadjusted basis) for that service in the year does not exceed a specified 

percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 

copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in 

calendar years thereafter, shall not exceed 40 percent of the APC payment rate. 
CMS-1589-FC 330 

Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered OPD service (or 

group of such services) furnished in a year, the national unadjusted copayment amount 

cannot be less than 20 percent of the OPD fee schedule amount. However, section 

1833(t)(8)(C)(i) of the Act limits the amount of beneficiary copayment that may be 

collected to the amount of the inpatient deductible. 

Section 4104 of the Affordable Care Act eliminated the Part B coinsurance for 

preventive services furnished on and after January 1, 2011, that meet certain 

requirements, including flexible sigmoidoscopies and screening colonscopies, and waived 

the Part B deductible for screening colonoscopies that become diagnostic during the 

procedure. Our discussion of the changes made by the Affordable Care Act with regard 

to copayments for preventive services furnished on and after January 1, 2011, may be 

found in section XII.B. of the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72013). 

2. OPPS Copayment Policy 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45113), we proposed to 

determine copayment amounts for new and revised APCs using the same methodology 

that we implemented beginning in CY 2004. (We refer readers to the November 7, 2003 

OPPS final rule with comment period (68 FR 63458).) In addition, we proposed to use 

the same standard rounding principles that we have historically used in instances where 

the application of our standard copayment methodology would result in a copayment 

amount that is less than 20 percent and cannot be rounded, under standard rounding 

principles, to 20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with 
CMS-1589-FC 331 

comment period (72 FR 66687) in which we discuss our rationale for applying these 

rounding principles.) The national unadjusted copayment amounts for services payable 

under the OPPS that will be effective January 1, 2013, are shown in Addenda A and B to 

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

Web site). As discussed in section XV. of this final rule with comment period, for 

CY 2013, the Medicare beneficiary’s minimum unadjusted copayment and national 

unadjusted copayment for a service to which a reduced national unadjusted payment rate 

applies equals the product of the reporting ratio and the national unadjusted copayment, 

or the product of the reporting ratio and the minimum unadjusted copayment, 

respectively, for the service. 

We note that APC copayments may increase or decrease each year based on 

changes in the calculated APC payment rates due to updated cost report and claims data, 

and any changes to the OPPS cost modeling process. The CY 2013 proposed policy to 

base APC relative weights on geometric mean costs would also affect the APC payment 

rates and, through them, the corresponding beneficiary copayments. However, as 

described in the CY 2004 OPPS/ASC final rule with comment period, the development of 

the copayment methodology generally moves beneficiary copayments closer to 20 

percent of OPPS APC payments (68 FR 63458 through 63459). For a more detailed 

discussion of the final policy to base the APC relative payment weights on geometric 

mean costs, we refer readers to section II.A.2.f. of this final rule with comment period. 

We did not receive any public comments regarding the proposed methodology for 

calculating copayments for CY 2013. Therefore, for the reasons set forth in the proposed 
CMS-1589-FC 332 

rule (77 FR 45113), we are finalizing our CY 2013 copayment methodology without 

modification. 

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

Individuals interested in calculating the national copayment liability for a 

Medicare beneficiary for a given service provided by a hospital that met or failed to meet 

its Hospital OQR Program requirements should follow the formulas presented in the 

following steps. 

Step 1. Calculate the beneficiary payment percentage for the APC by dividing the 

APC’s national unadjusted copayment by its payment rate. For example, using 

APC 0019, $67.28 is 20 percent of the full national unadjusted payment rate of $336.38. 

For APCs with only a minimum unadjusted copayment in Addenda A and B of this final 

rule with comment period (which are available via the Internet on the CMS Web site), the 

beneficiary payment percentage is 20 percent. 

The formula below is a mathematical representation of Step 1 and calculates 

national copayment as a percentage of national payment for a given service. 

B is the beneficiary payment percentage. 

B = National unadjusted copayment for APC/national unadjusted payment rate for APC 

Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the 

provider in question, as indicated in Steps 2 through 4 under section II.H. of this final 

rule with comment period. Calculate the rural adjustment for eligible providers as 

indicated in Step 6 under section II.H. of this final rule with comment period. 
CMS-1589-FC 333 

Step 3. Multiply the percentage calculated in Step 1 by the payment rate 

calculated in Step 2. The result is the wage-adjusted copayment amount for the APC. 

The formula below is a mathematical representation of Step 3 and applies the 

beneficiary payment percentage to the adjusted payment rate for a service calculated 

under section II.H. of this final rule with comment period, with and without the rural 

adjustment, to calculate the adjusted beneficiary copayment for a given service. 

Wage-adjusted copayment amount for the APC = Adjusted Medicare 

Payment * B 

Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted 

Medicare Payment * 1.071) * B

Step 4. For a hospital that failed to meet its Hospital OQR Program requirements, 

multiply the copayment calculated in Step 3 by the reporting ratio of 0.980. 

The unadjusted copayments for services payable under the OPPS that will be 

effective January 1, 2013, are shown in Addenda A and B to this final rule with comment 

period (which are available via the Internet on the CMS Web site). We note that the 

national unadjusted payment rates and copayment rates shown in Addenda A and B to 

this final rule with comment period reflect the full CY 2013 OPD fee schedule increase 

factor discussed in section II.B. of this final rule with comment period. 

Also, as noted above, section 1833(t)(8)(C)(i) of the Act limits the amount of 

beneficiary copayment that may be collected to the amount of the inpatient deductible. 
CMS-1589-FC 334 

III. OPPS Ambulatory Payment Classification (APC) Group Policies 

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

CPT and Level II HCPCS codes are used to report procedures, services, items, 

and supplies under the hospital OPPS. Specifically, CMS recognizes the following codes 

on OPPS claims: 

● Category I CPT codes, which describe surgical procedures and medical 

services; 

● Category III CPT codes, which describe new and emerging technologies, 

services, and procedures; and 

● Level II HCPCS codes, which are used primarily to identify products, supplies, 

temporary procedures, and services not described by CPT codes. 

CPT codes are established by the American Medical Association (AMA) and the 

Level II HCPCS codes are established by the CMS HCPCS Workgroup. These codes are 

updated and changed throughout the year. CPT and HCPCS code changes that affect the 

OPPS are published both through the annual rulemaking cycle and through the OPPS 

quarterly update Change Requests (CRs). CMS releases new Level II HCPCS codes to 

the public or recognizes the release of new CPT codes by the AMA and makes these 

codes effective (that is, the codes can be reported on Medicare claims) outside of the 

formal rulemaking process via OPPS quarterly update CRs. This quarterly process offers 

hospitals access to codes that may more accurately describe items or services furnished 

and/or provides payment or more accurate payment for these items or services in a 

timelier manner than if CMS waited for the annual rulemaking process. We solicit public 
CMS-1589-FC 335 

comments on these new codes and finalize our proposals related to these codes through 

our annual rulemaking process. As we proposed in the CY 2013 OPPS/ASC proposed 

(77 FR 45114), in Table 10 below (Table 13 of the proposed rule), we summarize our 

process for updating codes through our OPPS quarterly update CRs, seeking public 

comments, and finalizing their treatment under the OPPS. We note that because the 

payment rates associated with codes effective July 1 were not available to us in time for 

incorporation into the Addenda of the proposed rule, the Level II HCPCS codes and the 

Category III CPT codes implemented through the July 2012 OPPS quarterly update CR 

were not included in Addendum B of the proposed rule (which is available via the 

Internet on the CMS Web site), while those codes based upon the April 2012 OPPS 

quarterly update were included in Addendum B. Nevertheless, we requested public 

comments on the codes included in the July 2012 OPPS quarterly update and included 

these codes in the preamble of the proposed rule. 

TABLE 10.—COMMENT TIMEFRAME FOR NEW OR REVISED 

HCPCS CODES 

OPPS 

Quarterly 

Update CR 

Type of Code Effective Date Comments 

Sought When Finalized 

April l, 2012 Level II HCPCS 

Codes April 1, 2012 

CY 2013 

OPPS/ASC 

proposed rule 

CY 2013 

OPPS/ASC final 

rule with 

comment period 

Level II HCPCS 

Codes July 1, 2012 

CY 2013 

OPPS/ASC 

proposed rule 

CY 2013 

OPPS/ASC final 

rule with 

comment period July 1, 2012 

Category I 

(certain vaccine July 1, 2012 CY 2013 OPPS/ASC 

CY 2013 

OPPS/ASC final 
CMS-1589-FC 336 

OPPS 

Quarterly 

Update CR 

Type of Code Effective Date Comments 

Sought When Finalized 

codes) and III 

CPT codes 

proposed rule rule with 

comment period 

October 1, 2012 Level II HCPCS 

Codes October 1, 2012

CY 2013 

OPPS/ASC final 

rule with 

comment period 

CY 2014 

OPPS/ASC final 

rule with 

comment period 

Level II HCPCS 

Codes January 1, 2013 

CY 2013 

OPPS/ASC final 

rule with 

comment period 

CY 2014 

OPPS/ASC final 

rule with 

comment period January 1, 2013 

Category I and 

III CPT Codes January 1, 2013 

CY 2013 

OPPS/ASC final 

rule with 

comment period 

CY 2014 

OPPS/ASC final 

rule with 

comment period 

This process is discussed in detail below. We have separated our discussion into 

two sections based on whether we solicited public comments in the CY 2013 OPPS/ASC 

proposed rule or whether we are soliciting public comments in this CY 2013 OPPS/ASC 

final rule with comment period. We note that we sought public comments in the 

CY 2012 OPPS/ASC final rule with comment period on the new CPT and Level II 

HCPCS codes that were effective January 1, 2012. We also sought public comments in 

the CY 2012 OPPS/ASC final rule with comment period on the new Level II HCPCS 

codes effective October 1, 2011. These new codes, with an effective date of 

October 1, 2011, or January 1, 2012, were flagged with comment indicator “NI” (New 

code, interim APC assignment; comments will be accepted on the interim APC 

assignment for the new code) in Addendum B to the CY 2012 OPPS/ASC final rule with 

comment period to indicate that we were assigning them an interim payment status and 
CMS-1589-FC 337 

an APC and payment rate, if applicable, which were subject to public comment following 

publication of the CY 2012 OPPS/ASC final rule with comment period. We are 

responding to public comments and finalizing our interim OPPS treatment of these codes 

in this CY 2013 OPPS/ASC final rule with comment period. 

We received comments on several new codes that were assigned to comment 

indicator "NI" in Addendum B of the CY 2012 OPPS/ASC final rule with comment 

period. We respond to those comments in sections II.A., III.D., V.B., and IX of this final 

rule with comment period. Table 11 below lists the long descriptors for the CPT codes 

that were assigned to comment indicator “NI” for which we received public comments to 

the CY 2012 OPPS/ASC final rule with comment period and the specific sections where 

the comments are addressed. 

TABLE 11.—COMMENTS TO THE CY 2012 OPPS/ASC FINAL RULE 

WITH COMMENT PERIOD ON NEW HCPCS CODES ASSIGNED TO 

COMMENT INDICATOR “NI” 

CY 2012 

CPT Code CY 2012 Long Descriptor 

Section In This CY 2013 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

0278T 

Transcutaneous electrical modulation pain 

reprocessing (eg, scrambler therapy), each treatment 

session (includes placement of electrodes) 

III.D.4.a. 

(Scrambler Therapy) 

0293T 

Insertion of left atrial hemodynamic monitor; 

complete system, includes implanted 

communication module and pressure sensor lead in 

left atrium including transseptal access, radiological 

supervision and interpretation, and associated 

injection procedures, when performed 

0294T Insertion of left atrial hemodynamic monitor; 

IX. 

(Inpatient Procedures) 
CMS-1589-FC 338 

CY 2012 

CPT Code CY 2012 Long Descriptor 

Section In This CY 2013 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

pressure sensor lead at time of insertion of pacing 

cardioverter-defibrillator pulse generator including 

radiological supervision and interpretation and 

associated injection procedures, when performed 

(list separately in addition to primary procedure) 

0296T 

External electrocardiographic recording for more 

than 48 hours up to 21 days by continuous rhythm 

recording and storage; recording (includes 

connection and initial recording) 

0297T 

External electrocardiographic recording for more 

than 48 hours up to 21 days by continuous rhythm 

recording and storage; scanning analysis with report 

III.D.1.e. 

(External 

Electrocardiographic 

Monitoring) 

0299T 

Extracorporeal shock wave for integumentary 

wound healing, high energy, including topical 

application and dressing care; initial wound 

0300T 

Extracorporeal shock wave for integumentary 

wound healing, high energy, including topical 

application and dressing care; each additional 

wound (list separately in addition to code for 

primary procedure) 

III.D.3.a. 

(Extracorporeal Shock 

Wave Wound Treatment) 

15272 

Application of skin substitute graft to trunk, arms, 

legs, total wound surface area up to 100 sq cm; each 

additional 25 sq cm wound surface area, or part 

thereof (list separately in addition to code for 

primary procedure) 

15274 

Application of skin substitute graft to trunk, arms, 

legs, total wound surface area greater than or equal 

to 100 sq cm; each additional 100 sq cm wound 

surface area, or part thereof, or each additional 1% 

of body area of infants and children, or part thereof 

(list separately in addition to code for primary 

procedure) 

15276 Application of skin substitute graft to face, scalp, 
CMS-1589-FC 339 

CY 2012 

CPT Code CY 2012 Long Descriptor 

Section In This CY 2013 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

eyelids, mouth, neck, ears, orbits, genitalia, hands, 

feet, and/or multiple digits, total wound surface area 

up to 100 sq cm; each additional 25 sq cm wound 

surface area, or part thereof (list separately in 

addition to code for primary procedure) 

15278 

Application of skin substitute graft to face, scalp, 

eyelids, mouth, neck, ears, orbits, genitalia, hands, 

feet, and/or multiple digits, total wound surface area 

greater than or equal to 100 sq cm; each additional 

100 sq cm wound surface area, or part thereof, or 

each additional 1% of body area of infants and 

children, or part thereof (list separately in addition 

to code for primary procedure) 

III.D.3.b. 

(Application of Skin 

Substitute) 

15777 

Implantation of biologic implant (eg, acellular 

dermal matrix) for soft tissue reinforcement (eg, 

breast, trunk) (list separately in addition to code for 

primary procedure) 

II.A.3. 

(Changes to Packaged 

Services) 

64633 

Destruction by neurolytic agent, paravertebral facet 

joint nerve(s), with imaging guidance (fluoroscopy 

or ct); cervical or thoracic, single facet joint 

III.D.4.c. 

(Paravertebral Neurolytic 

Agent) 

62369 

Electronic analysis of programmable, implanted 

pump for intrathecal or epidural drug infusion 

(includes evaluation of reservoir status, alarm 

status, drug prescription status); with 

reprogramming and refill 

62370 

Electronic analysis of programmable, implanted 

pump for intrathecal or epidural drug infusion 

(includes evaluation of reservoir status, alarm 

status, drug prescription status); with 

reprogramming and refill (requiring physician’s 

skill) 

III.D.4.d. 

(Programmable 

Implantable Pump) 

77424 Intraoperative radiation treatment delivery, x-ray, 

single treatment session 

III.D.6.e. 

(Intraoperative Radiation 
CMS-1589-FC 340 

CY 2012 

CPT Code CY 2012 Long Descriptor 

Section In This CY 2013 

OPPS/ASC Final Rule 

With Comment Period 

Where Comments Are 

Addressed 

77425 Intraoperative radiation treatment delivery, 

electrons, single treatment session 

Therapy) 

81200-

81383 Tier I Molecular Pathology Procedures 

81400- 

81408 Tier 2 Molecular Pathology Procedures 

III.D.9.a. 

(Molecular Pathology 

Procedures) 

J9179 Injection, eribulin mesylate, 0.1 mg 

V.A. 

(OPPS Transitional Passthrough Payment for 

Additional Costs of 

Drugs, Biologicals, and 

Radiopharmaceuticals) 

Q4128 Flexhd or allopatch hd, per square centimeter 

V.B. 

(OPPS Payment for 

Drugs, Biologicals, and 

Radiopharmaceuticals 

Without Pass-Through 

Status) 

1. Treatment of New CY 2012 Level II HCPCS and CPT Codes Effective April 1, 2012 

and July 1, 2012 for Which We Solicited Public Comments in the CY 2013 OPPS/ASC 

Proposed Rule 

Through the April 2012 OPPS quarterly update CR (Transmittal 2418, Change 

Request 7748, dated March 2, 2012) and the July 2012 OPPS quarterly update CR 

(Transmittal 2483, Change Request 7847, dated June 8, 2012), we recognized several 

new HCPCS codes for separate payment under the OPPS. Effective April 1 and July 1 of 

CY 2012, we made effective 13 new Level II HCPCS codes and 7 Category III CPT 
CMS-1589-FC 341 

codes. Specifically, 5 new Level II HCPCS codes were effective for the April 2012 

update and another 8 new Level II HCPCS codes were effective for the July 2012 update 

for a total of 13. Seven new Category III CPT codes were effective for the July 2012 

update. Of the 13 new Level II HCPCS codes, we recognized for separate payment 11 of 

these codes, and of the 7 new Category III CPT codes, we recognized for separate 

payment all 7 new Category III CPT codes, for a total of 18 new Level II HCPCS and 

Category III CPT codes that are recognized for separate payment for CY 2013. 

Through the April 2012 OPPS quarterly update CR, we allowed separate payment 

for each of the five new Level II HCPCS codes. Specifically, as displayed in Table 12 

below, we provided separate payment for HCPCS codes C9288, C9289, C9290, C9291 

and C9733.

TABLE 12.— NEW LEVEL II HCPCS CODES IMPLEMENTED IN 

APRIL 2012 

CY 2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

April 2012 

Status 

Indicator 

April 

2012 

APC 

C9288 

Injection, centruroides (scorpion) immune f(ab)2 

(equine), 1 vial G 9288 

C9289 

Injection, asparaginase Erwinia chrysanthemi, 

1,000 international units (I.U.) G 9289 

C9290 Injection, bupivacaine liposome, 1 mg G 9290 

C9291* Injection, aflibercept, 2 mg vial G 9291 

C9733 

Non-ophthalmic fluorescent vascular 

angiography Q2 0397 

*Level II HCPCS code C9291 (Injection, aflibercept, 2 mg vial) was deleted June 30, 2012, and 

replaced with HCPCS code Q2046 (Injection, aflibercept, 1 mg) effective July 1, 2012.

In the CY 2013 OPPS/ASC proposed rule (77 FR 45115), we solicited public 

comments on the proposed status indicators and APC assignments for Level II HCPCS 
CMS-1589-FC 342 

codes C9288, C9289, C9290, C9291, and C9733, which were listed in Table14 of the 

proposed rule (77 FR 45115) and now appear in Tables 12 and 13 of this final rule with 

comment period. 

We did not receive any public comments on the proposed APC assignments and 

status indicators for HCPCS codes C9288, C9289, C9290, and C9291. However, we 

received several public comments on HCPCS code C9733, which are addressed in 

section III.D.7.a. of this final rule with comment period. 

For CY 2013, the HCPCS Workgroup replaced HCPCS codes C9288, C9289, and 

C9291 (which was replaced with HCPCS code Q2046, effective July 1, 2012) with 

permanent HCPCS J-codes. Table 13 below list the replacement HCPCS J-codes for the 

temporary HCPCS C-codes. Consistent with our general policy of using permanent 

HCPCS codes rather than using temporary HCPCS codes for the reporting of drugs under 

the OPPS in order to streamline coding, we are showing the replacement HCPCS codes 

C9288, C9289, and C9291/Q2046, effective January 1, 2013, in Table 13.

In this final rule with comment period, we are assigning the Level II HCPCS 

codes listed in Table 13 below to the specific APCs and status indicators for CY 2013.

TABLE 13.—FINAL CY 2013 STATUS INDICATOR AND APC 

ASSIGNMENTS FOR THE LEVEL II HCPCS CODES THAT WERE NEWLY 

IMPLEMENTED IN APRIL 2012 

CY 2012 

HCPCS 

Code 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Final 

CY 2013 

Status 

Indicator 

Final 

CY 2013 

APC 

C9288 J0716 Injection, centruroides immune f(ab)2, up to 

120 milligrams G 1431 
CMS-1589-FC 343 

CY 2012 

HCPCS 

Code 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Final 

CY 2013 

Status 

Indicator 

Final 

CY 2013 

APC 

C9289 J9019 Injection, asparaginase (Erwinaze), 1,000 IU G 9289 

C9290 C9290 Injection, bupivacaine liposome, 1 mg G 9290 

C9291 / 

Q2046 J0178 Injection, aflibercept, 1 mg G 1420 

C9733 C9733 Non-ophthalmic fluorescent vascular 

angiography Q2 0397 

For CY 2013, we note that we are not making any changes to the status indicators 

and APC assignments for HCPCS code C9290 and C9733. That is, HCPCS code C9290 

will continue its pass-through status and will also continue to be assigned to APC 9290 

for CY 2013. Similarly, HCPCS code C9733 will continue to be assigned to status 

indicator “Q2” and also will continue to be assigned to APC 0397 for CY 2013. 

Furthermore, because HCPCS code J9019 describes the same drug and the same 

dosage currently designated by HCPCS code C9289, this drug will continue its 

pass-through status in CY 2013. Therefore, we are assigning HCPCS code J9019 to the 

same status indicator and APC as its predecessor HCPCS code, as shown in Table 13. 

However, we note that the replacement code for HCPCS code C9291, which was 

replaced with HCPCS code Q2046 effective July 1, 2012, did not describe the same 

dosage descriptor, and consequently, the replacement HCPCS code was assigned a new 

APC number. Specifically, HCPCS code Q2046, which has a dosage descriptor of 1 mg, 

was assigned to APC 1420 effective July 1, 2012. Because the predecessor HCPCS code 
CMS-1589-FC 344 

C9291 was assigned to pass-through status, HCPCS code Q2046 also was assigned to 

pass-through status for CY 2013. Similarly, the replacement code for HCPCS code 

C9288 does not describe the same dosage descriptor, and, consequently, its replacement 

HCPCS code J0716 was assigned a new APC. Specifically, HCPCS code C9288 has a 

dosage descriptor of 1 vial; however, its replacement HCPCS code J0716 has a dosage 

descriptor of “up to 120 milligrams.” Therefore, effective January 1, 2013, HCPCS 

codes J0716 is assigned to APC 1431, a different APC, to maintain data consistency for 

future rulemaking. Because the predecessor HCPCS code C9288 was assigned to 

pass-through status, HCPCS code J0716 will continue to be assigned status indicator “G” 

for CY 2013. 

As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45115 through 45116), 

through the July 2012 OPPS quarterly update CR, which included HCPCS codes that were made 

effective July 1, 2012, we allowed separate payment for 6 of the 8 new Level II HCPCS codes. 

Specifically, as displayed in Table 14 below (also Table 14 of the proposed rule), we provided 

separate OPPS payment for HCPCS codes C9368, C9369, Q2045, Q2046, Q2048, and Q2049.

TABLE 14.—NEW LEVEL II HCPCS CODES IMPLEMENTED IN 

JULY 2012 

CY 2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

July 2012 

Status 

Indicator 

July 2012 

APC 

C9368 Grafix core, per square centimeter G 9368 

C9369 Grafix prime, per square centimeter G 9369 

Q2034 Influenza virus vaccine, split virus, for 

intramuscular use (Agriflu) L N/A 

Q2045* Injection, human fibrinogen concentrate, 

1 mg K 1414 

Q2046** Injection, aflibercept, 1 mg G 1420 
CMS-1589-FC 345 

CY 2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

July 2012 

Status 

Indicator 

July 2012 

APC 

Q2047 Injection, peginesatide, 0.1 mg (for ESRD 

on dialysis) A N/A 

Q2048*** Injection, doxorubicin hydrochloride, 

liposomal, doxil, 10 mg K 7046 

Q2049 Injection, doxorubicin hydrochloride, 

liposomal, imported lipodox, 10 mg K 1421 

*HCPCS code Q2045 replaced HCPCS code J1680 effective July 1, 2012. The status indicator for 

HCPCS code J1680 was changed to “E” (Not Payable by Medicare) effective July 1, 2012. 

**HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012.

***HCPCS code Q2048 replaced HCPCS code J9001 effective July 1, 2012. The status indicator for 

HCPCS code J9001 was changed to “E” (Not Payable by Medicare) effective July 1, 2012. 

We note that three of the Level II HCPCS Q-codes that were made effective 

July 1, 2012, were previously described by HCPCS J-codes or C-codes that were 

separately payable under the hospital OPPS. First, HCPCS code Q2045 replaced HCPCS 

code J1680 (Injection, human fibrinogen concentrate, 100 mg), beginning July 1, 2012. 

HCPCS code J1680 was assigned to status indicator “K” (Nonpass-through drugs and 

nonimplantable biologicals, including therapeutic radiopharmaceuticals; paid under 

OPPS; separate APC payment) on January 1, 2012. However, because HCPCS code 

J1680 was replaced by HCPCS code Q2045 effective July 1, 2012, we changed its status 

indicator to “E” (Not Payable by Medicare) effective July 1, 2012. Because HCPCS code 

Q2045 describes the same drug as HCPCS code J1680, we continued its separate 

payment status and assigned it to status indicator “K” effective July 1, 2012. However, 

because the dosage descriptor for HCPCS code Q2045 is not the same as HCPCS code 

J1680, we assigned HCPCS code Q2045 to a new APC to maintain data consistency for 
CMS-1589-FC 346 

future rulemaking. Specifically, HCPCS code Q2045 was assigned to APC 1414 

effective July 1, 2012.

Second, HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012. 

HCPCS code C9291 was assigned pass-through status when it was effective 

April 1, 2012. Because HCPCS code Q2046 describes the same product as HCPCS code 

C9291, we continued its pass-through status and assigned HCPCS code Q2046 to status 

indicator “G” as well as assigned it to the same APC, specifically APC 9291, effective 

July 1, 2012. HCPCS code C9291 was deleted on June 30, 2012.

Third, the HCPCS Workgroup replaced HCPCS code J9001 (Injection, 

doxorubicin hydrochloride, all lipid formulations, 10 mg) with new HCPCS code Q2048, 

effective July 1, 2012. Consequently, the status indicator for HCPCS code J9001 was 

changed to “E” (Not Payable by Medicare) effective July 1, 2012. Because HCPCS code 

Q2048 describes the same drug as HCPCS code J9001, we continued its separate 

payment status and assigned HCPCS code Q2048 to status indicator “K” effective 

July 1, 2012. In addition, because, HCPCS code Q2049 is similar to HCPCS code 

Q2048, we assigned HCPCS code Q2049 to status indicator “K” effective July 1, 2012.

Of the 15 HCPCS codes that were effective July 1, 2012, we did not recognize for 

separate OPPS payment two HCPCS codes because they are both paid under a payment 

system other than OPPS. Specifically, HCPCS code Q2047 was assigned to status 

indicator “A” (Not paid under OPPS; paid by fiscal intermediaries/MACs under a fee 

schedule or payment system other than OPPS), and HCPCS code Q2034 was assigned to 

status indicator “L” (Not paid under OPPS; paid at reasonable cost).
CMS-1589-FC 347 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45116), we solicited public 

comments on the proposed status indicators and APC assignments for the HCPCS codes 

that were listed in Table 15 of the proposed rule and now appear in Table 14 and 15 of 

this final rule with comment period.

We did not receive any other public comments on the new Level II HCPCS codes 

that were implemented in July 2012. We are adopting as final, without modification, our 

proposal to assign the Level II HCPCS codes listed in Table 15 to the APCs and status 

indicators as proposed for CY 2013. 

Table 15 below includes a complete list of the Level II HCPCS codes that were 

made effective July 1, 2012, with their final status indicators and APC assignments for 

CY 2013. 

TABLE 15.—FINAL CY 2013 STATUS INDICATORS AND APC 

ASSIGNMENTS FOR THE LEVEL II HCPCS CODES THAT WERE NEWLY 

IMPLEMENTED IN JULY 2012 

CY 2012 

HCPCS 

Code 

CY 

2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Final 

CY 2013 

Status 

Indicator

Final 

CY 

2013 

APC 

C9368 Q4132 Grafix core, per square centimeter G 9368 

C9369 Q4133 Grafix prime, per square centimeter G 9369 

Q2034 Q2034 Influenza virus vaccine, split virus, for 

intramuscular use (Agriflu) L N/A 

Q2045* J7178 Injection, human fibrinogen concentrate, 1 mg K 1414 

Q2046** J0178 Injection, aflibercept, 1 mg G 1420 

Q2047 J0890 Injection, peginesatide, 0.1 mg (for esrd on 

dialysis) A N/A 

Q2048*** J9002 Injection, doxorubicin hydrochloride, 

liposomal, doxil, 10 mg K 7046 
CMS-1589-FC 348 

CY 2012 

HCPCS 

Code 

CY 

2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Final 

CY 2013 

Status 

Indicator

Final 

CY 

2013 

APC 

Q2049 Q2049 Injection, doxorubicin hydrochloride, 

liposomal, imported lipodox, 10 mg K 1421 

We note that the HCPCS Workgroup replaced HCPCS codes C9368, C9369, 

Q2045, Q2046, Q2047, and Q2048 with HCPCS codes Q4132, Q4133, J7178, J0178, 

J0890, and J9002, respectively, effective January 1, 2013. Because HCPCS codes 

Q4132, Q4133, and J0178 describe the same products currently designated by HCPCS 

codes C9368, C9369, and Q2046, respectively, these products will continue their passthrough status in CY 2013. Therefore, we are assigning HCPCS codes Q4132, Q4133 

and J0178 to the same status indicators and APCs as their predecessor HCPCS codes, 

which share the same dosage descriptors, as shown in Table 15. We note that because 

HCPCS codes Q2045 and Q2048 are assigned to status indicator “K” (Nonpass-Through 

Drugs; Paid under OPPS; Separate APC payment), their replacement HCPCS codes 

J7178 and J9002, which share the same code descriptors as their predecessor codes, also 

will continue their nonpass-through status and APC assignments in CY 2013. 

Finally, HCPCS code Q2047 will be replaced with HCPCS code J0890 effective 

January 1, 2013. Because HCPCS code J0890 describes the same product currently 

designated by HCPCS code Q2047, this product will continue to be assigned to the same 

status indicator as its predecessor HCPCS code, as shown in Table 15. 
CMS-1589-FC 349 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45116), we proposed to 

continue our established policy of recognizing Category I CPT vaccine codes for which 

FDA approval is imminent and Category III CPT codes that the AMA releases in January 

of each year for implementation in July through the OPPS quarterly update process. 

Under the OPPS, Category I CPT vaccine codes and Category III CPT codes that are 

released on the AMA Web site in January are made effective in July of the same year 

through the July quarterly update CR, consistent with the AMA’s implementation date 

for the codes. For the July 2012 update, there were no new Category I CPT vaccine 

codes. Through the July 2012 OPPS quarterly update CR (Transmittal 2483, Change 

Request 7847, dated June 8, 2012), we allowed separate OPPS payment for all seven new 

Category III CPT codes effective July 1, 2012. Specifically, as displayed in Table 16 of 

the proposed rule and in Table 16 below, we allowed separate payment for Category III 

CPT codes 0302T, 0303T, 0304T, 0305T, 0306T, 0307T, and 0308T. 

We received one public comment on one of the Category III CPT codes that were 

implemented in July 2012, specifically on CPT code 0304T, which is addressed in 

section II.A.2.d.(1) of this final rule with comment period. Table 16 below lists the 

Category III CPT codes that were implemented in July 2012, along with their final status 

indicators and APC assignments, for CY 2013. The final payment rates for these codes 

can be found in Addendum B to this CY 2013 OPPS/ASC final rule with comment period 

(which is available via the Internet on the CMS Web site). 

TABLE 16.—NEW CATEGORY III CPT CODES IMPLEMENTED 

IN JULY 2012 
CMS-1589-FC 350 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45114 through 45117), we 

solicited public comments on the CY 2013 proposed status indicators and the proposed 

CY 2013 

CPT 

Code

CY 2013 Long Descriptor

Final 

CY 2013 

Status 

Indicator

Final 

CY 2013 

APC

0302T 

Insertion or removal and replacement of 

intracardiac ischemia monitoring system 

including imaging supervision and 

interpretation when performed and intraoperative interrogation and programming when 

performed; complete system (includes device 

and electrode) 

T 0089 

0303T 

Insertion or removal and replacement of 

intracardiac ischemia monitoring system 

including imaging supervision and 

interpretation when performed and intraoperative interrogation and programming when 

performed; electrode only 

T 0106 

0304T 

Insertion or removal and replacement of 

intracardiac ischemia monitoring system 

including imaging supervision and 

interpretation when performed and intraoperative interrogation and programming when 

performed; device only 

T 0090 

0305T 

Programming device evaluation (in person) of 

intracardiac ischemia monitoring system with 

iterative adjustment of programmed values, 

with analysis, review, and report 

S 0690 

0306T 

Interrogation device evaluation (in person) of 

intracardiac ischemia monitoring system with 

analysis, review, and report 

S 0690 

0307T Removal of intracardiac ischemia monitoring 

device T 0105 

0308T Insertion of ocular telescope prosthesis 

including removal of crystalline lens T 0234 
CMS-1589-FC 351 

APC assignments and payment rates for the Level II HCPCS codes and the Category III 

CPT codes that were effective April 1, 2012, and July 1, 2012, through the respective 

OPPS quarterly update CRs. These codes were listed in Tables 14, 15, and 16 of the 

proposed rule. We proposed to finalize their status indicators and their APC assignments 

and payment rates, if applicable, in this CY 2013 OPPS/ASC final rule with comment 

period. Because the new Category III CPT and Level II HCPCS codes that become 

effective for July are not available to us in time for incorporation into the Addenda to the 

OPPS/ASC proposed rule, our policy is to include the codes, their proposed status 

indicators, proposed APCs (where applicable), and proposed payment rates (where 

applicable) in the preamble of the proposed rule but not in the Addenda to the proposed 

rule. These codes were listed in Tables 15 and 16, respectively, of the proposed rule. We 

proposed to incorporate these codes into Addendum B to this CY 2013 OPPS/ASC final 

rule with comment period, which is consistent with our annual OPPS update policy. The 

Level II HCPCS codes implemented or modified through the April 2012 OPPS update 

CR and displayed in Table 14 were included in Addendum B to the proposed rule (which 

was available via the Internet on the CMS Web site), where their proposed CY 2013 

payment rates were also shown.

We did not receive any additional public comments on this process. The final 

status indicators, APC assignments, and payment rates if applicable, for the Level II 

HCPCS codes and the Category III CPT codes that were implemented or modified 

through the April 2012 or July 2012 OPPS update CR are found in Addendum B to this 

final rule with comment period (which is available via the Internet on the CMS Web site).
CMS-1589-FC 352 

2. Process for New Level II HCPCS Codes That Will Be Effective October 1, 2012 and 

New CPT and Level II HCPCS Codes That Will Be Effective January 1, 2013 for Which 

We Are Soliciting Public Comments in this CY 2013 OPPS/ASC Final Rule with 

Comment Period

As has been our practice in the past, we incorporate those new Category I and III 

CPT codes and new Level II HCPCS codes that are effective January 1 in the final rule 

with comment period updating the OPPS for the following calendar year. These codes 

are released to the public via the CMS HCPCS (for Level II HCPCS codes) and AMA 

Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In 

the past, we also have released new Level II HCPCS codes that are effective 

October 1 through the October OPPS quarterly update CRs and incorporated these new 

codes in the final rule with comment period updating the OPPS for the following calendar 

year. For CY 2013, these codes are flagged with comment indicator “NI” in Addendum 

B to the OPPS/ASC final rule with comment period to indicate that we are assigning 

them an interim payment status which is subject to public comment. In addition, the CPT 

and Level II HCPCS codes that will be effective January 1, 2013, are flagged with 

comment indicator “NI” in Addendum B to the OPPS/ASC final rule with comment 

period. Specifically, the status indicator and the APC assignment and payment rate, if 

applicable, for all such codes flagged with comment indicator “NI” are open to public 

comment in the final rule with comment period, and we respond to these comments in the 

OPPS/ASC final rule with comment period for the next calendar year’s OPPS/ASC 

update. In the CY 2013 OPPS/ASC proposed rule (77 FR 45117 through 45118), we 
CMS-1589-FC 353 

proposed to continue this process for CY 2013. Specifically, for CY 2013, we proposed 

to include in Addendum B to this CY 2013 OPPS/ASC final rule with comment period 

the new Category I and III CPT codes effective January 1, 2013 (including the Category 

III CPT codes that were released by the AMA in July 2012) that would be incorporated in 

the January 2013 OPPS quarterly update CR and the new Level II HCPCS codes, 

effective October 1, 2012, or January 1, 2013, that would be released by CMS in its 

October 2012 and January 2013 OPPS quarterly update CRs. As proposed, in this final 

rule with comment period, the October 1, 2012 and January 1, 2013 codes are flagged 

with comment indicator “NI” in Addendum B to this CY 2013 OPPS/ASC final rule with 

comment period to indicate that we have assigned them an interim OPPS payment status 

for CY 2013. As proposed, in this final rule with comment period, their status indicators 

and their APC assignments and payment rates, if applicable, are open to public comment 

and will be finalized in the CY 2014 OPPS/ASC final rule with comment period. 

We did not receive any public comments on our proposal. Therefore, we are 

finalizing our proposal to flag new Level II HCPCS codes that become effective 

October 1, 2012, and new CPT and Level II HCPCS codes that become effective 

January 1, 2013 with comment indicator “NI” in Addendum B to this CY 2013 

OPPS/ASC final rule with comment period to indicate that these codes have been 

assigned an interim OPPS payment status for CY 2013. In addition, because these codes 

have been assigned to comment indicator “NI,” their status indicators and their APC 

assignments and payment rates, if applicable, are open to public comment and will be 

finalized in the CY 2014 OPPS/ASC final rule with comment period. 
CMS-1589-FC 354 

B. OPPS Changes--Variations within APCs

1. Background 

Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification 

system for covered hospital outpatient department services. Section 1833(t)(2)(B) of the 

Act provides that the Secretary may establish groups of covered OPD services within this 

classification system, so that services classified within each group are comparable 

clinically and with respect to the use of resources. In accordance with these provisions, 

we developed a grouping classification system, referred to as Ambulatory Payment 

Classifications (APCs), as set forth in § 419.31 of the regulations. We use Level I and 

Level II HCPCS codes to identify and group the services within each APC. The APCs 

are organized such that each group is homogeneous both clinically and in terms of 

resource use. Using this classification system, we have established distinct groups of 

similar services. We have also developed separate APC groups for certain medical 

devices, drugs, biologicals, therapeutic radiopharmaceuticals, and brachytherapy devices. 

We have packaged into payment for each procedure or service within an APC 

group the costs associated with those items or services that are directly related to, and 

supportive of, performing the main independent procedures or furnishing the services. 

Therefore, we do not make separate payment for these packaged items or services. For 

example, packaged items and services include: 

(a) Use of an operating, treatment, or procedure room; 

(b) Use of a recovery room; 

(c) Observation services; 
CMS-1589-FC 355 

(d) Anesthesia; 

(e) Medical/surgical supplies; 

(f) Pharmaceuticals (other than those for which separate payment may be allowed 

under the provisions discussed in section V. of the proposed rule and this final rule with 

comment period); 

(g) Incidental services such as venipuncture; 

(h) Guidance services, image processing services, intraoperative services, 

imaging, supervision and interpretation services, diagnostic radiopharmaceuticals, and 

contrast media. 

Further discussion of packaged services is included in section II.A.3. of this final 

rule with comment period. 

In CY 2008, we implemented composite APCs to provide a single payment for 

groups of services that are typically performed together during a single clinical encounter 

and that result in the provision of a complete service (72 FR 66650 through 66652). 

Under CY 2012 OPPS policy, we provide composite APC payment for certain extended 

assessment and management services, low dose rate (LDR) prostate brachytherapy, 

cardiac electrophysiologic evaluation and ablation, mental health services, multiple 

imaging services, and cardiac resynchronization therapy services. Further discussion of 

composite APCs is included in section II.A.2.e. of this final rule with comment period. 

Under the OPPS, we generally pay for hospital outpatient services on a 

rate-per-service basis, where the service may be reported with one or more HCPCS 

codes. Payment varies according to the APC group to which the independent service or 
CMS-1589-FC 356 

combination of services is assigned. Each APC weight represents the hospital cost of the 

services included in that APC, relative to the hospital cost of the services included in 

APC 0606 (Level 3 Hospital Clinic Visits). The APC weights are scaled to APC 0606 

because it is the middle level hospital clinic visit APC (the Level 3 hospital clinic visit 

CPT code out of five levels), and because middle level hospital clinic visits are among 

the most frequently furnished services in the hospital outpatient setting. 

Section 1833(t)(9)(A) of the Act requires the Secretary to review, on a recurring 

basis occurring no less than annually, and revise the groups, the relative payment 

weights, and the wage and other adjustments to take into account changes in medical 

practice, changes in technology, the addition of new services, new cost data, and other 

relevant information and factors. Section 1833(t)(9)(A) of the Act also requires the 

Secretary to consult with an expert outside advisory panel composed of an appropriate 

selection of representatives of providers to review (and advise the Secretary concerning) 

the clinical integrity of the APC groups and the relative payment weights (the HOP Panel 

recommendations for specific services for the CY 2013 OPPS and our responses to them 

are discussed in the relevant specific sections throughout this final rule with comment 

period). 

Finally, section 1833(t)(2) of the Act provides that, subject to certain exceptions, 

the items and services within an APC group cannot be considered comparable with 

respect to the use of resources if the highest cost for an item or service in the group is 

more than 2 times greater than the lowest cost for an item or service within the same 

group (referred to as the “2 times rule”). In the CY 2013 OPPS/ASC proposed rule 
CMS-1589-FC 357 

(77 FR 45118), for CY 2013, we proposed to use the cost of the item or service in 

implementing this provision, as discussed in section II.A.2.f. of this final rule with 

comment period. The statute authorizes the Secretary to make exceptions to the 2 times 

rule in unusual cases, such as low-volume items and services (but the Secretary may not 

make such an exception in the case of a drug or biological that has been designated as an 

orphan drug under section 526 of the Federal Food, Drug, and Cosmetic Act). 

2. Application of the 2 Times Rule 

In accordance with section 1833(t)(2) of the Act and § 419.31 of the regulations, 

we annually review the items and services within an APC group to determine, with 

respect to comparability of the use of resources, if the cost of the highest cost item or 

service within an APC group is more than 2 times greater than the cost of the lowest cost 

item or service within that same group. In making this determination, we consider only 

those HCPCS codes that are significant based on the number of claims. We note that, for 

purposes of identifying significant HCPCS codes for examination in the 2 times rule, we 

consider codes that have more than 1,000 single major claims or codes that have both 

greater than 99 single major claims and contribute at least 2 percent of the single major 

claims used to establish the APC cost to be significant (75 FR 71832). This longstanding 

definition of when a HCPCS code is significant for purposes of the 2 times rule was 

selected because we believe that a subset of 1,000 claims is negligible within the set of 

approximately 100 million single procedure or single session claims we use for 

establishing costs. Similarly, a HCPCS code for which there are fewer than 99 single 

bills and which comprises less than 2 percent of the single major claims within an APC 
CMS-1589-FC 358 

will have a negligible impact on the APC cost. In the CY 2013 OPPS/ASC proposed rule 

(77 FR 45118), we proposed to make exceptions to this limit on the variation of costs 

within each APC group in unusual cases, such as low-volume items and services, for 

CY 2013. 

In the CY 2013 OPPS/ASC proposed rule, we identified APCs with 2 times rule 

violations but for which we proposed changes to their HCPCS codes’ APC assignments 

in Addendum B to the proposed rule. We note that Addendum B did not appear in the 

printed version of the Federal Register as part of the CY 2013 OPPS/ASC proposed 

rule. Rather, it was published and made available via the Internet on the CMS Web site 

at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a 2 times rule 

violation or to improve clinical and resource homogeneity, we proposed to reassign the 

codes to APCs that contain services that are similar with regard to both their clinical and 

resource characteristics. We also proposed to rename existing APCs or create new 

clinical APCs to accommodate proposed HCPCS code reassignments. In many cases, the 

proposed HCPCS code reassignments and associated APC reconfigurations for CY 2013 

included in the proposed rule were related to changes in costs of services that were 

observed in the CY 2011 claims data newly available for CY 2013 ratesetting. We also 

proposed changes to the status indicators for some codes that were not specifically and 

separately discussed in the proposed rule. In these cases, we proposed to change the 

status indicators for some codes because we believe that another status indicator would 

more accurately describe their payment status from an OPPS perspective based on the 
CMS-1589-FC 359 

policies that we proposed for CY 2013. Addendum B of the CY 2013 OPPS/ASC 

proposed rule identified with a comment indicator “CH” those HCPCS codes for which 

we proposed a change to the APC assignment or status indicator as assigned in the April 

2012 Addendum B Update (available via the Internet on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html). In contrast, Addendum B of this final rule 

with comment period (available via the Internet on the CMS Web site) identifies with the 

“CH” comment indicator the final CY 2013 changes compared to the codes’ status as 

reflected in the October 2012 Addendum B update. 

3. Exceptions to the 2 Times Rule 

As discussed earlier, we may make exceptions to the 2 times limit on the variation 

of costs within each APC group in unusual cases such as low-volume items and services. 

Taking into account the APC changes that we proposed for CY 2013, we reviewed all the 

APCs to determine which APCs would not satisfy the 2 times rule. Then we used the 

following criteria to decide whether to propose exceptions to the 2 times rule for affected 

APCs: 

● Resource homogeneity; 

● Clinical homogeneity; 

● Hospital outpatient setting utilization; 

● Frequency of service (volume); and 

● Opportunity for upcoding and code fragments. 
CMS-1589-FC 360 

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). 

Table 17 of the CY 2013 OPPS/ASC proposed rule listed 21 APCs that we 

proposed to exempt from the 2 times rule for CY 2013 based on the criteria cited above 

and based on claims data processed from January 1, 2011, through December 31, 2011. 

We note that, for cases in which a recommendation by the HOP Panel appears to 

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

recommendation because those recommendations are based on explicit consideration of 

resource use, clinical homogeneity, site of service, and the quality of the claims data used 

to determine the APC payment rates. 

For the CY 2013 OPPS/ASC proposed rule, we based the listed exceptions to the 

2 times rule on claims data for dates of service between January 1, 2011, and 

December 31, 2011, that were processed before January 1, 2011. For this final rule with 

comment period, we used claims data for dates of service between January 1, 2011, and 

December 31, 2011, that were processed on or before June 30, 2012 and updated CCRs, 

if available. Thus, after considering the public comments we received on the CY 2013 

OPPS/ASC proposed rule and making changes to APC assignments based on those 

comments, we analyzed the CY 2011 claims data used for this final rule with comment 

period to identify the APCs with 2 times rule violations. Based on the final CY 2011 

claims data, we found that there are 19 APCs with 2 times rule violations, a cumulative 

decrease of 2 APCs compared to the proposed rule. We applied the criteria as described 

earlier to identify the APCs that are exceptions to the 2 times rule for CY 2013, and 
CMS-1589-FC 361 

identified two additional APCs that meet the criteria for exception to the 2 times rule for 

this final rule with comment period: 

● APC 0148 (Level I Anal/Rectal Procedures) 

● APC 0254 (Level V ENT Procedures) 

In addition, we also determined that four APCs no longer violated the 2 times 

rule: 

● APC 0128 (Echocardiogram with Contrast) 

● APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs) 

● APC 0604 (Level 1 Hospital Clinic Visits) 

● APC 0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber 

Pacemaker or Pacing) 

As discussed in section III.D.1.f. of this final rule with comment period, because 

of concerns raised regarding the 2 times rule violation for echocardiography services, and 

after further analysis of our claims data, we deleted APC 0128 and replaced it with two 

new APCs to correct the 2 times rule violation. Specifically, APC 0128 has been 

replaced with APC 0177 (Level I Echocardiogram with Contrast) and APC 0178 (Level 

II Echocardiogram with Contrast). We have not included in this count those APCs where 

a 2 times rule violation is not a relevant concept, such as APC 0375 (Ancillary Outpatient 

Services when Patient Expires), with an APC cost set based on multiple procedure 

claims; therefore, we have identified only final APCs, including those with criteria-based 

costs, such as device-dependent APCs, with 2 times rule violations. 
CMS-1589-FC 362 

Comment: Several commenters urged CMS to reassign HCPCS G0379 (Direct 

admission of patient for hospital observation care) from APC 0604 (Level 1 Hospital 

Clinic Visits) to APC 0608 (Level 5 Hospital Clinic Visits). In particular, the 

commenters requested that CMS assign HCPCS G0379 to the same APC as CPT code 

99205 (Office or other outpatient visit for the evaluation and management of a new 

patient (Level 5)) when the Composite APC 8002 (Level I Extended Assessment & 

Management Composite) criteria are not met. The commenters indicated that the 

reassignment of HCPCS code G0379 to APC 0608 would be appropriate because it 

would resolve the 2 times rule violation in APC 0604 and also align the resources with a 

high-level hospital visit when the criteria for Composite APC 8002 are not met. The 

commenters suggested that continuing to assign HCPCS code G0379 to APC 0604 would 

result in continued underpayments to HOPDs when the services and claims processing 

requirements for APC 8002 are not met for a direct referral. The commenters further 

added that this same issue was discussed during the February 2012 HOP Panel meeting, 

and that after the discussion, the Panel recommended that CMS reassign HCPCS code 

G0379 from APC 0604 to an appropriate APC. The commenters urged CMS to accept 

the Panel’s recommendation. 

Response: Based on the recommendation of the HOP Panel at its February 2012 

meeting, we reviewed our claims data for HCPCS code G0379. Our analyses revealed 

that the level of hospital resources used to provide HCPCS code G0379 is about the same 

as for CPT code 99205. In particular, our claims data show similar geometric mean costs 

for HCPCS code G0379 and CPT code 99205. Specifically, our claims data show a 
CMS-1589-FC 363 

geometric mean cost of approximately $181 for HCPCS code G0379 based on 2,368 

single claims (out of 3,975 total claims), and a geometric mean cost of approximately 

$179 based on 95,017 single claims (out of 104,246 total claims) for CPT code 99205. 

Based on our review of the claims data associated with HCPCS code G0379 and CPT 

code 99025, we agree with the commenters that the reassignment of HCPCS code G0379 

to APC 0608 is appropriate. Because APC assignments are made based on consideration 

of both hospital resources and clinical homogeneity, we believe this reassignment 

improves the clinical homogeneity of APC 0608 and appropriately aligns the resource 

costs of HCPCS code G0379 to those procedures assigned to APC 0608. 

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

CY 2013 proposal with modification to reassign HCPCS code G0379 from APC 0604 to 

APC 0608, which has a final CY 2013 geometric mean cost of approximately $181. 

Comment: One commenter indicated that APC 0623 violates the 2 times rule and 

requested that CMS review the costs associated with CPT code 36260 (Insertion of 

implantable intra-arterial infusion pump (eg, for chemotherapy of liver)) and reassign the 

CPT code to a more appropriate APC. 

Response: Table 17 of the CY 2013 OPPS/ASC proposed rule listed 21 APCs 

that violated the 2 times rule for CY 2013. APC 0623 does not appear in Table 17 and 

assignment of CPT code 36260 to APC 0623 does not violate the 2 times rule. As stated 

above, in determining whether a 2 times rule violation exist in an APC, we consider only 

those HCPCS codes that are significant based on the number of claims. For purposes of 

identifying significant HCPCS codes for examination in the 2 times rule, we consider 
CMS-1589-FC 364 

codes that have more than 1,000 single major claims or codes that have both greater than 

99 single major claims and contribute at least 2 percent of the single major claims used to 

establish the APC cost to be significant (75 FR 71832). This longstanding definition of 

when a HCPCS code is significant for purposes of the 2 times rule was selected because 

we believe that a subset of 1,000 claims is negligible within the set of approximately 

100 million single procedure or single session claims we use for establishing costs. 

Similarly, a HCPCS code for which there are fewer than 99 single bills and which 

comprises less than 2 percent of the single major claims within an APC will have a 

negligible impact on the APC cost. For this CY 2013 OPPS/ASC final rule with 

comment period, there are only 3 single claims for CPT code 36260 (each of the 3 total 

claims). Because CPT code 36260 does not represent a significant HCPCS code based 

on the number of claims, it does not violate the 2 times rule. 

After consideration of the public comments we received and our review of the 

CY 2011 costs from hospital claims and cost report data available for this final rule with 

comment period, we are finalizing our proposals with some modifications. Specifically, 

we are finalizing our exemption of 17 of the original APCs (that appeared in Table 17 of 

the CY 2013 OPPS/ASC proposed rule with comment period and also appears in Table 

17 below) from the 2 times rule for CY 2013. We are removing four APCs that no longer 

violated the 2 times rule and decreasing the number of APC exceptions from 21 to 19 

APCs, as described previously in this section. Our final list of 19 APCs exempted from 

the 2 times rule for CY 2013 is displayed in Table 17 below. 
CMS-1589-FC 365 

TABLE 17.—FINAL APC EXCEPTIONS TO THE 2 TIMES RULE 

FOR CY 2013 

Final 

CY 2013 

APC Final CY 2013 APC Title 

0006 Level I Incision & Drainage 

0012 Level I Debridement & Destruction 

0045 Bone/Joint Manipulation Under Anesthesia 

0057 Bunion Procedures 

0060 Manipulation Therapy 

0105 Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices 

0148 Level I Anal/Rectal Procedures 

0152 Level I Percutaneous Abdominal and Biliary Procedures 

0230 Level I Eye Tests & Treatments 

0254 Level V ENT Procedures 

0272 Fluoroscopy 

0325 Group Psychotherapy 

0330 Dental Procedures 

0340 Minor Ancillary Procedures 

0369 Level III Pulmonary Tests 

0403 Level I Nervous System Imaging 

0409 Red Blood Cell Tests 

0688 Revision/Removal of Neurostimulator Pulse Generator Receiver 

0690 Level I Electronic Analysis of Devices 

C. New Technology APCs

1. Background 

In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the 

time period a service was eligible for payment under a New Technology APC. 

Beginning in CY 2002, we retain services within New Technology APC groups until we 

gather sufficient claims data to enable us to assign the service to an appropriate clinical 
CMS-1589-FC 366 

APC. This policy allows us to move a service from a New Technology APC in less than 

2 years if sufficient data are available. It also allows us to retain a service in a 

New Technology APC for more than 2 years if sufficient data upon which to base a 

decision for reassignment have not been collected. 

We note that the cost bands for New Technology APCs range from $0 to $50 in 

increments of $10, from $50 to $100 in increments of $50, from $100 to $2,000 in 

increments of $100, and from $2,000 to $10,000 in increments of $500. These cost bands 

identify the APCs to which new technology procedures and services with estimated 

service costs that fall within those cost bands are assigned under the OPPS. Payment for 

each APC is made at the mid-point of the APC’s assigned cost band. For example, 

payment for New Technology APC 1507 (New Technology – Level VII ($500 - $600)) is 

made at $550. Currently, there are 82 New Technology APCs, ranging from the lowest 

cost band assigned to APC 1491 (New Technology – Level IA ($0 - $10)) through the 

highest cost band assigned to APC 1574 (New Technology – Level XXXVII ($9,500 - 

$10,000). In CY 2004 (68 FR 63416), we last restructured the New Technology APCs to 

make the cost intervals more consistent across payment levels and refined the cost bands 

for these APCs to retain two parallel sets of New Technology APCs, one set with a status 

indicator of “S” (Significant Procedure, Not Discounted When Multiple) and the other set 

with a status indicator of “T” (Significant Procedure, Multiple Reduction Applies). 

These current New Technology APC configurations allow us to price new technology 

services more appropriately and consistently. 
CMS-1589-FC 367 

Every year we receive many requests for higher payment amounts under our New 

Technology APCs for specific procedures under the OPPS because they require the use 

of expensive equipment. We are taking this opportunity to reiterate our response in 

general to the issue of hospitals’ capital expenditures as they relate to the OPPS and 

Medicare. 

Under the OPPS, one of our goals is to make payments that are appropriate for the 

services that are necessary for the treatment of Medicare beneficiaries. The OPPS, like 

other Medicare payment systems, is budget neutral and increases are limited to the annual 

hospital inpatient market basket increase. We believe that our payment rates generally 

reflect the costs that are associated with providing care to Medicare beneficiaries in 

cost-efficient settings, and we believe that our rates are adequate to ensure access to 

services. 

For many emerging technologies, there is a transitional period during which 

utilization may be low, often because providers are first learning about the techniques and 

their clinical utility. Quite often, parties request that Medicare make higher payment 

amounts under our New Technology APCs for new procedures in that transitional phase. 

These requests, and their accompanying estimates for expected total patient utilization, 

often reflect very low rates of patient use of expensive equipment, resulting in high per 

use costs for which requesters believe Medicare should make full payment. Medicare 

does not, and we believe should not, assume responsibility for more than its share of the 

costs of procedures based on projected utilization for Medicare beneficiaries and does not 

set its payment rates based on initial projections of low utilization for services that 
CMS-1589-FC 368 

require expensive capital equipment. For the OPPS, we rely on hospitals to make 

informed business decisions regarding the acquisition of high cost capital equipment, 

taking into consideration their knowledge about their entire patient base (Medicare 

beneficiaries included) and an understanding of Medicare’s and other payers’ payment 

policies. 

We note that, in a budget neutral environment, payments may not fully cover 

hospitals’ costs in a particular circumstance, including those for the purchase and 

maintenance of capital equipment. We rely on hospitals to make their decisions 

regarding the acquisition of high cost equipment with the understanding that the 

Medicare program must be careful to establish its initial payment rates, including those 

made through New Technology APCs, for new services that lack hospital claims data 

based on realistic utilization projections for all such services delivered in cost-efficient 

hospital outpatient settings. As the OPPS acquires claims data regarding hospital costs 

associated with new procedures, we regularly examine the claims data and any available 

new information regarding the clinical aspects of new procedures to confirm that our 

OPPS payments remain appropriate for procedures as they transition into mainstream 

medical practice. 

2. Movement of Procedures from New Technology APCs to Clinical APCs 

As we explained in the November 30, 2001 final rule (66 FR 59902), we 

generally keep a procedure in the New Technology APC to which it is initially assigned 

until we have collected sufficient data to enable us to move the procedure to a clinically 

appropriate APC. However, in cases where we find that our original New Technology 
CMS-1589-FC 369 

APC assignment was based on inaccurate or inadequate information (although it was the 

best information available at the time), or where the New Technology APCs are 

restructured, we may, based on more recent resource utilization information (including 

claims data) or the availability of refined New Technology APC cost bands, reassign the 

procedure or service to a different New Technology APC that most appropriately reflects 

its cost. 

Consistent with our current policy, in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45120), for CY 2013, we proposed to retain services within New Technology 

APC groups until we gather sufficient claims data to enable us to assign the service to a 

clinically appropriate APC. The flexibility associated with this policy allows us to move 

a service from a New Technology APC in less than 2 years if sufficient claims data are 

available. It also allows us to retain a service in a New Technology APC for more than 

2 years if sufficient claims data upon which to base a decision for reassignment have not 

been collected. Table 18 of the proposed rule listed the HCPCS codes and associated 

status indicators that we proposed to reassign from a New Technology APC to a 

clinically appropriate APC or to a different New Technology APC for CY 2013. 

In the CY 2013 OPPS/ASC proposed rule, we noted that currently, in CY 2012, 

there are three procedures described by HCPCS G-codes receiving payment through a 

New Technology APC(77 FR 45121). Specifically, HCPCS code G0417 (Surgical 

pathology, gross and microscopic examination for prostate needle saturation biopsy 

sampling, 21-40 specimens) is assigned to New Technology APC 1505 (New Technology 

- Level V ($300 - $400)); HCPCS code G0418 (Surgical pathology, gross and 
CMS-1589-FC 370 

microscopic examination for prostate needle saturation biopsy sampling, 41-60 

specimens) is assigned to New Technology APC 1506 (New Technology - Level VI 

($400 - $500)); and HCPCS code G0419 (Surgical pathology, gross and microscopic 

examination for prostate needle saturation biopsy sampling, greater than 60 specimens) is 

assigned to New Technology APC 1508 (New Technology - Level VIII ($600 - $700)). 

These HCPCS codes have been assigned to New Technology APCs since CY 2009. 

Analysis of the hospital outpatient data for claims submitted in CYs 2009, 2010, 

and 2011 indicate that prostate needle saturation biopsy procedures are rarely performed 

on Medicare beneficiaries. For OPPS claims submitted from CY 2009 through CY 2011, 

our final rule claims data show very minimal claims for HCPCS code G0417, G0418, and 

G0419, as shown in Table 18. 

TABLE 18.—CY 2009 THROUGH CY 2011 OPPS CLAIMS FOR HCPCS 

CODES G0417, G0418, AND G0419 (PROSTATE NEEDLE SATURATION 

BIOPSY) 

HCPCS 

Code

Long Descriptor CY 2009 

Claims 

CY 2010 

Claims 

CY 2011 

Claims 

G0417 

Surgical pathology, gross and microscopic 

examination for prostate needle saturation biopsy 

sampling, 21-40 specimens 

6 1 0 

G0418 

Surgical pathology, gross and microscopic 

examination for prostate needle saturation biopsy 

sampling, 41-60 specimens 

0 0 0 

G0419 

Surgical pathology, gross and microscopic 

examination for prostate needle saturation biopsy 

sampling, greater than 60 specimens 

0 0 1 

Given the continued lack of cost data for these HCPCS codes, we proposed to 

reassign these procedures to an APC that is appropriate from a clinical standpoint (77 FR 
CMS-1589-FC 371 

45121). Specifically, we proposed to reassign HCPCS G-codes G0417, G0418, and 

G0419 to clinical APC 0661 (Level V Pathology), with a proposed APC payment rate of 

approximately $160 for CY 2013. We stated that we believe that all three procedures, as 

described by HCPCS codes G0417, G0418, and G0419, are comparable clinically to 

other pathology services currently assigned to APC 0661 and likely require similar 

resources. Table 18 of the proposed rule listed the HCPCS G-codes and associated status 

indicators that we proposed to reassign from New Technology APCs 1505, 1506, and 

1508 to APC 0661 for CY 2013. 

We did not receive any public comments on the APC reassignments for HCPCS 

codes G0417, G0418, and G0419. Therefore, for the reasons set forth above, we are 

finalizing our proposal, without modification, to assign these codes to APC 0661. We 

note that APC 0661 is the same APC to which the other HCPCS G-code for prostate 

needle saturation biopsy procedure, G0416 (Surgical pathology, gross and microscopic 

examination for prostate needle saturation biopsy sampling, 1-20 specimens), is assigned. 

In addition, for the CY 2013 update, we are revising the long descriptor for HCPCS code 

G0416 to read “Surgical pathology gross and microscopic examination for prostate 

needle saturation biopsy sampling 10-20 specimens” effective January 1, 2013. The final 

CY 2013 geometric mean cost for APC 0661 is approximately $162. 

Table 19 below lists the HCPCS codes and associated status indicators that we are 

reassigning from a New Technology APC to a different New Technology APC for 

CY 2013. The final CY 2013 payment rates for HCPCS codes G0417, G0418, and 
CMS-1589-FC 372 

G0419 can be found in Addendum B of this final rule with comment period (which is 

available via the Internet on the CMS Web site). 

TABLE 19.—REASSIGNMENT OF PROCEDURES FROM NEW 

TECHNOLOGY APCs FOR CY 2013 

CY 

2013 

HCPCS 

Code 

CY 2013 Short Descriptor 

CY 

2012 

SI 

CY 2012 

APC 

Final 

CY 2013 

SI 

Final 

CY 2013 

APC 

G0417 Sat biopsy prostate 21-40 S 1505 

G0418 Sat biopsy prostate 41-60 S 1506 

G0419 Sat biopsy prostate: >60 S 1508 

X 0661 

3. Payment Adjustment Policy for Radioisotopes Derived from Non-Highly Enriched 

Uranium Sources

a. Background

Radioisotopes are widely used in modern medical imaging, particularly for 

cardiac imaging and predominantly for the elderly (Medicare) population. 

Technetium-99 (Tc-99m), the radioisotope used in the majority of such diagnostic 

imaging services, is currently produced in legacy reactors outside of the United States 

using highly enriched uranium (HEU). 

The Administration has established an agenda to eliminate domestic reliance on 

these reactors, and is promoting the conversion of all medical radioisotope production to 

non-HEU sources. Alternative methods for producing Tc-99m without HEU are 

technologically and economically viable, and conversion to such production has begun 

and is expected to be completed within a 5-year time period. We expect this change in 
CMS-1589-FC 373 

the supply source for the radioisotope used for modern medical imaging will introduce 

new costs into the payment system that are not accounted for in the historical claims data. 

Full Cost Recovery, which is routinely considered in CMS payment under 

Medicare, is the accounting practice used by producers and suppliers to describe the 

recovery of all contributing costs. Unlike legacy sources that often benefit from 

government subsidized multifunction facilities, the cost of these alternative methods will 

be increased over the cost of medical radioisotopes produced using HEU because 

hospitals’ payments to producers and suppliers will have to cover capital expense (such 

as, for example, the cost of building new reactors, particle accelerators, or other very 

long-term investments), as well as all other new industry-specific ancillary costs (such as, 

for example, the cost of long-term storage of radioactive waste). Hospitals that use 

medical radioisotopes that are produced from non-HEU sources can expect producers and 

suppliers to pass on to them the full impact of these costs. 

In the short term, some hospitals will be able to depend on low cost legacy 

producers using aging subsidized reactors while other hospitals will be forced to absorb 

the full cost of non-HEU alternative sources. Over several years, we believe that these 

cost differentials will promote increased regional shortages and create larger cost 

differentials and greater cost variations among hospitals. As a result, we believe this 

change in supply source will create a significant payment inequity among hospitals 

resulting from factors that are outside of normal market forces. 
CMS-1589-FC 374 

b. Payment Policy 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45121 through 45123), we 

proposed to exercise our authority to establish “other adjustments as determined to be 

necessary to ensure equitable payments” under the OPPS in accordance with section 

1833(t)(2)(E) of the Act. We stated that we do not believe that we can ensure equitable 

payments to hospitals over the next 4 to 5 years in the absence of an adjustment to 

account for the significant payment inequities created by factors that will likely arise due 

to the change in supply source for the radioisotope used commonly in modern medical 

imaging procedures. We proposed to provide an adjustment for the marginal cost for 

radioisotopes produced from non-HEU sources over the costs for radioisotopes produced 

by HEU sources. We stated that we believe such an adjustment would ensure equitable 

payments in light of the Administration’s HEU agenda, market influences, cost 

differentials, and cost variations that will create significant payment inequities among 

hospitals. 

For CY 2013, we proposed to make an additional payment of $10, which is an 

amount based on the best available estimations of the incremental costs associated with 

non-HEU Tc-99m production as calculated using the Full Cost Recovery accounting 

methodology. We proposed to establish a new HCPCS code, QXXXX (Tc-99m from 

non-HEU source, full cost recovery add-on, per dose), to describe the Tc-99m 

radioisotope produced by non-HEU methods and used in a diagnostic procedure. Under 

the proposal, hospitals would be able to report this HCPCS Q-code once per dose along 

with any diagnostic scan or scans furnished using Tc-99m as long as the Tc-99m doses 
CMS-1589-FC 375 

used can be certified by the hospital as coming from non-HEU sources and have been 

priced using a Full Cost Recovery accounting methodology. The HCPCS Q-code would 

be used to pay hospitals for the additional (incremental) cost of using Tc-99m from a 

non-HEU source. 

Under the proposal, hospitals would not be required to make a separate 

certification of the non-HEU source on the claim; the inclusion of the new HCPCS code 

QXXXX on the claim would indicate that the hospital has met the conditions of the 

service definition as it does for any billed service. However, in the event of an audit, we 

stated that hospitals would be expected to be able to produce documentation that the 

individual dose delivered to the patient was completely produced from a non-HEU 

source. We proposed three ways in which hospitals could accomplish this. 

First, the hospital could produce documentation such as invoices or patient dose 

labels or tracking sheets that indicated that the patient’s dose was completely produced 

from non-HEU sources and priced based on Full Cost Recovery. In this first case, the 

supplier would be expected to be able to trace a specific dose of Tc-99m to a completely 

non-HEU batch. Current pharmacy recordkeeping is generally able to trace all 

components of radiopharmaceuticals back to their source production batches. A hospital 

would not be compliant with the HCPCS Q-code definition if the documentation 

indicated the supplier produced a mixed batch and labeled a fraction of the doses equal to 

the non-HEU fraction in the batch. 

Second, a hospital could produce documentation that the entire batch of Tc-99m 

doses derives from non-HEU sources for a specified period of time, for example, the time 
CMS-1589-FC 376 

that a single non-HEU based generator is in use. This approach would obviate the need 

for specific dose tracking from a claims audit perspective, although that information is 

typically required for other purposes. An attestation from the generator supplier would 

be sufficient evidence for the hospital, as would invoices that show that all doses of 

Tc-99m during a specified period came from inherently non-HEU alternative sources. 

Third, if the industry was to implement labeling of generators and/or doses with 

labels attesting to 100 percent non-HEU sources priced based on Full Cost Recovery, 

documentation of labeled isotope usage using either the specific dose approach or the 100 

percent hospital usage approach could provide evidence of hospital compliance. The 

hospital would be required to retain appropriate documentation within the hospital 

(including pharmacy) records but would not need to keep any specific documentation 

within the individual medical record. Also, we would consider a dose to be priced based 

on Full Cost Recovery when the supplier could attest that the supply chain adheres to 

usual industry practices to account for Full Cost Recovery, specifically including the 

capital cost of sustainable production and the environmental cost of waste management. 

To reduce the administrative overhead for hospitals, we proposed not to require 

hospitals to separately track additional costs for Tc-99m doses from non-HEU sources, 

but to include the cost of the radioisotope in the cost of the diagnostic 

radiopharmaceutical as usual, reporting only a token $1 charge for the HCPCS code 

QXXXX line. Under the proposal, we would continue to calculate the total costs of 

radionuclide scans using claims data, and would periodically recalculate the estimated 

incremental cost of Tc-99m from non-HEU sources based on Full Cost Recovery, using 
CMS-1589-FC 377 

models relying on the best available industry reports and projections, and would adjust 

the payment for HCPCS code QXXXX accordingly, reducing the payment for the scans 

by the amount of cost paid through HCPCS code QXXXX payment. We stated that we 

believe this proposal allows us to continuously compensate for unanticipated changes in 

Tc-99m cost attributable to new non-HEU supply sources while avoiding a double 

payment for the increased cost. 

Comment: The vast majority of commenters conceptually agreed with CMS’ 

proposed payment policy. However, the commenters differed in opinion on how CMS 

should implement a proposal to encourage hospitals to switch from Tc-99m derived from 

HEU sources to Tc-99m derived from non-HEU sources. 

Many commenters disagreed specifically with CMS’ proposal to make an 

additional payment of $10 per dose for Tc-99m radioisotopes produced by non-HEU 

methods, used in a diagnostic procedure. These commenters agreed that an additional 

payment is necessary in order to ensure that hospitals are fully paid for the additional 

costs incurred for the use of non-HEU Tc-99m radioisotopes, but the commenters argued 

that the additional $10 payment is insufficient and inadequate to incentivize hospitals to 

change their current practices and transition purchases of Tc-99m to non-HEU sources. 

The commenters suggested that CMS instead adjust or increase the payment amount to 

more adequately cover any additional costs to providers. 

One commenter asked that CMS conduct a study of the actual costs at a time 

when non-HEU Tc-99m is actually available to hospitals, and propose an adjustment that 
CMS-1589-FC 378 

will better reflect both the marginal additional costs of the non-HEU sources and the 

administrative and compliance burden on hospitals. 

Another commenter recommended that CMS establish HCPCS code QXXXX 

(Tc-99m from non-HEU sources, full cost recovery add-on, per dose) and make an 

interim payment of $10 per unit for CY 2013 and CY 2014. The commenter further 

suggested that, beginning in CY 2015, CMS calculate the cost of the service described by 

the recommended code based on the standard CMS payment methodology because the 

calculations will be based on charges for services furnished in CY 2013, and for CY 2015 

and years following, CMS will have estimated costs on which to base the additional 

payment for the HCPCS Q-code. In addition, the commenter recommended that CMS 

carefully track the phase-out of the HEU sources and eliminate HCPCS code QXXXX 

once HEU is phased out of the market in the United States. 

Overall, most of the commenters encouraged CMS to continue to work with 

pertinent stakeholders and providers in the industry on this issue. 

Response: We agree with the commenters that $10 is not a large incentive 

payment to promote a conversion to non-HEU sources of Tc-99m. However, we are 

concerned that many commenters have mischaracterized this payment. We did not create 

an additional payment to promote the Administration’s initiative to eliminate domestic 

reliance on legacy production processes producing Tc-99m from HEU, as that is outside 

the scope of the OPPS. Rather, the industry has conveyed to us that this conversion to 

non-HEU sources will occur in response to U.S. strategic policy, but that cost 

considerations have created barriers to that movement. One of the cost considerations is 
CMS-1589-FC 379 

the fact that non-HEU sourced Mo-99, the Tc-99m precursor, is expected to cost more 

than current sources from legacy reactors, and this increased cost will adversely impact 

hospitals. In evaluating that concern, we determined that there is, in fact, a probability 

not only that costs will increase but that those costs will not be passed on uniformly as 

the industry converts. Therefore, we used our authority to ensure payment equity among 

hospitals by proposing to create this additional payment to address the incremental cost 

of obtaining Tc-99m from the new sources of supply. Although commenters have opined 

that a larger payment would be a better incentive to support non-HEU conversion, the 

purpose for the additional payment is limited to mitigating any adverse impact of existing 

payment policy and is based on the authority set forth at section 1833(t)(2)(E) of the Act. 

Most of the comments raising concerns about the inadequacy of the additional 

payment suggested that we did not account for the administrative costs involved in 

implementing this additional payment at the hospital level, at the radiopharmacy level, 

and at the level of the generator manufacturer. However, we note that previous 

discussions with the industry indicated that the actual costs of conversion, distinct from 

the administrative costs of billing, are confined to the producer (reactor) and the 

processor and are passed down through the supply chain from there. In our own analysis, 

we concurred with that finding and calculated a payment that would readily cover the 

additional cost of this change in supply as it is passed down the supply chain. We do not 

believe that it promotes efficiency to add administrative markup to this increased cost of 

a supply, especially given that we believe that the administrative cost of adding a new 

service into the billing system should be small at the hospital and the pharmacy levels. 
CMS-1589-FC 380 

Moreover, due to the small absolute difference in cost between non-HEU and HEU 

sourced Tc-99m, we do not believe that significant inequities would exist in hospital 

costs until a significant amount of more expensive non-HEU Mo-99 enters the system, at 

which point any administrative cost would be spread over a large number of claims. 

Finally, we agree with commenters who stated that this additional payment should 

be updated as better data become available. We stated in the proposed rule that we intend 

to look at the amount of the add-on payment and potentially update it as better economic 

information becomes available. Although we did not limit ourselves to the methodology 

beyond a commitment to use the best available data, we also did not propose using our 

usual OPPS methodologies to update the payment. We had specifically advised hospitals 

that separate reporting of the cost of Tc-99m from non-HEU sources was not required for 

several reasons. First, a particular generator manufacturer could elect to provide HEU 

and non-HEU generators at the same averaged cost, a method that would enable the client 

hospitals to defray any overall cost increase as non-HEU generators became randomly 

available. Because there could still be an incremental cost differential incurred by doing 

business with that manufacturer as compared with a purely non-HEU manufacturer, our 

normal OPPS methods would show no incremental cost and thus could not be used to 

mitigate a payment inequity. Second, we noted that separate reporting of the costs of the 

two sources or the calculation and reporting of a cost differential would significantly 

increase the administrative burden on hospitals, a burden of which we have been 

particularly mindful. 
CMS-1589-FC 381 

Comment: Several commenters asked that CMS provide separate payment for all 

diagnostic radiopharmaceuticals, regardless of their per day cost, as this policy would 

support conversion to non-HEU sources. A few commenters recommended that CMS 

unpackage all radiopharmaceuticals that meet the annual packaging threshold. They also 

suggested that CMS unpackage all radiopharmaceuticals that use Tc-99m, regardless of 

their per day cost. One commenter suggested that the proposed add-on payment of $10 

be made in addition to separate payment for the diagnostic radiopharmaceutical. 

The commenters emphasized their concern over increased costs of conversion to 

100 percent non-HEU for radioisotopes. One commenter argued that separate payment 

would provide a direct, measurable incentive to the entire radiopharmaceutical market 

supply chain to support the efforts to convert from HEU to non-HEU sources. 

Additionally, the commenter stated that separate payment would allow CMS to obtain 

accurate hospital cost data on the cost of both HEU and non-HEU radiopharmaceuticals. 

Response: We have already discussed in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66765 through 66768) the reasons why the agency has 

determined that it is appropriate to package payment for a diagnostic radiopharmaceutical 

into the payment for the nuclear medicine scan, and we have finalized this policy again in 

section II.A.3.f. of this final rule with comment period. However, specifically from the 

standpoint of this add-on payment to ensure equitable payments to hospitals, a separate 

payment for the diagnostic radiopharmaceutical would not unpackage the cost of the 

radioisotope from the much larger cost of the drug component, nor would it differentiate 

between HEU and non-HEU sources. Therefore, unpackaging the cost of the diagnostic 
CMS-1589-FC 382 

radiopharmaceutical would not create a differential payment to ensure payment equity 

amongst hospitals. 

Comment: Several commenters were concerned with CMS’ proposal that Tc-99m 

doses be derived 100 percent from non-HEU sources in order to receive the additional 

$10 payment. A few commenters stated that it would be impossible to accurately predict 

the percentage of Tc-99m doses that will be comprised 100 percent from non-HEU 

sources. Other commenters expressed concern over the significant costs that will be 

incurred for segregating 100 percent non-HEU sources, especially in the radiopharmacy. 

Response: We agree with the commenters that it will be impossible to accurately 

predict the percentage of Tc-99m doses that will be comprised of 100 percent of 

non-HEU sourced material, but that is because it will be impossible to predict the 

percentage of non-HEU Tc-99m available to manufacturers at any point in time. This 

presumption is one of the reasons that led us to the conclusion that payment for doses 

where 100 percent comes from non-HEU sources was the only reasonable option. We do 

not need to predict the amount of non-HEU Mo-99 available to the industry to establish a 

blend; instead, the HCPCS Q-code can be used whenever and wherever enough non-HEU 

Tc-99m is available to be kept separate down to the level of the generator or patient dose. 

Multiple codes to reflect different blends are not needed, and we do not need to create 

smaller payments for blends that reflect smaller amounts of non-HEU material. Because 

payment must be driven by cost, a 20-percent blend would be limited to 20 percent of the 

$10 cost or $2, and hospitals are already concerned that the $10 additional payment is a 
CMS-1589-FC 383 

small payment when they consider it against the effort involved in making tracking and 

billing changes. 

However, we do not believe that any costs created by changes in radiopharmacy 

procedures will be significant in the charges passed on to hospitals. We do understand 

that there may be some instances in which a radiopharmacy will have both a non-HEU 

and an HEU generator, and the pharmacy will need to determine whether it wants to keep 

those sources separate or blend them and eschew labeling of a non-HEU source. We also 

understand that this may be a larger issue at the generator manufacturer level, especially 

very early in the conversion when non-HEU Mo-99 is scarce. On the other hand, when 

non-HEU Mo-99 is scarce, the incremental cost of higher priced non-HEU Mo-99 is 

small and the blending of small amounts of non-HEU Mo-99 will not create payment 

inequities among hospitals. We expect that as conversion progresses and more non-HEU 

Mo-99 enters the supply chain, manufacturing processes may evolve. Ultimately, there is 

no requirement to use this HCPCS Q-code or label non-HEU based Mo-99; the payment 

exists as a tool if it is necessary to reduce payment inequities that might occur as a 

consequence of industry conversion to non-HEU based Mo-99. 

One of the concerns about reporting doses derived from 100 percent non-HEU 

sources had to do with compliance concerns if, in the process of switching between an 

HEU and a non-HEU run, the manufacturer or pharmacy did not add in an extra step of 

flushing lines to ensure that cross-contamination did not occur. Our understanding is that 

using different sources for consecutive manufacturing runs would not create source 

contamination of more than 1 or 2 percent based on usual manufacturing processes. We 
CMS-1589-FC 384 

note that it is not our intent to introduce unnecessary inefficiencies solely to support 

payment, and in this case we can confirm that production steps, such as cleaning lines, 

should be driven by FDA manufacturing requirements, not by payment artificialities. We 

believe that manufacturing steps that do not risk reducing the non-HEU sourced Mo-99 

or Tc-99m to less than 95 percent of the generator, elution or dose (that is, do not risk 

reducing the content of the dose supplied to the patient to less than 95 percent non-HEU 

sourced Tc-99m) are consistent with a product that is completely derived from a nonHEU source. Therefore, we are modifying our proposal to state that any dose of Tc-99m 

that can be traced to a Mo-99 supply containing no more than 5 percent HEU sourced 

Mo-99 shall be considered to be completely derived from non-HEU sources for the 

purposes of this final rule with comment period, this additional payment, and any 

compliance practices that support it. It is our understanding that the normal 

manufacturing records will still support processes that created the non-HEU supply. 

Comment: One commenter expressed concern regarding the administrative and 

financial burden that hospitals may incur upon adoption of this proposed policy. The 

commenter stated that these burdens may exceed the marginal additional cost of moving 

to non-HEU sources. The commenter believed that the proposed policy would result in 

additional administration and documentation burdens which include the following 

additional expenses: expenses for developing and maintaining policies to track, certify, 

and document HEU versus non-HEU sources in order to use the newly required HCPCS 

Q-code; new compliance program checks and monitoring to ensure the appropriate codes 

are used and documentation is maintained should an audit be conducted; additional 
CMS-1589-FC 385 

personnel time and resources to create and maintain line items on the hospital charge 

master for non-HEU versus HEU codes and charges; and additional resources to develop 

nuclear medicine department information technology infrastructure, as well as billing 

policies for documentation and use of the new HCPCS Q-code. 

Another commenter also believed that this proposal would create a significant 

burden on hospitals by requiring them to obtain, document, and track information from 

the supplier and thereby create an unnecessary level of complexity for hospitals that 

could result in code errors and omissions on claims. The commenter urged CMS not to 

finalize this proposal. 

Response: We do not believe that this additional payment will result in a 

significant administrative burden to hospitals. We note that most hospitals have 

computerized inventory and billing systems that are able to track low-cost items such as 

needles and aspirins. We have reiterated in our response to public comments in this final 

rule with comment period that we expect hospitals requesting this additional payment to 

be able to track a dose that has been labeled or claimed as “non-HEU sourced” and do not 

expect hospitals to audit the validity of such claims made by their suppliers. We also 

note that the cost of adding a new code to the hospital chargemaster is not large, and that 

a hospital is not being subject to a significant payment inequity if the cost of adding a 

new code to the chargemaster actually exceeds the added cost of non-HEU sourced 

Tc99m to the hospital. Hospitals that are not experiencing high volumes of significantly 

increased costs are not obligated to use this additional payment as its use is entirely 

optional. 
CMS-1589-FC 386 

Comment: One commenter asked that CMS confirm in this final rule with 

comment period that hospitals will not be required to audit or otherwise independently 

verify manufacturer or radiopharmacy documentation that a dose/injection meets the 

standard of non-HEU priced at Full Cost Recovery. 

A few commenters expressed concern regarding the compliance and liability 

burden that adopting this policy may place on hospitals. These commenters stated that 

hospitals may be uncomfortable attesting that the supplies they receive are from 

non-HEU sources when there is no reliable guarantee that the products are from 

non-HEU sources. Further, the commenters stated that they believe that the term 

“attesting” in the ASP model is significantly different from what they believe is the 

original intent of this proposal. Therefore, the commenters suggested that CMS clarify 

the adequate documentation necessary to confirm that the provider obtained a dose that is 

100 percent from non-HEU sources. 

Response: We are aware that providers must exert considerable effort to 

conscientiously perform their compliance responsibilities over such a vast health care 

system, and we specifically attempted to offer examples of acceptable compliance steps 

to alleviate that burden in this instance. We acknowledge that the end product used by 

hospitals is effectively homogenous, and there is no practical way for a hospital to prove 

chemically that a supply purported to be derived from a non-HEU source truly meets 

those requirements. On the other hand, the radiopharmaceutical industry is a heavily 

regulated industry closely monitored by the Food and Drug Administration, and it is our 

understanding that if a supplier indicates that a source is non-HEU, manufacturing 
CMS-1589-FC 387 

records will be able to confirm that. We are confident that claims by suppliers as to the 

source of the Tc-99m used can be satisfactorily audited through usual manufacturing 

processes without creating additional requirements for hospitals. We do not expect 

hospitals to assay doses of drugs to ensure that they received what the invoice claimed, 

and we do not expect any chemical or physical verification here. It was our intent in the 

proposed rule to indicate that providers are expected to exercise due diligence, and to 

ensure that their claims are supported by internal records of some type, but that facilities 

could accept any tracking mechanism by a supplier (invoice, label, contract, among 

others) regarding a non-HEU source as satisfactory proof for the purposes of the facility. 

We also note that any use of the word “attestation” in the proposed rule was 

meant only to indicate a formal statement by one party to assure another party of the 

source and composition. We further note that these were examples in the proposed rule 

rather than requirements. 

Comment: Several commenters asked that CMS publish the methodology and 

data used to establish the additional payment amount of $10 for Tc-99m derived from 

non-HEU sources. 

Response: There are two data sources on which we relied. First, the Organization 

for Economic Cooperation and Development - Nuclear Energy Agency (OECD-NEA) 

has published several economic analyses of the world market for Tc-99m, which are 

pertinent for the United States because, at present, our entire supply comes from foreign 

sources. Although some members of the industry have opined that these data are not 

accurate because the data include little information from U.S. suppliers, the fact remains 
CMS-1589-FC 388 

that there is currently no supply available domestically. Thus, while the data we used 

may not reflect all of the unique market forces present in the domestic market, this data 

source provides the best estimation of the costs of non-HEU sources compared to HEU 

sources because the manufacturing steps are primarily performed overseas and therefore 

reflect the global market. Nonetheless, as an additional data source, we invited industry 

entities to submit additional information regarding their manufacturing and supply costs, 

production levels, and prices. However, given that the industry is small with limited 

numbers of competitors at each level of the supply chain, most American companies were 

reluctant to provide information and were insistent on confidentiality (as protected by 

FOIA Exemption 4) to safeguard the sensitive (business competitive) information that 

they did share. Therefore, we accepted supplemental information from the industry and 

pledged to maintain its confidentiality, and consequently are unable to provide details of 

the additional information. We can disclose our methodology and refer readers to the 

OECD-NEA models that form the basis of our model, noting that the supplemental 

information submitted to date has not significantly altered the conclusions drawn by the 

OECD-NEA. 

To estimate costs, we tracked costs through the entire supply chain, using a 

building block approach to add the cost of each step onto the steps that occurred before it. 

Because the OECD-NEA provided ranges rather than point estimations, we used an 

averaging approach to factor in the possible low cost, the possible high cost, and the most 

likely “expected” cost. This is a common estimation technique used in business when 

significant uncertainty exists. By avoiding optimistic assumptions, we were able to 
CMS-1589-FC 389 

model a payment that reflects not only the likely costs but ones that would also be 

adequate to cover unexpected costs in one or more of the manufacturing steps. 

In response to the request to provide as much detail about our methodology as 

possible, we are detailing that methodology here. We used a supply chain model to 

accumulate costs through the Tc-99m supply chain based on-- 

(Unit Cost of Supply / Production Efficiency) + Unit Production Cost + ((Fixed 

Production Costs + Overhead) / Units Produced) = Unit Production Cost = Downstream 

Unit Cost of Supply. 

In tracking units (efficiency), we allowed for product loss during production and 

for product loss as a function of time (decay). We applied this model across a supply 

chain that consisted of-- 

Irradiator/Producer > Processor > Generator Manufacturer > Nuclear Pharmacy > 

Hospital > Patient. 

Using a Program Evaluation and Review Technique (PERT) 3-point estimation 

applied to costs, we based the upper and lower bounds on the OECD-NEA economic 

models for Full Cost Recovery (2011) and non-HEU Conversion (2012), given that U.S. 

supply is based on the global market. We then varied the expected value to model a 

range of outcomes. Finally we calculated the incremental cost of process changes by 

subtracting current costs. Almost all of the incremental costs of switching to non-HEU 

sources occur in the irradiation and the processing steps, with very little impact on 

generator assembly, generator elution, or the preparation of the patient dose. We noted 

that any artificial costs of tracking during conversion would not be reflected in the final 
CMS-1589-FC 390 

post-conversion costs of supply. Due to the wide variation in cost projections, we 

rounded up to the nearest $5 as most of the estimators could not be regarded as 

sufficiently precise to justify a more precise value until actual cost data become available. 

This methodology resulted in a projection that fully accounts for the cost of conversion in 

almost all probable scenarios and that also accounts for or significantly offsets the costs 

of Full Cost Recovery under most combinations of assumptions. Therefore, the $10 

value can be expected to offset any payment inequities under most likely combinations of 

cost changes within the Tc-99m supply chain. 

Comment: One commenter stated that suppliers of Mo-99 are currently working 

toward full conversion to non-HEU sources by 2015. However, the commenter stated 

that it is estimated that only 10 percent of the Tc-99m doses used in the United States 

could be produced from 100 percent non-HEU sources in 2013. The commenter further 

believed that the proposed policy will cause a substantial increase in material costs, 

require duplicative effort in the preparation of radiopharmaceutical doses, add additional 

administrative costs, increase the costs for non-HEU products, and create a disincentive 

for hospitals that cannot purchase non-HEU products as they would be unwilling to pay 

higher prices for their nuclear pharmaceutical products when they are not receiving any 

additional benefits. 

The commenter instead suggested that these impacts can be reduced by 

establishing a threshold amount of Mo-99 that must be used by a generator manufacturer 

for CY 2013, based on information provided by the OECD-NEA and other pertinent 

stakeholders. The commenter stated that this amount could then be adjusted upward in 
CMS-1589-FC 391 

later years. The commenter further explained that, in order for a technetium generator to 

be considered “compliant” with the requirements for the additional payment, the 

manufacturer of that generator would need to certify to providers that it used at least the 

established threshold amount of non-HEU sourced Mo-99 in the production of its 

generators for CY 2013 and for subsequent quarters. In turn, the hospitals that purchased 

the Tc-99m doses prepared by complaint manufactures would receive separate payment 

during that specific period. The commenter stated that this approach would require a 

downward adjustment to the proposed $10 additional payment to reflect the lower 

amount of non-HEU Mo-99. 

Response: We acknowledge the desirability of a simplified payment for 

non-HEU sourced material in the generators, and agree that the proposed blended 

payment would be much easier to implement. However, we note that we do not have the 

authority to create that type of payment. Within the OPPS, we depend on reported costs, 

as calculated from claims and cost report information, to set prospective payments. Our 

authority to deviate from this system in this instance is based on the authority of the 

Secretary to adjust payments if necessary to ensure payment equity among hospitals. A 

payment adjustment based on industry-wide thresholds would not create a payment 

differential among those hospitals with predominantly higher cost non-HEU sources and 

those hospitals with predominantly lower cost HEU sources. However, although we lack 

the authority to create a special payment to cover rising costs at the industry or 

manufacturer level, we note that the normal OPPS payment mechanism does exactly that: 

as costs rise, those costs will be passed on globally to hospitals and reflected in their 
CMS-1589-FC 392 

charges adjusted to costs and, therefore, ultimately reflected in the prospective payments 

calculated by our usual methodology. This add-on payment merely ensures equitable 

payments to hospitals through the transition where non-HEU sources are not uniformly 

distributed, while our established OPPS mechanisms will ensure that the total costs of 

new sources are incorporated into final payments year by year. We also have previously 

stated that we believe that costly changes in manufacturing solely to facilitate a 

transitional payment are not likely to occur, and that instead the payment can be expected 

to trigger small administrative changes. We expect that expensive changes in industry 

processes will not be driven by an interim payment but will occur only when those 

changes will continue to be necessary or desirable after the transition is complete. 

Comment: A few commenters suggested that CMS, at a minimum, allow a 

payment adjustment for lower percentages (less than 100 percent) of non-HEU sources 

and institute a multiyear phase-in period. One commenter suggested that CMS establish 

a “threshold quotient” of non-HEU content in Tc-99m radiopharmaceuticals during CY 

2013 and allow partial payment of the $10 additional payment amount. The commenter 

explained that this would require CMS to accept a given percentage amount of non-HEU 

source content and pay a corresponding percentage of the proposed $10 additional 

payment amount. The commenter gave the example of a payment of $1.50 for Tc-99m 

sources that contain 15 percent non-HEU, as $1.50 is 15 percent of the $10 proposed 

additional payment amount. The commenter also suggested that CMS could further 

promote the conversion to 100 percent non-HEU sources by adopting industry-wide 
CMS-1589-FC 393 

targets for conversion, which would include conversion to 25 percent in CY 2013, 50 

percent in CY 2014, 75 percent in CY 2015, and 100 percent in CY 2016. 

Another commenter suggested that a 10-percent industry threshold program be 

considered for CY 2013 in lieu of the 100 percent non-HEU sources proposed 

requirement. The commenter stated that a payment of no less than $10 could be given for 

non-HEU documented doses and that this would be more reflective of the short-term 

non-HEU Mo-99 supply. 

Response: As noted above, our authority to establish this additional payment is 

based on the necessity to ensure equitable payments to hospitals, an authority that does 

not allow us to develop payments to promote the conversion of the industry to non-HEU 

sources. Therefore, our ability to create industry-wide payments is limited. We 

considered using one or more thresholds ranging from 10 percent to 80 percent to pay for 

blended sources that were not derived entirely from non-HEU sourced Mo-99, but 

determined that to be impractical for several reasons. First, the use of multiple codes to 

describe different mixtures of HEU and non-HEU sourced Mo-99 is immeasurably more 

complex than a simple single all or nothing coding choice, and many commenters were 

concerned about the complexity of even our proposed coding schema. Second, any blend 

of HEU and non-HEU sourced material will, as mentioned by the commenters, have 

reduced additional costs in proportion to the percentage of the blend. Because many 

commenters were concerned that $10 was small compared to the administrative effort 

they believed might be involved, we did not believe that a significantly smaller payment 

would be acceptable to that level of the supply chain. 
CMS-1589-FC 394 

Comment: Several commenters suggested that CMS extend the $10 additional 

payment for non-HEU sources for at least 5 years. The commenters stated that this 

period of time will be required to convert fully to non-HEU sources. Another commenter 

requested clarification of the proposed implementation date and methodology for 

calculating the total costs of radionuclide scans using claims data and the periodic 

recalculation of the estimated marginal cost of non-HEU Full Cost Recovery sources 

using models relying on the best available industry reports and projections, resulting in an 

adjustment in the payment of the proposed HCPCS code QXXXX accordingly, reducing 

the payment for the scans by the amount of cost paid through the HCPCS code QXXXX 

payment. 

Response: Although we typically propose only the payments for the subsequent 

calendar year except in the case of adjustments that need to be phased in over multiple 

years, we did state our current expectations of the state of the industry and our 

expectations of a probable need for this additional payment over multiple years. We 

stated that our current expectation is that the transition to non-HEU sourced Mo-99 will 

be completed within 4 to 5 years. Therefore, we expect there may be a need to make 

differential payments for a period of 4 to 5 years. We will reassess, and propose, on an 

annual basis, whether such an adjustment under section 1833(t)(2)(E) of the Act 

continues to be necessary and whether any changes to the adjustment are needed. Again, 

our current expectation is that this additional payment will be needed for the duration of 

the industry’s conversion to alternative methods to producing Tc-99m without HEU, 

which is expected to be completed within 4 to 5 years. 
CMS-1589-FC 395 

With respect to the request for clarification regarding future adjustments of this 

proposed payment, we note that the payment is being applied in addition to the standard 

procedure payment amount for nuclear medicine scans, including the diagnostic 

radioisotope and pharmaceutical, that is paid based on reported costs. As more non-HEU 

sourced Mo-99 is used, the costs reported by hospitals will contain costs associated with 

non-HEU conversion. Because the HCPCS code QXXXX is the indicator of non-HEU 

Mo-99 use and is also the vehicle for the additional payment, the rate at which extra 

payments are made will exactly follow the rate at which non-HEU sources are reported 

with their attendant additional costs. Therefore, even as we increase the payment for the 

nuclear medicine scan with radioisotope in the future due to increasing radioisotope 

costs, we expect to offset (reduce) the payment by the amount of the non-HEU add-on 

payment to avoid paying twice for non-HEU costs. This approach has the effect of using 

the add-on payment to make an additional payment for the cost of non-HEU sourced Mo99 in the year that the cost appears, rather than waiting 18 months until the cost is 

reflected in the claims data. Consistent with our OPPS methods, though, we will still be 

basing the final payments for the nuclear medicine scans on the aggregate costs of the 

scan and its radioisotopes and pharmaceuticals as reported by hospitals. For example, 

suppose that 20 percent of hospitals in CY 2013 report non-HEU Tc-99m usage billed 

with HCPCS code QXXXX. The OPPS payment for the scan with its diagnostic 

radioisotope will still reflect 100 percent of the reported CY 2011 costs. The $10 from 

HCPCS code QXXXX will represent additional money because the higher cost non-HEU 

Tc-99m was not reflected in the CY 2011 cost data. However, when we set the rates for 
CMS-1589-FC 396 

CY 2015, those 20 percent of the hospitals who used non-HEU Tc-99m in CY 2013 will 

have reported higher costs for scans in the CY 2013 claims data because they had an 

additional cost from the non-HEU Tc-99m that they used. To eliminate a double 

payment, we will need to make an adjustment, such as removing the total dollars paid by 

HCPCS code QXXXX in CY 2013 (that is, the estimated additional cost of the non-HEU 

sourced isotope in those 20 percent of the claims) from the total reported procedure 

dollars in CY 2013 before setting the base procedure rate for CY 2015. We note that this 

offset does not reduce the payment for the scan below its current level; it only keeps the 

payment from going up as the cost of the radioisotope rises, because the increased cost of 

the radioisotope is being paid separately using HCPCS code QXXXX. In fact, in CY 

2015, the utilization of non-HEU sourced Tc-99m should have continued to climb well 

beyond 20 percent. As in CY 2013, the dollars associated with increased utilization, that 

is, HCPCS code QXXXX billing in excess of the 20 percent, will again represent 

additional money over the total costs reflected in the CY 2013 claims. 

Comment: A few commenters suggested that CMS alter the description of the 

proposed HCPCS code QXXXX by adding the word “study” into the descriptor in order 

to make this definition more consistent with the arcana of the radiopharmaceutical 

industry. The commenters stated that the descriptor for the HCPCS Q-code therefore 

would be HCPCS code QXXXX (Tc-99m from non-HEU source, full cost recovery addon, per study dose). The commenters stated that it would be logical to add the word 

“study” because several nuclear cardiology procedures could require multiple Tc-99m 

doses administered alone with one CPT procedure code. Thus, they believed that 
CMS-1589-FC 397 

providers would purchase one to three study doses. The commenters further suggested 

that CMS clarify in this final rule with comment period that the add-on payment would 

apply to each per study dose of the complete service as described by the CPT procedure 

code. Therefore, the commenters stated, providers would be able to bill the HCPCS Qcode with multiple units and be paid $10 per the number of study doses provided during 

the procedure described by the CPT code, as appropriate. 

Response: We acknowledge that it was our intent that this additional payment 

would be applied per study dose, such as the dose for the study performed at rest and the 

dose for the study performed with exercise. Therefore, we accept these recommendations 

and are modifying the proposed HCPCS definition to include the word “study” as 

follows: HCPCS code Q9969 (Tc-99m from non-highly enriched uranium source, full 

cost recovery add-on, per study dose). 

Comment: Several commenters requested that CMS clarify the proposal which 

requires a reduction to the payment for the scans by the amount of cost paid through the 

proposed HCPCS code QXXXX. The commenters were not sure whether the payment 

offset would be applied uniformly to all hospitals or only to those hospitals reporting 

non-HEU source doses. The commenters further requested that no reduction in payment 

for nuclear scans by made as a result of the additional $10 payment amount. 

Response: Although commenters were not making this comment in the context of 

budget neutrality, the considerations that caused us to create a payment offset were driven 

by precisely that statutory constraint. As discussed above, because hospitals will not be 

required to separately report costs for non-HEU radioisotopes, all increased costs will be 
CMS-1589-FC 398 

reported as part of the charges for the nuclear scans. To preserve budget neutrality, an 

additional payment in one place must be accompanied by an offset somewhere else. To 

prevent double payment for the radioisotope, this offset will have to come from the 

payment for nuclear scans. Because all hospitals use the same codes for scans, and 

because parallel families of codes for scans using HEU and non-HEU sourced Tc-99m 

were not feasible, the offset will be applied to all hospitals. However, this offset will not 

occur until the claims data show non-HEU payments, at which time reported charges will 

presumably also reflect these increases in radioisotope costs. Thus, under the current 

expectations, if 10 percent of CY 2013 claims for a given nuclear scan show a $10 nonHEU add-on payment, $1 (10 percent of $10) will be offset in CY 2015 from the nuclear 

scan payment. However, if the 10 percent of hospitals claiming the $10 add-on payment 

also had $10 in increased costs, the calculated cost of a scan using CY 2013 data will 

have increased by $1 (10 percent of $10). The payment for CY 2015 would therefore 

increase by $1 because of the new costs in the claims data, and that new $1 will then be 

removed (offset) to go exclusively to the hospitals that are actually using the non-HEU 

sourced Tc-99m and are carrying the added cost. Therefore, we note that we are not 

reducing payments to all hospitals to offset the cost of this payment; rather, we are 

ensuring that the added costs of the non-HEU sourced Tc-99m go only to the hospitals 

incurring the costs and that their payments are not diluted by increased payments to 

uninvolved facilities. In this way, we are not offsetting the current nuclear scan payment 

by the $10 non-HEU add-on payment even though we currently plan to offset future 
CMS-1589-FC 399 

payment increases to the extent necessary to avoid double payments, as those increased 

costs will be included in the costs reported by hospitals. 

Comment: Several commenters suggested that CMS use the average sales price 

(ASP) methodology to establish the additional payment amount for Tc-99m based on 

non-HEU sources. One commenter suggested that CMS use the ASP data when available 

as a benchmark for determining costs that are packaged. A few commenters suggested 

that payment based on the ASP methodology be applied in the same manner CMS pays 

for therapeutic radiopharmaceuticals. The commenters stated that this will establish 

transparency in the ratesetting for radioisotopes derived from non-HEU sources. 

Response: We note that the ASP methodology does not apply to the Tc-99m 

radioisotope but only to the radiopharmaceutical that results from the combination of the 

isotope with the pharmaceutical moiety. Moreover, the ASP methodology is particularly 

unsuited to use on the radioisotope component alone because the isotope does not have an 

ASP. The radioisotope is typically produced by a generator and, whereas the ASP of a 

generator can be determined, the cost of a single dose is highly dependent on the number 

and timing of elutions of the generator, information that is not captured in the ASP. In 

fact, ASP is marginally valuable for Tc-99m radiopharmaceuticals only because the cost 

of the drug component is typically large compared to the cost of the isotope. This fact 

also argues against the comment that ASP would increase “transparency” of the cost of 

Tc-99m: there is no additional transparency of an isotope packaged into a payment with 

the drug than there is for an isotope packaged into a payment with the scan. Finally, the 

use of the ASP methodology would not differentiate between the cost of a non-HEU 
CMS-1589-FC 400 

sourced Tc-99m and the cost of using an HEU source, which is the purpose of this 

payment. The proposed additional payment accounts for the increased cost of the 

isotope, which meets both incremental payment and transparency goals. 

Comment: A few commenters recommended that CMS establish parallel codes 

for the use of HEU and non-HEU sourced radiopharmaceuticals to collect cost data for 

future ratesetting. Most of the commenters were concerned with the complexity involved 

in adding and reporting a single code. 

Response: We do not believe that an entire set of parallel codes would lessen the 

complexity or the administrative cost and, in fact, we believe it would significantly 

increase them. We acknowledge that this, like many other options we have had on other 

issues, could significantly improve the accuracy of our ratesetting. However, based on 

other comments from the hospitals that would have to use these parallel codes, we do not 

believe that we or the hospitals would consider the increased administrative cost to be 

worth the slight increase in payment precision. 

Comment: A few commenters requested that CMS clarify the meaning of 

“calculation by ‘Full Cost Recovery’”. Some commenters also requested clarification of 

what this method encompasses. 

Response: Full Cost Recovery is a concept that is well known to the producers, 

processors, and manufacturers but is not commonly discussed by radiopharmacies and 

hospitals. Unlike other supplies, radioisotopes typically require nuclear reactors for 

initial production, and many of the capital and environmental costs are not captured in the 

prices. For example, some reactors were built decades ago for other purposes and can be 
CMS-1589-FC 401 

used (relatively) “free of charge” because it costs almost the same to run the reactor and 

do nothing as it does to run the reactor and irradiate some uranium. This has implications 

on the accounting of capital costs, which, in many cases, were or are recovered by other 

uses to which the reactors were put. Similarly, moderately enriched uranium left over 

from previous programs may be cheaply downgraded and provided at a “low” cost 

because the alternative is to allow it to decay in storage with no consequent benefit. In 

both cases, the Tc-99m produced is obtained by hospitals at a bargain price, but not at a 

price that is sustainable because the old reactors will need to be replaced and the enriched 

uranium will be depleted. There are other unique costs for radioisotopes, such as the 

need to make arrangements for long-term storage of radioactive waste. Failure to account 

for those costs can lower the price of the radioisotope for some hospitals today but 

creates a long-term problem in that other hospitals must pick up the costs. Full Cost 

Recovery is the accounting principle that ensures that all of these long-term costs are 

included in cost calculations. 

Full Cost Recovery is obviously not important to the hospitals although, because 

it is critically important in providing for the long-term supply of the radioisotope, it is 

actually a major underlying cause of payment inequities associated with this transition. 

From the standpoint of this final rule with comment period then, Full Cost Recovery is 

coupled to the non-HEU criterion for purposes of the additional payment. Just as 

manufacturers will indicate that certain Tc-99m doses are derived from non-HEU 

sources, it is our expectation that the irradiator (reactor) and the processor of the nonHEU Mo-99 will be able to confirm that Full Cost Recovery accounting was used in 
CMS-1589-FC 402 

setting the price of the non-HEU sourced Mo-99, an accounting principle that is 

considered integral to the conversion to non-HEU sources. We expect the generator 

manufacturer to affirm to the radiopharmacy that its source is non-HEU, with this 

designation including accounting according to Full Cost Recovery. As mentioned earlier, 

we consider this affirmation to be sufficient for the radiopharmacy and the hospital, 

regardless of whether the affirmation is in the form of a letter or statement, a notation on 

the invoice, or a label on the vial or tracking slip. We do not believe that independent 

verification is necessary or even possible for the radiopharmacy and the hospital and 

require only their due diligence in accepting claims made by their suppliers. The costs of 

new capital expenses such as new reactors, including all their associated costs, are 

factored into the manufacturer’s price of the Tc-99m and passed down to hospitals, and 

the additional payment is made to account for those unique costs that the hospitals will 

incur. 

Comment: One commenter asked that CMS delay finalizing the proposal until 

CY 2014 so that hospitals have adequate time to implement the proposed change. 

Another commenter recommended that CMS postpone the implementation of the 

proposed policy until CY 2015, so that hospitals could avoid the complexities of handling 

and segregating HEU sources versus non-HEU sources. Another commenter expressed 

doubt that hospitals would be able to obtain Tc-99m derived from non-HEU sources in 

CY 2013. Therefore, they requested that the proposal be deferred until CY 2014. 

One commenter expressed concern about the availability of non-HEU sources 

because they were told by their suppliers that a 100 percent non-HEU source supply is 
CMS-1589-FC 403 

unavailable for CY 2012 and also will be unavailable by CY 2013. The commenter 

questioned whether this issue should be addressed by a payment system and suggested 

that this issue instead be addressed by the Administration as opposed to CMS. The 

commenter further suggested that the implementation of this proposal be delayed until 

there is some availability of 100 percent non-HEU sourced isotopes in this country. 

Response: We considered the timing of this proposed additional payment after 

advice and consultation from both the Mo-99 industry and other U.S. agencies. We were 

initially advised that it is the understanding of the industry that conversion to non-HEU 

sources is already underway and is expected to be completed by the end of 2016. We 

understand this remains the case. We are aware that currently commercial Tc-99m is not 

readily available in the United States as it is in the world market, but that there also has 

not been a demand from within the United States. We do understand there is an 

expectation that it will make an appearance in CY 2013. 

We acknowledge that the supply of non-HEU sourced Mo-99 may be small in 

CY 2013. However, we believe, as the industry believes, that conversion to non-HEU 

sourced Tc-99m is inevitable and will occur over the next several years. From the 

standpoint of the Medicare payment system, it is important for us to have some 

mechanism in place to mitigate any adverse impact on hospitals. If the supply is very 

low, hospitals will not be significantly disadvantaged and may elect to not make use of 

this additional payment in CY 2013. Conversely, if the supply starts to increase, some 

hospitals may be forced to shoulder a disproportionate share of the cost due to supplier 

relationships and contract status; this additional payment will create an opportunity for 
CMS-1589-FC 404 

those hospitals to mitigate that cost. We fully expect that utilization of this additional 

payment will be small in CY 2013 but will increase in CYs 2014, 2015, and 2016 as this 

conversion occurs. We reiterate that the normal mechanisms of the OPPS will ultimately 

incorporate increased costs into APC calculations with resultant increased payments for 

the nuclear scans that use this radioisotope that will allow us to retire or modify this 

payment and incorporate the entire additional cost into the base payment. This additional 

payment will enable hospitals to avoid any inequities caused by suddenly rising local 

costs that are not able to be captured in a timely fashion by usual methods. Based on the 

timetable for conversion and the rescue nature of the payment, we believe that a delay 

until CY 2014 or CY 2015 is unnecessary. 

Comment: Several commenters suggested that an additional separate payment be 

given in other Medicare settings, including the physician’s office and ASC, for 

radioisotopes derived from non-HEU sources. One commenter recommended that these 

additional payments also be made under Medicaid, the Department of Defense/Veterans 

Affairs, Indian Health Services health programs, and any other government health 

programs where nuclear medicine procedures are covered. This commenter 

acknowledged that its comments are outside the scope of the OPPS/ASC final rule with 

comment period. 

Response: We agree with the commenter that addressing additional payments for 

radioisotopes derived from non-HEU sources in other settings and payment systems, such 

as the Physician’s Office, Medicaid, the Department of Defense/Veterans Affairs, Indian 

Health Services health programs, and any other government health programs where 
CMS-1589-FC 405 

nuclear medicine procedures are covered, is outside the scope of the proposed rule and 

cannot be addressed in this final rule with comment period. In addition, we note that the 

Medicare authority for this additional payment is based on the need to establish equitable 

payments for hospitals. The authority to make equitable adjustments under section 

1833(t)(2)(E) of the Act does not extend to the ASC setting. We do use a HCPCS Qcode as the vehicle for this additional payment so that other payers and other payment 

systems could use this code if desired. 

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

proposed policy with the modifications discussed above. Specifically, we are modifying 

the policy to provide that a product identified as non-HEU sourced must be at least 95 

percent derived from non-HEU sources. We also are finalizing our proposal to establish 

a HCPCS code for Tc-99m from non-HEU sources with a revised code definition. The 

number and title of the new HCPCS code is HCPCS code Q9969 (Tc-99m from nonhighly enriched uranium source, full cost recovery add-on, per study dose) for CY 2013. 

HCPCS code Q9969 is assigned to APC 1442 (Non-HEU TC-99M Add-On/Dose) with a 

status indicator of “K” and a CY 2013 payment rate of $10. 

D. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services 

a. Cardiac Telemetry (APC 0213)

For CY 2013, we proposed to reassign CPT code 93229 (External mobile 

cardiovascular telemetry with electrocardiographic recording, concurrent computerized 

real time data analysis and greater than 24 hours of accessible ecg data storage 
CMS-1589-FC 406 

(retrievable with query) with ecg triggered and patient selected events transmitted to a 

remote attended surveillance center for up to 30 days; technical support for connection 

and patient instructions for use, attended surveillance, analysis and physician prescribed 

transmission of daily and emergent data reports) from APC 0209 (Level II Extended 

EEG, Sleep, and Cardiovascular Studies), which had a proposed rule payment rate of 

approximately $808, to APC 0340 (Minor Ancillary Procedures), which had a proposed 

rule payment rate of approximately $49.

Comment: One commenter disagreed with CMS’ proposal to reassign CPT code 

93229 to APC 0340 because the service described by CPT code 93229 involves the use 

of sophisticated technology requiring 24-hour, 7 days a week monitoring by a technician 

for up to 30 days, which according to the commenter, is not a minor procedure. 

According to the commenter, the proposed rule payment rate of approximately $49 is 

significantly lower than the MPFS payment rate of $694, and much lower than the 

average contractual arrangement charge to hospitals of $674. The commenter explained 

that while this procedure is performed primarily by independent diagnostic testing 

facilities (approximately 98 percent), this service is provided in the HOPD setting under 

contractual arrangements with hospitals. The commenter stated that the CPT code is 

fairly new because it was effective January 1, 2009, and suggested that the low geometric 

mean cost for the service could be attributed to miscoding by hospitals. The commenter 

believed that hospitals may be reporting CPT code 93229 incorrectly when they are 

actually performing other remote cardiac tests, such as the services described by CPT 

code 93226 (External electrocardiographic recording up to 48 hours by continuous 
CMS-1589-FC 407 

rhythm recording and storage; scanning analysis with report) or CPT code 93271 

(External patient and, when performed, auto activated electrocardiographic rhythm 

derived event recording with symptom-related memory loop with remote download 

capability up to 30 days, 24-hour attended monitoring; transmission and analysis), that 

require fewer resources. In addition, the commenter questioned the validity of the claims 

data, given the low number of claims billed under the OPPS. The commenter requested 

that CMS delay the reassignment of the service described by CPT code 93229 to APC 

0340, and urged CMS to maintain CPT code 93229 in APC 0209 until more data are 

available to determine an appropriate payment for the service.

Response: The commenter is correct that CPT code 93229 was effective 

January 1, 2009. However, we believe that since that time hospitals have familiarized 

themselves with how to code this service appropriately. We have no reason to believe 

that hospitals are incorrectly reporting the service described by CPT code 93229, and 

note that we do not specify the methodologies that hospitals must use to set charges for 

this, or any other, procedure. The calculation of OPPS relative payment weights that 

reflect the relative resources required for HOPD services is the foundation of the OPPS. 

We rely on hospitals to bill all HCPCS codes accurately in accordance with their code 

descriptors and CPT and CMS instructions, as applicable, and to report charges on claims 

and charges and costs on their Medicare hospital cost report appropriately.

We do not agree with the commenter that it is necessary to delay the reassignment 

of CPT code 93229 to APC 0340. We examined our claims data for the last 3 years, 

given the concerns raised by the commenter regarding the low number of claims. Our 
CMS-1589-FC 408 

analysis revealed that the claims submitted for the service described by CPT code 93229 

have steadily increased since CY 2009, but the cost for the procedure has been 

significantly lower than the APC payment rate. Specifically, the cost for the service 

described by CPT code 93229 in CY 2009 was approximately $287, based on 103 single 

claims (out of 114 total claims), approximately $260 in CY 2010, based on 184 single 

claims (out of 184 total claims), and approximately $172 for CY 2011, based on 1,949 

single claims (out of 1,949 total claims). Based on the claims data, we have no reason to 

believe that the claims data used to calculate the cost for CPT code 93229 for CY 2013 

does not appropriately reflect the hospitals cost for providing this service.

In addition, because of concerns raised by the commenter regarding reassigning 

CPT code 93229 to an APC that is labeled “Minor Ancillary Procedures,” further review 

of our claims data for this final rule with comment period showed that CPT code 93229 

would be more appropriately assigned to APC 0213 (Level I Extended EEG, Sleep, and 

Cardiovascular Studies) than APC 0340 based on its clinical homogeneity and resource 

costs in relation to the other procedures assigned to APC 0213. Our claims data show a 

geometric mean cost of approximately $172 for CPT code 93229, which is relatively 

similar to the final geometric mean cost of approximately $178 for APC 0213.

Further, we recognize that the MPFS pays separately for CPT code 93229, but the 

MPFS and the OPPS are very different payment systems. Each system is established 

under a different set of statutory and regulatory principles, and the policies established 

under the MPFS do not have bearing on the payment policies under the OPPS.
CMS-1589-FC 409 

In summary, after consideration of the public comment we received, we are 

finalizing our CY 2013 proposal, with modification. Specifically, we are reassigning 

CPT code 93229 from APC 0209 to APC 0213 (instead of the proposed APC 0340) for 

CY 2013. The final CY 2013 geometric mean cost for APC 0213 is approximately $178.

b. Mechanical Thrombectomy (APC 0653)

For CY 2013, we proposed to continue to assign CPT code 36870 

(Thrombectomy, percutaneous, arteriovenous fistula, autogenous or nonautogenous graft 

(includes mechanical thrombus extraction and intra-graft thrombolysis)) to APC 0653 

(Level I Hand Musculoskeletal Procedures), which had a proposed rule payment rate of 

approximately $2,445.

Comment: Some commenters expressed concern regarding the proposed 19.7 

percent reduction in the payment rate for the APC in which the procedure describing a 

mechanical thrombectomy by arteriovenous access, CPT code 36870, is assigned. The 

commenters believed that such a reduction would impede Medicare beneficiary’s access 

to the procedure. In addition, the commenters stated that CMS offered no explanation for 

the payment rate reduction, nor permitted adequate notice for a meaningful opportunity to 

comment. The commenters requested that CMS delay its proposal to reduce the payment 

rate for mechanical thrombectomy by AV access until stakeholders have been given a 

meaningful opportunity to comment.

Response: On an annual basis, CMS evaluates hospital outpatient claims data to 

determine the cost of procedures and services paid under the OPPS to ensure appropriate 

APC assignment for the following year. This evaluation generally results in establishing 
CMS-1589-FC 410 

new APCs, reassigning procedures and services to more appropriate APCs, or deleting 

APCs that are no longer applicable. In addition, this evaluation may result in revising 

relative payment weights, as well as wage and other adjustments, to take into account 

changes in medical practices, changes in technology, the addition of new services, new 

cost data, and other relevant information and factors. The OPPS proposed rule is 

published annually in the summer and is the mechanism used by CMS to inform the 

public of the proposed changes for the upcoming year and provide an opportunity for 

comment. As has been our practice, we encourage the public to submit their comments 

on issues addressed in the proposed rule. Comments received in response to the proposed 

rule are addressed in the final rule with comment period, which is also published annually 

in the winter.

For the CY 2013 update, our analysis of the latest hospital outpatient data for 

claims submitted for services provided during CY 2011 shows a geometric mean cost for 

CPT code 36870 of approximately $2,662, based on 539 single claims (out of 50,476 

total claims), which is relatively similar to the proposed rule payment rate of 

approximately $2,748 for APC 0653. Based on our claims data, we believe that 

APC 0653 is the most appropriate APC assignment for CPT code 36870 based on its 

clinical homogeneity and resource costs in relation to the other procedures assigned to the 

APC. Consistent with our policy of reviewing APC assignments annually, we will again 

reevaluate the cost of CPT code 36870 and its APC assignment in CY 2013 for the 

CY 2014 rulemaking cycle.
CMS-1589-FC 411 

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

CY 2013 proposal without modification. We will continue to maintain CPT code 36870 

in APC 0653 for CY 2013. The final CY 2013 geometric mean cost for APC 0653 is 

approximately $2,748.

c. Non-Congenital Cardiac Catheterization (APC 0080) 

For CY 2011, the AMA’s CPT Editorial Panel restructured the Cardiac 

Catheterization section of the CPT codebook so that combinations of services that were 

previously reported using multiple codes are now reported with one CPT code. This 

revision deleted several non-congenital cardiac catheterization-related CPT codes from 

the 93500 series and created new CPT codes in the 93400 series and in the 93500 series. 

We discussed these coding changes in detail in the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71846 through 71849), along with the process by which we 

assigned the new CPT codes to APCs that we believe are comparable with respect to 

clinical characteristics and resources required to furnish the cardiac catheterization 

services described by the new CPT codes. As discussed in that final rule with comment 

period, we were able to use the existing CY 2009 hospital outpatient claims data and the 

most recent cost report data to create simulated costs for the new separately payable CPT 

codes for CY 2011. Specifically, to estimate the hospital costs associated with the 20 

new non-congenital cardiac catheterization-related CPT codes based on their CY 2011 

descriptors, we used claims and cost report data from CY 2009. Because of the 

substantive coding changes associated with the new non-congenital cardiac 

catheterization-related CPT codes for CY 2011, we used our CY 2009 single and 
CMS-1589-FC 412 

“pseudo” single claims data to simulate the new CY 2011 CPT code definitions. We 

stated that many of the new CPT codes were previously reported using multiple CY 2009 

CPT codes, and we provided a crosswalk of the new CY 2011 cardiac catheterization 

CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in Table 11 of the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 71849). Table 11 showed 

the criteria we applied to select a claim to be used in the calculation of the cost for the 

new codes (shown in Column A). As we stated in the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71847 through 71848), we developed these criteria based on 

our clinicians’ understanding of the services that were reported by the CY 2009 CPT 

codes that, in various combinations, reflect the services provided that are described in the 

new CPT codes. We used approximately 175,000 claims for the new non-congenital 

catheterization-related CPT codes, together with the single and “pseudo” single 

procedure claims for the remaining non-congenital catheterization-related CPT codes in 

APC 0080 (Diagnostic Cardiac Catheterization), to calculate CPT code level costs and 

the payment rate for APC 0080 of approximately $2,698. We noted that, because the 

CPT codes listed in Table 11 were new for CY 2011, they were identified with comment 

indicator “NI” in Addendum B to that final rule with comment period to indicate that the 

interim APC assignment was subject to public comment. We specifically requested 

public comment on our methodology for simulating the costs for these new CY 2011 

CPT codes, in addition to public comments on the payment rates themselves 

(75 FR 71848). 
CMS-1589-FC 413 

For CY 2012, we continued to use the CY 2011 methodology in determining the 

APC assignments for the new cardiac catheterization CPT codes. That is, we continued 

to use the CY 2011 methodology in determining the APC assignments for the cardiac 

catheterization CPT codes by using the existing hospital outpatient claims and the cost 

report data from the predecessor cardiac catheterization CPT codes to simulate an 

estimated cost for the new cardiac catheterization CPT codes in determining the 

appropriate APC assignments. Specifically, we used the CY 2010 hospital outpatient 

claims data and the most recent cost report data to create simulated costs for the new 

separately payable CPT codes for CY 2012 to determine the payment rates for the APC 

to which the cardiac catheterization CPT codes were assigned. For CY 2012, we did not 

make any changes to the CY 2011 APC assignments of any of the CPT codes assigned to 

APC 0080 because the claims data supported continuation of these APC assignments. 

As we discussed in the CY 2013 OPPS/ASC proposed rule, because the cardiac 

catheterization CPT codes were new for CY 2011, CY 2013 is the first year that claims 

data are available for ratesetting for these specific CPT codes (77 FR 45084 through 

45085). For CY 2013, our analysis of the CY 2011 claims data available for the 

proposed rule showed no violation of the 2 times rule for the cardiac catheterization CPT 

codes because the lowest cost of a CPT code with significant claims data in APC 0080 

was approximately $1,716 (for CPT code 93451), while the highest cost of a CPT code 

with significant claims data was approximately $3,308 (for CPT code 93461). We stated 

in the proposed rule that we believe that the cardiac catheterization CPT codes continue 

to be appropriately assigned to APC 0080 based on clinical homogeneity and resource 
CMS-1589-FC 414 

costs. Therefore, for CY 2013, we proposed to continue to assign the cardiac 

catheterization CPT codes to APC 0080. 

Comment: One commenter pointed out that CPT codes 93463 (Pharmacologic 

agent administration (eg, inhaled nitric oxide, intravenous infusion of nitroprusside, 

dobutamine, milrinone, or other agent) including assessing hemodynamic measurements 

before, during, after and repeat pharmacologic agent administration, when performed (list 

separately in addition to code for primary procedure)) and 93464 (Physiologic exercise 

study (eg, bicycle or arm ergometry) including assessing hemodynamic measurements 

before and after (list separately in addition to code for primary procedure)), which 

appeared in Table 5 (Proposed APCs to Which Non-Congenital Cardiac Catheterization 

CPT Codes Would Be Assigned for CY 2013 ) of the CY 2013 OPPS/ASC proposed rule 

do not appear to represent cardiac catheterization procedures. 

Response: CPT codes 93463 and 93464 are packaged procedures. These CPT 

codes appeared in Table 5 of the CY 2013 OPPS/ASC proposed rule because these 

procedures are performed in conjunction with cardiac catheterization procedures. CPT 

code 93463 is an add-on code that describes a pharmacologic agent that may be 

administered when a cardiac catherization procedure is performed. Similarly, CPT code 

93464 is an add-on code that describes a physiologic exercise test that may be combined 

with a cardiac catheterization. Because these procedures are used in conjunction with 

cardiac catherization procedures, we believe that listing them in Table 5 of the CY 2013 

OPPS/ASC proposed rule was appropriate. 
CMS-1589-FC 415 

After consideration of the public comment that we received, we are finalizing our 

proposal, without modification, to continue to assign the cardiac catheterization CPT 

codes to APC 0080 for CY 2013, as listed below in Table 20 below. The final CY 2013 

geometric mean cost for APC 0080 is approximately $2,726. 

TABLE 20.—APCs TO WHICH NON-CONGENITAL CARDIAC 

CATHETERIZATION CPT CODES ARE ASSIGNED FOR CY 2013 

CY 

2013 

HCPCS 

Code 

CY 2013 Short Descriptor 

CY 

2012 

SI 

CY 2012 

APC CY 2013 

SI 

CY 2013 

APC 

93451 Right heart cath T 0080 T 0080 

93452 Left hrt cath w/ventrclgrphy T 0080 T 0080 

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

93454 Coronary artery angio s&i T 0080 T 0080 

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

93456 R hrt coronary artery angio T 0080 T 0080 

93457 R hrt art/grft angio T 0080 T 0080 

93458 L hrt artery/ventricle angio T 0080 T 0080 

93459 L hrt art/grft angio T 0080 T 0080 

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

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

93462 L hrt cath trnsptl puncture T 0080 T 0080 

93463 

Drug admin & hemodynmic 

meas N NA N NA 

93464 Exercise w/hemodynamic meas N NA N NA 

93565 Inject l ventr/atrial angio N NA N NA 

93566 Inject r ventr/atrial angio N NA N NA 

93567 Inject suprvlv aortography N NA N NA 

93568 Inject pulm art hrt cath N NA N NA 
CMS-1589-FC 416 

d. Endovascular Revascularization of the Lower Extremity (APCs 0083, 0229, and 0319) 

For the CY 2011 update, the AMA’s CPT Editorial Panel created 16 new CPT 

codes under the Endovascular Revascularization section of the 2011 CPT codebook to 

describe endovascular revascularization procedures of the lower extremity performed for 

occlusive disease. In the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71841 through 71845), we discussed the process and methodology by which we 

assigned the CY 2011 endovascular revascularization CPT codes to APCs that we believe 

are comparable with respect to clinical characteristics and resources required to furnish 

the services. Specifically, we were able to use the existing CY 2009 hospital outpatient 

claims data and the most recent cost report data to create simulated costs for 12 of the 16 

new separately payable CPT codes for CY 2011. Because the endovascular 

revascularization CPT codes were new for CY 2011, we used our CY 2009 single and 

“pseudo” single claims data to simulate the new CY 2011 CPT code definitions. As 

shown in Table 7 of the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71844), many of the new endovascular revascularization CPT codes were 

previously reported using a combination of CY 2009 CPT codes. In order to simulate 

costs, we selected claims that we believe met the definition for each of the new 

endovascular revascularization CPT codes. Table 7 showed the criteria we applied to 

select a claim to be used in the calculation of the costs for the new CPT codes (shown in 

Column A). As we stated in the CY 2011 OPPS/ASC final rule with comment period (75 

FR 71842), we developed these criteria based on our clinicians’ understanding of services 
CMS-1589-FC 417 

that were reported by the CY 2009 CPT codes that, in various combinations, reflect the 

services provided that are described by the new CPT codes for CY 2011. 

After determining the simulated costs for the procedures, we assigned each CPT 

code to appropriate APCs based on their clinical homogeneity and resource use. Of the 

16 CPT new codes, we assigned 9 CPT codes to APC 0083 (Coronary or Non-Coronary 

Angioplasty and Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 

(Transcatheter Placement of Intravascular Shunts), and created new APC 0319 

(Endovascular Revascularization of the Lower Extremity) for the remaining 2 CPT codes. 

Table 8 of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71845) 

displayed their final CY 2011 APC assignments and CPT code costs. We noted that, 

because these CPT codes were new for CY 2011, they were assigned comment indicator 

“NI” in Addendum B to the CY 2011 OPPS/ASC final rule with comment period to 

identify them as new interim APC assignments for CY 2011, and subject to public 

comment. We specifically requested public comment on our methodology for simulating 

the costs for these new CY 2011 CPT codes in addition to public comments on the 

payment rates themselves (75 FR 71845). 

As stated in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74156), for CY 2012, we continued to use the CY 2011 methodology to 

determine the APC assignments for the CPT codes that describe endovascular 

revascularization of the lower extremity. Because previous endovascular 

revascularization CPT codes were in existence prior to CY 2011 and assigned to 

designated APCs, we continued to use existing hospital outpatient claims and cost report 
CMS-1589-FC 418 

data from the established CPT codes to simulate estimated costs for the endovascular 

revascularization CPT codes to determine the appropriate APC assignments for CY 2012, 

as we did for CY 2011. In the CY 2012 OPPS/ASC final rule with comment period, we 

also revised the title of APC 0083 from “Coronary or Non-Coronary Angioplasty and 

Percutaneous Valvuloplasty” to “Coronary Angioplasty, Valvuloplasty, and Level I 

Endovascular Revascularization of the Lower Extremity”; revised the title of APC 0229 

from “Transcatheter Placement of Intravascular Shunts and Stents” to “Level II 

Endovascular Revascularization of the Lower Extremity”; and revised the title of APC 

0319 from “Endovascular Revascularization of the Lower Extremity” to “Level III 

Endovascular Revascularization of the Lower Extremity”. 

Because the endovascular revascularization of the lower extremity CPT codes 

were new for CY 2011, CY 2013 is the first year of claims data that are available for 

ratesetting for these specific CPT codes. For CY 2013, review of the procedures with 

significant claims data in APCs 0083, 0229, and 0319 did not show 2 times rule 

violations in these APCs. In the CY 2013 OPPS/ASC proposed rule, we stated that we 

believe that the endovascular revascularization CPT codes assigned to APCs 0083, 0229, 

and 0319 continue to be appropriately assigned based on clinical homogeneity and 

resource costs. Therefore, we proposed to continue to assign the endovascular 

revascularization CPT codes to APCs 0083, 0229, and 0319 for CY 2013 (77 FR 45083 

through 45084). 

Comment: Several commenters believed that the assignment of CPT code 37183 

(Revision of transvenous intrahepatic portosystemic shunt(s) (tips) (includes venous 
CMS-1589-FC 419 

access, hepatic and portal vein catheterization, portography with hemodynamic 

evaluation, intrahepatic tract recanulization/dilatation, stent placement and all associated 

imaging guidance and documentation) and 37210 (Uterine fibroid embolization (ufe, 

embolization of the uterine arteries to treat uterine fibroids, leiomyomata), percutaneous 

approach inclusive of vascular access, vessel selection, embolization, and all radiological 

supervision and interpretation, intraprocedural roadmapping, and imaging guidance 

necessary to complete the procedure) to APC 0229 (Level II Endovascular 

Revascularization of the Lower Extremity) violated the 2 times rule. The commenter 

believed that these two codes should be reassigned to APC 0083 (Coronary Angioplasty, 

Valvuloplasty, and Level I Endovascular Revascularization of the Lower Extremity). 

Response: As stated above, in determining whether a 2 times rule violation exists 

in an APC, we consider only those HCPCS (both CPT and Level II Alphanumeric 

HCPCS codes) codes that are significant based on the number of claims. For purposes of 

identifying significant HCPCS codes for examination to determine if they violate the 

2 times rule, we consider codes that have more than 1,000 single major claims or codes 

that have both greater than 99 single major claims and contribute at least 2 percent of the 

single major claims used to establish the APC cost to be significant (75 FR 71832). This 

longstanding definition of when a code is significant for purposes of the 2 times rule was 

selected because we believe that a subset of 1,000 claims is negligible within the set of 

approximately 100 million single procedure or single session claims we use for 

establishing costs. Similarly, a code for which there are fewer than 99 single claims and 
CMS-1589-FC 420 

which comprises less than 2 percent of the single major claims within an APC will have a 

negligible impact on the APC cost. 

For this CY 2013 OPPS/ASC final rule with comment period, our analysis of the 

CY 2011 claims data showed that CPT code 37183 had 211 single claims (out of 302 

total claims) while CPT code 37210 had 211 single claims (out of 254 total claims). Of 

the 12 procedures assigned to APC 0229, only 5 procedures meet the definition of 

significant claims. Specifically, CPT codes 37205 (Transcatheter placement of an 

intravascular stent(s) (except coronary, carotid, vertebral, iliac, and lower extremity 

arteries), percutaneous; initial vessel), 37221 (Revascularization, endovascular, open or 

percutaneous, iliac artery, unilateral, initial vessel; with transluminal stent placement(s), 

includes angioplasty within the same vessel, when performed), 37225 (Revascularization, 

endovascular, open or percutaneous, femoral, popliteal artery(s), unilateral; with 

atherectomy, includes angioplasty within the same vessel, when performed), 37226 

(Revascularization, endovascular, open or percutaneous, femoral, popliteal artery(s), 

unilateral; with transluminal stent placement(s), includes angioplasty within the same 

vessel, when performed), and 37229 (Revascularization, endovascular, open or 

percutaneous, tibial, peroneal artery, unilateral, initial vessel; with atherectomy, includes 

angioplasty within the same vessel, when performed) have significant claims data to 

determine whether a violating of the 2 times rule exists within APC 0229. Review of the 

procedures assigned to APC 0229 revealed that the range of the CPT geometric mean 

costs for the procedures with significant claims data is between approximately $7,013 

(for CPT code 37205, which represents 14 percent of the single claims) and 
CMS-1589-FC 421 

approximately $9,915 (for CPT code 37229, which represents 5 percent of the single 

claims). Taking into consideration all of the codes with significant claims that are 

assigned to APC 0229, CPT codes 37183 and 37210 do not meet the definition of 

significant claims to determine if there is a violation of the 2 times rule within APC 0229. 

Therefore, based on the clinical similarity to other procedures currently assigned 

to APC 0229, and because there is no determination of a violation of the 2 times rule, we 

are continuing to assign CPT codes 37183 and 37210 to APC 0229 for CY 2013. For 

CY 2013, APC 0229 has a final geometric mean cost of approximately $8,905. 

Comment: Several commenters recommended the reassignment of add-on CPT 

code 37223 (Revascularization, endovascular, open or percutaneous, iliac artery, each 

additional ipsilateral iliac vessel; with transluminal stent placement(s), includes 

angioplasty within the same vessel, when performed (list separately in addition to code 

for primary procedure)) from APC 0083 to APC 0229 because the proposed geometric 

mean cost of the procedure is similar to the geometric mean costs of procedures assigned 

to APC 0229 (although the commenters also pointed out that the cost data calculated 

from single claims for CPT code 37223 are unreliable because CPT code 37223 is an 

add-on code and would not appear by itself on a claim). Some commenters also argued 

that the assignment of CPT code 37223 to APC 0083 results in a violation of the 2 times 

rule. The commenters stated that the reassignment of CPT code 37223 to APC 0229 

would be consistent with CMS’ policy of assigning add-on codes to the same APC as 

their base codes. In addition, the commenters asserted that this reassignment would not 

only ensure patient access for this therapeutic procedure, but also would promote clinical 
CMS-1589-FC 422 

homogeneity and similar resource cost of procedures assigned to APC 0229 and provide 

accurate payment for the procedure. 

Response: Although there are many add-on codes that have been assigned to the 

same APC as their base code, there are some procedures that are add-on codes that have 

been assigned to different APCs from their base or primary codes. In establishing an 

appropriate APC assignment, we take into consideration the clinical homogeneity and 

similarity in resource use associated with the procedure or service. This determination 

may result in the same APC assignment for both the base code and the add-on code, or in 

different APC assignments, as illustrated in Table 21 below. Therefore, we disagree with 

the commenters’ assertion that we should reassign CPT code 37223 to APC 0229 so that 

it is in the same APC as its base code. 

We also do not agree with commenters that the composition of APC 0083 

constitutes a violation of the 2 times rule because CPT code 37223 does not have 

sufficient single claims to qualify as a significant procedure for purposes of applying the 

2 times rule, as described earlier in this section. Based on our understanding of the 

procedure, we continue to believe that APC 0083 is the most appropriate assignment for 

CPT code 37223 based on clinical considerations and similarity in resource use to other 

procedures assigned to APC 0083, as we have stated in the past (76 FR 74156). 

TABLE 21.—EXAMPLES OF BASE AND ADD-ON CPT CODES THAT ARE 

ASSIGNED TO DIFFERENT APCs 

CY 2013 

CPT Code CY 2013 Short Descriptor CY 2013 SI 

CY 2013 

APC 

11000 Debride infected skin T 0016 

11001* Debride infected skin add-on T 0013 
CMS-1589-FC 423 

CY 2013 

CPT Code CY 2013 Short Descriptor CY 2013 SI 

CY 2013 

APC 

11044 Deb bone 20 sq cm/< T 0020 

11047* Deb bone add-on T 0019 

11100 Biopsy skin lesion T 0015 

11101* Biopsy skin add-on T 0013 

13101 Repair of wound or lesion T 0135 

13102* Repair wound/lesion add-on T 0134 

56605 Biopsy of vulva/perineum T 0189 

56606* Biopsy of vulva/perineum T 0188 

64479 Inj foramen epidural c/t T 0207 

64480* Inj foramen epidural add-on T 0206 

*Add-on procedure code. 

Further, in response to the commenters’ concerns regarding providing accurate 

payment for the procedure described by CPT code 37223 to ensure patient access, we 

believe that the payment rate for the procedure does not inhibit HOPDs from performing 

the procedure. The OPPS, like other Medicare payment systems, is budget neutral and 

overall increases in payments are limited to the hospital inpatient market basket increase. 

We believe that our payment rates generally reflect the costs that are associated with 

providing care to Medicare beneficiaries in cost efficient settings, and we believe that our 

payment rates are adequate to ensure access to services. 

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

proposal, without modification, to continue to assign CPT code 37223 to APC 0083 for 

CY 2013. 

Comment: One commenter believed that CPT codes 37234 (Revascularization, 

endovascular, open or percutaneous, tibial/ peroneal artery, unilateral, each additional 

vessel; with transluminal stent placement(s), includes angioplasty within the same vessel, 
CMS-1589-FC 424 

when performed (list separately in addition to code for primary procedure)), and 37235 

(Revascularization, endovascular, open or percutaneous, tibial/ peroneal artery, unilateral, 

each additional vessel; with transluminal stent placement(s) and atherectomy, includes 

angioplasty within the same vessel, when performed (list separately in addition to code 

for primary procedure)) are inappropriately assigned to APC 0083, and recommended 

that they be reassigned to APC 0229. The commenter indicated that these procedures 

involve both angioplasty with stent placements, similar to the procedure described by 

CPT code 37221 (Revascularization, endovascular, open or percutaneous, iliac artery, 

unilateral, initial vessel; with transluminal stent placement(s), includes angioplasty within 

the same vessel, when performed), which is assigned to APC 0229. The commenter also 

stated that CPT codes 37234 and 37235 are similar to the stent procedures described by 

CPT codes 37205 (Transcatheter placement of an intravascular stent(s) (except coronary, 

carotid, vertebral, iliac, and lower extremity arteries), percutaneous; initial vessel) and 

37206 (Transcatheter placement of an intravascular stent(s) (except coronary, carotid, 

vertebral, iliac, and lower extremity arteries), percutaneous; each additional vessel (list 

separately in addition to code for primary procedure)), which are assigned to APC 0229. 

The commenter concluded that the payment rate for APC 0083 does not reflect the 

resources associated with placement of a cardiovascular stent; therefore, CPT codes 

37234 and 37235 should be reassigned to APC 0229. 

Response: We continue to believe that APC 0083 is the most appropriate 

assignment for these CPT codes based on clinical and resource considerations. We do not 

agree that the procedures described by CPT codes 37234 and 37235 are dissimilar to 
CMS-1589-FC 425 

other procedures in APC 0083 because they involve a stent. In addition, an analysis of 

CY 2011 claims data shows only one single claim for CPT code 37234 (out of 153 total 

claims) and no single claims (out of 31 total claims) for CPT code 37235. Therefore, the 

outpatient claims data do not support an APC reassignment of these CPT codes. Because 

these CPT codes were made effective January 1, 2011, CY 2011 is the first year of claims 

data available for CPT codes 37234 and 37235. Consistent with CMS’ policy of 

reviewing APC assignments annually, we will reevaluate the cost of these procedures and 

their APC assignments next year for the CY 2014 rulemaking cycle. 

After consideration of the public comment we received, we are finalizing our 

CY 2013 proposal, without modification, to continue to assign CPT codes 37234 and 

37235 to APC 0083, which has a CY 2013 final geometric mean cost of approximately 

$4,139. 

Table 22 below provides the list of endovascular revascularization CPT codes 

assigned to APCs 0083, 0229, and 0319 for CY 2013. 

TABLE 22.—APCs TO WHICH ENDOVASCULAR REVASCULARIZATION OF 

THE LOWER EXTREMITY CPT CODES WILL BE ASSIGNED 

FOR CY 2013 

CY 

2013 

CPT 

Code 

CY 2013 Short Descriptor 

CY 

2012 

SI 

CY 2012 

APC 

CY 2013 

SI 

CY 2013 

APC 

37220 Iliac revasc T 0083 T 0083 

37221 Iliac revasc w/stent T 0229 T 0229 

37222 Iliac revasc add-on T 0083 T 0083 

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

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

37225 Fem/popl revas w/ather T 0229 T 0229 
CMS-1589-FC 426 

CY 

2013 

CPT 

Code 

CY 2013 Short Descriptor 

CY 

2012 

SI 

CY 2012 

APC 

CY 2013 

SI 

CY 2013 

APC 

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

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

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

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

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

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

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

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

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

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

e. External Electrocardiographic Monitoring (APC 0097)

In the CY 2012 OPPS/ASC final rule with comment period, we assigned new 

CPT codes 0296T (External electrocardiographic recording) and 0297T (External 

electrocardiographic recording; scanning analysis with report) on an interim basis to 

APC 0097 (Level I Non-Invasive Physiologic Studies), which has a CY 2012 payment 

rate of approximately $68 and a CY 2013 proposed payment rate of approximately $67.

Comment: One commenter who responded to the CY 2012 OPPS/ASC final rule 

with comment period supported our placement of CPT code 0296T in APC 0097. The 

commenter stated that the service described by CPT code 0296T is clinically similar to 

other services in that APC. However, the commenter believed that CPT code 0297T 

would be more appropriately assigned to APC 0692 (Level II Electronic Analysis of 

Devices), which has a CY 2013 proposed rule cost of approximately $113). The 

commenter argued that CPT code 0297T is similar in nature and in required resources to 
CMS-1589-FC 427 

CPT code 93271 (Electrocardiographic monitoring and analysis), which is assigned to 

APC 0692, because it has a similar monitoring period and requires similar network and 

information technology resources.

Response: Based on our understanding of the resources that are required to 

furnish the services described by CPT codes 93271 and 0297T, we do not agree with the 

commenter. The service described by CPT code 93271 includes 24-hour attended 

monitoring, while the service described by CPT 0297T does not. Therefore, we believe 

that CPT code 0297T is more clinically similar to the services assigned to APC 0097. 

Therefore, for CY 2013, we will continue to assign this service to APC 0097, which has a 

final CY 2013 geometric mean cost of approximately $68. We will reevaluate the APC 

placement using our standard ratesetting methodology when we receive claims data for 

these services.

f. Echocardiography (APCs 0177, 0178, 0269, 0270, and 0697)

Under the OPPS, echocardiography services are reported using a combination of 

CPT codes and HCPCS C-codes. Hospitals report the echocardiography CPT codes 

when performing echocardiography procedures without contrast. Alternatively, hospitals 

report the HCPCS C-codes when performing echocardiography procedures with contrast, 

or procedures without contrast followed by procedures with contrast. In addition to the 

HCPCS C-codes, hospitals should also report the appropriate units of the HCPCS codes 

for the contrast agents used in the performance of the echocardiograms.

Currently, there are four APCs that describe echocardiography services:

● APC 0128 (Echocardiogram With Contrast)
CMS-1589-FC 428 

● APC 0697 (Level I Echocardiogram Without Contrast)

● APC 0269 (Level II Echocardiogram Without Contrast)

● APC 0270 (Level III Echocardiogram Without Contrast)

For CY 2013, we proposed payment rates for these APCs of approximately $571, 

$212, $392, and $558, respectively.

Comment: One commenter expressed concern regarding the APC assignment of 

the procedures for fetal echocardiography to APC 0697. The commenter believed that 

this APC classification and payment rate are inconsistent with the resources required to 

perform fetal echocardiography studies. These resources, the commenter noted, 

substantially exceed the resources generally needed for adult services. Therefore, the 

commenter recommended that CMS reassign fetal echocardiography CPT codes 76825 

(Echocardiography, fetal, cardiovascular system, real time with image documentation 

(2d), with or without m-mode recording;) and 76826 (Echocardiography, fetal, 

cardiovascular system, real time with image documentation (2d), with or without m-mode 

recording; follow-up or repeat study) to the same APC as adult echocardiography 

procedures, APC 0269 (Level II Echocardiogram Without Contrast).

Response: For the CY 2013 OPPS/ASC proposed rule, we proposed to assign 

CPT codes 76825 and 76826 to APC 0697, which had a proposed payment rate of 

$211.71. As we stated in the CY 2012 OPPS/ASC final rule with comment period, 

because these codes have been in existence for almost 20 years, and have been reportable 

under the OPPS since it was implemented in 2000, we believe that the low frequency of 

these services is the result of infrequent use of this procedure on Medicare beneficiaries. 
CMS-1589-FC 429 

Analysis of our claims data from past years revealed that these procedures are relatively 

low volume procedures. CPT code 76825 has had fewer than 330 single claims for 

ratesetting for each year with a cost that has ranged between approximately $88 and 

approximately $140. Similarly, CPT code 76826 has had fewer than 50 single claims for 

ratesetting for each year with a cost that has ranged between approximately $85 and 

approximately $92. For this CY 2013 OPPS/ASC final rule with comment period, CPT 

codes 76826 and 76825 are assigned APCs with payment rates that exceed their 

respective individual geometric mean costs. Therefore, based on our claims data, we 

believe that CPT codes 76825 and 76826 are appropriately assigned to APC 0697 for CY 

2013 based on their clinical homogeneity and resource costs of the other procedure 

assigned to APC 0697.

Comment: Several commenters expressed concern regarding a violation of the 

2 times rule for APC 0128 and urged CMS not to finalize an exemption from the 2 times 

rule for APC 0128. The commenters stated that the assignment of HCPCS codes C8924 

(Transthoracic echocardiography with contrast, or without contrast followed by with 

contrast, real-time with image documentation (2d), includes m-mode recording, when 

performed, follow-up or limited study) and C8930 (Transthoracic echocardiography, with 

contrast, or without contrast followed by with contrast, real-time with image 

documentation (2d), includes m-mode recording, when performed, during rest and 

cardiovascular stress test using treadmill, bicycle exercise and/or pharmacologically 

induced stress, with interpretation and report; including performance of continuous 

electrocardiographic monitoring, with physician supervision) to APC 0128 results in a 
CMS-1589-FC 430 

violation of the 2 times rule in particular, and that the other procedures assigned to APC 

0128 are not clinically comparable in nature, therefore resulting in an APC payment rate 

that does not reflect the wide range of resources utilized for the procedures assigned to 

APC 0128. The commenters further recommended that CMS reconfigure APC 0128 so 

that the procedures are clinically similar with respect to resources. One commenter 

recommended that CMS adopt three levels of contrast-enhanced APCs that parallel the 

three APCs that have been established for non-contrast enhanced procedures.

Response: As stated above, we have four separate APCs to which 

echocardiography services are assigned. Procedures that utilize contrast agents are 

currently assigned to APC 0128, while procedures without contrast agents are assigned to 

one of three APCs, specifically APC 0270, APC 0269, or APC 0697. In the CY 2013 

OPPS/ASC proposed rule, we proposed a payment rate for APC 0128 of approximately 

$571 for CY 2013. As we do every year, we reviewed our claims data for the services 

assigned to APC 0128. Based on our review, and taking into consideration the public 

comments received in response to the final rule with comment period, we agree with 

commenters that APC 0128 has a 2 times violation that cannot be exempted for this 

CY 2013 OPPS/ASC final rule with comment period. As we have stated in section III.B. 

of this final rule with comment period, we make exemptions to the 2 times rule’s limit on 

the variation of costs within each APC group in unusual cases, such as low volume items 

and services. In deciding to propose exemptions to the 2 times rule, we look at the 

respective APC’s resource homogeneity, clinical homogeneity, hospital outpatient 

setting, frequency of service (volume), and opportunity for upcoding and code 
CMS-1589-FC 431 

fragmentation. We believe that, for this CY 2013 OPPS/ASC final rule with comment 

period, it would be inappropriate to exempt APC 0128 from the 2 times rule and to 

continue to assign echocardiography services utilizing contrast agents to one APC, based 

on our evaluation of the aforementioned criteria. Therefore, for CY 2013, we are 

splitting APC 0128 to create two new level APCs: APC 0177 (Level I Echocardiogram 

with Contrast) and APC 0178 (Level II Echocardiogram with Contrast).

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

proposals, with the modifications mentioned above, to continue to calculate the costs of 

the HCPCS codes describing the non-contrast echocardiography procedures based on 

APCs 0697, 0269, and 0270, and to calculate the costs for the HCPCS codes describing 

contrast echocardiography procedures based on new APCs 0177 and 0178. For a more 

detailed discussion and history of the OPPS payment for echocardiography services, we 

refer readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66644 

through 66646), the CY 2009 OPPS/ASC final rule with comment period (72 FR 68542 

through 68544), and the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60374 through 60383).

Table 23 below shows the procedure assignments and the final geometric mean 

cost assigned to echocardiography APCs, including the new Level I and Level II 

Echocardiogram with Contrast APCs.
CMS-1589-FC 432 

TABLE 23.—APC ASSIGNMENTS FOR ECHOCARDIOGRAPHY 

PROCEDURES FOR CY 2013 

APC 

HCPCS 

Code Short Descriptor 

Final CY 

2013 

Geometric 

Mean Cost

C8924 2D TTE w or w/o fol w/con,fu 

C8922 TTE w or w/o fol w/cont, f/u 

C8923 2D TTE w or w/o fol w/con,co 

0177 

(Level I Echocardiogram 

With Contrast) C8927 TEE w or w/o fol w/cont, mon 

$446.38 

C8921 TTE w or w/o fol w/cont, com 

C8925 2D TEE w or w/o fol w/con,in 

C8926 TEE w or w/o fol w/cont,cong 

C8928 TTE w or w/o fol w/con,stres 

C8929 TTE w or wo fol wcon,Doppler 

0178 

(Level II Echocardiogram 

With Contrast) 

C8930 TTE w or w/o contr, cont ECG 

$594.96 

76825 Echo exam of fetal heart 

0697 76826 Echo exam of fetal heart 

(Level I Echocardiogram 

Without Contrast) 93308 Tte f-up or lmtd 

$218.76 

93304 Echo transthoracic 

93306 Tte w/doppler complete 

93307 Tte w/o doppler complete 

93313 Echo transesophageal 

93315 Echo transesophageal 

0269 

(Level II Echocardiogram 

Without Contrast) 

93350 Stress tte only 

$401.69 

93303 Echo transthoracic 

93312 Echo transesophageal 

93316 Echo transesophageal 

93318 Echo transesophageal intraop 

0270 

(Level II Echocardiogram 

Without Contrast) 

93351 Stress tte complete 

$574.69 
CMS-1589-FC 433 

2. Gastrointestinal Services

a. Laparoscopic Adjustable Gastric Band (APC 0132)

Effective January 1, 2006, the AMA’s CPT Editorial Panel established CPT code 

43770 (Laparoscopy, surgical, gastric restrictive procedure; placement of adjustable 

gastric restrictive device (eg, gastric band and subcutaneous port components)) to 

describe the bariatric placement of an adjustable band by laparoscopy. From 

January 1, 2006 through December 31, 2011, CPT code 43770 was assigned to status 

indicator “C” to indicate that the procedure was not paid separately under the OPPS 

because the procedure was considered an “inpatient” procedure. However, in the 

CY 2012 OPPS/ASC final rule (76 FR 74355), we stated that we received a comment 

requesting that this CPT code be removed from the inpatient list and assigned to a 

separately payable APC, effective January 1, 2012. Based on input from our physicians 

and review of our claims data, we determined that it was appropriate to remove CPT code 

43770 from the inpatient list because patients undergoing this procedure can typically be 

managed postoperatively as outpatients. Consequently, we assigned CPT code 43770 to 

APC 0131 (Level II Laparoscopy), effective January 1, 2012. 

At the August 2012 HOP Panel meeting, a presenter requested that the Panel 

recommend to CMS the reassignment of CPT code 43770 from APC 0131 to a new APC. 

The commenter expressed concern about the existing APC assignment and indicated that 

APC 0131 does not adequately cover the costs of performing the procedure. After 

discussion of the procedure and review of the hospital outpatient claims data, the Panel 

recommended that CPT code 43770 remain in APC 0131 for the CY 2013 update. 
CMS-1589-FC 434 

For CY 2013, we proposed to continue to assign CPT code 43770 to APC 0131, 

which had a proposed rule payment rate of approximately $3,497. 

Comment: Several commenters disagreed with the proposal to continue to assign 

CPT code 43770 to APC 0131 because the procedure is different from other procedures 

assigned to this APC. According to one commenter, the procedures assigned to APC 

0131 are less intensive (for example, resource cost) than CPT code 43770. Another 

commenter stated that the procedures assigned to APC 0131 are not similar to CPT code 

43770 because this procedure includes the implantation of a gastric band device as well 

as a port device, while the other procedures assigned to this APC do not. In addition, 

some commenters believed that assignment of CPT code 43770 to APC 0131 violates the 

2 times rule. According to the commenters, there is no existing APC that includes 

procedures that are comparable to the procedures described by CPT code 43770, both 

clinically and in terms of resource utilization. Therefore, they requested that CMS 

establish a new APC for CPT code 43770 to ensure the most appropriate payment for this 

procedure. 

However, we received conflicting statements on the issue of clinical 

comparability from some of the commenters. One commenter stated that, although there 

is no existing APC that accurately fits with CPT code 43770, the commenter mentioned 

that APC 0132 (Level III Laparoscopy) does include some procedures that are more 

clinically comparable to CPT code 43770 than the procedures assigned to APC 0131, and 

suggested that APC 0132 would be an appropriate APC assignment for this procedure. 

Another commenter considered suggesting a reassignment of CPT code 43770 to APC 
CMS-1589-FC 435 

0132 but stated that the procedures assigned to APC 0132 are not comparable in terms of 

resource utilization. Although most of the commenters agreed that establishing a new 

APC for CPT code 43770 would be more appropriate, some commenters suggested 

assigning the procedure to APC 0132 as an interim APC assignment if a new APC cannot 

be established for the CY 2013 update. 

Response: We do not agree with the commenters’ assertion that assigning CPT 

code 43770 to APC 0131 violates the 2 times rule. In determining whether a 2 times rule 

violation exists in an APC, we consider only those HCPCS codes that are significant 

based on the number of claims. For purposes of identifying significant HCPCS codes for 

examination in the 2 times rule, we consider codes that have more than 1,000 single 

major claims or codes that have both greater than 99 single major claims and comprise at 

least 2 percent of the single major claims used to establish the costs of the procedures 

assigned to an APC to be significant (75 FR 71832). This longstanding definition of 

when a HCPCS code is significant for purposes of the 2 times rule was selected because 

we believe that a subset of 1,000 claims is negligible within the set of approximately 

100 million single procedure or single session claims we use for establishing costs. 

Similarly, a HCPCS code for which there are fewer than 99 single claims and which 

comprises less than 2 percent of the single major claims within an APC will have a 

negligible impact on the costs of the procedures in an APC. For the CY 2013 OPPS/ASC 

proposed rule, claims data for CPT code 43770 showed 171 single claims out of 216 total 

claims and comprised less than 1 percent of the claims for procedures within APC 0131. 

Although CPT code 43770 had more than 99 single major claims, it did not contribute to 
CMS-1589-FC 436 

at least 2 percent of the single major claims for procedures within APC 0131. Therefore, 

in the CY 2013 OPPS/ASC proposed rule, we determined that assigning CPT code 43770 

to APC 0131 did not violate the 2 times rule because it did not meet the definition of a 

significant HCPCS code. 

As stated above, the HOP Panel made a recommendation to continue to assign 

CPT code 43770 to APC 0131 for the CY 2013 update. However, after the Panel 

meeting, we reviewed our more recent claims data for this final rule with comment 

period, and our analysis revealed that the procedure would be more appropriately 

assigned to APC 0132 (Level III Laparoscopy). Specifically, our analysis showed 213 

single claims (out of 262 total claims) for CPT code 43770 with a geometric mean cost of 

approximately $7,410. Furthermore, our analysis revealed that CPT code 43770 meets 

the definition of significant claims because the procedure represents more than 99 single 

major claims and contribute to at least 2 percent of the claims for procedures within APC 

0132. Consequently, we do not agree with the Panel's recommendation, and are 

reassigning CPT code 43770 to APC 0132. 

In summary, after consideration of the public comments we received, we are 

revising the APC assignment for CPT code 43770 from APC 0131 to 0132 for CY 2013. 

The final CY 2013 geometric mean cost for APC 0132 is approximately $5,268. 

b. Transoral Incisionless Fundoplication (APC 0422) 

For CY 2013, we proposed to continue to assign CPT code C9724 (Endoscopic 

full-thickness plication in the gastric cardia using endoscopic plication system (eps); 
CMS-1589-FC 437 

includes endoscopy) to APC 0422 (Level III Upper GI Procedures), which had a 

proposed payment rate of approximately $1,878. 

We note that at the August 2012 HOP Panel meeting, a presenter requested that 

the Panel recommend to CMS the reassignment of HCPCS code C9724 from APC 0422 

to a new APC, or alternatively, to establish a new APC with a descriptor of “Level IV 

Upper GI Procedures.” The commenter stated that the payment rate for APC 0422 does 

not cover the cost of providing the procedure. After discussion of the procedure and 

review of the hospital outpatient claims data, the Panel recommended that HCPCS code 

C9724 remain in APC 0422 for the CY 2013 update. 

Comment: Several commenters disagreed with the proposal to continue to assign 

HCPCS code C9724 to APC 0422. The commenters stated that the proposed payment 

rate for APC 0422 would not cover the cost of performing the procedure. According to 

the commenters, the cost of performing the procedure is approximately $5,000. The 

commenters urged CMS to either reassign HCPCS code C9724 to APC 1565 (New 

Technology - Level XXVIII ($5000-$5500)), which had a proposed payment rate of 

approximately $5,250, or establish a new APC titled “Level IV Upper GI Procedures” 

with a payment rate of approximately $5,000. 

Response: HCPCS code C9724, which was established by CMS effective 

April 1, 2005, describes an endoscopic full-thickness plication procedure for the 

treatment of gastroesophageal reflux disease (GERD). Since April 2005, HCPCS code 

C9724 has been assigned to APC 0422. Because this code has been in existence since 

April 2005, we have claims data for several years. For this final rule with comment 
CMS-1589-FC 438 

period, which is based on claims submitted from January 1, 2011 through 

December 31, 2011, our data show a geometric mean cost of approximately $5,728 based 

on 24 single claims (out of 120 total claims) for HCPCS code C9724. In addition, we 

agree with the Panel’s recommendation to maintain HCPCS code C9724 in APC 0422 for 

the CY 2013 update. Based on the clinical similarity to other procedures currently 

assigned to APC 0422, and because there is no violation with the 2 times rule, we will 

continue to assign HCPCS code C9724 to APC 0422. Consistent with CMS’ policy of 

reviewing APC assignments annually, we will reevaluate the cost of HCPCS code C9724 

and its APC assignment for the CY 2014 rulemaking cycle. 

In addition, because of concerns related to the current descriptor for HCPCS code 

C9724, we are revising the long descriptor to read “Endoscopic full-thickness plication of 

the stomach using endoscopic plication system (eps); includes endoscopy,” effective 

January 1, 2013. This change in the long descriptor is necessary to accurately describe 

how the procedure is currently performed. 

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

CY 2013 proposal without modification and will continue to maintain HCPCS code 

C9724 in APC 0422. The final CY 2013 geometric mean cost for APC 0422 is 

approximately $1,921. 

c. Gastrointestinal Transit and Pressure Measurement (APC 0361) 

The AMA’s CPT Editorial Panel created CPT code 0242T (Gastrointestinal tract 

transit and pressure measurement, stomach trough colon, wireless capsule, with 

interpretation and report) effective January 1, 2011. For CY 2011, we initially assigned 
CMS-1589-FC 439 

CPT code 0242T to APC 0361 (Level II Alimentary Tests), with a payment rate of 

$282.48. 

For CY 2012, we maintained the assignment of CPT code 0242T to APC 0361 

with a payment rate of $285.59. We noted in the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74242) that we routinely make assignments of new CPT codes to 

clinical APCs before we have claims data that are indicative of the resource costs of a 

procedure. We make these assignments initially using the best currently available 

information, while reviewing claims data once such data become available and making 

reassignments accordingly based on those data. 

We stated in the CY 2012 OPPS/ASC final rule with comment period that, as was 

the case when we made the initial assignment for CY 2011, we continued to believe that 

there are relevant clinical similarities between the service described by CPT code 0242T 

and other services assigned to APC 0361 to continue to justify this APC assignment. The 

service described by CPT code 0242T and the services assigned to APC 0361 all involve 

tests of the alimentary canal. We believed that the clinical attributes and CY 2012 costs 

of the services assigned to APC 0361 supported the initial assignment of CPT code 

0242T to APC 0361. We indicated that we routinely make assignments of new CPT 

codes to clinical APCs before we have claims data to indicate the procedural resource 

costs, and that we generally wait until claims data are available before reassignment to a 

new APC. For CY 2012, we maintained our assignment of CPT code 0242T to APC 

0361, which has a final median cost of $285.89, and we stated that we would review this 

assignment for CY 2013 when some claims data should be available for this procedure. 
CMS-1589-FC 440 

For CY 2013, we proposed to maintain the assignment of CPT code 0242T to 

APC 0361, which had a proposed rule geometric mean cost of approximately $311 and a 

proposed payment rate of approximately $303. We now have a small number of claims 

for use in CY 2013 for CPT code 0242T, which had a proposed rule geometric mean cost 

of approximately $613. The range of procedure level costs in APC 0361 for the CY 2013 

proposed rule was approximately $214 to approximately $633. This range of costs does 

not constitute a 2 times rule violation because the range of costs for procedures with 

significant volume in the APC is approximately $302 to approximately $406. 

We did not receive any public comments on our proposed APC assignment of 

CPT code 0242T to APC 0361. 

At the August 2012 meeting of the HOP Panel, the Panel recommended that CMS 

assign CPT code 0242T to APC 0142 (Level I Small Intestine Endoscopy), based on the 

procedure’s proposed rule mean cost of approximately $613, with a frequency of 8 

claims. 

Our CY 2013 final rule claims data show a cost of approximately $497 for CPT 

code 0242T, based on 8 claims. Our analysis comparing the proposed rule data and the 

final rule data for CPT code 0242T shows that one claim was dropped and another added, 

resulting in the fluctuation in geometric mean costs for the small number of claims 

between the proposed rule dataset and the final rule dataset for this procedure. The 

CY 2013 final geometric mean cost for APC 0361 is approximately $311, which includes 

a range of costs for procedures in the APC of approximately $209 to approximately $633. 

The CY 2013 final geometric mean cost for APC 0142 is approximately $772, which 
CMS-1589-FC 441 

includes a range of costs for procedures in the APC of approximately $569 to 

approximately $826. Therefore, based on the final rule geometric mean cost for CPT 

code 0242T, assignment of the code to APC 0361 is appropriate. We also continue to 

believe that CPT code 0242T is similar clinically to other procedures assigned to APC 

0361. Therefore we are maintaining our assignment of the CPT code 0242T procedure to 

APC 0361 for CY 2013. 

We note that the CPT Editorial Panel is replacing the CPT code for the procedure 

described by CPT code 0242T with a Category I CPT code, CPT code 91112 

(Gastrointestinal transit and pressure measurement, stomach trough colon, wireless 

capsule, with interpretation and report), effective January 1, 2013. Therefore, we are 

deleting CPT code 0242T from the OPPS effective January 1, 2013, and assigning 

replacement CPT code 91112 to APC 0361 for this procedure. 

3. Integumentary System Services 

a. Extracorporeal Shock Wave Wound Treatment (APC 0340)

In the CY 2012 OPPS/ASC final rule with comment period, we assigned new 

CPT codes 0299T (Extracorporeal shock wave for integumentary wound healing, initial 

wound) and 0300T (Extracorporeal shock wave for integumentary wound healing, each 

additional wound) on an interim basis to APC 0340 (Minor Ancillary Procedures), which 

has a CY 2012 payment rate of approximately $46 and a CY 2013 proposed rule payment 

rate of approximately $49.

Comment: One commenter objecting to the interim APC assignment of CPT 

codes 0299T and 0300T believed that the assignment is not consistent clinically or in 
CMS-1589-FC 442 

terms of the resources associated with the shock wave treatment procedures. The 

commenter stated that these services are more similar clinically and in related resources 

to the high-energy shock wave procedure for musculoskeletal conditions that is assigned 

to APC 0050 (Level II Musculoskeletal Procedures Except Hand and Foot), which has a 

CY 2012 payment rate of approximately $2,269. The commenter believed that 

assignment of these codes to a New Technology APC would be appropriate to gather cost 

data, and indicated that they would submit an application for new technology payments 

for these codes to CMS.

We received other similar comments to the proposed rule from several clinicians 

in the field who were involved in the initial clinical trial of the extracorporeal shock wave 

procedure. These commenters discussed the clinical trial and the clinical attributes of this 

treatment, indicating that it offers significantly greater clinical benefit than other wound 

healing therapies at a considerably lower cost. They objected to CMS’ assignment of 

CPT codes 0299T and 0300T to APC 0340. The commenters believed that the payment 

rate for this APC would inhibit the use of this emerging technology and would prevent 

patient access to the treatment.

Response: We agree with the commenters that it may be more appropriate in 

terms of clinical and resource similarity to assign CPT codes 0299T and 0300T to an 

APC other than APC 0340. However, we do not agree that CPT codes 0299T and 0300T 

should be assigned to APC 0050. Having considered the information provided by the 

commenters, and based on our evaluation of clinical and resource similarity to existing 

services, we believe that placement in APC 0133 (Level I Skin Repair) would be more 
CMS-1589-FC 443 

appropriate for these services until claims data are available. For CY 2013, we are 

placing CPT codes 0299T and 0300T in APC 0133, which has a final geometric mean 

cost of approximately $88. We will reevaluate the APC placement when claims data are 

available for CY 2014. 

b. Application of Skin Substitute (APCs 0133 and 0134) 

For CY 2012, we made assignments for several new (replacement) CPT codes for 

the application of skin substitutes. We assigned CPT code 15272 (Application of skin 

substitute graft to trunk, arms, legs, total wound surface area up to 100 sq cm; each 

additional 25 sq cm or part thereof) and CPT code 15276 (Application of skin substitute 

graft to face, scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet and/or 

multiple digits, total wound surface area up to 100 sq cm; each additional 25 sq cm or 

part thereof) to APC 0133 (Level I Skin Repair), which has a CY 2012 payment rate of 

approximately $84 and a CY 2013 proposed payment rate of approximately $86. We 

assigned CPT code 15274 (Application of skin substitute graft to trunk, arms, legs, total 

wound surface area greater than or equal to 100 sq cm; each additional 100 sq cm or part 

thereof) and CPT code 15278 (Application of skin substitute graft to face, scalp, eyelids, 

mouth, neck, ears, orbits, genitalia, hands, feet and/or multiple digits, total wound surface 

area greater than or equal to 100 sq cm; each additional 100 sq cm or part thereof) to 

APC 0134 (Level II Skin Repair), which has a CY 2012 payment rate of approximately 

$228 and a CY 2013 proposed payment rate of approximately $252.

Comment: One commenter stated that CMS should have assigned the new codes 

to the APC that includes their predecessor base codes so that a 2 times rule violation is 
CMS-1589-FC 444 

avoided. They requested that for CY 2013, CMS reassign CPT codes 15272 and 15276 

to APC 0134, crosswalking them to the predecessor add-on CPT code 15341 and assign 

them to the same APC as the former base CPT code 15340. Similarly, the commenter 

requested that CMS reassign CPT codes 15274 and 15278 to APC 0135 (Level III Skin 

Repair) which includes their applicable base codes (CPT codes 15273 and 15277).

Response: As we indicated in the CY 2012 OPPS/ASC final rule (76 FR 74269), 

we assigned these four replacement CPT codes for CY 2012 based on their clinical and 

estimated resource similarity to the services in their assigned APCs. We also took into 

account the size descriptions in the new codes’ long descriptors. There was not a 

one-to-one crosswalk between the old skin substitute application codes and the new CPT 

codes, as suggested by the commenter. Several of the old CPT codes map to a single new 

code. Therefore, we made the most appropriate assignment based on clinical 

homogeneity and estimated resource similarity, taking into account all of the former 

procedures that are now encompassed by a single code and the new coding structure for 

the family of codes. 

For CY 2013, we will continue to assign CPT codes 15272 and 15276 to APC 

0133, which has a final geometric mean cost of approximately $88, and CPT codes 15274 

and 15278 to APC 0134, which has a final geometric mean cost of approximately $259. 

We will reevaluate the placement of these codes when claims data become available in 

the CY 2014 rulemaking cycle.
CMS-1589-FC 445 

c. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0015)

Effective January 1, 2008, the CPT Editorial Panel created CPT code 0183T (Low 

Frequency, Non-Contact, Non-Thermal Ultrasound). Since that time, we have assigned 

this service to either APC 0013 (Level II Debridement and Destruction) or APC 0015 

(Level III Debridement and Destruction). Initially, for CY 2008 and CY 2009, we placed 

this service in the higher Level III APC 0015, with a payment rate of approximately 

$100. Based on our review of the first year of hospital claims data (CY 2008 claims), for 

CY 2010 we reassigned the service to the lower Level II APC 0013, with a payment rate 

of approximately $59. For CY 2011 and CY 2012, due to a change in the estimated cost 

of CPT code 0183T, we reassigned it to the higher level APC 0015, with a payment rate 

of approximately $105 in CY 2011 and approximately $103 in CY 2012. 

For CY 2013, we proposed to reassign CPT 0183T to APC 0013 because its 

proposed rule geometric mean cost of approximately $89 was closer to the proposed rule 

geometric mean cost of APC 0013 (approximately $73) than the proposed rule geometric 

mean cost of APC 0015 (approximately $110). 

Comment: One commenter objected to the reassignment of CPT code 0183T to 

APC 0013 because the commenter’s estimated cost of furnishing this service of 

approximately $101 would be greater than its proposed payment. The commenter 

believed that procedures currently assigned to APC 0013 and those assigned to APC 

0015 are not homogeneous clinically or in terms of resource requirements. The 

commenter requested that CMS split APC 0013 and APC 0015 to create a third APC, 

such that APC 0013 would include the services with costs less than $80; the new APC 
CMS-1589-FC 446 

would include services with costs between $80 and $110; and APC 0015 would include 

services with costs greater than or equal to $110. 

Another commenter recommended that CMS merge APC 0013 and APC 0015, 

arguing that both APCs are for skin procedures and noting that the proposed cost for the 

highest volume service in APC 0013, described by CPT code 17000 (Destruction of 

premalignant lesions; first lesion), is more than half of the cost of the highest volume 

service in APC 0015, described by CPT code 97597 (Open wound debridement; first 20 

sq cm or less). 

Response: The final rule geometric mean cost of CPT code 0183T and APC 0013 

(approximately $88 and $74, respectively) did not change significantly from their 

proposed rule costs and remain very similar. There also is no significant change in the 

final rule geometric mean cost of APC 0015 (approximately $110). We note that 

merging the two APCs as one commenter suggested would create several 2-times rule 

violations, and we see no clinical or other need to further split the APCs. Therefore, 

because the geometric mean cost of CPT code 0183T continues to be closer to the 

geometric mean cost of APC 0013 than that of APC 0015, and because merging the 

APCs would create several 2 times rule violations, for CY 2013, we are finalizing our 

proposal to reassign CPT code 0183T to APC 0013. 

4. Nervous System Services

a. Scrambler Therapy (APC 0275)

For the CY 2012 update, the AMA’s CPT Editorial Panel established Category III 

CPT code 0278T (Transcutaneous electrical modulation pain reprocessing (eg, scrambler 

therapy), each treatment session (includes placement of electrodes)) effective 
CMS-1589-FC 447 

January 1, 2012. CPT code 0278T describes a transcutaneous electrical modulation pain 

reprocessing procedure and involves the use of four to five electrodes that deliver 

electrical stimulation to treat chronic chemo-induced neuropathic pain. Based on the 

nature of the procedure, which can be performed by physicians, nurses, or physical 

therapists, the therapy involves 10 sessions (1 session per day for 10 days), and each 

session takes approximately between 30 and 45 minutes. 

In Addendum B of the CY 2012 OPPS/ASC final rule with comment period, we 

assigned CPT code 0278T to APC 0215 (Level I Nerve and Muscle Tests) which has a 

CY 2012 payment rate of approximately $44. We also assigned this CPT code comment 

indicator “NI” to indicate that the code was new for CY 2012 with an interim APC 

assignment that was subject to public comment following the publication of the final rule 

with comment period. Specifically, the code’s APC assignment and status indicator were 

subject to public comment. We received one public comment regarding the interim APC 

assignment for CPT code 0278T which we address below in this section. 

We note that we do not discuss APC or status indicator assignments for new 

codes for the upcoming year in the proposed rule because the new codes are not available 

when we publish the proposed rule. Rather, as has been our practice in the past, we 

implement new HCPCS codes in the OPPS final rule with comment period, at which time 

we invite public comments regarding the treatment of the new codes. We subsequently 

respond to those comments in the final rule with comment period for the following year's 

OPPS update. 
CMS-1589-FC 448 

As has been our practice since the implementation of the OPPS in 2000, we 

carefully review all new procedures before assigning them to an APC. In determining the 

APC assignment for CPT code 0278T, we took into consideration the clinical and 

resource characteristics involved with Scrambler Therapy. Based on our initial review of 

the components of these services and consultation with our medical advisors, we assigned 

CPT code 0278T to APC 0215 for CY 2012. 

At the February 2012 HOP Panel meeting, a presenter requested the reassignment 

of CPT code 0278T from APC 0215 to APC 0206 (Level II Nerve Injections) based on 

resource cost and clinical homogeneity. The presenter stated that the assignment of CPT 

code 0278T to APC 0215 is not appropriate because the procedures in this APC are 

primarily diagnostic in nature, whereas CPT code 0278T represents a therapeutic 

procedure. The presenter further added that the time and cost involved with providing 

the service associated with CPT code 0278T is considerably greater than the time and 

cost involved for procedures assigned to APC 0215, and recommended that the 

Scrambler Therapy would be more appropriately assigned to APC 0206 because the 

procedures in APC 0206 are mostly therapeutic in nature and represent similar costs. At 

the February 2012 meeting, the Panel made no recommendation to reassign CPT code 

0278T from its current APC 0215 assignment for CY 2013. 

In Addendum B of the CY 2013 OPPS/ASC proposed rule, we proposed to 

continue to assign CPT code 0278T to APC 0215. At the August 2012 HOP Panel 

meeting, the same presenter at February 2012 Panel meeting made the same request to 

the Panel to recommend to CMS to reassign CPT code 0278T to a more appropriate APC. 
CMS-1589-FC 449 

Specifically, at the August 2012 HOP Panel meeting, the requester recommended that 

CPT code 0278T be reassigned to APC 0204 (Level I Nerve Injections) based on clinical 

and cost considerations. During the discussion, one of the Panel members pointed out 

that the procedures assigned to APC 0204 represent nerve injections, which is in contrast 

to how the procedure described by CPT code 0278T is delivered because the procedure 

associated with the Scrambler Therapy does not involve injections. After discussion of 

the issue, the HOP Panel recommended that CMS assign CPT code 0278T to APC 0218 

(Level II Nerve and Muscle Tests). 

Comment: One commenter to the CY 2012 OPPS/ASC final rule with comment 

period recommended the reassignment of CPT code 0278T from APC 0215 to APC 0206 

based on the commenter’s cost analysis. Alternatively, the commenter recommended 

assignment of CPT code 0278T to APC 0204 because this is the APC assigned to unlisted 

CPT code 64999 (Unlisted procedure, nervous system), which would be used to report 

the Scrambler Therapy if CPT code 0278T had not been established. 

Response: As a new Category III CPT code for CY 2012, we do not yet have 

hospital claims data for the procedure. Category III CPT codes are temporary codes that 

describe emerging technology, procedures, and services, and are created by the AMA to 

allow for data collection for new services or procedures. Under the OPPS, we generally 

assign a payment rate to a new Category III CPT code based on input from a variety of 

sources, including but not limited to, review of resource costs and clinical homogeneity 

of the service to existing procedures, information from specialty societies, input from 

CMS medical advisors, and other information available to us. Based on our review of the 
CMS-1589-FC 450 

clinical characteristics of the service described by CPT code 0278T and the information 

provided by the commenter, we do not believe that we have sufficient clinical or cost 

information to justify a reassignment to a different APC at this time. As we do every 

year for other services and procedures under the OPPS, we will review the claims data for 

CPT code 0278T for CY 2012 for the CY 2014 rulemaking cycle. Because CPT code 

0278T was a new code for CY 2012, the first time we will have claims data for this 

procedure is next year for the CY 2014 update, and at which time we will reevaluate the 

APC assignment for this code. 

Comment: Some commenters recommended a range of the appropriate payment 

for CPT code 0278T based on their internal analysis. One commenter recommended that 

CPT code 0278T be assigned to an APC that has a payment rate of between $124 to $144 

based on their analysis, by taking into consideration the site of service, staff time 

involved, and system costs associated with providing the therapy. Another commenter 

stated that the total cost of providing Scrambler Therapy is approximately $274; 

however, an initial payment of approximately $184 may be adequate for hospitals to 

initiate treatment. The commenter further stated that the proposed payment rate of 

approximately $81 for APC 0218, which was recommended by the HOP Panel at the 

August 2012 meeting, is adequate. However, the commenter asserted that the proposed 

payment rate of approximately $150 for New Technology APC 1540 (New Technology - 

Level III ($100 - $200)) would be more appropriate. 

Response: After further review of the HOP Panel recommendation at the August 

2012 meeting and consideration of the public comments that we received on this 
CMS-1589-FC 451 

particular procedure, we believe that we should continue to assign the Scrambler Therapy 

to APC 0215. Therefore, we are not accepting the Panel's recommendation to reassign 

CPT code 0278T to APC 0218. In addition, we do not agree with the commenter that 

CPT code 0278T should be assigned to New Technology APC 1540. Based on our 

understanding of the procedure, we believe that APC 0215 is the most appropriate APC 

assignment for CPT code 0278T based on its similarity to other procedures assigned to 

APC 0215. We will review the claims data for CPT 0278T next year for the CY 2014 

rulemaking to determine whether an APC reassignment for the Scrambler Therapy is 

necessary. 

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

CY 2013 proposal, without modification, to continue to assign CPT code 0278T to APC 

0215 for CY 2013. The final CY 2013 geometric mean cost for APC 0215 is 

approximately $44. 

b. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0216)

Since July 2006, CPT codes have existed to describe Transcranial Magnetic 

Stimulation Therapy (TMS) therapy. The initial CPT codes were temporary Category 

III CPT codes, specifically, CPT code 0160T (Therapeutic repetitive transcranial 

magnetic stimulation treatment planning) and 0161T (Therapeutic repetitive transcranial 

magnetic stimulation treatment delivery and management, per session), that were 

effective July 1, 2006. For CY 2011, the CPT Editorial Panel deleted CPT code 0160T 

on December 31, 2010, and replaced it with CPT code 90867 (Therapeutic repetitive 

transcranial magnetic stimulation (tms) treatment; initial, including cortical mapping, 

motor threshold determination, delivery and management) effective January 1, 2011. 
CMS-1589-FC 452 

Similarly, CPT code 0161T was deleted on December 31, 2010, and was replaced with 

CPT code 90868 (Therapeutic repetitive transcranial magnetic stimulation (tms) 

treatment; subsequent delivery and management, per session) effective January 1, 2011. 

In CY 2012, the AMA’s CPT Editorial Panel established an additional TMS therapy 

code, specifically CPT code 90869 (Therapeutic repetitive transcranial magnetic 

stimulation (tms) treatment; subsequent motor threshold re-determination with delivery 

and management), that was effective January 1, 2012. 

In Addendum B of the CY 2013 OPPS/ASC proposed rule, we proposed to 

continue to assign CPT codes 90867, 90868, and 90869 to APC 0218 (Level II Nerve and 

Muscle Tests), which had a proposed payment rate of approximately $81. 

Comment: One commenter disagreed with the proposed APC assignment and 

stated that the TMS therapy codes are not similar to the services assigned to APC 0218. 

The commenter recommended three options on the appropriate APC assignment. 

Under the first option, the commenter recommended the reassignment of CPT 

codes 90867, 90868, and 90869 to APC 0216 (Level III Nerve and Muscle Tests), which 

had a proposed payment rate of approximately $182. The commenter also recommended 

the revision of the APC title description to read “Level III Nerve and Muscle Tests & 

TMS”. The commenter stated that the TMS therapy services are similar to the services 

described by CPT codes 95961 (Functional cortical and subcortical mapping by 

stimulation and/or recording of electrodes on brain surface, or of depth electrodes, to 

provoke seizures or identify vital brain structures; initial hour of physician attendance), 

95962 (Functional cortical and subcortical mapping by stimulation and/or recording of 
CMS-1589-FC 453 

electrodes on brain surface, or of depth electrodes, to provoke seizures or identify vital 

brain structures; each additional hour of physician attendance (list separately in addition 

to code for primary procedure)), and 96000 (Comprehensive computer-based motion 

analysis by video-taping and 3d kinematics), which are assigned to APC 0216. 

Under the second option, the commenter recommended the establishment of a 

new APC for the three TMS therapy CPT codes, and further recommended revising the 

APC title description to read “Transcranial Magnetic Stimulation”. 

Under the third option, the commenter suggested assigning CPT codes 90867, 

90868, and 90869 to APC 0320 (Electroconvulsive Therapy), which had a proposed 

payment rate of approximately $441. Although TMS therapy is clinically related to 

electroconvulsive therapy (ECT), the commenter stated that its resource costs are lower 

than ECT. 

Response: We appreciate the commenter's thoughtful suggestions on the APC 

assignments for CPT codes 90867, 90868, and 90869. We do not agree with the 

commenter that the procedures described by CPT codes 90867, 90868, and 90869 would 

be appropriately assigned to APC 0320 from a clinical perspective because the provision 

of electroconvulsive therapy generally requires more extensive monitoring and services 

(for example, muscle blockade) than transcranial magnetic treatment delivery and 

management. However, based on the latest claims data used for this rulemaking, we do 

agree with the commenter's suggestion that APC 0216 would be the more appropriate 

APC assignment for the three TMS therapy CPT codes. Analysis of our more recent 

claims data revealed that the resources associated with CPT codes 90867, 90868, and 
CMS-1589-FC 454 

90869 are similar to those services assigned to APC 0216. Specifically, for claims 

submitted during CY 2011, which were used for this final rule with comment period, 

CPT code 90867 showed a geometric mean cost of approximately $190 based on 15 

single claims (out of 18 total claims), and a geometric mean cost of approximately $233 

for CPT code 90868 based on 609 single claims (out of 614 total claims). In addition, 

review of the procedures assigned to APC 0216 showed that the range of the geometric 

mean cost for the procedures with significant claims data is between approximately $146 

(for CPT code 92584 (Electrocochleography)) and approximately $233 (for CPT code 

90868 (Tcranial magn stim tx deli)). Based on the clinical and resource similarity to 

other procedures currently assigned to this APC, we believe it is appropriate to reassign 

the TMS therapy services to APC 0216. Although CPT code 90869 is a new code for CY 

2012, we believe that it is appropriate to reassign this service to APC 0216, similar to the 

APC assignment of CPT codes 90867 and 90868. Because of this reassignment, we also 

are revising the APC title descriptions of APCs 0215, 0216, and 0218 to appropriately 

reflect the services within each APC. Specifically, we are revising the APC title 

description of APC 0215 from “Level I Nerve and Muscle Tests” to “Level I Nerve and 

Muscle Services”; the title description of APC 0218 from “Level II Nerve and Muscle 

Tests” to “Level II Nerve and Muscle Services”; and the title description of APC 0216 

from “Level III Nerve and Muscle Tests” to “Level III Nerve and Muscle Services”. 

After consideration of the public comment we received, we are finalizing our 

CY 2013 proposal, with modification. That is, we are reassigning CPT codes 90867, 

90868, and 90869 from APC 0218 to APC 0216, which has a final CY 2013 geometric 
CMS-1589-FC 455 

mean cost of approximately $189. Table 24 below shows the final APC assignments for 

CPT codes 90867, 90868, and 90869 for CY 2013. 

TABLE 24.—FINAL APC ASSIGNMENTS FOR TMS THERAPY 

FOR CY 2013 

CY 2012 

HCPCS 

Code 

CY 2012 Short Descriptor CY 2012 

SI 

CY 2012 

APC 

Final 

CY 2013 

SI 

Final 

CY 2013 

APC 

90867 Tcranial magn stim tx plan S 0218 S 0216 

90868 Tcranial magn stim tx deli S 0218 S 0216 

90869 Tcran magn stim redetemine S 0218 S 0216 

c. Paravertebral Neurolytic Agent (APC 0207) 

Effective January 1, 2012, the AMA’s CPT Editorial Panel created CPT code 

64633 (Destruction by neurolytic agent, paravertebral facet joint nerve(s), with imaging 

guidance (fluoroscopy or ct); cervical or thoracic, single facet joint). For CY 2012, we 

assigned new CPT code 64633 on an interim basis to APC 0207 (Level III Nerve 

Injections). This interim APC assignment was consistent with our standard process for 

dealing with new CPT codes effective on January 1 for the upcoming calendar year, 

which is to assign each code to the APC that we believe contains services that are 

comparable with respect to clinical characteristics and resources required to furnish the 

service. CPT code 64633 was assigned a comment indicator of “NI” in Addendum B to 

the CY 2012 OPPS/ ASC final rule with comment period to identify it as a new interim 

APC assignment for the new year and the APC assignment for this new code was open to 

public comment for 60 days following the publication of the CY 2012 OPPS/ ASC final 
CMS-1589-FC 456 

rule with comment period. For CY 2013, we proposed to continue to assign CPT code 

64633 to APC 0207, which had a proposed payment rate of approximately $568. 

Comment: One commenter who responded to the CY 2012 OPPS/ ASC final rule 

with comment period objected to the assignment of CPT code 64633 to APC 0207 

because the commenter believed that the payment rate for APC 0207 substantially 

underpays providers for this service. 

Response: Due to the lack of any claims data for CPT code 64633, we have no 

way to validate or substantiate the claim made by the commenter. We expect to have 

CY 2012 claims data for CPT code 64633 available in CY 2013 in preparation for the 

CY 2014 rulemaking cycle and will reevaluate the APC assignment of CPT code 64633 

at that time. 

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

CY 2013 proposal, without modification, to continue to assign CPT code 64633 to APC 

0207, which has a final CY 2013 APC geometric mean cost of approximately $582. 

d. Programmable Implantable Pump (APC 0691) 

Effective January 1, 2012, the AMA’s CPT Editorial Panel created two new CPT 

codes that combine pump refill and programming/analysis procedures: CPT code 62369 

(Electronic analysis of programmable, implanted pump for intrathecal or epidural drug 

infusion (includes evaluation of reservoir status, alarm status, drub prescription status); 

with reprogramming and refill) and CPT code 62370 (Electronic analysis of 

programmable, implanted pump for intrathecal or epidural drug infusion (includes 

evaluation of reservoir status, alarm status, drub prescription status); with reprogramming 
CMS-1589-FC 457 

and refill (requiring physician’s skill)). For CY 2012, CPT codes 62369 and 62370 

received a new interim APC assignment to APC 0691 (Level III Electronic Analysis of 

Devices), consistent with our standard process for dealing with new CPT codes effective 

on January 1 for the upcoming calendar year, which is to assign each code to the APC 

that we believe contains services that are comparable with respect to clinical 

characteristics and resources required to furnish the service. CPT codes 62369 and 62370 

were both given a comment indicator of “NI” in Addendum B to the CY 2012 

OPPS/ASC final rule with comment period to identify it as a new interim APC 

assignment for the new year and the APC assignment for these two new codes was open 

to public comment for 60 days following the publication of the CY 2012 OPPS/ASC final 

rule with comment period. For CY 2013, we proposed to continue to assign CPT codes 

62369 and 62370 to APC 0691, which had a proposed payment rate of approximately 

$192. 

Comment: Commenters who responded to the CY 2012 OPPS/ ASC final rule 

with comment period objected to the assignment of CPT codes 62369 and 62370 to APC 

0691 because they believed that the payment rate for APC 0691 substantially underpays 

providers for these services. 

Response: Due to the lack of any claims data for CPT codes 62369 and 62370, 

we have no way to validate or substantiate the claim made by commenters. We expect to 

have CY 2012 claims data for CPT codes 62369 and 62370 in CY 2013 in preparation for 

the CY 2014 rulemaking cycle and will reevaluate the APC assignment of CPT codes 

62369 and 62370 at that time. 
CMS-1589-FC 458 

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

CY 2013 proposal, without modification, to continue to assign CPT codes 62369 and 

62370 to APC 0691, which has a final CY 2013 APC geometric mean cost of 

approximately $197. 

e. Revision/Removal of Neurostimulator Electrodes (APC 0687) 

For CY 2013, we proposed to continue to assign CPT code 64569 (Revision or 

replacement of cranial nerve (eg, vagus nerve) neurostimulator electrode array, including 

connection to existing pulse generator) to APC 0687 (Revision/Removal of 

Neurostimulator Electrodes), which had a proposed CY 2013 payment rate of 

approximately $1,576. 

Comment: Commenters objected to the assignment of CPT code 64569 in APC 

0687 because they stated that this code is used to report both the revision and the 

replacement of neurostimulator electrodes. The commenters believed that hospital 

resources are substantially greater when neurostimulator electrodes are being replaced 

rather than revised. The commenters asked CMS to reassign CPT code 64569 to 

device-dependent APC 0040 (Level I Implantation/ Revision/ Replacement of 

Neurostimulator Electrodes) or assign new HCPCS codes to differentiate between 

electrode replacements (with a new electrode) and electrode revisions (without a new 

electrode) so that electrode revisions map to APC 0687 and electrode replacements map 

to APC 0040. The commenters noted that, like CPT code 64569, the procedures 

currently assigned to APC 0040 involve the implantation of a new electrode, either as an 

initial implant or as a replacement, while all of the procedures currently assigned to APC 
CMS-1589-FC 459 

0687, with the exception of CPT code 64569, are defined as “revision or removal” or 

simply “removal” of electrodes. The commenters stated that the resources associated 

with the procedure described by CPT code 64569 are similar to the resources associated 

with the procedures assigned to APC 0040. 

Response: We agree with the commenters that the resources associated with the 

procedure described by CPT code 64569 are similar to the resources associated with 

procedures assigned to APC 0040, and that these procedures share clinical characteristics. 

We note that the CY 2013 final rule geometric mean cost for CPT code 64569 of 

approximately $5,473 is more consistent with the CY 2013 final rule geometric mean 

cost of APC 0040 of approximately $4,526 than with the CY 2013 final rule geometric 

mean cost of APC 0687 of approximately $1,554. Therefore, we are modifying our 

proposal and assigning CPT code 64569 to APC 0040 for CY 2013. 

5. Ocular Services: Placement of Amniotic Membrane (APC 0233)

In CY 2011, the AMA CPT Editorial Panel revised the long descriptor for CPT 

code 65780 (Ocular surface reconstruction; amniotic membrane transplantation, multiple 

layers) to include the words “multiple layers” to further clarify the code descriptor. In 

addition, the AMA’s CPT Editorial Panel created two new CPT codes that describe the 

placement of amniotic membrane on the ocular surface without reconstruction: one 

describing the placement of a self-retaining (non-sutured/non-glued) device on the 

surface of the eye; and the other describing a single layer of amniotic membrane sutured 

to the surface of the eye. Specifically, the AMA’s CPT Editorial Panel established CPT 

codes 65778 (Placement of amniotic membrane on the ocular surface for wound healing; 
CMS-1589-FC 460 

self-retaining) and 65779 (Placement of amniotic membrane on the ocular surface for 

wound healing; single layer, sutured), effective January 1, 2011. 

As has been our practice since the implementation of the OPPS in 2000, we 

review all new procedures before assigning them to an APC. In determining the APC 

assignments for CPT codes 65778 and 65779, we took into consideration the clinical and 

resource characteristics involved with placement of amniotic membrane products on the 

eye for wound healing via a self-retaining device and a sutured, single-layer technique. 

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72402), we assigned 

CPT code 65778 to APC 0239 (Level II Repair and Plastic Eye Procedures), which had a 

payment rate of approximately $559, and CPT code 65779 to APC 0255 (Level II 

Anterior Segment Eye Procedures), which had a payment rate of approximately $519. 

In addition, consistent with our longstanding policy for new codes, we assigned 

these two new CPT codes to interim APCs for CY 2011. Specifically, we assigned CPT 

codes 65778 and 65779 to comment indicator “NI” in Addendum B of the CY 2011 

OPPS/ASC final rule with comment period to indicate that the codes were new with 

interim APC assignments that were subject to public comment. In accordance with our 

longstanding policy, our interim APC assignment for each code was based on our 

understanding of the resources required to furnish the service as defined in the code 

descriptor and input from our physicians. 

At the Panel’s February 28-March 1, 2011 meeting, a presenter requested the 

reassignment of CPT codes 65778 and 65779 to APC 0244 (Corneal and Amniotic 

Membrane Transplant), which is the same APC to which CPT code 65780 is assigned. 
CMS-1589-FC 461 

The presenter indicated that, prior to CY 2011, the procedures described by CPT codes 

65778 and 65779 were previously reported under the original version of CPT code 

65780, which did not specify “multiple layers,” and as such these new CPT codes should 

continue to be assigned to APC 0244. Further, the presenter stated that the costs of the 

procedures described by CPT codes 65778 and 65779 are very similar to the cost of the 

procedure described by CPT code 65780. 

The Panel recommended that CMS reassign the APC assignments for both CPT 

codes 65778 and 65779. Specifically, the Panel recommended the reassignment of CPT 

code 65778 from APC 0239 to APC 0233 (Level III Anterior Segment Eye Procedures), 

and the reassignment of CPT code 65779 from APC 0255 to APC 0233. In addition, the 

Panel recommended that CMS furnish data when data become available for these two 

codes. We noted at that time that because these CPT codes were effective 

January 1, 2011, the first available claims data for these codes would be for the CY 2013 

OPPS rulemaking cycle. 

We accepted the Panel’s recommendations. However, in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74247), we indicated that, while we 

agreed with the Panel’s recommendation to reassign CPT codes 65778 and 65779 to 

APC 0233, we believed that CPT code 65778 should be assigned to a conditionally 

packaged status indicator of “Q2” to indicate that the procedure would be packaged when 

it is reported with another procedure that is also assigned to status indicator “T”; but in all 

other circumstances, the CPT code would be paid separately. Because the procedure 

described by CPT code 65778 would rarely be provided as a separate, stand-alone service 
CMS-1589-FC 462 

in the HOPD, and because the procedure would almost exclusively be provided in 

addition to and following another procedure or service, we proposed to reassign CPT 

code 65778 a conditionally packaged status indicator of “Q2.” In addition, our medical 

advisors indicated that the procedure described by CPT code 65778 is not significantly 

different than placing a bandage contact lens on the surface of the eye to cover a corneal 

epithelial defect. CPT code 65778 describes the simple placement of a special type of 

bandage (a self-retaining amniotic membrane device) on the surface of the eye, which 

would most commonly be used in the HOPD to cover the surface of the eye after a 

procedure that results in a corneal epithelial defect. 

At the August 10-11, 2011 Panel meeting, a presenter urged the Panel to 

recommend to CMS not to conditionally package CPT code 65778 for CY 2012, and 

instead, assign it status indicator “T.” Based on information presented at the meeting, 

and after further discussion of the issue, the Panel recommended that CMS reassign the 

status indicator for CPT code 65778 from conditionally packaged “Q2” to status indicator 

“T.” Several commenters also urged CMS not to finalize its proposal to conditionally 

package CPT code 65778 by assigning it status indicator “Q2” and instead adopt the 

Panel’s recommendation to assign status indicator “T.” 

After consideration of the Panel’s August 2011 recommendation and the public 

comments that we received in response to the CY 2012 OPPS/ASC proposed rule, we 

finalized our proposal and reassigned the status indicator for CPT code 65778 from “T” 

to “Q2” effective January 1, 2012 (76 FR 74246). Given the clinical characteristics of 
CMS-1589-FC 463 

this procedure, we believed that conditionally packaging CPT code 65778 was 

appropriate under the OPPS. 

For the CY 2013 OPPS update, we proposed (77 FR 45123) to continue to assign 

CPT code 65778 a conditionally packaged status indicator of “Q2.” Similarly, we stated 

that we believe that we should assign CPT code 65779 to a conditionally packaged status 

indicator of “Q2.” Therefore, for CY 2013, we proposed to revise the status indicator for 

CPT code 65779 from status indicator “T” to “Q2” to indicate that the procedure would 

be packaged when it is reported with another procedure that is also assigned status 

indicator “T,” but in all other circumstances, the CPT code would be paid separately. 

This reassignment would enable hospitals to perform either procedures (CPT code 65778 

or 65779) when appropriate, and would not differentiate one procedure from the other 

because of the status indicator assignment under the OPPS. 

As indicated at the February 28-March 1, 2011 Panel meeting, because CPT codes 

65778 and 65779 were effective January 1, 2011, the first available claims data for these 

codes would be in CY 2012 for the CY 2013 OPPS rulemaking. We now have claims 

data for CPT codes 65778 and 65779, and our data show that both procedures are 

performed in the HOPD setting. Analysis of the CY 2011 claims data available for the 

proposed rule, which was based on claims processed from January 1 through 

December 31, 2011, revealed that the estimated cost for CPT code 65778 is 

approximately $1,025 based on 33 single claims (out of 130 total claims), and the 

estimated cost for CPT code 65779 is approximately $2,303 based on 35 single claims 

(out of 260 total claims). Based on the clinical similarity to other procedures currently 
CMS-1589-FC 464 

assigned to APC 0233, and because there was no violation with the 2 times rule, we 

stated that we believe that we should continue to assign both CPT codes 65778 and 

65779 to APC 0233, which had a payment rate of approximately $1,150. Review of the 

procedures assigned to APC 0233 showed that the range of the cost for the procedures 

with significant claims data is between approximately $859 (for CPT code 65400 

(Removal of eye lesion)) and approximately $1,397 (for CPT code 66840 (Removal of 

lens material)). 

In summary, for CY 2013, we proposed to continue to assign CPT code 65778 to 

a conditionally packaged status indicator of “Q2” and to reassign the status indicator for 

CPT code 65779 from “T” to “Q2,” similar to CPT code 65778. In addition, we 

proposed to continue to assign both CPT codes 65778 and 65779 to APC 0233, which 

had a proposed geometric mean cost of approximately $1,150. Both procedures and their 

CY 2013 APC assignments were displayed in Table 19 of the proposed rule. 

At the August 2012 HOP Panel Meeting, a presenter urged the Panel to 

recommend to CMS not to conditionally package CPT code 65779 for CY 2013, and 

instead, assign status indicator “T” to the code. Based on the information presented at the 

meeting, and after further discussion of the issue, the HOP Panel made no 

recommendation to revise the status indicator assignment for CPT code 65779. 

Comment: One commenter urged CMS not to finalize its proposal to 

conditionally package CPT code 65779 by assigning it status indicator “Q2,” and 

recommended that CMS continue to assign the code status indicator “T.” The commenter 

expressed concern that assigning a "Q2" status indicator to CPT code 65779 would 
CMS-1589-FC 465 

impede access to this procedure because, in a majority of the cases (84 percent), hospitals 

perform this procedure with another procedure. Consequently, a “Q2” status indicator 

would result in no payment for CPT code 65779. The commenter further recommended 

that CMS assign CPT code 65779 to APC 0244, or another APC that better reflects the 

resources associated with the procedure, such as APC 0241 (Level IV Repair and Plastic 

Eye Procedures) or APC 0234 (Level IV Anterior Segment Eye Procedures). 

Response: We believe that the revision in status indicator for CPT code 65779 

would enable hospitals to perform either procedures (CPT code 65778 or 65779) when 

appropriate, and would not differentiate one procedure from the other because of the 

status indicator assignment under the hospital OPPS. In addition, because CPT codes 

65778 and 65779 were new for CY 2011, CY 2013 is the first year of claims data that we 

have available for ratesetting for both CPT codes. Analysis of the CY 2011 claims data 

revealed a geometric mean cost of approximately $989 for CPT code 65778 based on 36 

single claims (out of 142 total claims), and approximately $2,314 for CPT code 65779 

based on 37 single claims (out of 280 total claims). Review of the procedures assigned to 

APC 0233 showed that the range of the CPT geometric mean cost for the procedures with 

significant claims data is between approximately $867 (for CPT code 65400 (Removal of 

eye lesion)) and approximately $1,390 (for CPT code 66840 (Removal of lens material)). 

Based on the clinical similarity to other procedures currently assigned to APC 0233, and 

because there is no violation with the 2 times rule, we believe that we should continue to 

assign CPT code 65779 to APC 0233, which has a final geometric mean cost of 

approximately $1,162 for CY 2013.
CMS-1589-FC 466 

As has been our practice since the implementation of the OPPS, we annually 

review all the items and services within an APC group to determine, with respect to 

comparability of the use of resources, for any 2 times rule violations. In making this 

determination, we review our claims data and determine whether we need to make 

changes to the current APC assignments for the following year. For CPT codes 65778 

and 65779, we will again reevaluate their APC assignments for the CY 2014 OPPS 

rulemaking cycle. 

After consideration of the public comment that we received, we are finalizing our 

CY 2013 proposal, without modification, to assign status indicator “Q2” to CPT code 

65779. When the service is furnished with a separately payable surgical procedure with 

status indicator “T” on the same day, payment for CPT code 65779 is packaged. 

Otherwise, payment for CPT code 65779 is made separately through APC 0233, which 

has a final CY 2013 geometric mean cost of approximately $1,162. The amniotic 

membrane procedures and their CY 2013 final APC assignments are displayed in Table 

25 below.

TABLE 25.—FINAL APC ASSIGNMENTS FOR 

CPT CODES 65778 AND 65779 FOR CY 2013 

CY 

2012 

HCPCS 

Code 

CY 2012 Short Descriptor 

CY 

2012

SI 

CY 2012 

APC 

Final 

CY 2013 

SI 

Final 

CY 2013 

APC 

65778 Cover eye w/membrane Q2 0233 

65779 Cover eye w/membrane suture T 0233 

Q2 0233 
CMS-1589-FC 467 

6. Radiology Oncology

a. Proton Beam Therapy (APCs 0664 and 0667)

APC 0664 (Level I Proton Beam Radiation Therapy) includes two procedures: 

CPT code 77520 (Proton treatment delivery; simple, without compensation), which had a 

CY 2013 proposed rule cost of approximately $331 (based on 185 single claims of 185 

total claims submitted for CY 2011); and CPT code 77522 (Proton treatment delivery; 

simple, with compensation), which had a proposed rule cost of approximately $1,191 

(based on 14,279 single claims of 15,405 total claims submitted for CY 2011). APC 

0667 (Level II Proton Beam Radiation Therapy) also includes two procedures: CPT code 

77523 (Proton treatment delivery, intermediate), which had a proposed rule cost of 

approximately $920 (based on 3,009 single claims out of 3,202 total claims submitted for 

CY 2011), and CPT code 77525 (Proton treatment delivery, complex), which had a 

proposed rule cost of approximately $483 (based on 1,400 single claims out of 1,591 total 

claims submitted for CY 2011). Based on these CY 2011 claims data, under the current 

APC structuring the proposed rule cost of APC 0664 was approximately $1,171, and the 

proposed rule cost of APC 0667 was approximately $750. 

Because only a few hospitals bill Medicare for these services, their payment rates, 

which are set annually based on claims data according to the standard OPPS ratesetting 

methodology, may fluctuate significantly from year to year. For CY 2013, under the 

current APC assignments, the proposed rule cost of APC 0664 was approximately the 

same as its CY 2012 payment rate of $1,184. However, the proposed rule cost of APC 

0667 decreased substantially from the CY 2012 payment rate. We also observed that for 
CMS-1589-FC 468 

CY 2013, as in several prior years, the lower level APC 0664 did not include the lower 

cost services among the four CPT codes. For CY 2013, we proposed to improve the 

resource homogeneity within the proton beam therapy APCs by including the services 

requiring fewer resources in APC 0664 (Level I) and the services requiring greater 

resources in APC 0667 (Level II). Specifically, we proposed to reassign CPT code 77522 

to APC 0667 and to reassign CPT code 77525 to APC 0664. Under the proposed 

reassignment, the estimated cost of APC 0664 was approximately $462, and the 

estimated cost of APC 0667 was approximately $1,138. We invited public comments on 

this proposal. 

Comment: Several commenters indicated that the decrease in the cost of APC 

0667 is attributable to inaccurate coding and cost reporting during part of CY 2010 and 

part of CY 2011, on the part of one hospital. The commenters stated that one hospital’s 

services that should have been billed as CPT code 77523 were instead billed as CPT 

code77525, which has a lower estimated cost. They stated that these services were also 

reported under an unintended cost center in the hospital’s cost report, and argued that the 

current APC configuration better reflects the clinical similarity and relative resources 

used to furnish proton beam therapy services. We received a comment from the hospital 

in question indicating the same. This provider also stated that these issues were corrected 

and do not affect any claims in CY 2012. These commenters requested that we therefore 

forego using the CY 2011 claims data to set CY 2013 rates because they are based in part 

on inaccurate data reported by one of the few billing providers. They requested that CMS 

maintain both the CY 2012 payment rates and the current CY 2012 APC configuration 
CMS-1589-FC 469 

through CY 2013, and the HOP Panel agreed with this recommendation at its August 

2012 public meeting. 

One commenter recommended that CMS obtain corrected data from the provider 

in question and use the corrected data in updating the CY 2012 proton beam therapy 

payment rates for CY 2013. The commenter recommended that if CMS could not 

accomplish this in time for publication of the CY 2013 final rule, CMS exclude the 

reportedly erroneous data from its ratesetting process and update the CY 2012 payments 

for proton beam services for CY 2013 using the remaining claims data. In either event, 

the commenter recommended that we not restructure the APCs this year because despite 

what the cost data show, simple and complex proton beam therapy services are not 

clinically homogenous. 

Another commenter supported the proposed reduction in payments for proton 

beam services. The commenter stated that given the cost of establishing and staffing 

proton beam centers, proton beam therapy does not yield commensurate benefit over 

other therapies. 

Response: We appreciate the public comments and the HOP Panel’s 

recommendation. After consideration of the public comments we received, we are 

updating the payment rates for proton beam therapy for CY 2013 to reflect the most 

recently available claims data from all providers. Therefore, we are not maintaining the 

CY 2013 payment rates at CY 2012 levels, and we are not excluding the reportedly 

erroneous data from the ratesetting process. However, we are maintaining the current 

APC structure for CY 2013 and will reevaluate the costs and appropriateness of the APC 
CMS-1589-FC 470 

structuring for proton beam services next year. Using the current APC assignments for 

proton beam services, the CY 2013 final geometric mean cost of APC 0664 (including 

CPT codes 77520 and 77522) is approximately $1,169. The CY 2013 final geometric 

mean cost of APC 0667 (including CPT codes 77523 and 77525) is approximately $702. 

b. Device Construction for Intensity Modulated Radiation Therapy (IMRT) (APC 0305) 

Effective January 1, 2010, the CPT Editorial Panel created CPT code 77338 

(Construction of multi-leaf collimator (MLC) device(s) for IMRT per IMRT plan) to 

report all of the devices furnished under a single IMRT treatment plan. The code was 

created as part of an effort to consolidate the reporting of multiple services or units of 

service into a single code. For CY 2011, we assigned CPT 77338 to APC 0310 (Level III 

Therapeutic Radiation Treatment Preparation) based on a simulated cost of 

approximately $792 that we calculated using CY 2009 claims data for the predecessor 

CPT code 77334 ((Treatment devices, design and construction; complex (irregular 

blocks, special shields, compensators, wedges, molds or casts)). 

For CY 2012, using our standard ratesetting methodology and the first year of 

available claims data for CPT code 77338, and based upon a final rule cost of 

approximately $188, we reassigned this service from APC 0310 to APC 0305 (Level II 

Therapeutic Radiation Treatment Preparation) with a final payment rate of approximately 

$264. In our response to public comments, we noted several possible reasons for the 

discrepancy in the reported cost of the service relative to its predecessor code. We stated 

that it is not unusual for providers to bill a given service in a manner that is inconsistent 

with what we would expect based on the definition of a new code. We also noted 
CMS-1589-FC 471 

potential clinical reasons for the apparent anomaly, such as the inclusion of laborintensive physical blocks, shields, and molds in the service described by CPT code77334, 

and accounting rationales such as the crosswalking of a single collimator setting to the 

charges for the construction of a physical block, also in the service described by CPT 

code 77334. We stated that we saw no basis to ignore our robust set of single procedure 

claims submitted by a significant number of hospitals by continuing to simulate a cost for 

CPT code 77338. 

In the CY 2013 OPPS/ASC proposed rule Addenda, based on a proposed rule cost 

of approximately $293, we proposed to continue the current assignment of CPT code 

77338 for CY 2013 to APC 0305, and to add this service to the bypass list which would 

increase the number of claims that could be used in setting its payment rate. 

Comment: One commenter objected to the continued assignment of CPT code 

77338 to APC 0305. The commenter again noted the low estimated cost of this service 

compared to its predecessor code, and continued to believe that providers are 

inappropriately coding the service. They requested that for CY 2013, we simulate the 

cost of this service using the alternative methodology that we used in CY 2011, and that 

we reassign the service to APC 0310, which has a final rule cost of approximately 

$1,013. 

Response: As we noted last year, we see no reason to discard the reported claims 

data for CPT code 77338, which has a CY 2013 final rule geometric mean cost of 

approximately $297. For the reasons previously discussed, for CY 2013 we will continue 

assigning this CPT code to APC 0305, which has a final geometric mean cost of 
CMS-1589-FC 472 

approximately $299. We will reevaluate whether this placement is appropriate next year 

when additional claims data are available. 

c. Other Radiation Oncology Services (APCs 0310 and 0412) 

Comment: One commenter addressed the proposed payment rates for the 

following services: CPT code 77418 (Radiation treatment delivery intensity modulated 

radiotherapy), which is assigned to APC 0412 (Level II Radiation Therapy) and is 

separately paid; CPT code 77295 (3-D Therapeutic radiology simulation-aided field 

setting), which is assigned to APC 0310 (Level III Therapeutic Radiation Treatment 

Preparation) and is also separately paid; CPT code 77373 (Stereotactic body radiation 

therapy delivery), which has a status indicator of “B” (Not covered under the OPPS); and 

CPT code 77014 (CT scan for therapy guidance), which has status indicator of “N” and is 

packaged. The commenter expressed concern about perceived decreases in payment for 

these services. 

Response: Under our standard ratesetting methodology, we proposed a slight 

payment increase for CPT 77418 from approximately $459 in CY 2012 to approximately 

$484 in CY 2013, based on a CY 2013 proposed rule geometric mean cost of $497. 

Similarly, we proposed a slight payment increase for CPT 77295 from approximately 

$953 in CY 2012 to approximately $985 in CY 2013, based on a CY 2013 proposed rule 

geometric mean cost of $988. The final CY 2013 geometric mean cost of CPT 77418 is 

approximately $498, and the final CY 2013 geometric mean cost of CPT 77295 is 

approximately $991. 
CMS-1589-FC 473 

Since 2007, we have not recognized CPT code 77373 under the OPPS, and 

hospitals should instead report this service using HCPCS code G0251 (Linear accelerator 

based stereotactic radiosurgery, delivery). HCPCS code G0251 is assigned to APC 0065 

(Level I Stereotactic Radiosurgery, MRgFUS, and MEG), whose payment rate also 

increased from CY 2012 (final CY 2012 payment of approximately $902) to CY 2013 

(final CY 2013 geometric mean cost of approximately $1,007). CPT code 77014 has 

been packaged under the OPPS since 2008 when we implemented our guidance services 

policy. 

d. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 0065, 0066, 

0067, and 0127) 

For CY 2013, we proposed to continue to assign CPT code 77371 (Radiation 

treatment delivery, stereotactic radiosurgery (SRS), complete course of treatment of 

cranial lesion(s) consisting of 1 session; multi-source Cobalt 60 based) to APC 0127 

(Level IV Stereotactic Radiosurgery, MRgFUS, and MEG), which had a CY 2013 

proposed payment rate of approximately $8,011. 

We also proposed to continue to recognize four existing HCPCS G-codes that 

describe linear accelerator-based SRS treatment delivery services for separate payment in 

CY 2013. Specifically, we proposed the following: to assign HCPCS code G0173 (Linear 

accelerator based stereotactic radiosurgery, complete course of therapy in one session) 

and HCPCS code G0339 (Image-guided robotic linear accelerator-based stereotactic 

radiosurgery, complete course of therapy in one session or first session of fractionated 

treatment) to APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, and MEG), 
CMS-1589-FC 474 

which had a CY 2013 proposed payment rate of approximately $3,294; to assign HCPCS 

code G0251 (Linear accelerator-based stereotactic radiosurgery, delivery including 

collimator changes and custom plugging, fractionated treatment, all lesions, per session, 

maximum five sessions per course of treatment) to APC 0065 (Level I Stereotactic 

Radiosurgery, MRgFUS, and MEG), which had a CY 2013 proposed payment rate of 

approximately $967; and to assign HCPCS code G0340 (Image-guided robotic linear 

accelerator based stereotactic radiosurgery, delivery including collimator changes and 

custom plugging, fractionated treatment, all lesions, per session, second through fifth 

sessions, maximum five sessions per course of treatment) to APC 0066 (Level II 

Stereotactic Radiosurgery, MRgFUS, and MEG), which had a CY 2013 proposed 

payment rate of approximately $2,361. 

Further, we proposed to continue to assign SRS CPT codes 77372 (Radiation 

treatment delivery, stereotactic radiosurgery (SRS) (complete course of treatment of 

cerebral lesion(s) consisting of 1 session); linear accelerator based) and 77373 

(Stereotactic body radiation therapy, treatment delivery, per fraction to 1 or more lesions, 

including image guidance, entire course not to exceed 5 fractions) status indicator “B” 

(Codes that are not recognized by OPPS when submitted on an outpatient hospital Part B 

bill type (12x and 13x)) under the OPPS, to indicate that these CPT codes are not payable 

under the OPPS. 

Comment: One commenter urged CMS to reevaluate the APC assignments for 

the linear accelerator-based (LINAC) and robotic Cobalt-60 based stereotactic 

radiosurgery (r-SRS) HCPCS codes. The commenter stated that no clinical data exist to 
CMS-1589-FC 475 

support the need for differential payments for LINAC-based and Cobalt-60 r-SRS 

procedures. The commenter further explained that there is no clinical evidence to suggest 

that one system is superior to the other, and the costs of purchasing and maintaining the 

devices are similar. The commenter recommended that CMS assign HCPCS code G0339 

and CPT code 77371 to the same APC, thereby establishing payment parity for the 

complete course of treatment for intracranial and other head and neck r-SRS, regardless 

of equipment or energy source. In addition, the commenter argued that this APC 

reevaluation is necessary to protect the Medicare program and beneficiaries from 

excessive costs associated with Cobalt-60-based system, when both the LINAC-based 

and Cobalt-60-based systems are similar in clinical homogeneity and resource costs. 

Response: We disagree with the commenter’s argument that the LINAC-based 

and Cobalt-60 based systems have similar resource costs. For the past several years, we 

have seen resource differences based on the geometric mean costs for the LINAC-based 

and Cobalt-60-based systems, and analysis of our claims data show that the geometric 

mean costs for LINAC-based and Cobalt-60-based SRS procedures differ significantly. 

Since CY 2007, when CPT code 77371 became effective, our claims data have shown 

consistently a cost of more than $7,000 for the service associated with the Cobalt-60-

based system, which is higher than the mean cost of approximately $3,500 for the 

LINAC-based system (described by HCPCS G-code G0339). 

Analysis of the updated CY 2011 claims data used for this final rule with 

comment period indicates that the code-specific geometric mean costs for the 

LINAC-based and Cobalt-60-based systems continue to differ. Our updated claims data 
CMS-1589-FC 476 

on the hospital outpatient claims available for CY 2013 ratesetting show a geometric 

mean cost of approximately $8,138 for CPT code 77371 based on 410 single claims (out 

of a total of 4,598 claims), which is significantly higher than the geometric mean costs 

associated with HCPCS codes G0173, G0251, G0339, and G0340. Specifically, our 

claims data indicate a geometric mean cost of approximately $2,605 for HCPCS code 

G0173 based on 923 single claims (out of a total of 1,597 claims), a geometric mean cost 

of approximately $1,007 for HCPCS code G0251 based on 12,965 single claims (out of a 

total of 13,746 claims), a geometric mean cost of approximately $3,497 for HCPCS code 

G0339 based on 8,287 single claims (out of a total of 10,462 claims), and a geometric 

mean cost of approximately $2,423 for HCPCS code G0340 based on 25,444 single 

claims (out of a total of 25,708 claims). Because the geometric mean costs of HCPCS 

code G0339 and CPT code 77371 differ significantly, we do not believe it would be 

appropriate to provide OPPS payment through a single APC for these r-SRS treatment 

delivery services in CY 2013. We continue to believe that APC 0127 is an appropriate 

APC assignment for CPT code 77371, and, similarly, that APC 0067 is an appropriate 

APC assignment for HCPCS code G0339 based on consideration of the clinical 

characteristics associated with these procedures and based on the geometric mean costs 

for these services calculated from the most recently available hospital outpatient claims 

and cost report data. Consistent with our current policy to annually assess the 

appropriateness of the APC assignments for all services under the hospital OPPS, we will 

continue to monitor our claims data for the SRS treatment delivery services in the future. 
CMS-1589-FC 477 

As we have stated in the past (74 FR 60456), the OPPS is a prospective payment 

system, where APC payment rates are based on the relative costs of services as reported 

to us by hospitals according to the most recent claims and cost report data as described in 

section II.A. of this final rule with comment period. The 2 times rule specifies that the 

mean cost of the highest cost item or service within a payment group may be no more 

than 2 times greater than the mean cost of the lowest cost item or service within the same 

group. Based on the 2 times rule, HCPCS code G0339 and CPT code 77371 could not be 

assigned to the same APC and, because hospitals continue to report very different costs 

for these services, we believe it is appropriate to maintain their assignments to different 

payment groups for CY 2013. As a matter of payment policy, the OPPS does not set 

payment rates for services based on considerations of clinical effectiveness. Furthermore, 

in accordance with the statute, we budget neutralize the OPPS each year in the annual 

update so that projected changes in spending for certain services are redistributed to 

payment for other services. 

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

CY 2013 proposals, without modification, to continue to assign CPT code 77371 to APC 

0127, which has a final CY 2013 APC geometric mean cost of approximately $8,138, and 

to continue to assign HCPCS code G0339 to APC 0067, which has a final CY 2013 APC 

geometric mean cost of approximately $3,395. 
CMS-1589-FC 478 

e. Intraoperative Radiation Therapy (IORT) (APC 0412) 

(1) Background 

The AMA’s CPT Editorial Panel created three new Category I CPT codes for 

intraoperative radiation therapy (IORT), effective January 1, 2012: CPT codes 77424 

(Intraoperative radiation treatment delivery, x-ray, single treatment session); 77425 

(Intraoperative radiation treatment delivery, electrons, single treatment session); and 

77469 (Intraoperative radiation treatment management). As with all new CPT codes for 

CY 2012, these three codes were included in Addendum B to the CY 2012 OPPS/ASC 

final rule with comment period (available via the CMS Web site), effective on 

January 1, 2012. In accordance with our standard practice each year, our clinicians 

review the many CPT code changes that will be effective in the forthcoming year and 

make decisions regarding status indicators and/or APC assignments based on their 

understanding of the nature of the services. We are unable to include proposed status 

indicators and/or APC assignments in the proposed rule for codes that are not announced 

by the AMA’s CPT Editorial Panel prior to the issuance of the proposed rule. Therefore, 

in accordance with our longstanding policy, we include, in the final rule with comment 

period, interim status indicators and/or APC assignments for all new CPT codes that are 

announced by the AMA’s CPT Editorial Panel subsequent to the issuance of the 

OPPS/ASC proposed rule to enable payment for new services as soon as the codes are 

effective. 

We identified the new codes for IORT for CY 2012 in Addendum B to the 

CY 2012 OPPS/ASC final rule with comment period as being open to public comment by 
CMS-1589-FC 479 

showing a comment indicator of “NI” and made interim status indicator assignments for 

each of these new IORT codes, based on our understanding of the clinical nature of the 

services they describe. Specifically, for CY 2012, we packaged these IORT service 

codes with the surgical procedures with which they are billed, assigning them interim 

status indicators of “N” (Items and Services Packaged into APC Rates). We did so based 

on a policy that was adopted in the CY 2008 OPPS final rule with comment period 

(72 FR 66610 through 66659) to package services that are typically ancillary and 

supportive of a principal diagnostic or therapeutic procedure, which would generally 

include intraoperative services. Because IORT are intraoperative services furnished as a 

single dose during the time of the related surgical session, we packaged them into the 

payment for the principal surgical procedures with which they are performed based on 

claims data used for the CY 2012 OPPS/ASC final rule with comment period. 

Subsequent to issuance of the CY 2012 OPPS/ASC final rule with comment 

period, stakeholders provided comments on the interim status of these IORT service 

codes for CY 2012, asserting that these services are not ancillary to the surgical 

procedures, urging us to unpackage these codes, and requesting that we assign them to an 

APC reflective of the resources used to provide the IORT services. Commenters who 

responded to the CY 2012 OPPS/ASC final rule with comment period argued that IORT 

services described by CPT codes 77424 and 77425 are separate, distinct, and independent 

radiation treatment services from the surgical services to remove a malignant growth. 

According to the commenters, IORT is performed separately by a radiation oncologist 

and a medical physicist when there is concern for residual unresected cancer because of 
CMS-1589-FC 480 

narrow margins related to the surgical resection. A number of the commenters provided 

varied estimates of the cost of IORT as between $4,000 and $7,000 per treatment, and 

some commenters cited a hospital survey of per treatment costs for the procedure 

described by CPT code 77424 of $4,441.17 and for the procedure described by CPT code 

77425 of $6,897.50. 

One commenter stated that the x-ray intraoperative service described by CPT 

code 77424 has previously been reported with CPT code 0182T (High dose rate 

electronic brachytherapy, per fraction), which is a separately paid OPPS service. 

However, the commenter pointed out that it would not be proper to report intraoperative 

radiation therapy with CPT code 0182T because now CPT codes 77424 and 77425 more 

specifically and accurately describe the intraoperative radiation services. One commenter 

recommended that CPT code 77425 be mapped to a new technology APC. 

(2) CY 2013 Proposals for CPT Codes 77424, 77425, and 77469 

Based on the public comments and information received on the IORT policies 

contained in the CY 2012 OPPS/ASC final rule with comment period, and after further 

review and consideration of those public comments and the clinical nature of the IORT 

procedures, we agreed that IORT services are not the typical intraoperative services that 

we package, as they are not integral to or dependent upon the surgical procedure to 

remove a malignancy that precedes IORT. Therefore, for CY 2013, we proposed to 

unpackage CPT codes 77424 and 77425 and assign them to APC 0412, currently titled 

“IMRT Treatment Delivery” (77 FR 45124). We stated that IORT treatment services are 

clinically similar to other radiation treatment forms, such as IMRT treatment, which are 
CMS-1589-FC 481 

assigned to APC 0412. Furthermore, we proposed to change the title of APC 0412 to 

“Level III Radiation Therapy” to encompass a greater number of clinically similar 

radiation treatment modalities. The CY 2013 proposed rule geometric mean cost for 

APC 0412, based on CY 2011 claims data, was approximately $496. We also proposed 

to monitor hospitals’ costs for furnishing the services described by CPT codes 77424 and 

77425. 

In the CY 2013 proposed rule, we stated that we believe that CPT code 77469 

should receive equal treatment to other radiation management codes, such as CPT code 

77431 (Radiation therapy management with complete course of therapy consisting of 1 or 

2 fractions only) and CPT code 77432 (Stereotactic radiation treatment management of 

cranial lesion(s) (complete course of treatment consisting of 1 session)), which are 

assigned status indicator “B” (Codes that are not recognized by OPPS when submitted on 

an outpatient hospital Part B bill type (12x and 13x)) and are not paid under the OPPS. 

Therefore, we proposed that the appropriate status indicator code assignment for CPT 

code 77469 be “B” for nonpayable status under the OPPS for CY 2013, a change from its 

current CY 2012 status indicator assignment of “N” for packaged payment status. 

At its August 2012 meeting, the HOP Panel recommended that CMS assign CPT 

code 77424 and CPT code 77425 to APC 0313 (Brachytherapy), and consider renaming 

the APC “Brachytherapy and Intraoperative Radiation Therapy.” The Panel also 

recommended that CMS present to the Panel cost data regarding CPT codes 77424 and 

77425, when available or by the August 2013 Panel meeting. 
CMS-1589-FC 482 

Comment: Many commenters supported the proposal to unpackage CPT codes 

77424 and 77425, but objected to the proposed assignment of these codes to APC 0412. 

The commenters asserted that APC 0412 is neither reflective of the clinical 

characteristics nor the resources needed to perform the IORT services described by CPT 

codes 77424 and 77425. The commenters pointed out the clinical differences between 

IORT and IMRT, in that IORT provides a much higher dose of radiation during a single 

fraction (session) lasting about 45 minutes, while IMRT provides lower doses over 

multiple fractions lasting about 15 minutes. The commenters asserted that IMRT’s cost 

over the full course of therapy is $17,000 to $20,000, much higher than IORT’s cost. 

Many commenters requested that CMS assign CPT codes 77424 and 77425 to an 

appropriate APC based on clinical similarity to other radiation treatments and suggested 

that CMS use external cost data to estimate the costs of IORT, because cost data from 

hospital claims are not yet available for these new CPT codes. Some commenters 

recommended that CPT codes 77424 and 77425 be assigned to APC 0313 

(Brachytherapy), which has a proposed payment rate of approximately $685, because the 

IORT services are more similar to brachytherapy services than the IMRT services 

currently assigned to APC 0412. These commenters asserted that both IORT and 

brachytherapy involve placement of a radiation source inside or next to the area of the 

body requiring treatment, while IMRT, which is a form of external beam radiation 

therapy, delivers radiation from outside the body. The commenters opined that CPT 

codes 77424 and 77425 and the APC 0313 brachytherapy procedures have similar 

resource costs, particularly because the X-ray based IORT procedure is comparable to 
CMS-1589-FC 483 

high dose rate (HDR) brachytherapy, and the X-ray based IORT system may be used for 

the delivery of fractionated breast brachytherapy, often billed with CPT code 0182T 

(High dose rate electronic brachytherapy, per fraction), which is assigned to APC 0313. 

Several other commenters stated that IORT is very different than HDR 

brachytherapy, as well as IMRT and multi-fraction stereotactic radiosurgery, in terms of 

both clinical characteristics and resource costs. Commenters stated that IORT capital 

equipment can only be used for IORT in the operating room, and not for other forms of 

radiation therapy, resulting in less patient utilization over which to spread costs. These 

commenters recommended that CMS assign CPT codes 77424 and 77425 to APC 0067 

(Level III Stereotactic Radiosurgery, MRgFUS, and MEG), which has a proposed 

payment rate of approximately $3,294. These commenters believed that IORT is more 

similar clinically to stereotactic radiosurgery (SRS) than IMRT, pointing out that SRS 

may be delivered in single or multiple fraction therapy and has many fewer (that is, 2 to 

5) fractions, making it more similar to IORT, in that regard. A few commenters 

recommended that CMS assign IORT to a New Technology APC, with a wide range of 

recommended payment rates, from approximately $4,000 to approximately $7,000, citing 

various data estimates and sources including a survey of hospitals. 

Regarding our proposal to change the status indicator for CPT code 77469 to “B” 

and make the service non-payable, one commenter supported the proposed change on the 

basis that it is consistent with our policy regarding other radiation treatment management 

codes. 
CMS-1589-FC 484 

Response: We appreciate all of the feedback we received on the CY 2012 interim 

status indicator assignment of “N” to CPT codes 77424 and 77425 and the CY 2013 

proposal to assign these CPT codes to APC 0412. As stated in the CY 2013 OPPS/ASC 

proposed rule and described above, we agree with the commenters that IORT services are 

not the typical intraoperative services that we package, as they are not integral to or 

dependent upon the surgical procedure to remove a malignancy that precedes IORT. 

We agree with commenters that the resource costs of APC 0412 do not fit well 

with single fraction radiation therapy technologies, such as IORT. However, we believe 

the resource costs of IORT can be accommodated by one of the existing APCs for 

radiation therapy, and therefore, a new technology APC assignment is not needed. From a 

clinical standpoint, we agree with commenters that the procedures described by CPT 

codes 77424 and 77425 share important characteristics with SRS, particularly because 

SRS may be a single fraction therapy or involve many fewer fractions than IMRT. Based 

on the range of claimed costs provided by the commenters, which are all based on 

external costs, as we do not yet have claims data, there is clearly a wide range of reported 

or estimated costs for IORT services, and, as some commenters indicate, there may be a 

difference in the cost structures of CPT codes 77424 and 77425. 

After consideration of the public comments we received, we believe that an 

appropriate initial APC assignment for CPT codes 77424 and 77425 is APC 0065 (Level 

I Stereotactic Radiosurgery, MRgFUS, and MEG), in terms of clinical characteristics, 

and the range of estimated costs for IORT services. Therefore, for CY 2013, we are 

assigning CPT codes 77424 and 77425 to APC 0065, which has a CY 2013 final 
CMS-1589-FC 485 

geometric mean cost of approximately $1,006. We will review the APC assignment of 

CPT codes 77424 and 77425, individually, once we have OPPS hospital claims data. 

Regarding the Panel recommendation that we present to the Panel cost data regarding 

CPT codes 77424 and 77425, we agree to provide cost data from claims for these service 

codes when available. 

7. Imaging

a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0397) 

Effective April 1, 2012, we created HCPCS code C9733 (Non-ophthalmic 

fluorescent vascular angiography (FVA)) for a service that became known to us via the 

new technology APC application process. We assigned HCPCS code C9733 to APC 

0397 (Vascular Imaging), which has a CY 2012 payment rate of $154.87 and a status 

indicator assignment of “Q2.” The “Q2” status indicator provides that the service will 

have packaged APC payment if billed on the same date of service as a HCPCS code 

assigned status indicator “T”; and in all other circumstances, there is a separate APC 

payment for the service. We proposed to continue to assign HCPCS code C9733 to APC 

0397 for CY 2013, which had a CY 2013 proposed payment rate of $192.21, and to 

continue the assignment of the code to the “Q2” status indicator. 

The HOP Panel, at its August 2012 meeting, recommended that CMS maintain a 

status indicator of “Q2” for HCPCS code C9733, while making no recommendation as to 

its APC assignment. The proposed payment rate for APC 0397 was $197.08, with a 

range in individual procedure geometric mean costs from $140.78 to $202.97. We 

proposed the assignment of HCPCS code C9733 to APC 0397 because we believed that 

the service described by HCPCS code C9733 is similar in clinical characteristics to other 
CMS-1589-FC 486 

vascular imaging services. We do not have claims cost data available for HCPCS code 

C9733 because it was made effective on April 1, 2012. For new HCPCS codes, our 

longstanding policy is to wait until we have claims data on new services before 

considering them for reassignment to clinical APCs other than the originally assigned 

APC. 

Comment: A number of commenters were appreciative that CMS created a new 

HCPCS code for non-ophthalmic FVA, but were concerned with the packaged status that 

would result from assigning HCPCS code C9733 status indicator “Q2” because the 

procedure is usually performed with a service having a “T” status indicator. A few 

commenters pointed out that FVA is effective in assessing perfusion in tissue, and is 

particularly useful when vascular function is diminished. A number of commenters 

pointed out that the procedure is performed intraoperatively for this purpose, and is a 

valuable tool to assist the surgeon with clinical decision-making. Commenters also 

pointed out that the non-ophthalmic FVA procedure has been used primarily in the 

hospital inpatient setting, and only recently offered in the hospital outpatient setting; 

therefore, outpatient data are only beginning to accumulate. However, commenters 

believed that because the “Q2” status indicator will typically result in packaging the cost 

of the procedure, the procedure will not be performed at many hospitals. The 

commenters asserted that it was very important that CMS change the status indicator of 

HCPCS code C9733 to “S,” which is the same status indicator as all other procedures 

assigned to APC 0397. Moreover, some commenters stated that other vascular imaging 

procedures, such as Doppler Ultrasound, fluoroscopy, and magnetic resonance 
CMS-1589-FC 487 

angiography (MRA), are alternatives to the procedure described by HCPCS code C9733 

and are assigned status indicator “S” rather than status indicator “Q2.” Another 

commenter noted that other modalities used for tissue perfusion screening in the hospital 

outpatient setting are assigned to APC 0096 (Level II Noninvasive Physiologic Studies), 

and these procedures also are assigned status indicator “S.” The commenter opined that 

assignment of status indicator “Q2” will encourage outpatient clinics to schedule multiple 

visits to avoid the packaging of HCPCS code C9733. One commenter claimed that only 

a small number of APCs have more than one status indicator for their assigned 

procedures, and that no other HCPCS C-codes have a status indicator of “Q2.” The 

commenter asserted that packaged status should only be assigned to procedures where 

data indicate that the costs and services associated with the procedure are integral to 

existing procedures. 

One commenter asserted that the assignment of HCPCS code C9733 to APC 0397 

is not appropriate based on the costs of the procedure, and estimated that the cost is 

approximately $2,100 per procedure. The commenter stated that this estimate is based on 

a $6,000 monthly lease payment of the system’s capital with 5 times per month use, 

disposable kit costs of approximately $800, plus $100 in indirect costs. The commenter 

recommended the assignment of HCPCS code C9733 to APC 0279 (Level II 

Angiography and Venography), which has a CY 2013 proposed payment rate of 

approximately $2,219, or assignment of the C-code to New Technology APC 1522 

(Level XXII New Technology), which has a CY 2013 proposed payment rate of $ 2,250, 
CMS-1589-FC 488 

for at least a 3-year transitional period, until the costs to perform the non-ophthalmic 

FVA procedure are known, in order to package the procedure. 

A few commenters were concerned that the HOP Panel, and perhaps CMS as 

well, were confusing the HCPCS code C9733 technology with a “Wood’s Lamp.” The 

commenters explained the differences in the two technologies, indicating that there are 

clinically significant differences as a result of the properties of the fluorescent dyes with 

which they are used. 

Response: We believe that, when the non-ophthalmic FVA procedure is 

performed with a surgical procedure, it is ancillary to the surgical service, providing 

imaging services that are supportive and adjunctive to the surgical service. As a number 

of commenters stated, the procedure is used intraoperatively to assist the surgeon. In 

those instances when the service described by HCPCS code C9733 is performed as a 

stand-alone service, it is separately paid. Therefore, we believe the “Q2” status indicator 

is appropriate. Regarding the comment that there are only a few APCs that have more 

than one status indicator, we assign status indicators to HCPCS codes, not to APCs. 

APCs are sometimes composed of procedures that have similar roles in the overall 

provision of services (for example, they are either major or minor services, serve an 

adjunct role), but this is not always the case. We disagree that the “Q2” status indicator 

will encourage multiple clinic visits. In cases where surgery requires intraoperative 

imaging to assess tissue perfusion, the procedure described by HCPCS code C9733 

cannot be provided separate from the surgery. Regarding the estimated cost of the 

procedure that a commenter provided, we note that the assumptions regarding the use of 
CMS-1589-FC 489 

the capital equipment markedly affects the estimate of the cost of the procedure. The 

commenter’s assumed use of the equipment at 5 times per month, results in the $1,200 

monthly capital cost. However, an assumed monthly use of 20 times results in $300 

monthly costs, and 30 times per month results in $200 monthly capital costs, and so on. 

Low utilization of a new technology can result in aberrantly high per case cost estimates 

and illustrates why it is important for us to wait until hospital outpatient claims data 

become available to us for use in ratesetting. We understand the differences between the 

non-ophthalmic FVA and Wood’s Lamp technologies, and assure the commenters that 

our decision is not based on any confusion regarding the two technologies. 

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

CY 2013 proposal to assign HCPCS code C9733 to APC 0397 and to continue to assign 

the code to status indicator “Q2.” APC 0397 has a CY 2013 final geometric mean cost of 

approximately $340, which we note is a significant increase over the CY 2012 proposed 

rule mean cost. 

b. Level II Nervous System Imaging (APC 0402)

For CY 2013, we proposed to continue to assign CPT code 78607 (Brain imaging, 

tomographic (spect)) in APC 0402 (Level II Nervous System Imaging), which had a 

proposed payment rate of approximately $477.

Comment: Some commenters requested that CMS assess the accuracy of the 

payment rate calculation for APC 0402. One commenter stated that the proposed 

22-percent payment reduction does not appear to be due to any significant reduction in 

hospital charges for the procedures included in the APC or the shift from the use of 
CMS-1589-FC 490 

medical charges to the use of the geometric mean cost. Another commenter requested 

that CMS reassess its APC payment rate calculation, including the proposed geometric 

mean cost of brain SPECT, which is described by CPT code 78607, and only phase in a 

change to the APC payment rate if the data support a reduction.

Response: We reviewed our claims data and, for the CY 2013 update, used more 

claims to determine the payment rate for APC 0402, as compared to the CY 2012 update. 

For the CY 2012 final rule with comment period, there were 2,593 single claims (out of 

4,643 total claims), while for the CY 2013 proposed rule, there were 3,062 single claims 

(out of 4,793 total claims) used to calculate the proposed payment rate for APC 0402. 

Also, as indicated in the file that we made available with the proposed rule entitled 

“CY 2013 OPPS Comparison Between Proposed Geometric Mean and Median Based 

Payments,” the proposed payment rate using either payment methodology shows a 

decrease in the payment rate for APC 0402 for the CY 2013 update. That is, the 

CY 2013 proposed payment rate for APC 0402, based on the median cost methodology, 

was approximately $497, while the geometric mean cost methodology resulted in a CY 

2013 proposed payment rate of approximately $477. While the proposed payment rate 

decreased for APC 0402, overall, the use of the geometric mean methodology has been 

positive for many services. In addition, basing the OPPS payment calculations on 

geometric means aligns the metric used in the ratesetting methodology for the OPPS with 

that used for the IPPS.

Further examination of the claims data used for this final rule with comment 

period revealed an increase in services assigned to APC 0402. Specifically, our claims 
CMS-1589-FC 491 

data show a geometric mean cost of approximately $472 based on 3,446 single claims 

(out of 5,345 total claims). Similarly, we saw the same pattern of increase in services and 

cost for CPT code 78607 from the proposed rule claims data to this final rule claims data. 

That is, for the CY 2013 OPPS/ASC proposed rule, the proposed geometric mean cost for 

CPT code 78607 was approximately $490 based on 2,295 single claims (out of 2,573 

total claims), while the final rule geometric mean cost is approximately $468 based on 

2,592 single claims (out of 2,902 total claims). We note that CPT code 78607 represents 

75 percent of the claims for services assigned to APC 0402. Because of the robust 

claims, we believe that our claims data accurately reflect the resource costs of the 

procedures assigned to APC 0402, including the service described by CPT code 78607. 

We do not believe that applying a phase-in change to the APC payment rate for the brain 

SPECT CPT code 78607 is necessary, given the significant claims data for this 

procedure.

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

CY 2013 proposal, without modification, to continue to assign CPT code 78607 to APC 

0402. The final CY 2013 geometric mean cost for APC 0402 is approximately $472.

c. Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334)

For CY 2011, the AMA’s CPT Editorial Panel established three new CPT codes 

to describe computed tomography of the abdomen and pelvis. CPT codes 74176 

(Computed tomography, abdomen and pelvis; without contrast material), 74177 

(Computed tomography, abdomen and pelvis; with contrast material(s)), and 74178 

(Computed tomography, abdomen and pelvis; without contrast material in one or both 
CMS-1589-FC 492 

body regions, followed by contrast material(s) and further sections in one or both body 

regions) were effective January 1, 2011. As shown in Table 26, for CY 2011, these 

services were paid under one of two methods under the OPPS. They were either paid 

separately through a single APC or through a composite APC. We assigned CPT code 

74176 to APC 0332 (Computed Tomography Without Contrast), CPT code 74177 to 

APC 0283 (Computed Tomography With Contrast), and CPT code 74178 to APC 0333 

(Computed Tomography Without Contrast Followed By Contrast). We also assigned 

CPT code 74176 to composite APC 8005 (CT and CTA Without Contrast Composite), 

and CPT codes 74177 and 74178 to composite 8006 (CT and CTA With Contrast 

Composite). We assigned the CPT codes to status indicator “Q3” to indicate that they 

were eligible for composite payment under the multiple imaging composite APC 

methodology when they are furnished with other computed tomography procedures 

performed on the same patient on the same day. 

TABLE 26.—CY 2011 OPPS APC ASSIGNMENTS FOR THE 

COMPUTED TOMOGRAPHY OF ABDOMEN AND PELVIS CPT CODES 

CY 

2011 

CPT 

Code 

CY 2011 Short Descriptor 

CY 

2011 

SI 

CY 

2011 

Single 

Code 

APC 

CY 2011 

Single 

Code 

APC 

Payment 

Rate 

CY 2011 

Composite 

APC 

CY 2011 

Composite 

APC 

Payment 

Rate 

74176 Ct abd & pelvis Q3 0332 $193.85 8005 $420.85 

74177 Ct abd & pelv w/contrast Q3 0283 $299.81 8006 $628.61 

74178 Ct abd & pelv 1/> regns Q3 0333 $334.24 8006 $628.61 

Consistent with our longstanding policy for new codes, in Addendum B of the 

CY 2011 OPPS/ASC final rule with comment period, we assigned these new CPT codes 
CMS-1589-FC 493 

to interim APCs for CY 2011, with comment indicator “NI” to denote that the codes were 

new and the interim APC assignment would be open to public comment. In accordance 

with our longstanding policy to provide codes to enable payment to be made for new 

services as soon as the code is effective, our interim APC assignment for each code was 

based on our understanding of the resources required to furnish the service and its clinical 

characteristics as defined in the code descriptor. 

As we described in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74259), in general, stakeholders who provided comments on the interim APC 

assignments of these CPT codes for CY 2011 stated that the most appropriate approach to 

establishing payment for these new codes was to assign the procedures described by the 

codes to APCs that recognize that each of the new codes reflects the reporting, under a 

single code, of two services that were previously reported under two separate codes and 

that, therefore, payments would be more accurate and better reflective of the services 

under the OPPS than if we were to establish payment rates for the codes for CY 2012 

using claims data that reflect the combined cost of the two predecessor codes. In 

addition, at the February 28-March 1, 2011 Panel meeting, several presenters expressed 

their concern and disagreement with our single APC assignments for these new codes. 

The presenters stated that the payment rates for the single APC assignments reflected 

only half of the true costs of these services based on their internal calculated costs. 

Similar to the public commenters, the presenters indicated that, prior to CY 2011, these 

services were reported using a combination of codes, and suggested that CMS revise the 

methodology to include these combinations of codes to determine accurate payment rates 
CMS-1589-FC 494 

for these services. Specifically, the presenters indicated that simulating the costs for CPT 

codes 74176, 74177, and 74178 using historical claims data from the predecessor codes 

would result in the best estimates of costs for these CPT codes and, therefore, the most 

accurate payment rates. 

After examination of our claims data for the predecessor codes, and after 

considering the various concerns and recommendations that we received on this issue 

(specifically, the views of the stakeholders who met with us to discuss this issue, the 

comments received in response to the CY 2011 OPPS/ASC final rule with public 

comment period, and input from the Panel at its February 28-March 1, 2011 meeting), we 

proposed to revise our payment methodology for CPT codes 74176, 74177, and 74178 

for CY 2012 (76 FR 42235). That is, we proposed to simulate the costs for CPT codes 

74176, 74177, and 74178 using historical claims data from the predecessor codes to 

determine the most accurate payment rates for these CPT codes. This new proposed 

payment methodology necessitated establishing two new APCs, specifically, APC 0331 

(Combined Abdominal and Pelvis CT Without Contrast) to which CPT code 74176 

would be assigned, and APC 0334 (Combined Abdominal and Pelvis CT With Contrast) 

to which CPT codes 74177 and 74178 would be assigned. In addition, we proposed to 

continue to assign CPT code 74176 to composite APC 8005 and CPT codes 74177 and 

74178 to composite APC 8006 for CY 2012. 

Based on the feedback that we received from the Panel at its August 10-11, 2011 

meeting, and the public comments received in response to the CY 2012 OPPS/ASC 

proposed rule in support of the proposed revised payment methodology for CPT codes 
CMS-1589-FC 495 

74176, 74177, and 74178, we finalized our proposals in the CY 2012 OPPS/ASC final 

rule with comment period. Specifically, we reassigned CPT code 74176 from APC 0332 

to APC 0331, CPT code 74177 from APC 0283 to APC 0334, and CPT code 74178 from 

APC 0333 to APC 0334. (We refer readers to the CY 2012 OPPS/ASC final rule with 

comment period for a detailed description of the methodology we used to simulate the 

costs of these procedures using claims data for the predecessor CPT codes (76 FR 74259 

through 74262).) We also continued with our composite APC assignments for these 

codes. Specifically, we continued to assign CPT code 74176 to composite APC 8005 and 

CPT codes 74177 and 74178 to composite APC 8006. Table 27 below shows the 

payment rates for these CPT codes for the CY 2012 update. 
CMS-1589-FC 496 

TABLE 27.—CY 2012 OPPS APC ASSIGNMENTS FOR THE COMPUTED 

TOMOGRAPHY OF ABDOMEN AND PELVIS CPT CODES 

CY 

2012 

CPT 

Code 

CY 2012 Short Descriptor

CY 

2012 

SI 

CY 2012 

Single 

Code 

APC 

CY 2012 

Single 

Code 

APC 

Payment 

Rate 

CY 2012 

Composite 

APC 

CY 2012 

Composite 

APC 

Payment 

Rate 

74176 Ct abd & pelvis Q3 0331 $405.17 8005 $431.60 

74177 Ct abd & pelv w/contrast Q3 0334 $580.54 8006 $721.12 

74178 Ct abd & pelv 1/> regns Q3 0334 $580.54 8006 $721.12 

We stated in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74262) that we would reassess whether there is a continued need for these APCs 

for the CY 2013 OPPS/ASC update once we have actual charges for these services. 

Because CPT codes 74176, 74177, and 74178 became effective on January 1, 2011, we 

have hospital claims data available for these codes that we can use for ratesetting for the 

first time. In the CY 2013 OPPS/ASC proposed rule (77 FR 45086), we stated that 

analysis of the latest CY 2011 hospital outpatient claims data for the CY 2013 

OPPS/ASC proposed rulemaking update, which was based on claims processed with 

dates of service from January 1, 2011 through December 31, 2011, revealed a decrease in 

costs for the three procedures, compared to the costs simulated using the predecessor 

CPT codes for CY 2012. CPT code 74176 showed a proposed geometric mean cost of 

approximately $314 based on 312,493 single claims (out of 713,662 total claims), while 

CPT code 74177 showed a proposed geometric mean cost of approximately $476 based 

on 367,002 single claims (out of 951,296 total claims). In addition, CPT code 74178 
CMS-1589-FC 497 

showed a proposed geometric mean cost of approximately $537 based on 184,580 single 

claims (out of 267,401 total claims). Because we used hospital claims data specific to 

CPT codes 74176, 74177, and 74178, we stated that we believe these costs accurately 

reflect the resources associated with providing computed tomography of the abdomen 

and pelvis as described by these CPT codes in the HOPD. 

Furthermore, our analysis of the CY 2011 claims data available for the proposed 

rule showed no 2 times rule violation for either APC 0331 or APC 0334. Therefore, for 

CY 2013, we proposed to continue to assign CPT code 74176 to APC 0331 and 

CPT codes 74177 and 74178 to APC 0334. (Because we have claims data available for 

these three CPT codes, we will no longer simulate their costs using the predecessor codes 

as we did in CY 2012.) In addition, we proposed to continue to assign these codes to 

their existing composite APCs for CY 2013. Specifically, we proposed to continue to 

assign CPT code 74176 to composite APC 8005, and to assign CPT codes 74177 and 

74178 to composite APC 8006. 

Comment: Several commenters expressed concern with the decreased payment 

rates for APCs 0331 and 0334, and suggested that the coding changes that occurred in 

CY 2011 for CPT codes 74176, 74177, and 74178, attributed to the payment reduction. 

Some of the commenters believed that because the codes were new in CY 2011, hospitals 

have not had enough time to appropriately adjust their charge masters to accurately 

reflect the CY 2011 coding changes. One commenter urged CMS to take whatever action 

necessary to mitigate the payment cuts for CY 2013. Some of commenters requested that 
CMS-1589-FC 498 

CMS delay the use of claims data and continue the use of historical data for an additional 

year to give more time for education and adjustment of hospital charge masters. 

Response: We believe that hospitals have a process in place to adjust to the 

numerous coding changes that occur annually. There are hundreds of coding changes 

(that is, CPT, Level II Alphanumeric HCPCS, and ICD-9-CM codes) that occur every 

year, and hospitals make changes to their internal systems (for example, coding, charge 

masters, grouper, business office systems, among other) accordingly to capture these 

changes so that their claims are processed timely and accurately. 

Because of the substantial claims data that we have for these procedures, we see 

no reason to delay the use of the claims data in determining the costs for CPT codes 

74176, 74177, and 74178. Specifically, we were able to use at least 1 million claims that 

were submitted during CY 2011 in determining the payment rates for CPT codes 74176, 

74177, and 74178. Our analysis for this final rule with comment period revealed a 

geometric mean cost of approximately $315 for CPT code 74176 based on 333,144 single 

claims (out of 769,757 total claims), a geometric mean cost of approximately $477 for 

CPT code 74177 based on 388,506 single claims (out of 1,024,117 total claims), and a 

geometric mean cost of approximately $538 for CPT code 74178 based on 194,216 single 

claims (out of 283,435 total claims). We have no reason to believe that our claims data, 

as reported by hospitals, do not accurately reflect the hospital costs for CPT codes 74176, 

74177 and 74178. 

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

CY 2013 proposal, without modification. Specifically, for CY 2013, we are continuing 
CMS-1589-FC 499 

to assign CPT code 74176 to APC 0331 and CPT codes 74177 and 74178 to APC 0334. 

In addition, we are continuing to assign these CPT codes to their existing composite 

APCs for CY 2013. Specifically, we are continuing to assign CPT code 74176 to 

composite APC 8005, and to assign CPT codes 74177 and 74178 to composite APC 

8006. 

Table 28 below lists the computed tomography of the abdomen and pelvis CPT 

codes along with their status indicators, and single and composite APC assignments for 

CY 2013. 

TABLE 28.—APC ASSIGNMENTS FOR THE COMPUTED TOMOGRAPHY OF 

ABDOMEN AND PELVIS CPT CODES FOR CY 2013 

CY 2013 

CPT 

Code 

CY 2013 Short Descriptor CY 

2013 

SI 

CY 2013 

Single Code 

APC 

CY 2013 

Composite 

APC 

74176 Ct abd & pelvis Q3 0331 8005 

74177 Ct abd & pelv w/contrast Q3 0334 8006 

74178 Ct abd & pelv 1/> regns Q3 0334 8006 

8. Respiratory Services

a. Bronchoscopy (APC 0415)

CPT code 31629 (Bronchoscopy, rigid or flexible, including fluoroscopic 

guidance, when performed; with transbronchial needle aspiration biopsy(s), trachea, main 

stem and/or lobar bronchus(i)) was established by the AMA’s CPT Editorial Panel in 

1987. CPT code 31634 (Bronchoscopy, rigid or flexible, including fluoroscopic 

guidance, when performed; with balloon occlusion, with assessment of air leak, with 
CMS-1589-FC 500 

administration of occlusive substance (eg, fibrin glue), if performed) was established 

effective January 1, 2011. CPT code 31629 has been assigned to APC 0076 (Level I 

Endoscopy Lower Airway) since August 2000, when the hospital OPPS was 

implemented, while CPT code 31634 has been assigned to APC 0076 since the code was 

effective on January 1, 2011. 

In the CY 2013 OPPS/ASC proposed rule, we proposed to reassign both CPT 

codes 31629 and 31634 from APC 0076 to APC 0415 (the Level II Endoscopy Lower 

Airway). Consistent with CMS’ policy of reviewing APC assignments annually for any 2 

times rule violations and appropriateness of APC assignments based on the latest hospital 

outpatient claims data, we evaluated the resource cost associated with the procedures 

assigned to APC 0076 for the CY 2013 rulemaking update. Based on our analysis, we 

determined that the configuration of APC 0076 violated the 2 times rule. To eliminate 

the 2 times rule violation, we proposed to reassign CPT codes 31629 and 31634 from 

APC 0076 to APC 0415 because we believe this APC appropriately reflects these 

services based on their resource costs as well as clinical homogeneity. 

At the August 2012 HOP Panel meeting, a presenter requested that the Panel 

recommend to CMS not to reassign CPT codes 31629 and 31634 to APC 0415 for 

CY 2013. The presenter stated that including both procedures in APC 0415 would result 

in a 2 times rule violation. In addition, the presenter recommended that CPT codes 

31629 and 31634 be reassigned to APC 0074 (Level IV Endoscopy Upper Airway) 

instead of APC 0415. After discussion of the procedures and review of the hospital 
CMS-1589-FC 501 

outpatient claims and cost report data, the Panel recommended that CPT codes 31629 and 

31634 be reassigned from APC 0076 to APC 0415 for the CY 2013 OPPS update. 

Comment: Some commenters disagreed with the proposal to include CPT codes 

31629 and 31634 in APC 0415, and indicated that including both procedures reduces the 

proposed payment rate for APC 0415 by at least 23 percent. One commenter specified 

that adding CPT codes 31629 and 31634, which have greater volumes of lower geometric 

mean costs than other services assigned to APC 0415, reduces the overall payment of 

APC 0415. One commenter indicated that the reduction in payment would hinder patient 

access to the pulmonary services listed under APC 0415 and recommended alternative 

endoscopy lower airway APC configurations, such as establishing a new APC titled 

“Level III Endoscopy Lower Airway” for six lower endoscopy procedures, that would 

include both CPT codes 31629 and 31634 as well as four other lower endoscopy 

procedures. Specifically, the commenter suggested including CPT codes 31626 

(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with 

placement of fiducial markers, single or multiple), 31631 (Bronchoscopy, rigid or 

flexible, including fluoroscopic guidance, when performed; with placement of tracheal 

stent(s) (includes tracheal/bronchial dilation as required)), 31636 (Bronchoscopy, rigid or 

flexible, including fluoroscopic guidance, when performed; with placement of bronchial 

stent(s) (includes tracheal/bronchial dilation as required), initial bronchus), 31638 

(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with 

revision of tracheal or bronchial stent inserted at previous session (includes 

tracheal/bronchial dilation as required)), and CPT codes 31629 and 31634. The 
CMS-1589-FC 502 

commenter explained that CPT codes 31626, 31631, 31636, and 31638 are different from 

other procedures assigned to APC 0415 because they require implanting medical devices 

in the patient (fiducial markers, stents), which results in extra cost. Another commenter 

requested that CMS reevaluate the endoscopy lower airway APCs (0076 and 0415) as 

more claims data become available for newer procedures, and to meet with stakeholders 

to discuss the future reconfiguration of APCs for endoscopy lower airway. 

Response: As indicated above, we proposed to revise the APC assignments for 

CPT codes 31629 and 31634 after our analysis of the claims data for the CY 2013 

rulemaking revealed a 2 times rule violation in APC 0076. Based on the latest hospital 

outpatient claims data for this final rule with comment period, we do not agree with the 

commenters that we should implement an alternative configuration for endoscopy lower 

airway APCs because the existing APCs are sufficient to reflect the costs of all of the 

procedures assigned to these APCs. We continue to believe that APC 0415 is the most 

appropriate APC assignment for CPT codes 31629 and 31634 because their resource 

costs are relatively similar to the procedures assigned to APC 0415. Therefore, we are 

accepting the Panel's recommendation and will assign both procedures to APC 0415. For 

the CY 2013 update, our analysis of the claims data submitted during CY 2011 and used 

for this final rule with comment period show a geometric mean cost of approximately 

$1,381 based on 2,699 single claims (out of 12,209 total claims) for CPT code 31629, 

and a relatively similar geometric mean cost of approximately $1,394 for CPT code 

31634 based on 10 single claims (out of 16 total claims). Consistent with CMS’ policy of 

reviewing APC assignments annually, we will again reevaluate the clinical similarity and 
CMS-1589-FC 503 

resource use of the procedures in APC 0415 for the CY 2014 rulemaking cycle. Finally, 

we note that we regularly accept meetings from interested parties throughout the year, 

and we encourage stakeholders to continue a dialogue with us during the rulemaking 

cycle and throughout the year on this issue. 

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

CY 2013 proposal, without modification, to reassign CPT codes 31629 and 31634 from 

APC 0076 to APC 0415. The final CY 2013 geometric mean cost for APC 0415 is 

approximately $1,617. 

b. Upper Airway Endoscopy (APC 0075) 

For CY 2013, we proposed to continue to assign CPT codes 31295 (Nasal/sinus 

endoscopy, surgical; with dilation of maxillary sinus ostium (eg, balloon dilation), 

transnasal or via canine fossa;), 31296 (Nasal/sinus endoscopy, surgical; with dilation of 

frontal sinus ostium (eg, balloon dilation)), and 31297 (Nasal/sinus endoscopy, surgical; 

with dilation of sphenoid sinus ostium (eg, balloon dilation)) to APC 0075 (Level V 

Endoscopy Upper Airway), which had a CY 2013 proposed payment rate of 

approximately $2,039. In addition, we proposed to reassign CPT code 31541 

(Laryngoscopy, direct, operative, with excision of tumor and/ or stripping of vocal cords 

or epiglottis; with operating microscope or telescope) from APC 0074 (Level IV 

Endoscopy Upper Airway) to APC 0075. 

Comment: Commenters objected to the assignment of CPT codes 31295, 31296, 

and 31297 to APC 0075 because the commenters believed that the payment rate for APC 

0075 substantially underpays providers. The commenters recommended that CMS create 
CMS-1589-FC 504 

split APCs for sinus surgery with balloon catheter and without balloon catheter, the 

former of which should be deemed device-dependent to appropriately account for the cost 

of such procedures. The commenters also requested that CMS not finalize its proposal to 

reassign CPT 31541 to APC 0075 and, instead, maintain the code in APC 0074 for 

CY 2013. 

Response: We believe that the most clinically appropriate APC assignment for 

CPT codes 31295, 31296, and 31297 is APC 0075, which includes other nasal and sinus 

endoscopy procedures. When assigning procedures to an APC, we first consider the 

clinical and resource characteristics of a procedure and determine the most appropriate 

APC assignment. Regarding the resource costs of the procedures in question, the 

commenters asserted costs of approximately $4,000 for these procedures, which are 

currently assigned to the highest paying clinically appropriate APC (APC 0075), which is 

Level 5 out of 5 levels of APCs for “endoscopy upper airway.” The highest geometric 

mean cost of all of the procedures assigned to APC 0075 is approximately $4,000. 

Therefore, even the nonclaims data-based cost estimate for these procedures offered by 

the commenters is within the approximate range (although on the high end of the range) 

of the geometric mean costs for procedures assigned to APC 0075. We do not agree with 

the commenters that new APCs should be created to differentiate between sinus surgery 

with balloon catheter and without balloon catheter, as APC 0075 accurately reflects a 

reasonable distribution of resource costs reflected in the group of clinically similar 

services currently assigned to the APC. We note that there is currently no 2 times rule 

violation in APC 0075. We do not agree with the commenters that CPT code 31541 
CMS-1589-FC 505 

should continue to be assigned to APC 0074, as CPT code 31541’s geometric mean cost 

of approximately $1,962 is higher than the geometric mean cost for any service currently 

assigned to APC 0074 and would result in a 2 times rule violation for APC 0074 as well. 

We believe that the geometric mean cost and clinical characteristics of CPT code 31541 

justify its assignment to APC 0075 for CY 2013. 

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

CY 2013 proposals, without modification, to continue to assign CPT codes 31295, 31296, 

and 31297 to APC 0075, and reassign CPT code 31541 to APC 0075, which has a final 

CY 2013 APC geometric mean cost of approximately $2,085. 

9. Other Services

a. Payment for Molecular Pathology Services

For the January 2012 update, the AMA’s CPT Editorial Panel established 101 

new molecular pathology services CPT codes that were designated as either Molecular 

Pathology Procedures Tier 1 or Molecular Pathology Procedures Tier 2 effective January 

1, 2012. Tier 1 consisted of CPT codes 81200 through 81383, while Tier 2 consisted of 

CPT codes 81400 through 81408. However, these new molecular pathology CPT codes 

are not valid for payment under Medicare for CY 2012. 

Instead, molecular pathology tests for CY 2012 are billed using combinations of 

longstanding CPT codes that describe each of the various steps required to perform a 

given test. This billing method is called “stacking” because different “stacks” of codes 

are billed depending on the components of the furnished test. Currently, all of the 

stacking codes are paid under the Clinical Laboratory Fee Schedule (CLFS) and one 
CMS-1589-FC 506 

stacking code, CPT code 83912 (Molecular diagnostics; interpretation and report), is paid 

on both the CLFS and the Medicare Physician Fee Schedule (MPFS). Payment for the 

interpretation and report of a molecular pathology test when furnished and billed by a 

physician is made under the MPFS using the professional component (PC, or modifier 

“26”) of CPT code 83912 (83912-26). Payment for the interpretation and report of a 

molecular pathology test when furnished by nonphysician laboratory staff is made under 

the CLFS using CPT code 83912. Thus, under Medicare, molecular pathology services 

are paid under a fee schedule other than the OPPS. 

In Addendum B of the CY 2012 OPPS/ASC final rule with comment period, we 

assigned the 101 molecular pathology services CPT codes to status indicator “B” to 

indicate that Medicare recognizes another more specific HCPCS code for the service, as 

well as to comment indicator “NI” to indicate that the CPT code was new for CY 2012 

and that public comments would be accepted on the interim APC assignment for the new 

code, if applicable. We subsequently corrected the status indicator assignment for these 

CPT codes from “B” to “E” to indicate that they are not paid by Medicare in Addendum 

B of the CY 2012 OPPS/ASC final rule with comment period that was posted on the 

CMS Web site. In the CY 2013 OPPS/ASC proposed rule, we proposed to reassign the 

status indicator for the 101 molecular pathology services CPT codes from “E” to “A” for 

CY 2013 to indicate that the codes would be paid under a Medicare fee schedule and not 

under the OPPS. The public comments that we received in response to the CY 2012 

OPPS/ASC final rule with comment period and the CY 2013 OPPS/ASC proposed rule 

are addressed below. 
CMS-1589-FC 507 

Comment: One commenter to the CY 2012 OPPS/ASC final rule with comment 

period requested that CMS consider paying separately for the molecular pathology 

services under the OPPS, and recommended that CMS reassign the services to status 

indicator “X” (Paid under OPPS; separate APC payment). 

Several commenters who responded to the CY 2013 OPPS/ASC proposed rule 

requested clarification of the status indicator assignment and payment status for the 

molecular pathology services. One commenter indicated that CMS did not specify 

whether CPT codes 81200 through 81299, 81300 through 81383, and 81400 through 

81408 will continue to be assigned status indicator “E” under the OPPS. 

Another commenter pointed out that CMS did not specifically discuss the 101 

molecular pathology services CPT codes in the CY 2013 OPPS/ASC proposed rule, but 

did propose to assign status indicator “A” to the new molecular pathology services CPT 

codes. The commenter believed that CMS is unsure as to how these services will be paid, 

whether they will be paid under the MPFS or under the CLFS. The commenter 

recommended that CMS pay for the molecular pathology services codes under the MPFS 

to cover the professional interpretation and work components, and under the OPPS to 

cover the technical component of the services when provided in a HOPD. 

Response: Molecular pathology services are not paid under the OPPS. As 

explained above, molecular pathology services currently are billed using stacking codes 

that are paid under the CLFS with one stacking code, specifically, CPT code 83912, 

being paid under both the CLFS and the MPFS. For the CY 2013 update, the CPT 

“stacking” codes 83890 through 83914 will be deleted on December 31, 2012, and will 
CMS-1589-FC 508 

be replaced with 115 new molecular pathology CPT codes. Specifically, this includes the 

101 molecular pathology services CPT codes discussed above plus an additional 14 new 

Tier I Molecular Pathology Procedure CPT codes that the AMA’s CPT Editorial Panel 

established effective January 1, 2013. In addition, CMS established one HCPCS G-code 

effective January 1, 2013. With the exception of the HCPCS G-code, the 115 molecular 

pathology CPT codes will be paid under the CLFS. Payment for the interpretation and 

report of a molecular pathology test when furnished and billed by a physician will be 

made under the MPFS using the professional component-only HCPCS code G0452 

(Molecular pathology procedure; physican interpretation and report). We refer readers to 

the CY 2013 MPFS final rule with comment period for further information on the 

molecular pathology services CPT codes. 

Although we did not discuss this issue in the preamble of the CY 2013 

OPPS/ASC proposed rule, we proposed to assign the 101 molecular pathology services 

CPT codes to status indicator “A” for the CY 2013 update. Specifically, we assigned the 

101 molecular pathology services CPT codes to status indicator “A” in Addendum B to 

the proposed rule (which is available via the Internet on the CMS Web site). We note 

that HCPCS codes listed in Addenda A and B are subject to comment, and responses to 

the comments received are addressed in the final rule with comment period. 

For CY 2013, the 101 molecular pathology services CPT codes will be assigned 

to status indicator “A” because they will be paid under the CLFS. Consistent with the 

OPPS assignment for the 101 molecular pathology services, the 14 new CPT codes also 

will be assigned to status indicator “A” for CY 2013. Specifically, CPT codes 81201 
CMS-1589-FC 509 

through 81203, 81235, 81252 through 81254, 81321 through 81326, and 81479 will be 

assigned to status indicator “A” because they will be paid under the CLFS. In addition, 

HCPCS code G0452 will be assigned to status indicator “B” to indicate that the HCPCS 

code describes a professional component-only service that is paid under the MPFS. 

In summary, after consideration of the public comments we received, we are 

finalizing our proposal, without modification, to assign the 101 molecular pathology 

services CPT codes to status indicator “A” for CY 2013. Consistent with the OPPS 

assignment for the 101 molecular pathology services, the 14 new CPT codes also will be 

assigned to status indicator “A” for CY 2013. In addition, HCPCS code G0452 will be 

assigned to status indicator “B” under the OPPS for the CY 2013 update. 

b. Bone Marrow (APC 0112) 

For CY 2013, we proposed to continue to assign CPT code 38240 (Bone marrow 

or blood-derived peripheral stem cell transplantation; allogeneic) and CPT code 38241 

(Bone marrow or blood-derived peripheral stem cell transplantation; autologous) to APC 

0112 (Apheresis and Stem Cell Procedures), which had a CY 2013 proposed payment 

rate of approximately $2,878. 

Comment: One commenter requested that CMS create separate APCs for 

autologous and allogeneic transplants in recognition of the cost difference between the 

two procedures. In addition, the commenter urged CMS to develop an alternate 

ratesetting methodology for low volume services or services performed by a small 

number of providers to more accurately capture their costs. 
CMS-1589-FC 510 

Response: We believe that CPT codes 38240 and 38241 are both appropriately 

assigned to APC 0112 based on clinical homogeneity. We note that there is no 2 times 

rule violation in APC 0112; therefore, we do not agree with the commenter’s suggestion 

that we need to create separate APCs for autologous and allogeneic transplants. We 

appreciate the commenter’s interest in developing an alternate ratesetting methodology 

for low-volume services as we are always eager to find improved methods to more 

accurately capture costs of services performed in the hospital outpatient setting. 

After consideration of the public comment we received, we are finalizing our 

CY 2013 proposal, without modification, to continue to assign CPT codes 38240 and 

38241 to APC 0112, which has a final CY 2013 APC geometric mean cost of 

approximately $2,972. 
CMS-1589-FC 511 

IV. OPPS Payment for Devices 

A. Pass-Through Payments for Devices

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

a. Background 

Section 1833(t)(6)(B)(iii) of the Act requires that, under the OPPS, a category of 

devices be eligible for transitional pass-through payments for at least 2, but not more than 

3 years. This pass-through payment eligibility period begins with the first date on which 

transitional pass-through payments may be made for any medical device that is described 

by the category. We may establish a new device category for pass-through payment in 

any quarter. Under our established policy, we base the pass-through status expiration 

date for a device category on the date on which pass-through payment is effective for the 

category, which is the first date on which pass-through payment may be made for any 

medical device that is described by such category. We propose and finalize the dates for 

expiration of pass-through status for device categories as part of the OPPS annual update. 

We also have an established policy to package the costs of the devices that are no 

longer eligible for pass-through payments into the costs of the procedures with which the 

devices are reported in the claims data used to set the payment rates (67 FR 66763). 

Brachytherapy sources, which are now separately paid in accordance with section 

1833(t)(2)(H) of the Act, are an exception to this established policy. 

There currently are four device categories eligible for pass-through payment. 

These device categories are described by HCPCS code C1749 (Endoscope, retrograde 

imaging/illumination colonoscope device (implantable)), which we made effective for 
CMS-1589-FC 512 

pass-through payment October 1, 2010; HCPCS codes C1830 (Powered bone marrow 

biopsy needle) and C1840 (Lens, intraocular (telescopic)), which we made effective for 

pass-through payment October 1, 2011; and HCPCS code C1886 (Catheter, extravascular 

tissue ablation, any modality (insertable)), which we made effective for pass-through 

payment January 1, 2012. In the CY 2012 OPPS/ASC final rule with comment period, 

we finalized the expiration of pass-through payment for HCPCS code C1749, which will 

expire after December 31, 2012 (76 FR 74278). Therefore, after December 31, 2012, we 

will package the costs of the HCPCS code C1749 device into the costs of the procedures 

with which the devices are reported in the hospital claims data used in OPPS ratesetting. 

b. CY 2013 Policy 

As stated above, section 1833(t)(6)(B)(iii) of the Act requires that, under the 

OPPS, a category of devices be eligible for transitional pass-through payments for at least 

2, but not more than 3 years. Device pass-through categories C1830 and C1840 were 

established for pass-through payments on October 1, 2011, and will have been eligible 

for pass-through payments for more than 2 years but less than 3 years as of the end of 

CY 2013. Also, device pass-through category C1886 was established for pass-through 

payments on January 1, 2012, and will have been eligible for pass-through payments for 

at least 2 years but less than 3 years as of the end of CY 2013. Therefore, in the CY 2013 

OPPS/ASC proposed rule (77 FR 45125), we proposed a pass-through payment 

expiration date for device categories C1830, C1840, and C1886 of December 31, 2013. 

Under our proposal, beginning January 1, 2014, device categories C1830, C1840, and 

C1886 will no longer be eligible for pass-through payments, and their respective device 
CMS-1589-FC 513 

costs would be packaged into the costs of the procedures with which the devices are 

reported in the claims data. 

Comment: One commenter expressed concern that under the CMS proposal to 

expire device HCPCS code C1886 from pass-through payment, CMS will have difficulty 

in establishing a payment rate that will reflect all costs associated with bronchial 

thermoplasty, the procedure with which the HCPCS code C1886 device is used. The 

commenter indicated that the two bronchial thermoplasty codes, CPT code 0276T 

(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when performed; with 

bronchial thermoplasty, 1 lobe) and CPT code 0277T (Bronchoscopy, rigid or flexible, 

including fluoroscopic guidance, when performed; with bronchial thermoplasty, 2 or 

more lobes) are subject to noncoverage policies for all Category III CPT codes for all but 

two MACs, resulting in few Medicare claims for CY 2012, the year for which CPT codes 

0276T and 0277T are reported for bronchial thermoplasty, and which will be used for 

CY 2014 ratesetting. The commenter estimated that there are nine Medicare claims for 

bronchial thermoplasty in CY 2011, available for CY 2013 ratesetting, which were billed 

with HCPCS codes C9730 and C9731. The commenter requested that CMS delay the 

expiration of pass-through status for HCPCS code C1886 because of limited data 

available for CY 2014 ratesetting, and because two Category 1 CPT codes related to 

bronchial thermoplasty are expected to become effective January 1, 2013, which would 

result in these procedures being removed from the MAC local coverage determinations 

for noncovered services. 
CMS-1589-FC 514 

Response: We created HCPCS code C1886 as a new device category effective 

January 1, 2012. As such, there are no claims for HCPCS code C1886 in our CY 2011 

claims data. However, although we have no claims data for CY 2011, we have over 300 

units of HCPCS code C1886 reported in the first 8 months of CY 2012, with robust cost 

data. Therefore, we believe that we will have sufficient CY 2012 claims on which to 

base payment rates for the bronchial thermoplasty procedures with which HCPCS code 

C1886 is billed. 

After consideration of the public comment we received, we are finalizing our 

proposal to expire from pass-through payment HCPCS C1886 on December 31, 2013, 

and to package its costs with the costs of the procedures with which it is billed. 

We did not receive any public comments regarding our proposals to expire 

pass-through payment eligibility for device categories C1830 and C1840 and to package 

their respective costs into the costs of the procedures with which the devices are reported. 

Therefore, we are finalizing our proposals to expire from pass-through payment these 

device categories, and to package their costs with the costs of the procedures with which 

they are billed. 

We also received a number of comments related to packaging the costs of HCPCS 

code C1749 into the costs of the procedures with which the HCPCS code C1749 device 

are reported, a policy we finalized in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74278). We are discussing these public comments in this section instead 

of the section on packaging because of their relationship to device pass-through payment. 
CMS-1589-FC 515 

Comment: A few commenters asserted that packaging payment for the HCPCS 

code C1749 device (retrograde colonoscope or Third Eye Retroscope) into the costs of 

colonoscopy procedure codes, with which it is billed, after the period of pass-through 

payment ends on December 31, 2012, will not provide adequate payment for use of the 

device. 

One commenter based this assertion on a study of CY 2011 Medicare claims data 

(which the commenter summarized in its comment letter) for 7 diagnostic colonoscopy 

procedures found in APC 0143 (Lower GI endoscopy) performed with HCPCS code 

C1749, finding that the weighted geometric mean costs of procedures in which HCPCS 

code C1749 was used is approximately $969; the cost of the same 7 colonoscopy 

procedures without HCPCS code C1749 is approximately $437, showing a cost 

difference of approximately $532, which it attributed to the cost of the HCPCS code 

C1749 device. At the same time, the commenter pointed out that it identified 688 claims 

for these 7 colonoscopy procedure codes that included units of HCPCS code C1749, 

while there were 1,067,828 claims for the same 7 procedure codes that did not include 

HCPCS code C1749 on the claim, or only 0.064 percent of the total claims for these 7 

codes that included HCPCS code C1749. Therefore, the commenter claimed that the 

proposed rates for existing colonoscopy procedures do not fairly reflect the costs of 

HCPCS code C1749. The commenter further asserted that the proposed APC 0143 

payment rate of $691.58 would not pay hospitals adequately for the cost of a procedure 

using the HCPCS code C1749 device. The commenter claimed that the payment shortfall 

would be even greater in the ASC setting, where the proposed payment rate for 
CMS-1589-FC 516 

colonoscopies is $389.60. The commenter requested that CMS create a G-code (entitled 

“colonoscopy, flexible, proximal to splenic flexure; with continuous retrograde 

examination”) to be billed along with existing colonoscopy procedure codes when using 

the HCPCS code C1749 device; assign the new G-code and its costs to a unique device 

dependent APC under the OPPS and a device-intensive APC under the ASC payment 

system; and require that HCPCS code C1749 be billed with the new G-code. 

Some commenters suggested that CMS continue to pay for HCPCS code C1749 

separately, based on OPPS claims data, from the APC payment for the procedure under a 

unique device-dependent APC in the OPPS and a device-intensive APC for ASC 

payment because the HCPCS code C1749 device represents the primary cost of this 

procedure. Another commenter requested that CMS extend the pass-through payment for 

HCPCS code C1749 through CY 2013 to help further data collection for the device 

regarding its clinical role and to ensure access to the device for endoscopists’ use. 

A number of commenters, including those who were patients or relatives of 

patients, emphasized the importance of being examined by the Third Eye Retroscope, the 

device upon which HCPCS code C1749 is based, because it provides dramatically 

improved detection rates of pre-cancerous adenomas, and urged CMS to improve 

payment for the HCPCS code C1749 procedure. Several commenters claimed that the 

proposal did not provide a code or payment to report use of the HCPCS code C1749 

device. 

Response: HCPCS code C1749 was created for device pass-through payment of 

the retrograde colonoscope effective October 1, 2010. Under the statute, hospitals are 
CMS-1589-FC 517 

paid for devices eligible for pass-through payment, which is payment for the device in 

addition to the usual APC payment rate, for at least 2 but not more than 3 years from the 

date we establish pass-through payment. We finalized the expiration of pass-through 

payment eligibility for HCPCS code C1749 on December 31, 2012, and, consistent with 

our normal ratesetting methodology for expired device pass-through payment, we 

finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74278) our 

policy to package the costs of the HCPCS code C1749 device with the procedures with 

which it is billed, effective January 1, 2013 (76 FR 74278). For CY 2013, there are 692 

units of HCPCS code C1749 reported in our CY 2011 OPPS claims data, with a 

geometric mean cost of approximately $536. For CY 2013, these costs would be 

packaged into the procedures with which HCPCS code C1749 are billed. CY 2011 was 

the first complete year that HCPCS code C1749 was effective, and we assume that 

utilization of this new device will grow over time. 

We do not agree with the commenter that using the HCPCS code C1749 

retrograde colonoscope during a colonoscopy is a separate procedure, and therefore 

would require a G-code to describe a separate procedure. We believe that the retrograde 

colonoscopic portion of the procedure entails a small incremental amount of colonoscopy 

procedure time, as it is primarily used during withdrawal of the colonoscope, and there 

are few additional resource costs (such as procedure room time, equipment costs) other 

than the HCPCS code C1749 device itself, according to the commenter in its study of the 

7 colonoscopy procedure codes. Therefore, the retrograde portion of the procedure is not 

a separate procedure on which to base a new G-code. Therefore, we will package costs 
CMS-1589-FC 518 

for HCPCS code C1749 with the colonoscopic procedures with which they are billed 

according to our standard policy. Because we are declining to create a G-code to 

describe the retrograde colonoscopic portion of colonoscopy procedures, there is no need 

to create a new, dedicated device-dependent APC, as requested by the commenter. 

We also do not agree with the commenter’s alternate suggestion that separate 

payment is needed for HCPCS code C1749 at this time. HCPCS code C1749 is currently 

under separate payment under the pass-through provision, and once pass-through status 

expires, device costs are packaged into the payment for the procedure. 

Regarding the commenter’s request that we extend the eligibility for pass-through 

payment of HCPCS code C1749 through CY 2013, based on the statutory limits at 

section 1833(t)(6)(B)(iii) of the Act and related payment policies not permitting partial 

year rate changes, we are not able to further extend pass-through payment for HCPCS 

code C1749. Moreover, we will be able to track the HCPCS code C1886 device 

utilization in CY 2013 even without the pass-through payment eligibility because HCPCS 

code C1749 will still be required to be reported with the procedures with which it is 

billed. 

The commenters who believe that HCPCS codes for pass-through devices become 

inactive when pass-through status for a device expires are incorrect. Under our 

longstanding policy, once the period of device pass-through payment is complete, we 

package the costs of the devices with the procedures with which they are billed. In the 

case of HCPCS code C1749, as stated previously, it is our proposal to package the device 

costs with the colonoscopy procedures with which the retrograde colonoscope is billed, 
CMS-1589-FC 519 

effective January 1, 2013, to maintain HCPCS code C1749 for the device, and to require 

hospitals to include HCPCS code C1749 and its costs on the claims for the procedures 

with which it is billed. This will provide assurance that the costs of HCPCS code C1749 

will be represented in our claims data and accounted for in the relevant APC payment 

rates. 

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

proposals concerning the expiration for pass-through payment eligibility for device 

category codes C1830, C1840, and C1886 as of December 31, 2013, and to package the 

device costs with the respective procedures with which these devices are billed. 

Furthermore, we are maintaining our previous decision to package the costs of HCPCS 

code C1749 with the procedures with which it is billed, as of January 1, 2013. 

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

into APC Groups 

a. Background 

Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional pass-through 

payment for an eligible device as the amount by which the hospital’s charges for a 

device, adjusted to cost (cost of device) exceeds the portion of the otherwise applicable 

Medicare outpatient department fee schedule amount (APC payment amount) associated 

with the device. We have an established policy to estimate the portion of each APC 

payment rate that could reasonably be attributed to the cost of the associated devices that 

are eligible for pass-through payments (66 FR 59904) for purposes of estimating the 

portion of the otherwise applicable APC payment amount associated with the device. For 
CMS-1589-FC 520 

eligible device categories, we deduct an amount that reflects the portion of the APC 

payment amount that we determine is associated with the cost of the device, defined as 

the device APC offset amount, from the charges adjusted to cost for the device, as 

provided by section 1833(t)(6)(D)(ii) of the Act, to determine the eligible device’s 

pass-through payment amount. We have consistently employed an established 

methodology to estimate the portion of each APC payment rate that could reasonably be 

attributed to the cost of an associated device eligible for pass-through payment, using 

claims data from the period used for the most recent recalibration of the APC rates 

(72 FR 66751 through 66752). We establish and update the applicable device APC offset 

amounts for eligible pass-through device categories through the transmittals that 

implement the quarterly OPPS updates. 

We currently have published a list of all procedural APCs with the CY 2012 

portions (both percentages and dollar amounts) of the APC payment amounts that we 

determine are associated with the cost of devices on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. The dollar amounts are used as the device 

APC offset amounts. In addition, in accordance with our established practice, the device 

APC offset amounts in a related APC are used in order to evaluate whether the cost of a 

device in an application for a new device category for pass-through payment is not 

insignificant in relation to the APC payment amount for the service related to the 

category of devices, as specified in our regulations at § 419.66(d). 
CMS-1589-FC 521 

Beginning in CY 2010, we include packaged costs related to implantable 

biologicals in the device offset calculations in accordance with our policy that the 

pass-through evaluation process and payment methodology for implantable biologicals 

that are surgically inserted or implanted (through a surgical incision or a natural orifice) 

and that are newly approved for pass-through status beginning on or after 

January 1, 2010, be the device pass-through process and payment methodology only 

(74 FR 60476). 

b. CY 2013 Policy 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45125), we proposed to 

continue, for CY 2013, our established methodology to estimate the portion of each APC 

payment rate that could reasonably be attributed to (that is, reflect) the cost of an 

associated device eligible for pass-through payment, using claims data from the period 

used for the most recent recalibration of the APC rates. We proposed to continue our 

policy, for CY 2013, that the pass-through evaluation process and pass-through payment

methodology for implantable biologicals that are surgically inserted or implanted 

(through a surgical incision or a natural orifice) and that are newly approved for 

pass-through status beginning on or after January 1, 2010, be the device pass-through 

process and payment methodology only. The rationale for this policy is provided in the 

CY 2010 OPPS/ASC final rule with comment period (74 FR 60471 through 60477). We 

also proposed to continue our established policies for calculating and setting the device 

APC offset amounts for each device category eligible for pass-through payment. In 

addition, we proposed to continue to review each new device category on a case-by-case 
CMS-1589-FC 522 

basis to determine whether device costs associated with the new category are already 

packaged into the existing APC structure. If device costs packaged into the existing APC 

structure are associated with the new category, we proposed to deduct the device APC 

offset amount from the pass-through payment for the device category. As stated earlier, 

these device APC offset amounts also would be used in order to evaluate whether the cost 

of a device in an application for a new device category for pass-through payment is not 

insignificant in relation to the APC payment amount for the service related to the 

category of devices (§ 419.66(d)). 

For CY 2013, we also proposed to continue our policy established in CY 2010 to 

include implantable biologicals in our calculation of the device APC offset amounts. In 

addition, we proposed to continue to calculate and set any device APC offset amount for 

a new device pass-through category that includes a newly eligible implantable biological 

beginning in CY 2013 using the same methodology we have historically used to calculate 

and set device APC offset amounts for device categories eligible for pass-through 

payment, and to include the costs of implantable biologicals in the calculation of the 

device APC offset amounts. 

In addition, we proposed to update, on the CMS Web site at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html the list of all procedural APCs with the final 

CY 2013 portions of the APC payment amounts that we determine are associated with the 

cost of devices so that this information is available for use by the public in developing 
CMS-1589-FC 523 

potential CY 2013 device pass-through payment applications and by CMS in reviewing 

those applications. 

Comment: One commenter recommended that all biologicals, including 

implantable biologicals that are approved by the FDA under biological license 

applications (BLAs), be treated as drugs, rather than as devices, for pass-through 

payment purposes for CY 2013. The commenter claimed that when Congress enacted the 

current payment system for SCODs that previously had pass-through status, it intended 

for biologicals approved under BLAs to be paid under the specific statutory provisions 

for drugs. The commenter argued that it is only logical, then, that Congress would have 

intended for these BLA-approved therapies to be paid as pass-through drugs as well. The 

commenter requested that, if CMS continues to evaluate implantable biologicals under 

the pass-through device criteria, CMS clarify its policy that the device pass-through 

criteria apply only to biologicals if they are solely surgically implanted according to their 

FDA approved indications. The commenter stated that the current regulation at 

42 CFR 419.64(a)(4) is unclear how we would evaluate pass-through eligibility of a 

biological that has both surgically implanted and nonimplantable indications. The 

commenter stated that the explanation CMS provided in the CY 2012 OPPS/ASC final 

rule with comment period, that “we mean to exclude from consideration for drug and 

biological pass-through status any biological that has an indication such that it may 

function as a surgically implanted or inserted biological, even if there are also indications 

in which the biological is not surgically implanted or inserted” (76 FR 74280), is unclear 

and inconsistent with what CMS has stated previously in policy and billing instructions. 
CMS-1589-FC 524 

The commenter recommended that CMS revise the regulation text so that if refers to “a 

biological that is not always surgically implanted into the body.” 

Response: As stated in previous OPPS/ASC final rules with comment period, we 

evaluate implantable biologicals that function as, and are substitutes for, implantable 

devices for OPPS payment purposes. This is done regardless of their category of FDA 

approval (74 FR 60476; 75 FR 71924; 76 FR 74279 through 74280). We do not believe 

it is necessary to make our OPPS payment policies regarding implantable biologicals 

dependent on categories of FDA approval, the intent of which is to ensure the safety and 

effectiveness of medical products. 

We do not agree with the commenter who asserted that Congress intended 

biologicals approved under BLAs to be paid under the specific OPPS statutory provisions 

that apply to SCODs, including the pass-through provisions. Moreover, as we stated in 

previous OPPS/ASC final rules with comment period, Congress did not specify in the 

statute that we must pay for implantable biologicals as biologicals rather than devices, if 

they also meet our criteria for payment as a device (74 FR 60476; 75 FR 71924; and 

76 FR 74280). We continue to believe that implantable biologicals meet both the 

definitions of a device and a biological and that, for payment purposes, it is appropriate 

for us to consider implantable biologicals as implantable devices in all cases, and not as 

biologicals. 

We do not agree with the commenter’s assertion that the explanation offered in 

the CY 2012 OPPS/ASC final rule with comment period of the regulation text at 

42 CFR 419.64(a)(4)(iii) which indicates that a biological for drug pass-through payment 
CMS-1589-FC 525 

purposes must not be surgically implanted or inserted into the body, is inconsistent with 

our prior description of this policy, the application of this policy to date, and billing 

instruction to hospitals. Our policy and application process have consistently reflected 

that implantable biologicals are subject to the device application process since the 

beginning of CY 2010. For CYs 2010, 2011, and 2012, we finalized the same policy that 

the pass-through evaluation process and payment methodology for implantable 

biologicals that are surgically inserted or implanted (through a surgical incision or a 

natural orifice), and that are newly approved for pass-through status as of 

January 1, 2010, be the device pass-through process and payment methodology only 

(74 FR 60476, 75 FR 71924, and 76 FR 74280, respectively). We have not established a 

policy in any year that stated that implantable biologicals needed to be solely surgically 

inserted or implanted to be subject to the device pass-through process and payment 

methodology. Furthermore, there is no inconsistency with our policy and billing 

instructions regarding pass-through devices or implantable biologicals because there are 

no billing instructions regarding the device pass-through application process. Rather, 

application instructions are found on the CMS Web site (currently at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Downloads/catapp.pdf). The language on the device 

application web site is consistent with the language in the CYs 2010, 2011, and 2012 

final rules with comment period, stating that, as of January 1, 2010, implantable 

biologicals that are surgically inserted or implanted (through a surgical incision or natural 

orifice) are being evaluated for device pass-through payment under the instructions using 
CMS-1589-FC 526 

the device pass-through process. We reiterate our explanation provided in the CY 2012 

final rule with comment period (76 FR 74280) regarding the regulatory language at 

42 CFR 419.64(a)(4), that we mean to exclude from consideration for drug and biological 

pass-through status any biological that has an indication such that it may function as a 

surgically implanted or inserted biological, even if there also are indications in which the 

biological is not surgically implanted or inserted. We will add similar language to our 

device and drug pass-through application Web sites as well. 

We are finalizing the following proposals for CY 2013: to continue our 

established methodology to estimate the portion of each APC payment rate that could 

reasonably reflect the cost of an associated device eligible for pass-through payment; to 

continue our policy that the pass-through evaluation process and pass-through payment

methodology for implantable biologicals that are surgically inserted or implanted 

(through a surgical incision or a natural orifice) and that are newly approved for 

pass-through status beginning on or after January 1, 2010, be the device pass-through 

process and payment methodology only; to continue our established policies for 

calculating and setting the device APC offset amounts for each device category eligible 

for pass-through payment; and to continue to review each new device category on a caseby-case basis to determine whether device costs associated with the new category are 

already packaged into the existing APC structure, and, if device costs packaged into the 

existing APC structure are associated with the new category, to deduct the device APC 

offset amount from the pass-through payment for the device category. 
CMS-1589-FC 527 

For CY 2013, we also are finalizing our proposal and continuing our policy 

established in CY 2010 to include implantable biologicals in our calculation of the device 

APC offset amounts, and to continue to calculate and set any device APC offset amount 

for a new device pass-through category that includes a newly eligible implantable 

biological beginning in CY 2013 using the same methodology we have historically used 

to calculate and set device APC offset amounts for device categories eligible for 

pass-through payment, and to include the costs of implantable biologicals in the 

calculation of the device APC offset amounts. 

In addition, we will update, on the CMS Web site at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html the list of all procedural APCs with the final 

CY 2013 portions of the APC payment amounts that we determine are associated with the 

cost of devices so that this information is available for use by the public in developing 

potential CY 2013 device pass-through payment applications and by CMS in reviewing 

those applications. 

3. Clarification of Existing Device Category Criterion 

a. Background 

Section 1833(t)(6)(B)(ii)(IV) of the Act directs the Secretary to establish a new 

device category for pass-through payment for which none of the pass-through categories 

in effect (or that were previously in effect) is appropriate. Commenters who responded to 

our various proposed rules, as well as applicants for new device categories, had expressed 

concern that some of our existing and previously in effect device category descriptors 
CMS-1589-FC 528 

were overly broad, and that the device category descriptors as they are currently written 

may preclude some new technologies from qualifying for establishment of a new device 

category for pass-through payment (70 FR 68630 through 68631). As a result of these 

comments, we finalized a policy, effective January 1, 2006, to create an additional 

category for devices that meet all of the criteria required to establish a new category for 

pass-through payment in instances where we believe that an existing or previously in 

effect category descriptor does not appropriately describe the new device. Accordingly, 

effective January 1, 2006, we revised § 419.66(c)(1) of the regulations to reflect this 

policy change. In order to determine if a new device is appropriately described by any 

existing or previously in effect category of devices, we apply two tests based upon our 

evaluation of information provided to us in the device category application. First, an 

applicant for a new device category must show that its device is not similar to devices 

(including related predicate devices) whose costs are reflected in the currently available 

OPPS claims data in the most recent OPPS update. Second, an applicant must 

demonstrate that utilization of its device provides a substantial clinical improvement for 

Medicare beneficiaries compared with currently available treatments, including 

procedures utilizing devices in any existing or previously in effect device categories. We 

consider a new device that meets both of these tests not to be appropriately described by 

any existing or previously in effect pass-through device categories (70 FR 68630 through 

68631). 
CMS-1589-FC 529 

b. Clarification of CY 2013 Policy 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45126), we proposed, for 

CY 2013, to clarify the test that requires an applicant for a new device category to show 

that its device is not similar to devices (including related predicate devices) whose costs 

are reflected in the currently available OPPS claims data in the most recent OPPS update. 

We clarified that this test includes showing that a new device is not similar to predicate 

devices that once belonged in any existing or previously in effect pass-through device 

categories. Under this test, a candidate device may not be considered to be appropriately 

described by any existing or previously in effect pass-through device categories if the 

applicant adequately demonstrates that the candidate device is not similar to devices 

(including related predicate devices) that belong or once belonged to an existing or any 

previously in effect device category, and that the candidate device is not similar to 

devices whose costs are reflected in the OPPS claims data in the most recent OPPS 

update. The substantial clinical improvement criterion, which also must be satisfied in 

every case, as indicated in § 419.66(c)(2) of our regulations, is separate from the criterion 

that a candidate device not be similar to devices in any existing or previously in effect 

pass-through categories. We invited public comments regarding this proposed 

clarification. 

We did not receive any public comments on our proposal to clarify the test that 

requires an applicant for a new device category to show that its device is not similar to 

devices (including related predicate devices) whose costs are reflected in the currently 
CMS-1589-FC 530 

available OPPS claims data. Therefore, we are clarifying our existing policy as noted 

above. 

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

1. Background 

To ensure equitable payment when the hospital receives a device without cost or 

with full credit, in CY 2007, we implemented a policy to reduce the payment for 

specified device-dependent APCs by the estimated portion of the APC payment 

attributable to device costs (that is, the device offset) when the hospital receives a 

specified device at no cost or with full credit (71 FR 68071 through 68077). Hospitals 

are instructed to report no cost/full credit cases using the “FB” modifier on the line with 

the procedure code in which the no cost/full credit device is used. In cases in which the 

device is furnished without cost or with full credit, the hospital is instructed to report a 

token device charge of less than $1.01. In cases in which the device being inserted is an 

upgrade (either of the same type of device or to a different type of device) with a full 

credit for the device being replaced, the hospital is instructed to report as the device 

charge the difference between its usual charge for the device being implanted and its 

usual charge for the device for which it received full credit. In CY 2008, we expanded 

this payment adjustment policy to include cases in which hospitals receive partial credit 

of 50 percent or more of the cost of a specified device. Hospitals are instructed to append 

the “FC” modifier to the procedure code that reports the service provided to furnish the 

device when they receive a partial credit of 50 percent or more of the cost of the new 

device. We refer readers to the CY 2008 OPPS/ASC final rule with comment period for 
CMS-1589-FC 531 

more background information on the “FB” and “FC” payment adjustment policies 

(72 FR 66743 through 66749). 

2. APCs and Devices Subject to the Adjustment Policy 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45126), we proposed, for 

CY 2013, to continue the existing policy of reducing OPPS payment for specified APCs 

by 100 percent of the device offset amount when a hospital furnishes a specified device 

without cost or with a full credit and by 50 percent of the device offset amount when the 

hospital receives partial credit in the amount of 50 percent or more of the cost for the 

specified device. (We refer readers to section II.A.2.d.(1) of this final rule with comment 

period for a description of our standard ratesetting methodology for device-dependent 

APCs.) 

For CY 2013, we also proposed to continue using the three criteria established in 

the CY 2007 OPPS/ASC final rule with comment period for determining the APCs to 

which this policy applies (71 FR 68072 through 68077). Specifically: (1) all procedures 

assigned to the selected APCs must involve implantable devices that would be reported if 

device insertion procedures were performed; (2) the required devices must be surgically 

inserted or implanted devices that remain in the patient’s body after the conclusion of the 

procedure (at least temporarily); and (3) the device offset amount must be significant, 

which, for purposes of this policy, is defined as exceeding 40 percent of the APC cost. 

We also proposed to continue to restrict the devices to which the APC payment 

adjustment would apply to a specific set of costly devices to ensure that the adjustment 

would not be triggered by the implantation of an inexpensive device whose cost would 
CMS-1589-FC 532 

not constitute a significant proportion of the total payment rate for an APC. We stated in 

the CY 2013 OPPS/ASC proposed rule (77 FR 45127) that we continue to believe these 

criteria are appropriate because free devices and device credits are likely to be associated 

with particular cases only when the device must be reported on the claim and is of a type 

that is implanted and remains in the body when the beneficiary leaves the hospital. We 

believe that the reduction in payment is appropriate only when the cost of the device is a 

significant part of the total cost of the APC into which the device cost is packaged, and 

that the 40-percent threshold is a reasonable definition of a significant cost. 

As indicated in the CY 2013 OPPS/ASC proposed rule (77 FR 45127), we 

examined the offset amounts calculated from the CY 2013 proposed rule data and the 

clinical characteristics of APCs to determine whether the APCs to which the no cost/full 

credit and partial credit device adjustment policy applied in CY 2012 continue to meet 

the criteria for CY 2013, and to determine whether other APCs to which the policy did 

not apply in CY 2012 would meet the criteria for CY 2013. Based on the CY 2011 

claims data available for the proposed rule, we did not propose any changes to the APCs 

and devices to which this policy applies. 

Table 20 of the CY 2013 OPPS/ASC proposed rule (77 FR 45127) listed the 

proposed APCs to which the payment adjustment policy for no cost/full credit and partial 

credit devices would apply in CY 2013, and displayed the proposed payment adjustment 

percentages for both no cost/full credit and partial credit circumstances. We proposed 

that the no cost/full credit adjustment for each APC to which this policy would continue 

to apply would be the device offset percentage for the APC (the estimated percentage of 
CMS-1589-FC 533 

the APC cost that is attributable to the device costs that are already packaged into the 

APC). We also proposed that the partial credit device adjustment for each APC would 

continue to be 50 percent of the no cost/full credit adjustment for the APC. 

Table 21 of the CY 2013 OPPS/ASC proposed rule (77 FR 45128) listed the 

proposed devices to which the payment adjustment policy for no cost/full credit and 

partial credit devices would apply in CY 2013. We stated in the CY 2013 proposed rule 

(77 FR 45127) that we would update the lists of APCs and devices to which the no 

cost/full credit and partial credit device adjustment policy would apply for CY 2013, 

consistent with the three criteria discussed earlier in this section, based on the final 

CY 2011 claims data available for the CY 2013 OPPS/ASC final rule with comment 

period. The updated lists of APCs and devices appear below in Table 29 and Table 30, 

respectively, of this final rule with comment period. We note that there are no changes to 

the lists of APCs and devices compared to the proposed rule for CY 2013. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45127), we proposed, for 

CY 2013, that OPPS payments for implantation procedures to which the “FB” modifier is 

appended are reduced by 100 percent of the device offset for no cost/full credit cases 

when both a device code listed in Table 21 of the proposed rule is present on the claim, 

and the procedure code maps to an APC listed in Table 20 of the proposed rule. We also 

proposed that OPPS payments for implantation procedures to which the “FC” modifier is 

appended are reduced by 50 percent of the device offset when both a device code listed in 

Table 21 of the proposed rule is present on the claim and the procedure code maps to an 

APC listed in Table 20 of the proposed rule. Beneficiary copayment is based on the 
CMS-1589-FC 534 

reduced amount when either the “FB” modifier or the “FC” modifier is billed and the 

procedure and device codes appear on the lists of procedures and devices to which this 

policy applies. 

Comment: Commenters reported that there are some instances in which the 

hospital receives a full credit for only one component of a pacemaker or ICD replacement 

procedure that involves both a lead and a generator. Specifically, the commenters noted 

that the 2012 CPT Code Book states that when a pulse generator insertion involves the 

insertion or replacement of one or more lead(s), use system CPT codes 33206 (Insertion 

of new or replacement of permanent pacemaker with transvenous electrode(s); atrial), 

33207 (Insertion of new or replacement of permanent pacemaker with transvenous 

electrode(s); ventricular), and 33208 (Insertion of new or replacement of permanent 

pacemaker with transvenous electrode(s); atrial and ventricular) for pacemakers or CPT 

code 33249 (Insertion or replacement of permanent pacing cardioverter-defibrillator 

system with transvenous lead(s), single or dual chamber) for pacing cardioverterdefibrillators. The commenters noted that hospitals would still be required to assign an 

“FB” or “FC” modifier to the procedure code representing the replacement procedure, 

and the applicable offset would be applied to the entire APC payment, even when only 

one of the devices involved in the procedure was received at no cost or with full or partial 

credit. According to the commenters, the offset reduction may actually be much greater 

or much less than the credit received by the hospital, depending upon the component that 

was credited. The commenters requested that CMS alleviate this issue by allowing 

hospitals to bill individual CPT codes for each component of the replacement procedure, 
CMS-1589-FC 535 

rather than requiring the reporting of a full system as suggested by the CPT guidance. 

The commenters stated that this would allow the FB or FC modifiers and the respective 

offsets to be applied accurately to the payment for the individual component receiving the 

credit, rather than being broadly applied to the APC payment for the entire replacement. 

Response: We agree with the commenters that hospitals would be required to 

assign an “FB” or “FC” modifier to the procedure code representing the pacemaker or 

ICD replacement procedure as they describe, and that the applicable offset would be 

applied to the entire APC payment, even when just one of the devices involved in the 

procedure (that is, a lead or a generator) was received at no cost or with full or partial 

credit. However, we do not agree that this is problematic. As the commenter noted, the 

offset reduction may actually be much greater or much less than the credit received by 

the hospital, depending upon the component that was credited. As we have stated in the 

past (76 FR 74282), we recognize that, in some cases, the estimated device cost and, 

therefore, the amount of the payment reduction will be more or less than the cost a 

hospital would otherwise incur. However, because averaging is inherent in a prospective 

payment system, we do not believe this is inappropriate. Therefore, we do not agree that 

we should allow hospitals to bill individual CPT codes for each component of the 

replacement procedure, rather than requiring the reporting of a full system as suggested 

by the CPT guidance, as the commenters suggested. 

Comment: One commenter noted that the no cost/full credit and partial credit 

adjustment policy applies only when expensive devices are replaced and requested 

clarification regarding the assignment of the “FB/FC” modifier to devices that providers 
CMS-1589-FC 536 

receive at no cost or at an “inexpensive” cost. According to the commenter, providers 

lack clear guidelines to determine what is meant by “inexpensive.” The commenter also 

noted that there are inconsistencies between the “FB/FC” modifier list and the list of 

device-dependent APCs in the CY 2013 OPPS/ASC proposed rule, specifically that the 

FB/FC listing is not an inclusive listing of all device-dependent APCs. 

Response: As we stated in the Medicare Claims Processing Manual (Pub. 100-04, 

Chapter 4, Section 61.3.1), when a hospital furnishes a device received without cost or 

with full credit from a manufacturer, the hospital must append modifier “–FB” to the 

procedure code (not the device code) that reports the service provided to furnish the 

device. As we stated in the Medicare Claims Processing Manual (Pub. 100-04, Chapter 

4, Section 61.3.3), when a hospital receives a partial credit of 50 percent or more of the 

cost of a new replacement device due to warranty, recall, or field action, the hospital must 

append modifier “–FC” to the procedure code (not on the device code) that reports the 

service provided to replace the device. This guidance does not instruct providers to 

determine whether a no cost/full credit or partial credit device is “expensive” or 

“inexpensive.” Rather, providers should append the “FB” and “FC” modifiers to all 

procedures that meet the requirements of these instructions. The I/OCE determines, on a 

claim by claim basis, when to apply the no cost/full credit and partial credit device 

adjustment policy (that is, when both a specified device code is present on the claim, and 

the procedure code to which the “FB” or “FC” modifier is appended maps to a specified 

APC, as described previously in this section). 
CMS-1589-FC 537 

Regarding the comment that there are inconsistencies between the “FB/FC” 

modifier list and the list of device-dependent APCs in the CY 2013 OPPS/ASC proposed 

rule, we believe that the commenter is referring to the fact that Table 20 in the CY 2013 

OPPS/ASC proposed rule (the list of proposed APCs to which the no cost/full credit and 

partial credit device adjustment policy would apply (77 FR 45127)) and Table 4A (the list 

of proposed device-dependent APCs (77 FR 45082)) are not identical. The commenter is 

correct that the list of APCs to which the no cost/full credit and partial credit device 

adjustment policy will apply in CY 2013 in this section and the list of device-dependent 

APCs in section II.A.2.d.(1) of the proposed rule and this final rule with comment period 

are not the same. We believe this is appropriate because, as we describe earlier in this 

section, we use the following criteria to determine the list of APCs to which this policy 

will apply: (1) all procedures assigned to the selected APCs must involve implantable 

devices that would be reported if device insertion procedures were performed; (2) the 

required devices must be surgically inserted or implanted devices that remain in the 

patient’s body after the conclusion of the procedure (at least temporarily); and (3) the 

device offset amount must be significant. Not all device-dependent APCs meet these 

criteria, and therefore are appropriately excluded from the list of APCs to which the no 

cost/full credit and partial credit device adjustment policy applies. 

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

CY 2013 proposals, without modification, to continue the established no cost/full credit 

and partial credit adjustment policies. Table 29 below lists the APCs to which the 

payment adjustment policy for no cost/full credit and partial credit devices will apply in 
CMS-1589-FC 538 

CY 2013 and displays the final adjustment percentages for both no cost/full credit and 

partial credit circumstances. Table 30 below lists the devices to which the no cost/full 

credit and partial credit device adjustment policy will apply for CY 2013, consistent with 

the three selection criteria discussed earlier in this section and based on the CY 2011 

claims data available for this final rule with comment period. 

TABLE 29.—APCs TO WHICH THE NO COST/FULL CREDIT AND PARTIAL 

CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY IN CY 2013 

CY 2013 

APC CY 2013 APC Title 

CY 2013 

Device Offset 

Percentage for 

No Cost/ 

Full Credit 

Case 

CY 2013 

Device Offset 

Percentage 

for Partial 

Credit Case 

0039 

Level I Implantation of 

Neurostimulator Generator 87% 43%

0040 

Level I 

Implantation/Revision/Replac

ement of Neurostimulator 

Electrodes 56% 28%

0061 

Level II 

Implantation/Revision/Replac

ement of Neurostimulator 

Electrodes 69% 34%

0089 

Insertion/Replacement of 

Permanent Pacemaker and 

Electrodes 69% 35%

0090 

Insertion/Replacement of 

Pacemaker Pulse Generator 71% 36%

0106 

Insertion/Replacement of 

Pacemaker Leads and/or 

Electrodes 48% 24%

0107 

Level I Implantation of 

Cardioverter-Defibrillators 

(ICDs) 84% 42%
CMS-1589-FC 539 

CY 2013 

APC CY 2013 APC Title 

CY 2013 

Device Offset 

Percentage for 

No Cost/ 

Full Credit 

Case 

CY 2013 

Device Offset 

Percentage 

for Partial 

Credit Case 

0108 

Level II Implantation of 

Cardioverter-Defibrillators 

(ICDs) 84% 42%

0227 

Implantation of Drug Infusion 

Device 82% 41%

0259 Level VII ENT Procedures 84% 42%

0315 

Level II Implantation of 

Neurostimulator Generator 88% 44%

0318 

Implantation of Cranial 

Neurostimulator Pulse 

Generator and Electrode 89% 44%

0385 

Level I Prosthetic Urological 

Procedures 62% 31%

0386 

Level II Prosthetic Urological 

Procedures 70% 35%

0425 

Level II Arthroplasty or 

Implantation with Prosthesis 59% 30%

0648 Level IV Breast Surgery 50% 25%

0654 

Insertion/Replacement of a 

permanent dual chamber 

pacemaker 74% 37%

0655 

Insertion/Replacement/Conve

rsion of a Permanent Dual 

Chamber Pacemaker or 

Pacing Electrode 73% 37%

0680 

Insertion of Patient Activated 

Event Recorders 74% 37%
CMS-1589-FC 540 

TABLE 30.—DEVICES TO WHICH THE NO COST/FULL CREDIT AND 

PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY IN CY 2013 

CY 2013 Device 

HCPCS Code CY 2013 Short Descriptor 

C1721 AICD, dual chamber 

C1722 AICD, single chamber 

C1728 Cath, brachytx seed adm 

C1764 Event recorder, cardiac 

C1767 Generator, neurostim, imp 

C1771 Rep dev, urinary, w/sling 

C1772 Infusion pump, programmable 

C1776 Joint device (implantable) 

C1777 Lead, AICD, endo single coil 

C1778 Lead, neurostimulator 

C1779 Lead, pmkr, transvenous VDD 

C1785 Pmkr, dual, rate-resp 

C1786 Pmkr, single, rate-resp 

C1789 Prosthesis, breast, imp 

C1813 Prosthesis, penile, inflatab 

C1815 Pros, urinary sph, imp 

C1820 Generator, neuro rechg bat sys 

C1881 Dialysis access system 

C1882 AICD, other than sing/dual 

C1891 Infusion pump, non-prog, perm 

C1895 Lead, AICD, endo dual coil 

C1896 Lead, AICD, non sing/dual 

C1897 Lead, neurostim, test kit 

C1898 Lead, pmkr, other than trans 

C1899 Lead, pmkr/AICD combination 

C1900 Lead coronary venous 

C2619 Pmkr, dual, non rate-resp 

C2620 Pmkr, single, non rate-resp 

C2621 Pmkr, other than sing/dual 

C2622 Prosthesis, penile, non-inf 

C2626 Infusion pump, non-prog, temp 

C2631 Rep dev, urinary, w/o sling 
CMS-1589-FC 541 

CY 2013 Device 

HCPCS Code CY 2013 Short Descriptor 

L8600 Implant breast silicone/eq 

L8614 Cochlear device/system 

L8680 Implt neurostim elctr each 

L8685 Implt nrostm pls gen sng rec 

L8686 Implt nrostm pls gen sng non 

L8687 Implt nrostm pls gen dua rec 

L8688 Implt nrostm pls gen dua non 

L8690 Aud osseo dev, int/ext comp 
CMS-1589-FC 542 

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

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

and Radiopharmaceuticals

1. Background 

Section 1833(t)(6) of the Act provides for temporary additional payments or 

“transitional pass-through payments” for certain drugs and biologicals (also referred to as 

biologics). As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act (BBRA) of 1999 (Pub. L. 106-113), this provision requires the Secretary 

to make additional payments to hospitals for: current orphan drugs, as designated under 

section 526 of the Federal Food, Drug, and Cosmetic Act (Pub. L. 107-186); current 

drugs and biologicals and brachytherapy sources used for the treatment of cancer; and 

current radiopharmaceutical drugs and biologicals. For those drugs and biologicals 

referred to as “current,” the transitional pass-through payment began on the first date the 

hospital OPPS was implemented. 

Transitional pass-through payments also are provided for certain “new” drugs and 

biologicals that were not being paid for as an HOPD service as of December 31, 1996, 

and whose cost is “not insignificant” in relation to the OPPS payments for the procedures 

or services associated with the new drug or biological. For pass-through payment 

purposes, radiopharmaceuticals are included as “drugs.” Under the statute, transitional 

pass-through payments for a drug or biological described in section 1833(t)(6)(C)(i)(II) 

of the Act can be made for a period of at least 2 years, but not more than 3 years, after the 

product’s first payment as a hospital outpatient service under Medicare Part B. Proposed 
CMS-1589-FC 543 

CY 2013 pass-through drugs and biologicals and their designated APCs were assigned 

status indicator “G” in Addenda A and B to the proposed rule and in this final rule with 

comment period, which are available via the Internet on the CMS Web site. 

Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through payment 

amount, in the case of a drug or biological, is the amount by which the amount 

determined under section 1842(o) of the Act for the drug or biological exceeds the 

portion of the otherwise applicable Medicare OPD fee schedule that the Secretary 

determines is associated with the drug or biological. If the drug or biological is covered 

under a competitive acquisition contract under section 1847B of the Act, the pass-through 

payment amount is determined by the Secretary to be equal to the average price for the 

drug or biological for all competitive acquisition areas and the year established under 

such section as calculated and adjusted by the Secretary. However, we note that the 

Part B drug CAP program has been postponed since CY 2009, and such a program has 

not been reinstated for CY 2013. 

This methodology for determining the pass-through payment amount is set forth 

in regulations at 42 CFR 419.64. These regulations specify that the pass-through 

payment equals the amount determined under section 1842(o) of the Act minus the 

portion of the APC payment that CMS determines is associated with the drug or 

biological. Section 1847A of the Act establishes the average sales price (ASP) 

methodology, which is used for payment for drugs and biologicals described in section 

1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP methodology, 

as applied under the OPPS, uses several sources of data as a basis for payment, including 
CMS-1589-FC 544 

the ASP, the wholesale acquisition cost (WAC), and the average wholesale price (AWP). 

In this final rule with comment period, the term “ASP methodology” and “ASP-based” 

are inclusive of all data sources and methodologies described therein. Additional 

information on the ASP methodology can be found on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html. 

For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through payment 

amount for drugs and biologicals to be zero based on our interpretation that the 

“otherwise applicable Medicare OPD fee schedule” amount was equivalent to the amount 

to be paid for pass-through drugs and biologicals under section 1842(o) of the Act (or 

section 1847B of the Act if the drug or biological is covered under a competitive 

acquisition contract). We concluded for those years that the resulting difference between 

these two rates would be zero. For CYs 2008 and 2009, we estimated the OPPS 

pass-through payment amount for drugs and biologicals to be $6.6 million and 

$23.3 million, respectively. For CY 2010, we estimated the OPPS pass-through payment 

estimate for drugs and biologicals to be $35.5 million. For CY 2011, we estimated the 

OPPS pass-through payment for drugs and biologicals to be $15.5 million. For CY 2012, 

we estimated the OPPS pass-through payment for drugs and biologicals to be $19 

million. Our OPPS pass-through payment estimate for drugs and biologicals in CY 2013 

is $22 million, which is discussed in section VI.B. of this final rule with comment period. 
CMS-1589-FC 545 

The pass-through application and review process for drugs and biologicals is 

explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/passthrough_payment.html. 

2. Drugs and Biologicals with Expiring Pass-Through Status in CY 2012

In the CY 2013 OPPS/ASC proposed rule (77 FR 45128), we proposed that the 

pass-through status of 23 drugs and biologicals would expire on December 31, 2012, as 

listed in Table 22 of the proposed rule (77 FR 45129). All of these drugs and biologicals 

will have received OPPS pass-through payment for at least 2 years and no more than 3 

years by December 31, 2012. These drugs and biologicals were approved for passthrough status on or before January 1, 2011. With the exception of those groups of drugs 

and biologicals that are always packaged when they do not have pass-through status, 

specifically diagnostic radiopharmaceuticals and contrast agents, our standard 

methodology for providing payment for drugs and biologicals with expiring pass-through 

status in an upcoming calendar year is to determine the product’s estimated per day cost 

and compare it with the OPPS drug packaging threshold for that calendar year (which is 

$80), as discussed further in section V.B.2. of this final rule with comment period. If the 

drug’s or biological’s estimated per day cost is less than or equal to the applicable OPPS 

drug packaging threshold, we would package payment for the drug or biological into the 

payment for the associated procedure in the upcoming calendar year. If the estimated per 

day cost of the drug or biological is greater than the OPPS drug packaging threshold, we 

would provide separate payment at the applicable relative ASP-based payment amount 

(which is ASP+6 percent for CY 2013, as discussed further in section V.B.3. of this final 
CMS-1589-FC 546 

rule with comment period). Section II.A.3.e. of this final rule with comment period 

discusses the packaging of all nonpass-through contrast agents and diagnostic 

radiopharmaceuticals. 

Comment: Several commenters recommended that CMS continue pass-through 

status for new drugs, specifically diagnostic radiopharmaceuticals and contrast agents, for 

3 years. The commenters asserted that providing pass-through status for 3 years would 

help provide a more current and accurate data set on which to base payment amounts of 

the procedure when the diagnostic radiopharmaceutical or contrast agent is subsequently 

packaged. The commenters further recommended that CMS expire pass-through status 

for drugs and biologicals on a quarterly as opposed to an annual basis. One commenter 

disagreed with a prior CMS proposal to begin the pass-through payment eligibility period 

on the date of first sale of the drug in the United States following FDA approval. The 

commenter however approved of the concurrent proposal made at that time that would 

require CMS to accept and expire pass-through applications for drugs and biologicals on 

a quarterly basis. 

Response: As we stated in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74287), as described in section V.A. of this final rule with comment 

period, section 1833(t)(6)(C)(i)(II) of the Act permits CMS to make pass-through 

payments for a period of at least 2 but not more than 3 years, after the product’s first 

payment as a hospital outpatient service under Medicare Part B. We continue to believe 

that this period of payment facilitates dissemination of these new products into clinical 

practice and facilitates the collection of sufficient hospital claims data reflective of their 
CMS-1589-FC 547 

costs for future OPPS ratesetting. Our longstanding practice has been to provide passthrough payment for a period of 2 to 3 years, with expiration of pass-through status 

proposed and finalized through the annual rulemaking process. Each year, when 

proposing to expire the pass-through status of certain drugs and biologicals, we examine 

our claims data for these products. We observe that hospitals typically have incorporated 

these products into their chargemasters based on the utilization and costs observed in our 

claims data. Under the existing pass-through policy, which has been generally supported 

by commenters, we begin pass-through payment on a quarterly basis that depends on 

when applications are submitted to us for consideration and because we expire 

pass-through status only on an annual basis, there is no way to ensure that all passthrough drugs and biologicals receive pass-through payment for a full 3 years, while also 

providing pass-though payment for no more than 3 years as the statute requires. Further, 

we are confident that the period of time for which drugs, biologicals, contrast agents, and 

radiopharmaceuticals receive pass-through status, which is at least 2 but no more than 3 

years, is adequate for CMS to collect the sufficient amount of data to make a packaging 

determination. 

We further note that we are in full compliance with the requirements of the Act, 

which states that pass-through status is given for at least 2 but no more than 3 years. As 

noted in section V.A.1. of this final rule with comment period, when a product’s passthrough status expires, it is either packaged into an APC if it is a relatively low-cost 

product that does not exceed the packaging threshold or is “policy packaged”, or if it is a 

relatively high-cost product, it is paid separately on the basis of the product’s ASP (we 
CMS-1589-FC 548 

refer readers to section V.B.3. of this final rule with comment period for more details 

regarding our payment policy for separately payable drugs). Because our policies for 

drugs with expiring pass-through status recognize products’ relative costliness and 

establish either separate or bundled payment as appropriate, based on such costliness, we 

disagree with commenters that certain relatively high cost products currently receiving 

pass-through payment would not be adequately paid if taken off pass-through, and as a 

result should continue on such status. We expire pass-though status on an annual basis. 

Depending on when a drug is initially approved for pass-through status, the drug receives 

pass-through payment for at least 2 but not more than 3 years. 

Comment: Commenters, including several medical societies, individual 

practitioners, and a manufacturer, requested that CMS appropriately pay for HCPCS code 

C9275 (Injection, hexaminolevulinate hydrochloride, 100 mg, per study dose). Some 

commenters believed that payment would be eliminated for HCPCS code C9275 and 

requested that CMS evaluate its statutory authority and establish appropriate payment as 

necessary. One commenter recommended that CMS either continue to pay separately for 

HCPCS code C9275 because, the commenter argued, an insufficient amount of claims 

data have been collected, or assign HCPCS code C9275 to a new technology APC with 

the accompanying blue light cystoscopy procedure until sufficient claims are gathered to 

determine assignment of an appropriate clinical APC category. The commenter further 

argued that because C9275 will always be used with the blue light cystoscopy procedure, 

packaging C9275 will result in zero payment for the imaging agent, since current 

cystoscopy APCs do not include costs of imaging agents. 
CMS-1589-FC 549 

The commenter stated that if CMS chooses to not provide payment for HCPCS 

code C9275 as a separately billable product, CMS should use its “waiver authority” under 

section 1833(t)(2)(E) of the Act to ensure that equitable payments are made under the 

OPPS for C9275. The commenter noted that, for CY 2013, CMS used this statutory 

authority to propose an additional payment for radioisotopes derived from non-HEU 

sources. 

Response: We proposed for CY 2013 to package the payment, for all contrast 

agents, that are not on pass-through status, into the payment for the associated service. 

We continue to believe that all nonpass-through contrast agents function effectively as 

supplies that are ancillary and supportive to an independent service. The product 

described by HCPCS code C9275 is a contrast agent that was approved for pass-through 

status beginning on January 1, 2011. For the CY 2013 OPPS/ASC proposed rule 

(77 FR 45128 through 45129), we proposed to expire pass-through status for this product 

because it had received at least 2 and no more than 3 years, as permitted by the Act in 

section 1833(t)(6). We note that because we expire pass-through status on an annual 

basis and not a quarterly basis, we cannot extend the pass-through status for HCPCS code 

C9275 for an additional number of years because it would be counter to our current 

policy. Therefore, we believe that our proposal to expire pass-through status for HCPCS 

code C9275 for CY 2013 is appropriate. 

We disagree with the commenter that a sufficient amount of data was not 

collected for HCPCS code C9275 during its period under pass-through status. As we 

stated previously, we believe this pass-through period of payment facilitates 
CMS-1589-FC 550 

dissemination for new products into clinical practice and facilitates the collection of 

hospital claims data, reflective of their costs for future OPPS ratesetting. Each year, 

when proposing to expire the pass-through status of certain drugs and biologicals, we 

examine our claims data for these products. We observe that hospitals typically have 

incorporated these products, where the product is being used, into their chargemasters 

based on the utilization and costs observed in our claims data. We believe a sufficient 

amount of claims data has been collected in this case and we see no reason to exempt 

C9275 as an extraordinary case from our longstanding packaging policy to package 

payment for nonpass-through contrast agents. 

We also do not believe that it is appropriate to extend separate payment for 

HCPCS code C9275 based on section 1833(t)(2)(E) of the Act. We believe that all 

hospitals have the opportunity to bill for and receive equitable payment for HCPCS code 

C9275. Hospitals can bill for an appropriate unlisted code for the cystoscopy procedure 

and include the costs of the product currently reported by HCPCS code C9275 in that 

specific claim, in order to receive payment for the procedure and the product. Therefore, 

we do not believe that there is an inequity that should be adjusted. Additionally, we do 

not believe that an additional payment amount should be made for HCPCS code C9275, 

for the reasons given in this final rule with comment period, to ensure equitable payments 

are made to hospitals. Further, extending the pass-through status for HCPCS code C9275 

beyond 3 years would not be permitted under the statutory requirements of section 

1833(t)(6) of the Act. 
CMS-1589-FC 551 

We believe that commenters have erroneously stated that payment will not be 

made under the OPPS or that an insufficient amount of payment will be given to the 

product described by HCPCS code C9275. We remind commenters that products that are 

packaged under the OPPS receive payment that is packaged into the payment for the 

associated procedure. Hospitals include HCPCS codes and charges for packaged services 

on their claims, and the estimated costs associated with those packaged services are then 

added to the costs of separately payable procedures on the same claims in establishing 

payment rates for the separately payable services. Payment for the packaged product is 

then included in the payment for the independent service. For HCPCS code C9275, 

hospitals may bill an unlisted code for the cystoscopy procedure and include the costs for 

HCPCS code C9275 on that claim. These costs will additionally be included in future 

ratesetting for these products. 

We continue to believe that packaging payment for ancillary and dependent 

services creates appropriate incentives for hospitals to seriously consider whether a new 

service or a new technology offers a benefit that is sufficient to justify the cost of the new 

service or new technology. Therefore, we believe that HCPCS code C9275 is 

appropriately packaged for CY 2013 and we are finalizing our proposal to expire 

pass-through status for C9275 and assign this HCPCS code to a status indicator of “N” 

for CY 2013. 

We note that comments pertaining to a potential future new technology APC 

assignment or new technology APC application for HCPCS code C9275 and the 
CMS-1589-FC 552 

accompanying blue light cystoscopy procedure are outside the scope of this final rule 

with comment period. 

Comment: One commenter requested that CMS review the claims used in 

calculating the packaging status of HCPCS code J7183 (Injection, von willebrand factor 

complex (human), wilate, 1 i.u. vwf:rco) and assign HCPCS code J7183 to status 

indicator “K” as pass-through status has expired, but the cost per day exceeds $80. 

Response: We appreciate the commenter’s diligence. HCPCS code J7183 was 

erroneously assigned to a status indicator of “N” for the CY 2013 OPPS/ASC proposed 

rule (77 FR 45129). The per day cost for HCPCS code J7183 for this final rule with 

comment period exceeds the $80 packaging threshold for CY 2013. Therefore, we are 

finalizing our proposal, with modification, to expire the pass-through status for HCPCS 

code J7183 and assign it to a status indicator of “K” for CY 2013. 

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

proposal, with modification as described above, to expire the pass-through status of the 

23 drugs and biologicals listed in Table 31 below. We are assigning HCPCS code J7183 

to status indicator “K” for CY 2013. Table 31 lists the drugs and biologicals for which 

pass-through status will expire on December 31, 2012, the status indicators, and the 

assigned APCs for CY 2013. 

TABLE 31.—DRUGS AND BIOLOGICALS FOR WHICH PASS-THROUGH 

STATUS WILL EXPIRE DECEMBER 31, 2012 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor CY 2013 

SI 

CY 2013 

APC 
CMS-1589-FC 553 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor CY 2013 

SI 

CY 2013 

APC 

C9275 Injection, hexaminolevulinate 

hydrochloride, 100 mg, per study dose N N/A 

C9367 Skin substitute, Endoform Dermal 

Template, per square centimeter K 9367 

J0221 Injection, alglucosidase alfa, 

(lumizyme), 10 mg K 1413 

J0588 Injection, incobotulinumtoxin A, 1 unit K 9278 

J0597 Injection, C-1 esterase inhibitor 

(human), Berinert, 10 units K 9269 

J0775 Injection, collagenase clostridium 

histolyticum, 0.01 mg K 1340 

J0840 Injection, crotalidae polyvalent immune 

fab (ovine), up to 1 gram K 9274 

J0897 Injection, denosumab, 1 mg K 9272 

J1290 Injection, ecallantide, 1 mg K 9263 

J1557 

Injection, immune globulin 

(Gammaplex), intravenous, nonlyophilized (e.g. liquid), 500 mg K 9270 

J1741 Injection, ibuprofen, 100 mg N N/A 

J3095 Injection, telavancin, 10 mg K 9258 

J3262 Injection, tocilizumab, 1 mg K 9264 

J3357 Injection, ustekinumab, 1 mg K 9261 

J3385 Injection, velaglucerase alfa, 100 units K 9271 

J7183 

Injection, von Willebrand factor 

complex (human), Wilate, per 100 IU 

VWF: RCO 

K 1352 

J7335 Capsaicin 8% patch,per 10 square 

centimeters K 9268 

J8562 Fludarabine phosphate, oral, 10 mg K 1339 

J9043 Injection, cabazitaxel, 1 mg K 1339 

J9302 Injection, ofatumumab, 10 mg K 9260 

J9307 Injection, pralatrexate, 1 mg K 9259 

J9315 Injection, romidepsin, 1 mg K 9265 
CMS-1589-FC 554 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor CY 2013 

SI 

CY 2013 

APC 

Q2043 

Sipuleucel-t, minimum of 50 million 

autologous cd54+ cells activated with 

pap-gm-csf, including leukapheresis and 

all other preparatory procedures, per 

infusion 

K 9273 

3. Drugs, Biologicals, and Radiopharmaceuticals with New or Continuing Pass-Through 

Status in CY 2013 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45129), we proposed to 

continue pass-through status in CY 2013 for 21 drugs and biologicals. None of these 

drugs and biologicals will have received OPPS pass-through payment for at least 2 years 

and no more than 3 years by December 31, 2012. These drugs and biologicals, which 

were approved for pass-through status between April 1, 2011 and July 1, 2012, were 

listed in Table 23 of the proposed rule (77 FR 45130 through 45131). The APCs and 

HCPCS codes for these drugs and biologicals approved for pass-through status through 

April 1, 2012 were assigned status indicator “G” in Addenda A and B of the proposed 

rule. Addenda A and B for the proposed rule were available via the Internet on the CMS 

Web site. 

Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through payment for 

pass-through drugs and biologicals (the pass-through payment amount) as the difference 

between the amount authorized under section 1842(o) of the Act and the portion of the 

otherwise applicable OPD fee schedule that the Secretary determines is associated with 

the drug or biological. Payment for drugs and biologicals with pass-through status under 
CMS-1589-FC 555 

the OPPS is currently made at the physician’s office payment rate of ASP+6 percent. We 

believe it is consistent with the statute and we proposed to continue to provide payment 

for drugs and biologicals with pass-through status at a rate of ASP+6 percent in CY 2013, 

the amount that drugs and biologicals receive under section 1842(o) of the Act. 

Thus, for CY 2013, we proposed to pay for pass-through drugs and biologicals at 

ASP+6 percent, equivalent to the rate these drugs and biologicals would receive in the 

physician’s office setting in CY 2013. We proposed that a $0.00 pass-through payment 

amount would be paid for most pass-through drugs and biologicals under the CY 2013 

OPPS because the difference between the amount authorized under section 1842(o) of the 

Act, which is ASP+6 percent, and the portion of the otherwise applicable OPD fee 

schedule that the Secretary determines is appropriate, proposed at ASP+6 percent, is $0. 

In the case of pass-through contrast agents and diagnostic radiopharmaceuticals, 

their pass-through payment amount would be equal to ASP+6 percent because, if not on 

pass-through status, payment for these products would be packaged into the associated 

procedure. Therefore, we proposed that the difference between ASP+6 percent and the 

“policy-packaged” drug APC offset amount for the associated clinical APC in which the 

drug or biological is utilized would be the CY 2013 pass-through payment amount for 

these policy-packaged products. 

In addition, we proposed to continue to update pass-through payment rates on a 

quarterly basis on the CMS Web site during CY 2013 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 
CMS-1589-FC 556 

description of this policy, we refer readers to the CY 2006 OPPS/ASC final rule with 

comment period (70 FR 42722 and 42723). 

As is our standard methodology, we annually review new permanent HCPCS 

codes and delete temporary HCPCS C-codes if an alternate permanent HCPCS code is 

available for purposes of OPPS billing and payment. We specifically reviewed drugs 

with pass-through status for CY 2013 that will change from C-codes to J-codes for CY 

2013. For our CY 2013 review, we have determined that HCPCS code J1741 (Injection, 

ibuprofen, 100 mg) describes the product reported under HCPCS code C9279 (Injection, 

ibuprofen, 100 mg), HCPCS code J0485 (Injection, belatacept, 1 mg) describes the 

product reported under HCPCS code C9286 (Injection, belatacept, 1 mg), HCPCS code 

J9042 (Injection, brentuximab vedotin, 1 mg) describes the code reported under HCPCS 

code C9287 (Injection, brentuximab vedotin, 1 mg), HCPCS code J0716 (Injection, 

centruroides immune f(ab)2, up to 120 milligrams) describes the code reported under 

HCPCS code C9288 (Injection, centruroides (scorpion) immune f(ab)2 (equine), 1 vial), 

and HCPCS code J9019 (Injection, asparaginase (erwinaze), 1,000 iu) describes the code 

reported under HCPCS code C9289 (Injection, asparaginase Erwinia chrysanthemi, 1,000 

international units (I.U.)). 

In CY 2013, as is consistent with our CY 2012 policy for diagnostic and 

therapeutic radiopharmaceuticals, we proposed to provide payment for both diagnostic 

and therapeutic radiopharmaceuticals that are granted pass-through status based on the 

ASP methodology. As stated above, for purposes of pass-through payment, we consider 

radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or 
CMS-1589-FC 557 

therapeutic radiopharmaceutical receives pass-through status during CY 2013, we 

proposed to follow the standard ASP methodology to determine the pass-through 

payment rate that drugs receive under section 1842(o) of the Act, which is ASP+6 

percent. If ASP data are not available for a radiopharmaceutical, we proposed to provide 

pass-through payment at WAC+6 percent, the equivalent payment provided to passthrough drugs and biologicals without ASP information. If WAC information is also not 

available, we proposed to provide payment for the pass-through radiopharmaceutical at 

95 percent of its most recent AWP. 

Comment: Several commenters supported CMS’ proposal to provide payment at 

ASP+6 percent for drugs, biologicals, contrast agents, and radiopharmaceuticals that are 

granted pass-through status. A few commenters approved of the proposal to use the ASP 

methodology that would provide payment based on WAC if ASP information is not 

available, and payment at 95 percent of AWP if WAC information is not available. 

Another commenter requested that CMS provide an additional payment for 

radiopharmaceuticals that are granted pass-through status. The commenter gave an 

example amount of ASP+10 percent. Finally, one commenter, in response to both the 

proposal to continue to pay for drugs and biologicals on pass-through status and those not 

on pass-through status at ASP+6 percent, suggested that CMS explore alternative 

payment mechanisms that reward the pharmaceutical care provided by specialty trained 

pharmacists who ensure safe and effective medication use and provide for screening of 

drug interactions and contraindications. 
CMS-1589-FC 558 

Response: As discussed above, the statutorily mandated pass-through payment 

for pass-through drugs and biologicals for CY 2013 generally equals the amount 

determined under section 1842(o) of the Act minus the portion of the otherwise 

applicable APC payment that CMS determines is associated with the drug or biological. 

Therefore, the pass-through payment is determined by subtracting the otherwise 

applicable payment amount under the OPPS (ASP+6 percent for CY 2013) from the 

amount determined under section 1842(o) of the Act (ASP+6 percent). 

Regarding the comments that CMS should provide an additional payment for 

radiopharmaceuticals that are granted pass-through status, we note that for CY 2013, 

consistent with our CY 2012 payment policy for diagnostic and therapeutic 

radiopharmaceuticals, we proposed to provide payment for both diagnostic and 

therapeutic radiopharmaceuticals with pass-through status based on the ASP 

methodology. As stated above, the ASP methodology, as applied under the OPPS, uses 

several sources of data as a basis for payment, including the ASP, WAC if ASP is 

unavailable, and 95 percent of the radiopharmaceutical’s most recent AWP if ASP and 

WAC are unavailable. For purposes of pass-through payment, we consider 

radiopharmaceuticals to be drugs under the OPPS. Therefore, if a diagnostic or 

therapeutic radiopharmaceutical receives pass-through status during CY 2013, we 

proposed to follow the standard ASP methodology to determine its pass-through payment 

rate under the OPPS to account for the acquisition and pharmacy overhead costs, 

including compounding costs. We continue to believe that a single payment is 

appropriate for diagnostic radiopharmaceuticals with pass-through status in CY 2013, and 
CMS-1589-FC 559 

that the payment rate of ASP+6 percent (or payment based on the ASP methodology) is 

appropriate to provide payment for both the radiopharmaceutical’s acquisition cost and 

any associated nuclear medicine handling and compounding costs. We refer readers to 

section V.B.3. of this final rule with comment period for further discussion of payment 

for therapeutic radiopharmaceuticals based on ASP information submitted by 

manufacturers, and readers may also refer to the CMS Web site at: 

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

Finally, we note that the comment that suggested that CMS explore alternative 

payment mechanisms that reward the pharmaceutical care provided by specialty trained 

pharmacists who ensure safe and effective medication use and provide for screening of 

drug interactions and contraindications is outside the scope of this final rule with 

comment period. 

Comment: One commenter stated that HCPCS code J1572 (Injection, immune 

globulin (flebogamma/flebogamma dif), intravenous, non-lyophilized (e.g. liquid), 500 

mg) received an approval for a labeling change for the extraction process on January 20, 

2012, but that this did not constitute the approval of a “new drug.” The commenter 

requested that CMS reevaluate the status indicator for HCPCS code J1572 and assign it to 

a status indicator of “K” instead of “G” for CY 2013, because the original FDA approval 

date for the product of December 15, 2003 does not meet the criteria for pass-through 

status. 
CMS-1589-FC 560 

Response: For the CY 2013 OPPS/ASC proposed rule (77 FR 45129 through 

45131), we proposed to continue pass-through status for HCPCS code J1572 for the 

remainder of CY 2013. HCPCS code J1572 replaced HCPCS code Q4091 on 

January 1, 2008. The product described by HCPCS code J1572 also received FDA 

approval on December 15, 2003. When we reviewed the drug pass-through application 

for the product described by HCPCS code J1572, we concluded that the product 

described by HCPCS code J1572 had not previously received pass-through payment 

under the OPPS and had a cost that was not insignificant in relation to the OPD fee 

schedule amount. Therefore, we approved pass-through status for HCPCS code J1572 

beginning on July 1, 2011. We believe that we appropriately assigned pass-through 

status to HCPCS code J1572 and we continue to believe that pass-through status should 

continue through CY 2013. 

We disagree with the commenter that HCPCS code J1572 does not meet the 

criteria for pass-through status because the original FDA approval date for this product 

was December 15, 2003. We note that section 1833(t)(6)(A)(iv)(I) of the Act allows for 

pass-through payment for a device, drug, or biological as long as payment for such item 

was not being made as an outpatient hospital service as of December 31, 1996. 

Furthermore, we reiterate that the statute provides in section 1833(t)(6)(B)(iii) of the Act 

that pass-through status shall be in effect for a period of at least 2 but no more than 3 

years of pass-through payment. Therefore, we believe continuing pass-through status for 

HCPCS code J1572 is appropriate. 
CMS-1589-FC 561 

Comment: One commenter who responded to the CY 2012 OPPS/ASC final rule 

with comment period requested clarification on the dosage descriptor for HCPCS code 

J9179 (Injection, eribulin mesylate, 0.1 mg). The commenter noted that the final rule 

display version referenced inconsistent dosage size. 

Response: As displayed in Table 32 below, the correct dosage descriptor for 

HCPCS code J9179 is 0.1mg. HCPCS code J9179 will continue on pass-through status, 

with a status indicator of “G,” for CY 2013. 

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

proposal to provide payment for drugs, biologicals, diagnostic and therapeutic 

radiopharmaceuticals and contrast agents that are granted pass-through status based on 

the ASP methodology. If a diagnostic or therapeutic radiopharmaceutical receives passthrough status during CY 2013, we will follow the standard ASP methodology to 

determine the pass-through payment rate that drugs receive under section 1842(o) of the 

Act, which is ASP+6 percent. If ASP data are not available for a radiopharmaceutical, 

we will provide pass-through payment at WAC+6 percent, the equivalent payment 

provided to pass-through drugs and biologicals without ASP information. If WAC 

information is also not available, we will provide payment for the pass-through 

radiopharmaceutical at 95 percent of its most recent AWP. 

As discussed in more detail in section II.A.3.d. of this final rule with comment 

period, over the last 5 years, we implemented a policy whereby payment for all 

nonpass-through diagnostic radiopharmaceuticals and contrast agents is packaged into 

payment for the associated procedure. We proposed to continue the packaging of these 
CMS-1589-FC 562 

items, regardless of their per day cost, in CY 2013. As stated earlier, pass-through 

payment is the difference between the amount authorized under section 1842(o) of the 

Act and the portion of the otherwise applicable OPD fee schedule that the Secretary 

determines is associated with the drug or biological. Because payment for a drug that is 

either a diagnostic radiopharmaceutical or a contrast agent (identified as a “policypackaged” drug, first described in the CY 2009 OPPS/ASC final rule with comment 

period (73 FR 68639)) would otherwise be packaged if the product did not have passthrough status, we believe the otherwise applicable OPPS payment amount would be 

equal to the “policy-packaged” drug APC offset amount for the associated clinical APC 

in which the drug or biological is utilized. The calculation of the “policy-packaged” drug 

APC offset amounts is described in more detail in section IV.A.2. of this final rule with 

comment period. It follows that the copayment for the nonpass-through payment portion 

(the otherwise applicable fee schedule amount that we would also offset from payment 

for the drug or biological if a payment offset applies) of the total OPPS payment for those 

drugs and biologicals would, therefore, be accounted for in the copayment for the 

associated clinical APC in which the drug or biological is used. 

According to section 1833(t)(8)(E) of the Act, the amount of copayment 

associated with pass-through items is equal to the amount of copayment that would be 

applicable if the pass-through adjustment was not applied. Therefore, as we did in 

CY 2012, we proposed to continue to set the associated copayment amount for 

pass-through diagnostic radiopharmaceuticals and contrast agents that would otherwise 

be packaged if the item did not have pass-through status to zero for CY 2013. Similarly, 
CMS-1589-FC 563 

we proposed that the associated copayment amount for pass-through anesthesia drugs that 

would otherwise be packaged if the item did not have pass-through status would be zero 

for CY 2013. As discussed in further detail in section II.3.c.(2) of this final rule with 

comment period, we are clarifying that our general policy is to package drugs used for 

anesthesia, and that those anesthesia drugs with pass-through status will be packaged 

upon the expiration of pass-through status. 

The separate OPPS payment to a hospital for the pass-through diagnostic 

radiopharmaceutical, contrast agent, or anesthesia drug is not subject to a copayment 

according to the statute. Therefore, we proposed to not publish a copayment amount for 

these items in Addenda A and B to the proposed rule (which were available via the 

Internet on the CMS Web site). 

Comment: Commenters supported the CY 2013 proposal to continue to set the 

associated copayment amounts for pass-through diagnostic radiopharmaceuticals and 

contrast agents that would otherwise be packaged if the product did not have passthrough status to zero. The commenters noted that this policy is consistent with statutory 

requirements and provides cost-saving benefits to beneficiaries. 

Response: We appreciate the commenters’ support of our proposal. As discussed 

in the CY 2013 OPPS/ASC proposed rule (77 FR 45129 through 45130), we believe that 

for drugs and biologicals that are “policy-packaged,” the copayment for the 

nonpass-through payment portion of the total OPPS payment for this subset of drugs and 

biologicals is accounted for in the copayment of the associated clinical APC in which the 

drug or biological is used. According to section 1833(t)(8)(E) of the Act, the amount of 
CMS-1589-FC 564 

copayment associated with pass-through items is equal to the amount of copayment that 

would be applicable if the pass-through adjustment was not applied. Therefore, we 

believe that the copayment amount should be zero for drugs and biologicals that are 

“policy-packaged,” including diagnostic radiopharmaceuticals and contrast agents. We 

also believe that the copayment amount should be zero for anesthesia drugs that would 

otherwise be packaged if the item did not have pass-through status. 

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

proposal, without modification, to continue to set the associated copayment amount for 

pass-through diagnostic radiopharmaceuticals and contrast agents that would otherwise 

be packaged if the item did not have pass-through status to zero for CY 2013. We are 

also finalizing our proposal to extend this policy to anesthesia drugs that have passthrough status, and to set a copayment amount of zero for these drugs for CY 2013. 

The 26 drugs and biologicals that we are continuing on pass-through status for 

CY 2013 or have been granted pass-through status as of January 2013 are displayed in 

Table 32 below. 
CMS-1589-FC 565 

TABLE 32.—DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS 

IN CY 2013 

CY 2012 

HCPCS 

Code 

CY 2013 

HCPCS 

Code CY 2013 Long Descriptor Final CY 2013 SI 

Final 

CY 

2013 

APC 

A9584 A9584 Iodine I-123 ioflupane, diagnostic, 

per study dose, up to 5 millicuries G 9406 

C9285 C9285 Lidocaine 70 mg/tetracaine 70 mg, 

per patch G 9285 

C9286 J0485 Injection, belatacept, 1 mg G 9286 

C9287 J9042 Injection, brentuximab vedotin, 1 mg G 9287 

C9288 J0716 Injection, centruroides immune 

f(ab)2, up to 120 milligrams G 1431 

C9289 J9019 Injection, asparaginase (erwinaze), 

1,000 iu G 9289 

C9290 C9290 Injection, bupivicaine liposome, 1 

mg 

G 9290 

C9292 C9292 Injection, pertuzumab, 10 mg G 9292 

C9293 C9293 Injection, glucarpidase, 10 units G 9293 

N/A C9294* Injection, taliglucerase alfa, 100 units G 9294 

N/A C9295* Injection, carfilzomib, 1 mg G 9295 

N/A C9296* Injection, ziv-aflibercept, 1 mg G 9296 

C9366 Q4131 EpiFix, per square centimeter G 9366 

C9368 Q4132 Grafix core, per square centimeter G 9368 

C9369 Q4133 Grafix prime, per square centimeter G 9369 

J0131 J0131 Injection, acetaminophen, 10 mg G 9283 

J0490 J0490 Injection, belimumab, 10 mg G 1353 

J0638 J0638 Injection, canakinumab, 1mg G 1311 

J0712 J0712 Injection, ceftaroline fosamil, 10 mg G 9282 

J1572 J1572 

Injection, immune globulin, 

(flebogamma/flebogamma dif), 

intravenous, non-lyophilized (e.g. 

liquid), 500 mg 

G 0947 

J2507 J2507 Injection, pegloticase, 1 mg G 9281 

J7180 J7180 Injection, factor xiii (antihemophilic G 1416 
CMS-1589-FC 566 

CY 2012 

HCPCS 

Code 

CY 2013 

HCPCS 

Code CY 2013 Long Descriptor Final CY 

2013 SI 

Final 

CY 

2013 

APC 

factor, human), 1 i.u 

J9179 J9179 Injection, eribulin mesylate, 0.1 mg G 1426 

J9228 J9228 Injection, ipilimumab, 10 mg G 9284 

Q2046 J0178 Injection, aflibercept, 1 mg G 1420 

Q4124 Q4124 Oasis Ultra Tri-Layer matrix, per 

square centimeter G 9365 

*HCPCS codes C9294, C9295, and C9296 are effective January 1, 2013. 

4. Provisions for Reducing Transitional Pass-Through Payments for Diagnostic 

Radiopharmaceuticals and Contrast Agents to Offset Costs Packaged into APC Groups 

a. Background 

Prior to CY 2008, diagnostic radiopharmaceuticals and contrast agents were paid 

separately under the OPPS if their mean per day costs were greater than the applicable 

year’s drug packaging threshold. In CY 2008 (72 FR 66768), we began a policy of 

packaging payment for all nonpass-through diagnostic radiopharmaceuticals and contrast 

agents as ancillary and supportive items and services into their associated nuclear 

medicine procedures. Therefore, beginning in CY 2008, nonpass-through diagnostic 

radiopharmaceuticals and contrast agents were not subject to the annual OPPS drug 

packaging threshold to determine their packaged or separately payable payment status, 

and instead all nonpass-through diagnostic radiopharmaceuticals and contrast agents were 

packaged as a matter of policy. For CY 2013, in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45131), we proposed to continue to package payment for all nonpass-through 
CMS-1589-FC 567 

diagnostic radiopharmaceuticals and contrast agents, as discussed in section II.A.3.e. of 

the proposed rule and this final rule with comment period. 

b. Payment Offset Policy for Diagnostic Radiopharmaceuticals 

As previously noted, radiopharmaceuticals are considered to be drugs for OPPS 

pass-through payment purposes. As described above, section 1833(t)(6)(D)(i) of the Act 

specifies that the transitional pass-through payment amount for pass-through drugs and 

biologicals is the difference between the amount paid under section 1842(o) of the Act 

and the otherwise applicable OPD fee schedule amount. There is currently one 

radiopharmaceutical with pass-through status under the OPPS, HCPCS code A9584 

(Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries). This product, 

which is presently referred to using HCPCS code A9584, was granted pass-through status 

using HCPCS code C9406 beginning July 1, 2011, and we proposed that it continue 

receiving pass-through status in CY 2013. We currently apply the established 

radiopharmaceutical payment offset policy to pass-through payment for this product. As 

described earlier in section V.A.3. of this final rule with comment period, we proposed 

that new pass-through diagnostic radiopharmaceuticals would be paid at ASP+6 percent, 

while those without ASP information would be paid at WAC+6 percent or, if WAC is not 

available, payment would be based on 95 percent of the product’s most recently 

published AWP. 

Because a payment offset is necessary in order to provide an appropriate 

transitional pass-through payment, we deduct from the pass-through payment for 

diagnostic radiopharmaceuticals an amount reflecting the portion of the APC payment 
CMS-1589-FC 568 

associated with predecessor radiopharmaceuticals in order to ensure no duplicate 

radiopharmaceutical payment is made. In CY 2009, we established a policy to estimate 

the portion of each APC payment rate that could reasonably be attributed to the cost of 

predecessor diagnostic radiopharmaceuticals when considering a new diagnostic 

radiopharmaceutical for pass-through payment (73 FR 68638 through 68641). 

Specifically, we use the “policy-packaged” drug offset fraction for APCs containing 

nuclear medicine procedures, calculated as 1 minus the following: the cost from single 

procedure claims in the APC after removing the cost for “policy-packaged” drugs divided 

by the cost from single procedure claims in the APC. 

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 through 

60484), we finalized a policy to redefine “policy-packaged” drugs as only 

nonpass-through diagnostic radiopharmaceuticals and contrast agents, as a result of the 

policy discussed in sections V.A.4. and V.B.2.d. of the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60471 through 60477 and 60495 through 60499, 

respectively) that treats nonpass-through implantable biologicals that are surgically 

inserted or implanted (through a surgical incision or a natural orifice) and implantable 

biologicals that are surgically inserted or implanted (through a surgical incision or a 

natural orifice) with newly approved pass-through status beginning in CY 2010 or later as 

devices, rather than drugs. To determine the actual APC offset amount for pass-through 

diagnostic radiopharmaceuticals that takes into consideration the otherwise applicable 

OPPS payment amount, we multiply the “policy-packaged” drug offset fraction by the 

APC payment amount for the nuclear medicine procedure with which the pass-through 
CMS-1589-FC 569 

diagnostic radiopharmaceutical is used and, accordingly, reduce the separate OPPS 

payment for the pass-through diagnostic radiopharmaceutical by this amount. 

Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71934 through 71936), we finalized a policy to require 

hospitals to append modifier “FB” to specified nuclear medicine procedures when the 

diagnostic radiopharmaceutical is received at no cost/full credit. These instructions are 

contained within the I/OCE CMS specifications on the CMS Web site at 

http://www.cms.gov/Medicare/Coding/OutpatientCodeEdit/index.html. 

For CY 2013 and future years, we proposed to continue to require hospitals to 

append modifier “FB” to specified nuclear medicine procedures when the diagnostic 

radiopharmaceutical is received at no cost/full credit. In addition, we proposed to 

continue to require that when a hospital bills with an “FB” modifier with the nuclear 

medicine scan, the payment amount for procedures in the APCs listed in Table 24 of the 

proposed rule (77 FR 45132) would be reduced by the full “policy-packaged” offset 

amount appropriate for diagnostic radiopharmaceuticals. Finally, we also proposed to 

continue to require hospitals to report a token charge of less than $1.01 in cases in which 

the diagnostic radiopharmaceutical is furnished without cost or with full credit. 

We did not receive any public comments on this proposal. Therefore, we are 

finalizing our policy, without modification, to continue requiring hospitals to append 

modifier “FB” to specified nuclear medicine procedures when the diagnostic 

radiopharmaceutical is received at no cost/full credit in CY 2013 and future years. In 

addition, we will continue to reduce the payment amount for procedures in the APCs 
CMS-1589-FC 570 

listed in Table 33 in this final rule with comment period by the full “policy-packaged” 

offset amount appropriate for diagnostic radiopharmaceuticals. Finally, we also will 

continue to require hospitals to report a token charge of less than $1.01 in cases in which 

the diagnostic radiopharmaceutical is furnished without cost or with full credit. 

For CY 2012, we finalized a policy to apply the diagnostic radiopharmaceutical 

offset policy to payment for pass-through diagnostic radiopharmaceuticals, as described 

above. For CY 2013, we proposed to continue to apply the diagnostic 

radiopharmaceutical offset policy to payment for pass-through diagnostic 

radiopharmaceuticals. 

Comment: Commenters recommended that CMS continue to apply 

radiopharmaceutical edits for nuclear medicine procedures using radiopharmaceuticals as 

long as diagnostic radiopharmaceuticals are packaged. The commenters noted that the 

proposed rule was silent on whether CMS will continue this policy for CY 2013 and they 

requested that CMS confirm in the final rule that it will continue to apply the 

radiopharmaceutical edits and use only claims with a radiopharmaceutical code in 

determining nuclear medicine APC rates. 

Response: Beginning in CY 2008, we implemented nuclear medicine 

procedure-to-radiolabeled product claims processing edits in the I/OCE that required a 

diagnostic radiopharmaceutical to be present on the same claim as a nuclear medicine 

procedure for payment under the OPPS to be made. These edits ensure that hospitals 

submit correctly coded claims that report the HCPCS codes for the products and their 

charges that are necessary for performance of nuclear medicine procedures. Although we 
CMS-1589-FC 571 

do not discuss our policy regarding nuclear medicine-to-radiolabeled product claims 

processing edits in this final rule with comment period, we will continue to annually 

update and implement this list in accordance with our original finalized policy. We refer 

readers to the CY 2010 OPPS/ASC final rule with comment period (74 FR 60384 through 

60390) for a detailed discussion of the nuclear medicine procedure-to-radiolabeled 

product edits and the evolution of our edit policy. In addition, specific instructions for 

the nuclear medicine procedure-to-radiolabeled product claims processing edits are 

contained within the I/OCE CMS specifications on the CMS Web site at 

http://www.cms.gov/OutpatientCodeEdit/02OCEQtrReleaseSpecs.asp#TopOfPage. 

Comment: A few commenters recommended that CMS publish preliminary offset 

amounts for diagnostic radiopharmaceuticals and contrast agents with the proposed rule 

to allow for meaningful assessment of and public comment on the data. 

Response: The exact data used to calculate all of the proposed and final payment 

rates, including the associated offset amounts, for the CY 2013 OPPS are available for 

purchase under a CMS data use agreement through the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HhospitalOutpatientPPS/index.html. This Web site includes information about 

purchasing the “OPPS Limited Data Set”, which now includes the additional variables 

previously available only in the OPPS identifiable data set, including ICD-9-CMS 

diagnosis codes and revenue code payment amounts. We do not post the offset amounts 

by APC until publication of the final rule with comment period because we assign 

services to APCs based on our estimate of their full resource cost, including, but not 
CMS-1589-FC 572 

limited to, packaged diagnostic radiopharmaceuticals and contrast agents. The offset 

amount is the portion of each APC payment rate that could reasonably be attributed to the 

cost of predecessor diagnostic radiopharmaceuticals and contrast agents when 

considering a new diagnostic radiopharmaceutical and contrast agent for pass-through 

payment and has no bearing on APC assignment. 

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

proposal, without modification, to continue to apply the diagnostic radiopharmaceutical 

offset policy to payment for pass-through diagnostic radiopharmaceuticals, as described 

in the CY 2013 OPPS/ASC proposed rule (77 FR 45131). 

Table 33 below displays the APCs to which nuclear medicine procedures will be 

assigned in CY 2013 and for which we expect that an APC offset could be applicable in 

the case of diagnostic radiopharmaceuticals with pass-through status. 

TABLE 33.—APCs TO WHICH NUCLEAR MEDICINE PROCEDURES 

WILL BE ASSIGNED FOR CY 2013 

CY 2013 

APC CY 2013 APC Title 

0308 Positron Emission Tomography (PET) Imaging 

0377 Level II Cardiac Imaging. 

0378 Level II Pulmonary Imaging. 

0389 Level I Non-imaging Nuclear Medicine. 

0390 Level I Endocrine Imaging. 

0391 Level II Endocrine Imaging. 

0392 Level II Non-imaging Nuclear Medicine. 

0393 Hematologic Processing & Studies. 

0394 Hepatobiliary Imaging. 

0395 GI Tract Imaging. 

0396 Bone Imaging. 
CMS-1589-FC 573 

CY 2013 

APC CY 2013 APC Title 

0397 Vascular Imaging. 

0398 Level I Cardiac Imaging. 

0400 Hematopoietic Imaging. 

0401 Level I Pulmonary Imaging. 

0402 Level II Nervous System Imaging. 

0403 Level I Nervous System Imaging. 

0404 Renal and Genitourinary Studies. 

0406 Level I Tumor/Infection Imaging. 

0408 Level III Tumor/Infection Imaging. 

0414 Level II Tumor/Infection Imaging. 

c. Payment Offset Policy for Contrast Agents 

Section 1833(t)(6)(D)(i) of the Act specifies that the transitional pass-through 

payment amount for pass-through drugs and biologicals is the difference between the 

amount paid under section 1842(o) of the Act and the otherwise applicable OPD fee 

schedule amount. There currently are no contrast agents with pass-through status under 

the OPPS. As described in section V.A.3. of the proposed rule, we proposed that new 

pass-through contrast agents would be paid at ASP+6 percent, while those without ASP 

information would be paid at WAC+6 percent or, if WAC is not available, payment 

would be based on 95 percent of the product’s most recently published AWP. 

Although there are no contrast agents with pass-through status, we believe that a 

payment offset is necessary in the event that a new contrast agent is approved for 

pass-through status during CY 2013, in order to provide an appropriate transitional 

pass-through payment for them because all of these items are packaged when they do not 

have pass-through status. In accordance with our standard offset methodology, in the 
CMS-1589-FC 574 

CY 2013 OPPS/ASC proposed rule (77 FR 45132), we proposed for CY 2013 to deduct 

from the payment for new pass-through contrast agents that are approved for passthrough status as a drug or biological during CY 2013, an amount that reflects the portion 

of the APC payment associated with predecessor contrast agents, in order to ensure no 

duplicate contrast agent payment is made. 

In CY 2010, we established a policy to estimate the portion of each APC payment 

rate that could reasonably be attributed to the cost of predecessor contrast agents when 

considering new contrast agents for pass-through payment (74 FR 60482 through 60484). 

For CY 2013, as we did in CY 2012, we proposed to continue to apply this same policy 

to contrast agents. Specifically, we proposed to utilize the “policy-packaged” drug offset 

fraction for clinical APCs calculated as 1 minus (the cost from single procedure claims in 

the APC after removing the cost for “policy-packaged” drugs divided by the cost from 

single procedure claims in the APC). In CY 2010, we finalized a policy to redefine 

“policy-packaged” drugs as only nonpass-through diagnostic radiopharmaceuticals and 

contrast agents (74 FR 60495 through 60499). To determine the actual APC offset 

amount for pass-through contrast agents that takes into consideration the otherwise 

applicable OPPS payment amount, we proposed to multiply the “policy-packaged” drug 

offset fraction by the APC payment amount for the procedure with which the 

pass-through contrast agent is used and, accordingly, reduce the separate OPPS payment 

for the pass-through contrast agent by this amount. We proposed to continue to apply 

this methodology for CY 2013 to recognize that when a contrast agent with pass-through 

status is billed with any procedural APC listed in Table 25 of the proposed rule 
CMS-1589-FC 575 

(77 FR 45132 through 45133), a specific offset based on the procedural APC would be 

applied to payments for the contrast agent to ensure that duplicate payment is not made 

for the contrast agent. 

As we proposed, for this final rule with comment period, we will continue to post 

annually on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/index.html a file that contains the APC offset 

amounts that will be used for that year for purposes of both evaluating cost significance 

for candidate pass-through device categories and drugs and biologicals, including 

contrast agents, and establishing any appropriate APC offset amounts. Specifically, the 

file will continue to provide the amounts and percentages of APC payment associated 

with packaged implantable devices, “policy-packaged” drugs, and “threshold-packaged” 

drugs and biologicals for every OPPS clinical APC. 

We proposed to identify procedural APCs for which we expect a contrast offset 

could be applicable in the case of a pass-through contrast agent as any procedural APC 

with a “policy-packaged” drug amount greater than $20 that is not a nuclear medicine 

APC identified in Table 33 above, and these APCs are displayed in Table 34 below. The 

methodology used to determine a threshold cost for application of a contrast agent offset 

policy is described in detail in the CY 2010 OPPS/ASC final rule with comment period 

(70 FR 60483 through 60484). For CY 2013, we proposed to continue to recognize that 

when a contrast agent with pass-through status is billed with any procedural APC listed in 

Table 25 of the proposed rule (77 FR 45132 through 45133), a specific offset based on 
CMS-1589-FC 576 

the procedural APC would be applied to payment for the contrast agent to ensure that 

duplicate payment is not made for the contrast agent. 

Comment: One commenter urged CMS to publish the proposed offset amount for 

contrast agents in the proposed rule to allow interested stakeholders the opportunity to 

review the data and comment on the amount of the offset. 

Response: As we stated previously, the exact data used to calculate all of the 

proposed and final payment rates, including the associated offset amounts, for the 

CY 2013 OPPS are available for purchase under a CMS data use agreement through the 

CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. This Web site includes information about 

purchasing the “OPPS Limited Data Set”, which now includes the additional variables 

previously available only in the OPPS identifiable data set, including ICD-9-CMS 

diagnosis codes and revenue code payment amounts. We do not post the offset amounts 

by APC until publication of the final rule because we assign services to APCs based on 

our estimate of their full resource cost, including, but not limited to, packaged contrast 

agents. The offset amount is the portion of each APC payment rate that could reasonably 

be attributed to the cost of a predecessor contrast agent when considering a new 

diagnostic radiopharmaceutical and contrast agent for pass-through payment and has no 

bearing on APC assignment. 
CMS-1589-FC 577 

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

proposal for CY 2013 without modification. 

TABLE 34.—APCs TO WHICH A CONTRAST AGENT OFFSET MAY BE 

APPLICABLE FOR CY 2013 

CY 2013 

APC CY 2013 APC Title 

0080 Diagnostic Cardiac Catheterization. 

0082 Coronary or Non-Coronary Atherectomy. 

0083 

Coronary Angioplasty, Valvuloplasty, and Level I Endovascular 

Revascularization. 

0093 Vascular Reconstruction/Fistula Repair without Device. 

0104 Transcathether Placement of Intracoronary Stents. 

0152 Level I Percutaneous Abdominal and Biliary Procedures. 

0177 Level I Echocardiogram With Contrast. 

0178 Level II Echocardiogram With Contrast. 

0229 Level II Endovascular Revascularization of the Lower Extremity. 

0278 Diagnostic Urography. 

0279 Level II Angiography and Venography. 

0280 Level III Angiography and Venography. 

0283 Computed Tomography with Contrast. 

0284 

Magnetic Resonance Imaging and Magnetic Resonance 

Angiography with Contrast. 

0333 Computed Tomography without Contrast followed by Contrast. 

0334 Combined Abdomen and Pelvis CT with Contrast. 

0337 

Magnetic Resonance Imaging and Magnetic Resonance 

Angiography without Contrast followed by Contrast. 

0375 Ancillary Outpatient Services When Patient Expires. 

0383 Cardiac Computed Tomographic Imaging. 

0388 Discography. 

0442 Dosimetric Drug Administration. 

0653 Vascular Reconstruction/Fistula Repair with Device. 

0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents. 

0662 CT Angiography. 

0668 Level I Angiography and Venography. 
CMS-1589-FC 578 

CY 2013 

APC CY 2013 APC Title 

8006 CT and CTA with Contrast Composite. 

8008 MRI and MRA with Contrast Composite. 

B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals Without 

Pass-Through Status

1. Background 

Under the CY 2012 OPPS, we currently pay for drugs, biologicals, and 

radiopharmaceuticals that do not have pass-through status in one of two ways: as a 

packaged payment included in the payment for the associated service, or as a separate 

payment (individual APCs). We explained in the April 7, 2000 OPPS final rule with 

comment period (65 FR 18450) that we generally package the cost of drugs and 

radiopharmaceuticals into the APC payment rate for the procedure or treatment with 

which the products are usually furnished. Hospitals do not receive separate payment for 

packaged items and supplies, and hospitals may not bill beneficiaries separately for any 

packaged items and supplies whose costs are recognized and paid within the national 

OPPS payment rate for the associated procedure or service. (Transmittal A-01-133, 

issued on November 20, 2001, explains in greater detail the rules regarding separate 

payment for packaged services.) 

Packaging costs into a single aggregate payment for a service, procedure, or 

episode-of-care is a fundamental principle that distinguishes a prospective payment 

system from a fee schedule. In general, packaging the costs of items and services into the 

payment for the primary procedure or service with which they are associated encourages 
CMS-1589-FC 579 

hospital efficiencies and also enables hospitals to manage their resources with maximum 

flexibility. 

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

a. Background 

As indicated in section V.B.1. of this final rule with comment period, in 

accordance with section 1833(t)(16)(B) of the Act, the threshold for establishing separate 

APCs for payment of drugs and biologicals was set to $50 per administration during 

CYs 2005 and 2006. In CY 2007, we used the four quarter moving average Producer 

Price Index (PPI) levels for Pharmaceutical Preparations (Prescription) to trend the 

$50 threshold forward from the third quarter of CY 2005 (when the Pub. L. 108-173 

mandated threshold became effective) to the third quarter of CY 2007. We then rounded 

the resulting dollar amount to the nearest $5 increment in order to determine the CY 2007 

threshold amount of $55. Using the same methodology as that used in CY 2007 (which 

is discussed in more detail in the CY 2007 OPPS/ASC final rule with comment period 

(71 FR 68085 through 68086)), we set the packaging threshold for establishing separate 

APCs for drugs and biologicals at $60 for CYs 2008 and 2009. For CY 2010, we set the 

packaging threshold at $65; for CY 2011, we set the packaging threshold at $70; and for 

CY 2012, we set the packaging threshold at $75. 

Following the CY 2007 methodology, for the CY 2013 OPPS/ASC proposed rule 

(77 FR 45133), we used the most recently available four quarter moving average PPI 

levels to trend the $50 threshold forward from the third quarter of CY 2005 to the third 

quarter of CY 2013 and rounded the resulting dollar amount ($81.59) to the nearest $5 
CMS-1589-FC 580 

increment, which yielded a figure of $80. In performing this calculation, we used the 

most recent forecast of the quarterly index levels for the PPI for Pharmaceuticals for 

Human Use (Prescription) (Bureau of Labor Statistics (BLS) series code WPUSI07003) 

from CMS’ Office of the Actuary (OACT). (We note that we did not propose a change to 

the PPI that is used to calculate the threshold for CY 2013; rather, this change in 

terminology reflects a change to the BLS naming convention for this series.) We refer 

below to this series generally as the PPI for Prescription Drugs. 

We chose this PPI as it reflects price changes associated with the average mix of 

all pharmaceuticals in the overall economy. In addition, we chose this price series 

because it is publicly available and regularly published, improving public access and 

transparency. Forecasts of the PPI for Prescription Drugs are developed by IHS Global 

Insight, Inc., a nationally recognized economic and financial forecasting firm. As actual 

inflation for past quarters replaced forecasted amounts, the PPI estimates for prior 

quarters have been revised (compared with those used in the CY 2007 OPPS/ASC final 

rule with comment period) and have been incorporated into our calculation. Based on the 

calculations described above, we proposed a packaging threshold for CY 2013 of $80. 

(For a more detailed discussion of the OPPS drug packaging threshold and the use of the 

PPI for Prescription Drugs, we refer readers to the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68085 through 68086).) 
CMS-1589-FC 581 

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

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

In the CY 2013 OPPS/ASC proposed rule (77 FR 45134), to determine the 

proposed CY 2013 packaging status for all nonpass-through drugs and biologicals that 

are not policy packaged, we calculated on a HCPCS code-specific basis the per day cost 

of all drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals 

(collectively called “threshold-packaged” drugs) that had a HCPCS code in CY 2011 and 

were paid (via packaged or separate payment) under the OPPS. We used data from 

CY 2011 claims processed before January 1, 2012 for this calculation. However, we did 

not perform this calculation for those drugs and biologicals with multiple HCPCS codes 

that include different dosages as described in section V.B.2.c. of this final rule with 

comment period or for diagnostic radiopharmaceuticals, contrast agents, and implantable 

biologicals that we proposed to continue to package in CY 2013, as discussed in section 

V.B.2.d. of this final rule with comment period. 

In order to calculate the per day costs for drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals to determine their proposed packaging status in 

CY 2013, we used the methodology that was described in detail in the CY 2006 OPPS 

proposed rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS final 

rule with comment period (70 FR 68636 through 70 FR 68638). For each drug and 

nonimplantable biological HCPCS code, we used an estimated payment rate of ASP+6 

percent (which is the payment rate we proposed for separately payable drugs and 
CMS-1589-FC 582 

nonimplantable biologicals for CY 2013, as discussed in more detail in section V.B.3.b. 

of this final rule with comment period) to calculate the CY 2013 proposed rule per day 

costs. We used the manufacturer submitted ASP data from the fourth quarter of CY 2011 

(data that were used for payment purposes in the physician’s office setting, effective 

April 1, 2012) to determine the proposed rule per day cost. 

As is our standard methodology, for CY 2013 we proposed to use payment rates 

based on the ASP data from the fourth quarter of CY 2011 for budget neutrality 

estimates, packaging determinations, impact analyses, and completion of Addenda A and 

B to the proposed rule (which was available via the Internet on the CMS Web site) 

because these were the most recent data available for use at the time of development of 

the proposed rule. These data were also the bases for drug payments in the physician’s 

office setting, effective April 1, 2012. 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 2011 hospital claims data to determine their per day cost. 

We proposed to package items with a per day cost less than or equal to $80, and 

identify items with a per day cost greater than $80 as separately payable. Consistent with 

our past practice, we crosswalked historical OPPS claims data from the CY 2011 HCPCS 

codes that were reported to the CY 2012 HCPCS codes that we displayed in Addendum 

B of the proposed rule (which was available via the Internet on the CMS Web site) for 

payment in CY 2013. 

Comment: The majority of commenters objected to the proposed increase in the 

OPPS packaging threshold to $80 for CY 2013. The commenters recommended that 
CMS-1589-FC 583 

CMS consider either eliminating the drug packaging threshold and providing separate 

payment for all drugs with HCPCS codes or freezing the packaging threshold at $75 for 

CY 2013. Many commenters objected to the use of a packaging threshold under the 

OPPS when one is not used for physician’s office payment. These commenters argued 

for parity across the payment systems and they expressed concern that the packaging 

threshold may impede beneficiary access to lower cost packaged drugs in the HOPD 

setting. A few commenters suggested that CMS limit increases in the packaging 

threshold amount to the hospital update factor for the year, reflective of all statutory 

adjustments. One commenter believed that these dollar figures are arbitrary and 

recommended that CMS tie the threshold for separate payment to the annual market 

basket rather than randomly assigning thresholds for separate payment for these products. 

One commenter noted that increasing the packaging threshold could have the 

unintended impact of undermining conversion to LEU sources of diagnostic 

radiopharmaceuticals if CMS adopts a proposal to unbundle diagnostic 

radiopharmaceuticals from the APC rate under the policy packaging rule without also 

waiving the dollar threshold for radiopharmaceuticals produced from LEU sources. 

Response: As discussed in detail in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66758 through 66767), the CY 2009 OPPS/ASC final rule with 

comment period (73 FR 68643), the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60485 through 60487), the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71940 through 71943), and the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74300 through 74301), we continue to believe that unpackaging payment 
CMS-1589-FC 584 

for all drugs, biologicals and radiopharmaceuticals is inconsistent with the concept of a 

prospective payment system and that such a change could create an additional reporting 

burden for hospitals. The OPPS and the MPFS (which applies to physician’s services) 

are fundamentally different payment systems with essential differences in their payment 

policies and structures. Specifically, the OPPS is a prospective payment system based on 

the concept of payment for groups of services that share clinical and resource 

characteristics. Payment is made under the OPPS according to prospectively established 

payment rates that are related to the relative costs of hospital resources for services. 

When physician’s services are furnished in an office setting, they are paid under the 

MPFS, which is a fee schedule based on the relative value of each component. Under the 

MPFS, separate payment is made for each service provided in the physician’s office; 

when individual drugs are administered to beneficiaries in the physician’s office, they are 

generally paid under the ASP methodology. In contrast, the OPPS includes various drugs 

within a prospective payment system, where payment for certain drugs is packaged into 

the associated procedure payment for the APC group. Given the fundamental differences 

in the way payment is made in an HOPD and a physician’s office setting for these drugs, 

differences in payment are to be expected. 

In general, we do not believe that our packaging methodology under the OPPS 

results in limited beneficiary access to drugs because packaging is a fundamental 

component of a prospective payment system that accounts for the cost of certain items 

and services in larger payment bundles, recognizing that some cases may be more costly 

and others less costly, but that, on average, OPPS payment is appropriate for the services 
CMS-1589-FC 585 

provided. The growing utilization associated with packaged drugs and biologicals in our 

claims data suggests Medicare beneficiaries have sufficient access to these items. 

We note that, in CYs 2005 and 2006, the statutorily mandated drug packaging 

threshold was set at $50, and we continue to believe that it is appropriate to continue a 

drug packaging threshold for the CY 2013 OPPS for the reasons set forth below. As 

stated in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68086), we 

believe that packaging certain items is a fundamental component of a prospective 

payment system, that packaging these items does not lead to beneficiary access issues and 

does not create a problematic site of service differential, that updating the packaging 

threshold of $50 for the CY 2005 OPPS is consistent with industry and government 

practices, and that the PPI for Prescription Drugs is an appropriate mechanism to gauge 

Part B drug inflation. Therefore, because of our continued belief that packaging is a 

fundamental component of a prospective payment system that continues to provide 

important flexibility and efficiency in the delivery of high quality hospital outpatient 

services, we are not adopting the commenters’ recommendations to pay separately for all 

drugs, biologicals, and radiopharmaceuticals for CY 2013 or to eliminate or to freeze the 

packaging threshold at $75. 

We disagree with the commenters who suggested that CMS should limit increases 

in the outpatient drug packaging threshold amount to the hospital update factor for the 

year, reflective of all statutory adjustments or the market basket update. As stated above, 

we continue to believe that updating the $50 threshold is consistent with industry and 

government practices and that the PPI for Prescription Drugs is an appropriate 
CMS-1589-FC 586 

mechanism to gauge Part B drug inflation. As we stated in the CY 2007 OPPS/ASC final 

rule with comment period (71 FR 68085), we believe that the PPI for Prescription Drugs 

reflects price changes at the wholesale or manufacturer stage. Because OPPS payment 

rates for drugs and biologicals are generally based on the ASP data that are reported by 

their manufacturers, we believe that the PPI for Prescription Drugs is an appropriate price 

index to use to update the packaging threshold for CY 2007 and beyond. 

In contrast, the market basket update contains numerous price proxies, including, 

but not limited to, proxies for wages and salaries, utilities, and nonlabor-related expenses, 

that are not related to price increases for prescription drugs. Therefore, we believe that 

the market basket as a whole is not an appropriate mechanism for determining the 

outpatient drug packaging threshold amount. Within the calculation of the market basket 

update, we use the PPI for Prescription Drugs specifically to measure the price growth for 

prescription drugs, but price changes for prescription drugs are only one component of 

price changes for the numerous items and services hospitals purchase. 

Additionally, we strongly disagree with the commenter who suggested that our 

methodology for updating the packaging threshold is arbitrary and recommended that 

CMS tie the threshold for separate payment to the annual market basket rather than 

randomly assigning thresholds for separate payment for these products. As we have 

stated above, the PPI for Prescription Drugs reflects price changes at the wholesale or 

manufacturer stage. Because OPPS payment rates for drugs and biologicals are generally 

based on the ASP data that are reported by their manufacturer, we believe that the PPI for 

Prescription Drugs is an appropriate price index to use to update the packaging threshold 
CMS-1589-FC 587 

for CY 2007 and subsequent years. Therefore, we believe that our continued 

methodology of updating the CY 2005 $50 packaging threshold for inflation based on the 

PPI for Prescription Drugs is not arbitrary in nature nor does it have the effect of 

randomly assigning a payment threshold for drugs. Our methodology continues to be an 

accurate way to apply an annual inflation adjustment factor that is consistent with the 

practices of many health care payment policy areas, and many other areas of government 

policy, that acknowledge real costs by using an inflation adjustment factor instead of a 

static dollar value. 

Finally, we disagree with commenters that increasing the packaging threshold 

could have the unintended impact of undermining conversion to LEU sources. As we 

discuss in section II.A.3.e. of this final rule with comment period, we are finalizing our 

proposals for CY 2013 to continue to package payment for all nonpass-through 

diagnostic radiopharmaceuticals. Therefore, diagnostic radiopharmaceuticals will not be 

subject to the packaging threshold and will instead be packaged regardless of their per 

day cost. Additionally, as we discuss in section III.A.C.3., removing the diagnostic 

radiopharmaceutical so that this cost is passed through directly to Medicare is not 

consistent with the fundamental concept of packaging under the OPPS. Moreover, the 

diagnostic radiopharmaceutical is never separately billed, being a supply in the diagnostic 

procedure it supports, so the true cost cannot be captured by single service claims. Most 

significantly from the standpoint of payment for non-HEU sources, however, a separate 

payment for the diagnostic radiopharmaceutical does not unbundle the cost of the isotope 

from the much larger cost of the drug component, nor does it differentiate between HEU 
CMS-1589-FC 588 

and non-HEU sources, so it does not create a differential payment to further the CMS 

goals of payment equity or the Administration’s goal of promoting non-HEU conversion. 

Comment: Several commenters suggested that CMS reinstate its policy of 

separate payment for 5-HT3 antiemetics, which are a class of drugs often used as part of 

an anticancer treatment regiment to treat nausea. One commenter believed that CMS 

packaged all 5-HT3 antiemetic drugs (HCPCS codes J1260 (Injection, dolasetron 

mesylate, 10 mg), J1626 (Injection, granisetron hydrochloride, 100 mcg), J2405 

(Injection, ondansetron hydrochloride, per 1 mg), J2469 (Injection, palonosetron hcl, 25 

mcg), Q0166 (Granisetron hydrochloride, 1 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an iv anti-emetic at the time of 

chemotherapy treatment, not to exceed a 24 hour dosage regimen), Q0180 (Dolasetron 

mesylate, 100 mg, oral, fda approved prescription anti-emetic, for use as a complete 

therapeutic substitute for an iv anti-emetic at the time of chemotherapy treatment, not to 

exceed a 24 hour dosage regimen)). The commenter opposed the packaging of these 

drugs. 

Response: We continue to believe that use of these antiemetics is an integral part 

of an anticancer treatment regimen and that OPPS claims data demonstrate their 

increasingly common hospital outpatient utilization. As we stated in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60488), we no longer believe that a 

specific exemption to our standard drug payment methodology is necessary to ensure 

access to the most appropriate antiemetic products for Medicare beneficiaries. We 

continue to believe that our analysis conducted in the CY 2010 OPPS/ASC proposed rule 
CMS-1589-FC 589 

on 5-HT3 antiemetics (74 FR 35320), along with the historical stability in prescribing 

patterns for these products and the availability of generic alternatives for several of these 

products, allows us to continue our policy of not specifically exempting these products 

from the OPPS drug packaging threshold. 

Additionally, we clarify that we did not propose to assign a packaged payment 

status indicator to all 5-HT3 antiemetic codes in the CY 2013 OPPS/ASC proposed rule. 

HCPCS code J2469 (Injection, palonosetron hcl, 25 mcg) had a per day cost above the 

proposed $80 packaging threshold and was assigned a separately payable status indicator 

of “K” for the proposed rule. HCPCS code J2469 has a CY 2013 estimated per day cost, 

from the CY 2011 claims data, above the CY 2013 drug packaging threshold and 

therefore will receive separate payment in CY 2013. 

Comment: One commenter recommended that CMS not package any drugs used 

in anticancer regimens. 

Response: We disagree with the commenter for the reasons mentioned above. 

We believe that packaging certain items, including items used in anticancer regimens, is a 

fundamental component of a prospective payment system, and is an essential feature that 

distinguishes a prospective payment system from a fee schedule. We do not believe that 

packaging drugs used in an anticancer regimen or in outpatient treatment of other 

significant disease leads to beneficiary access issues. This finding is confirmed by our 

analysis of hospital claims data in which we have found that beneficiaries appear to have 

adequate access to cancer treatments, as is signified by ongoing volume growth in cancerrelated APCs and stability in prescribing products for anticancer drugs such as 5-HT3 
CMS-1589-FC 590 

antiemetics, for which CMS has continued to observe volume growth, even after we 

ended our multiyear exemption from the packaging threshold for these products. In 

summary, after consideration of the public comments we received, we are not providing 

any exceptions to the standard drug packaging methodology for any class of drugs, 

including anticancer therapies, for CY 2013. 

Since publication of the CY 2013 OPPS/ASC proposed rule, consistent with our 

policy of updating the packaging threshold with more recently available data for the final 

rule, we have again followed the CY 2007 methodology for CY 2013 and used updated 

four quarter moving average PPI index levels provided by the CMS Office of the Actuary 

to trend the $50 threshold forward from the third quarter of CY 2005 to the third quarter 

of CY 2013. We then rounded the resulting updated dollar amount ($81.91) to the 

nearest $5 increment, which yielded a figure of $80. Therefore, after consideration for 

the public comments we received, and consistent with our methodology for establishing 

the packaging threshold using the most recent PPI forecast data, we are adopting a 

CY 2013 packaging threshold of $80. Our policy during previous cycles of the OPPS has 

been to use updated ASP and claims data to make final determinations of the packaging 

status of HCPCS codes for drugs, nonimplantable biologicals, and therapeutic 

radiopharmaceuticals for the 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/ASC final rule with comment period for the update year. 

Only HCPCS codes that are identified as separately payable in the final rule with 

comment period are subject to quarterly updates. For our calculation of per day costs of 
CMS-1589-FC 591 

HCPCS codes for drugs and nonimplantable biologicals in this CY 2013 OPPS/ASC final 

rule with comment period, we proposed to use ASP data from the first quarter of 

CY 2012, which is the basis for calculating payment rates for drugs and biologicals in the 

physician’s office setting using the ASP methodology, effective July 1, 2012, along with 

updated hospital claims data from CY 2011. We note that we also proposed to use these 

data for budget neutrality estimates and impact analyses for this CY 2013 OPPS/ASC 

final rule with comment period. 

Payment rates for HCPCS codes for separately payable drugs and nonimplantable 

biologicals included in Addenda A and B to this final rule with comment period are based 

on ASP data from the second quarter of CY 2012. These data are the basis for 

calculating payment rates for drugs and biologicals in the physician’s office setting using 

the ASP methodology, effective October 1, 2012. These physician’s office payment rates 

will then be updated in the January 2013 OPPS update, based on the most recent ASP 

data to be used for physician’s office and OPPS payment as of January 1, 2013. For 

items that do not currently have an ASP-based payment rate, we proposed to recalculate 

their mean unit cost from all of the CY 2011 claims data and updated cost report 

information available for this CY 2013 final rule with comment period to determine their 

final per day cost. 

Consequently, the packaging status of some HCPCS codes for drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals in this CY 2013 

OPPS/ASC final rule with comment period may be different from the same drug HCPCS 

code’s packaging status determined based on the data used for the proposed rule. Under 
CMS-1589-FC 592 

such circumstances, we proposed to continue to follow the established policies initially 

adopted for the CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those 

drugs whose cost fluctuates relative to the proposed CY 2013 OPPS drug packaging 

threshold and the drug’s payment status (packaged or separately payable) in CY 2012. 

Specifically, for CY 2013, consistent with our historical practice, we proposed to apply 

the following policies to these HCPCS codes for drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals whose relationship to the proposed $80 drug packaging 

threshold changes based on the updated drug packaging threshold and on the final 

updated data: 

● HCPCS codes for drugs and nonimplantable biologicals that were paid 

separately in CY 2012 and that were proposed for separate payment in CY 2013, and that 

then have per day costs equal to or less than $80, based on the updated ASPs and hospital 

claims data used for this CY 2013 final rule with comment period, would continue to 

receive separate payment in CY 2013. 

● HCPCS codes for drugs and nonimplantable biologicals that were packaged in 

CY 2012 and that are proposed for separate payment in CY 2013, and that then have per 

day costs equal to or less than $80, based on the updated ASPs and hospital claims data 

used for this CY 2013 final rule with comment period, would remain packaged in 

CY 2013. 

● HCPCS codes for drugs and nonimplantable biologicals for which we proposed 

packaged payment in CY 2013 but then have per day costs greater than $80, based on the 
CMS-1589-FC 593 

updated ASPs and hospital claims data used for this CY 2013 final rule with comment 

period, would receive separate payment in CY 2013. 

We did not receive any public comments on our proposal to apply the established 

policies initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more 

equitably pay for those drugs whose cost fluctuates relative to the CY 2013 OPPS drug 

packaging threshold and the drug’s payment status (packaged or separately payable) in 

CY 2012. Therefore, we are finalizing our proposal, without modification, for CY 2013. 

We note that HCPCS codes J2700 (Injection, oxacillin sodium, up to 250 mg) and 

J9218 (Leuprolide acetate, per 1 mg) were paid separately for CY 2012 and were 

proposed for separate payment in the CY 2013 OPPS/ASC proposed rule and had final 

per day costs of less than the $80 drug packaging threshold, based on updated ASPs and 

the CY 2011 hospital claims data available for this CY 2013 final rule with comment 

period. Therefore, HCPCS codes J2700 and J9218 will continue to be paid separately in 

CY 2013 according to the established methodology set forth above. 

In addition, we proposed to package HCPCS codes J0365 (Injection, aprotonin, 

10,000 kiu), J1460 (Injection, gamma globulin, intramuscular, 1 cc), J1560 (Injection, 

gamma globulin, intramuscular, over 10 cc), J7183 (Injection, von willebrand factor 

complex (human), wilate, 1 i.u. vwf:rco), and Q4105 (Integra dermal regeneration 

template (drt), per square centimeter) for CY 2013. Using updated ASPs and the 

CY 2011 hospital claims data available for this final rule with comment period, HCPCS 

codes J0365, J1460, J1560, J7183, and Q4105 now have per day costs greater than $80. 
CMS-1589-FC 594 

In accordance with our established policy for such cases, for CY 2013 we will pay for 

HCPCS codes J0365, J1460, J1560, J7183, and Q4105 separately. 

Finally, because we did not have claims data for HCPCS codes J1452 (Injection, 

fomivirsen sodium, intraocular, 1.65 mg) and J1835 (Injection, itraconazole, 50 mg) in 

the CY 2013 OPPS/ASC proposed rule, we had proposed a status indicator of “E” for 

these products in CY 2013. However, since publication of the proposed rule, we have 

received claims data and the per day cost for these products are more than the $80 

CY 2013 packaged threshold. These products will be paid separately and will be 

assigned a status indicator of “K” for CY 2013. 

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

Biological But Different Dosages 

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66776), we 

began recognizing, for OPPS payment purposes, multiple HCPCS codes reporting 

different dosages for the same covered Part B drugs or biologicals in order to reduce 

hospitals’ administrative burden by permitting them to report all HCPCS codes for drugs 

and biologicals. In general, prior to CY 2008, the OPPS recognized for payment only the 

HCPCS code that described the lowest dosage of a drug or biological. We extended this 

recognition to multiple HCPCS codes for several other drugs under the CY 2009 OPPS 

(73 FR 68665). During CYs 2008 and 2009, we applied a policy that assigned the status 

indicator of the previously recognized HCPCS code to the associated newly recognized 

code(s), reflecting the packaged or separately payable status of the new code(s). In the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66775), we explained that 
CMS-1589-FC 595 

once claims data were available for these previously unrecognized HCPCS codes, we 

would determine the packaging status and resulting status indicator for each HCPCS code 

according to the general, established HCPCS code-specific methodology for determining 

a code’s packaging status for a given update year. However, we also stated that we 

planned to closely follow our claims data to ensure that our annual packaging 

determinations for the different HCPCS codes describing the same drug or biological did 

not create inappropriate payment incentives for hospitals to report certain HCPCS codes 

instead of others. 

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490 through 

60491), we finalized a policy to make a single packaging determination for a drug, rather 

than an individual HCPCS code, when a drug has multiple HCPCS codes describing 

different dosages. We analyzed CY 2008 claims data for the HCPCS codes describing 

different dosages of the same drug or biological that were newly recognized in CY 2008 

and found that our claims data would result in several different packaging determinations 

for different codes describing the same drug or biological. Furthermore, we found that 

our claims data included few units and days for a number of newly recognized HCPCS 

codes, resulting in our concern that these data reflected claims from only a small number 

of hospitals, even though the drug or biological itself may be reported by many other 

hospitals under the most common HCPCS code. Based on these findings from our first 

available claims data for the newly recognized HCPCS codes, we believed that adopting 

our standard HCPCS code-specific packaging determinations for these codes could lead 

to payment incentives for hospitals to report certain HCPCS codes instead of others, 
CMS-1589-FC 596 

particularly because we do not currently require hospitals to report all drug and biological 

HCPCS codes under the OPPS in consideration of our previous policy that generally 

recognized only the lowest dosage HCPCS code for a drug or biological for OPPS 

payment. 

For CY 2013, we continue to believe that adopting the standard HCPCS 

code-specific packaging determinations for these codes could lead to payment incentives 

for hospitals to report certain HCPCS codes for drugs instead of others. Making 

packaging determinations on a drug-specific basis eliminates these incentives and allows 

hospitals flexibility in choosing to report all HCPCS codes for different dosages of the 

same drug or only the lowest dosage HCPCS code. Therefore, in the CY 2013 

OPPS/ASC proposed rule (77 FR 45135), we proposed to continue our policy to make 

packaging determinations on a drug-specific basis, rather than a HCPCS code-specific 

basis, for those HCPCS codes that describe the same drug or biological but different 

dosages in CY 2013. 

For CY 2013, in order to propose a packaging determination that is consistent 

across all HCPCS codes that describe different dosages of the same drug or biological, 

we aggregated both our CY 2011 claims data and our pricing information at ASP+6 

percent across all of the HCPCS codes that describe each distinct drug or biological in 

order to determine the mean units per day of the drug or biological in terms of the 

HCPCS code with the lowest dosage descriptor. The following drugs did not have 

pricing information available for the ASP methodology for this CY 2013 OPPS/ASC 

final rule and, as is our current policy for determining the packaging status of other drugs, 
CMS-1589-FC 597 

we used the mean unit cost available from the fourth quarter CY 2011 claims data to 

make the packaging determinations for these drugs: HCPCS codes J3472 (Injection, 

hyaluronidase, ovine, preservative free, per 1000 usp units), Q0171 (Chlorpromazine 

hydrochloride, 10 mg, oral, FDA approved prescription antiemetic, for use as a complete 

therapeutic substitute for an IV antiemetic at the time of chemotherapy treatment, not to 

exceed a 48-hour dosage regimen), Q0172 (Chlorpromazine hydrochloride, 25 mg, oral, 

FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for 

an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage 

regimen), Q0175 (Perphenazine, 4 mg, oral, FDA approved prescription anti-emetic, for 

use as a complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy 

treatment, not to exceed a 48-hour dosage regimen), Q0176 (Perphenazine, 8 mg, oral, 

FDA approved prescription anti-emetic, for use as a complete therapeutic substitute for 

an IV anti-emetic at the time of chemotherapy treatment, not to exceed a 48-hour dosage 

regimen), Q0177 (Hydroxyzine pamoate, 25 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage regimen), and Q0178 

(Hydroxyzine pamoate, 50 mg, oral, FDA approved prescription anti-emetic, for use as a 

complete therapeutic substitute for an IV anti-emetic at the time of chemotherapy 

treatment, not to exceed a 48-hour dosage regimen). 

For all other drugs and biologicals that have HCPCS codes describing different 

dosages, we then multiplied the weighted average ASP+6 percent per unit payment 

amount across all dosage levels of a specific drug or biological by the estimated units per 
CMS-1589-FC 598 

day for all HCPCS codes that describe each drug or biological from our claims data to 

determine the estimated per day cost of each drug or biological at less than or equal to 

$80 (whereupon all HCPCS codes for the same drug or biological would be packaged) or 

greater than $80 (whereupon all HCPCS codes for the same drug or biological would be 

separately payable). 

We did not receive any public comments on this proposal. Therefore, we are 

finalizing our CY 2013 proposal, without modification. The packaging status of each 

drug and biological HCPCS code to which this methodology would apply is displayed in 

Table 35 below. 

TABLE 35.—HCPCS CODES TO WHICH THE CY 2013 DRUGSPECIFIC PACKAGING DETERMINATION METHODOLOGY APPLIES 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor CY 2013 

SI 

C9257 Injection, bevacizumab, 0.25 mg K 

J9035 Injection, bevacizumab, 10 mg K 

J1020 Injection, methylprednisolone acetate, 20 mg N 

J1030 Injection, methylprednisolone acetate, 40 mg N 

J1040 Injection, methylprednisolone acetate, 80 mg N 

J1070 Injection, testosterone cypionate, up to 100 mg N 

J1080 Injection, testosterone cypionate, 1 cc, 200 mg N 

J1440 Injection, filgrastim (g-csf), 300 mcg K 

J1441 Injection, filgrastim (g-csf), 480 mcg K 

J1460 Injection, gamma globulin, intramuscular, 1 cc N 

J1560 Injection, gamma globulin, intramuscular over 10 cc N 

J1642 

Injection, heparin sodium, (heparin lock flush), per 10 

units N 

J1644 Injection, heparin sodium, per 1000 units N 

J1850 Injection, kanamycin sulfate, up to 75 mg N 

J1840 Injection, kanamycin sulfate, up to 500 mg N 
CMS-1589-FC 599 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor CY 2013 

SI 

J2270 Injection, morphine sulfate, up to 10 mg N 

J2271 Injection, morphine sulfate, 100mg N 

J2788 

Injection, rho d immune globulin, human, minidose, 50 

micrograms (250 i.u.) K 

J2790 

Injection, rho d immune globulin, human, full dose, 300 

micrograms (1500 i.u.) K 

J2920 

Injection, methylprednisolone sodium succinate, up to 40 

mg N 

J2930 

Injection, methylprednisolone sodium succinate, up to 

125 mg N 

J3120 Injection, testosterone enanthate, up to 100 mg N 

J3130 Injection, testosterone enanthate, up to 200 mg N 

J3471 

Injection, hyaluronidase, ovine, preservative free, per 1 

usp unit (up to 999 usp units) N 

J3472 

Injection, hyaluronidase, ovine, preservative free, per 

1000 usp units N 

J7050 Infusion, normal saline solution , 250 cc N 

J7040 Infusion, normal saline solution, sterile (500 ml=1 unit) N 

J7030 Infusion, normal saline solution , 1000 cc N 

J7515 Cyclosporine, oral, 25 mg N 

J7502 Cyclosporine, oral, 100 mg N 

J8520 Capecitabine, oral, 150 mg K 

J8521 Capecitabine, oral, 500 mg K 

J9250 Methotrexate sodium, 5 mg N 

J9260 Methotrexate sodium, 50 mg N 

Q0164 

Prochlorperazine maleate, 5 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0165 

Prochlorperazine maleate, 10 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 
CMS-1589-FC 600 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor CY 2013 

SI 

Q0167 

Dronabinol, 2.5 mg, oral, FDA approved prescription 

anti-emetic, for use as a complete therapeutic substitute 

for an IV anti-emetic at the time of chemotherapy 

treatment, not to exceed a 48-hour dosage regimen N 

Q0168 

Dronabinol, 5 mg, oral, FDA approved prescription antiemetic, for use as a complete therapeutic substitute for an 

IV anti-emetic at the time of chemotherapy treatment, not 

to exceed a 48-hour dosage regimen N 

Q0169 

Promethazine hydrochloride, 12.5 mg, oral, FDA 

approved prescription anti-emetic, for use as a complete 

therapeutic substitute for an IV antiemetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0170 

Promethazine hydrochloride, 25 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV antiemetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0171 

Chlorpromazine hydrochloride, 10 mg, oral, FDA 

approved prescription antiemetic, for use as a complete 

therapeutic substitute for an IV antiemetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0172 

Chlorpromazine hydrochloride, 25 mg, oral, FDA 

approved prescription anti-emetic, for use as a complete 

therapeutic substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0175 

Perphenazine, 4 mg, oral, FDA approved prescription 

anti-emetic, for use as a complete therapeutic substitute 

for an IV anti-emetic at the time of chemotherapy 

treatment, not to exceed a 48-hour dosage regimen N 

Q0176 

Perphenazine, 8 mg, oral, FDA approved prescription 

anti-emetic, for use as a complete therapeutic substitute 

for an IV anti-emetic at the time of chemotherapy N 
CMS-1589-FC 601 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor CY 2013 

SI 

treatment, not to exceed a 48-hour dosage regimen 

Q0177 

Hydroxyzine pamoate, 25 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

Q0178 

Hydroxyzine pamoate, 50 mg, oral, FDA approved 

prescription anti-emetic, for use as a complete therapeutic 

substitute for an IV anti-emetic at the time of 

chemotherapy treatment, not to exceed a 48-hour dosage 

regimen N 

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

Packaged 

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

Payable and Packaged Drugs and Biologicals 

Section 1833(t)(14) of the Act defines certain separately payable 

radiopharmaceuticals, drugs, and biologicals and mandates specific payments for these 

items. Under section 1833(t)(14)(B)(i) of the Act, a “specified covered outpatient drug” 

is a covered outpatient drug, as defined in section 1927(k)(2) of the Act, for which a 

separate APC has been established and that either is a radiopharmaceutical agent or is a 

drug or biological for which payment was made on a pass-through basis on or before 

December 31, 2002. 
CMS-1589-FC 602 

Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and biologicals are 

designated as exceptions and are not included in the definition of “specified covered 

outpatient drugs,” known as SCODs. These exceptions are— 

● A drug or biological for which payment is first made on or after 

January 1, 2003, under the transitional pass-through payment provision in 

section 1833(t)(6) of the Act. 

● A drug or biological for which a temporary HCPCS code has not been 

assigned. 

● During CYs 2004 and 2005, an orphan drug (as designated by the Secretary). 

Section 1833(t)(14)(A)(iii) of the Act requires that payment for SCODs in 

CY 2006 and subsequent years be equal to the average acquisition cost for the drug for 

that year as determined by the Secretary, subject to any adjustment for overhead costs 

and taking into account the hospital acquisition cost survey data collected by the 

Government Accountability Office (GAO) in CYs 2004 and 2005, and later periodic 

surveys conducted by the Secretary as set forth in the statute. If hospital acquisition cost 

data are not available, the law requires that payment be equal to payment rates 

established under the methodology described in section 1842(o), section 1847A, or 

section 1847B of the Act, as calculated and adjusted by the Secretary as necessary. Most 

physician Part B drugs are paid at ASP+6 percent pursuant to section 1842(o) and section 

1847A of the Act. 

Section 1833(t)(14)(E) of the Act provides for an adjustment in OPPS payment 

rates for overhead and related expenses, such as pharmacy services and handling costs. 
CMS-1589-FC 603 

Section 1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead and 

related expenses and to make recommendations to the Secretary regarding whether, and if 

so how, a payment adjustment should be made to compensate hospitals for overhead and 

related expenses. Section 1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust 

the weights for ambulatory procedure classifications for SCODs to take into account the 

findings of the MedPAC study. 

It has been our longstanding policy to apply the same treatment to all separately 

payable drugs and biologicals, which include SCODs, and drugs and biologicals that are 

not SCODs. Therefore, we apply the payment methodology in section 

1833(t)(14)(A)(iii)(I) of the Act to SCODs, as required by statute, but we also apply it to 

separately payable drugs and biologicals that are not SCODs, which is a policy choice 

rather than a statutory requirement. In the CY 2013 OPPS/ASC proposed rule, we 

proposed to apply section 1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs 

and biologicals. Although we did not distinguish SCODs in that discussion, we note that 

we are required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we are 

choosing to apply it to other separately payable drugs and biologicals, consistent with our 

history of using the same payment methodology for all separately payable drugs and 

biologicals. 

In the CY 2006 OPPS proposed rule (70 FR 42728 through 42731), we discussed 

the June 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs and 

summarized the findings of that study. In response to the MedPAC findings, in the 

CY 2006 OPPS proposed rule (70 FR 42729), we discussed our belief that, because of the 
CMS-1589-FC 604 

varied handling resources required to prepare different forms of drugs, it would be 

impossible to exclusively and appropriately assign a drug to a certain overhead category 

that would apply to all hospital outpatient uses of the drug. Therefore, our CY 2006 

OPPS proposal included a proposal to establish three distinct Level II HCPCS C-codes 

and three corresponding APCs for drug handling categories to differentiate overhead 

costs for drugs and biologicals (70 FR 42730). We also proposed: (1) to combine 

several overhead categories recommended by MedPAC; (2) to establish three drug 

handling categories, as we believed that larger groups would minimize the number of 

drugs that may fit into more than one category and would lessen any undesirable payment 

policy incentives to utilize particular forms of drugs or specific preparation methods; 

(3) to collect hospital charges for these HCPCS C-codes for 2 years; and (4) to ultimately 

base payment for the corresponding drug handling APCs on CY 2006 claims data 

available for the CY 2008 OPPS. 

In the CY 2006 OPPS final rule with comment period (70 FR 68659 through 

68665), we discussed the public comments we received on our proposal regarding 

pharmacy overhead. The overwhelming majority of commenters did not support our 

proposal regarding pharmacy overhead and urged us not to finalize this policy, as it 

would be administratively burdensome for hospitals to establish charges for HCPCS 

codes for pharmacy overhead and to report them. Therefore, we did not finalize this 

proposal for CY 2006. Instead, we established payment for separately payable drugs and 

biologicals at ASP+6 percent, which we calculated by comparing the estimated aggregate 

cost of separately payable drugs and biologicals in our claims data to the estimated 
CMS-1589-FC 605 

aggregate ASP dollars for separately payable drugs and biologicals, using the ASP as a 

proxy for average acquisition cost (70 FR 68642). Hereinafter, we refer to this 

methodology as our standard drug payment methodology. We concluded that payment 

for drugs and biologicals and pharmacy overhead at a combined ASP+6 percent rate 

would serve as an acceptable proxy for the combined acquisition and overhead costs of 

each of these products. 

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68091), we 

finalized our proposed policy to provide a single payment of ASP+6 percent for the 

hospital’s acquisition cost for the drug or biological and all associated pharmacy 

overhead and handling costs. The ASP+6 percent rate that we finalized was higher than 

the equivalent average ASP-based amount calculated from claims of ASP+4 percent 

according to our standard drug payment methodology, but we adopted payment at ASP+6 

percent for stability while we continued to examine the issue of the costs of pharmacy 

overhead in the HOPD and awaited the accumulation of CY 2006 data as discussed in the 

prior year’s rule. 

In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to ongoing 

discussions with interested parties, we proposed to continue our methodology of 

providing a combined payment rate for drug and biological acquisition and pharmacy 

overhead costs while continuing our efforts to improve the available data. We also 

proposed to instruct hospitals to remove the pharmacy overhead charge for both packaged 

and separately payable drugs and biologicals from the charge for the drug or biological 

and report the pharmacy overhead charge on an uncoded revenue code line on the claim. 
CMS-1589-FC 606 

We believed that this would provide us with an avenue for collecting pharmacy handling 

cost data specific to drugs in order to package the overhead costs of these items into the 

associated procedures, most likely drug administration services. Similar to the public 

response to our CY 2006 pharmacy overhead proposal, the overwhelming majority of 

commenters did not support our CY 2008 proposal and urged us to not finalize this policy 

(72 FR 66761). At its September 2007 meeting, the APC Panel recommended that 

hospitals not be required to separately report charges for pharmacy overhead and 

handling and that payment for overhead be included as part of drug payment. The APC 

Panel also recommended that CMS continue to evaluate alternative methods to 

standardize the capture of pharmacy overhead costs in a manner that is simple to 

implement at the organizational level (72 FR 66761). Because of concerns expressed by 

the APC Panel and public commenters, we did not finalize the proposal to instruct 

hospitals to separately report pharmacy overhead charges for CY 2008. Instead, in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66763), we finalized a 

policy of providing payment for separately payable drugs and biologicals and their 

pharmacy overhead at ASP+5 percent as a transition from their CY 2007 payment of 

ASP+6 percent to payment based on the equivalent average ASP-based payment rate 

calculated from hospital claims according to our standard drug payment methodology, 

which was ASP+3 percent for the CY 2008 OPPS/ASC final rule with comment period. 

Hospitals continued to include charges for pharmacy overhead costs in the line-item 

charges for the associated drugs reported on claims. 
CMS-1589-FC 607 

For CY 2009, we proposed to pay separately payable drugs and biologicals at 

ASP+4 percent, including both SCODs and other drugs without CY 2009 OPPS 

pass-through status, based on our standard drug payment methodology. We also 

continued to explore mechanisms to improve the available data. We proposed to split the 

“Drugs Charged to Patients” cost center into two cost centers: one for drugs with high 

pharmacy overhead costs and one for drugs with low pharmacy overhead costs 

(73 FR 41492). We noted that we expected that CCRs from the proposed new cost 

centers would be available in 2 to 3 years to refine OPPS drug cost estimates by 

accounting for differential hospital markup practices for drugs with high and low 

overhead costs. After consideration of the public comments received and the APC Panel 

recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide payment for 

separately payable nonpass-through drugs and biologicals based on costs calculated from 

hospital claims at a 1-year transitional rate of ASP+4 percent, in the context of an 

equivalent average ASP-based payment rate of ASP+2 percent calculated according to 

our standard drug payment methodology from the final rule claims data and cost report 

data. We did not finalize our proposal to split the single standard “Drugs Charged to 

Patients” cost center into two cost centers largely due to concerns raised by hospitals 

about the associated administrative burden. Instead, we indicated in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68659) that we would continue to 

explore other potential approaches to improve our drug cost estimation methodology, 

thereby increasing payment accuracy for separately payable drugs and biologicals. 
CMS-1589-FC 608 

In response to the CMS proposals for the CY 2008 and CY 2009 OPPS, a group 

of pharmacy stakeholders (hereinafter referred to as the pharmacy stakeholders), 

including some cancer hospitals, some pharmaceutical manufacturers, and some hospital 

and professional associations, commented that CMS should pay an acquisition cost of 

ASP+6 percent for separately payable drugs, should substitute ASP+6 percent for the 

packaged cost of all packaged drugs and biologicals on procedure claims, and should 

redistribute the difference between the aggregate estimated packaged drug cost in claims 

and payment for all drugs, including packaged drugs at ASP+6 percent, as separate 

pharmacy overhead payments for separately payable drugs. They indicated that this 

approach would preserve the aggregate drug cost observed in the claims data, while 

significantly increasing payment accuracy for individual drugs and procedures by 

redistributing drug cost from packaged drugs. Their suggested approach would provide a 

separate overhead payment for each separately payable drug or biological at one of three 

different levels, depending on the pharmacy stakeholders’ assessment of the complexity 

of pharmacy handling associated with each specific drug or biological (73 FR 68651 

through 68652). Each separately payable drug or biological HCPCS code would be 

assigned to one of the three overhead categories, and the separate pharmacy overhead 

payment applicable to the category would be made when each of the separately payable 

drugs or biologicals was paid. 

In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we acknowledged the 

limitations of our data and our availability to find a method to improve that data in a way 

that did not impose unacceptable administrative burdens on providers. Accepting that 
CMS-1589-FC 609 

charge compression was a reasonable but unverifiable supposition, we proposed to 

redistribute between one-third and one-half of the estimated overhead cost associated 

with coded packaged drugs and biologicals with an ASP, which resulted in our proposal 

to pay for the acquisition and pharmacy overhead costs of separately payable drugs and 

biologicals that did not have pass-through payment status at ASP+4 percent. We 

calculated estimated overhead cost for coded packaged drugs and biologicals by 

determining the difference between the aggregate claims cost for coded packaged drugs 

and biologicals with an ASP and the ASP dollars (ASP multiplied by the drug’s or 

biological’s units in the claims data) for those same coded drugs and biologicals; this 

difference was our estimated overhead cost for coded packaged drugs and biologicals. In 

our rationale described in the CY 2010 OPPS/ASC proposed rule (74 FR 35326 through 

35333), we stated that we believed that approximately $150 million of the estimated 

$395 million total in pharmacy overhead cost, specifically between one-third and 

one-half of that cost, included in our claims data for coded packaged drugs and 

biologicals with reported ASP data should be attributed to separately payable drugs and 

biologicals and that the $150 million serves as the adjustment for the pharmacy overhead 

costs of separately payable drugs and biologicals. As a result, we also proposed to reduce 

the costs of coded drugs and biologicals that are packaged into payment for procedural 

APCs to offset the $150 million adjustment to payment for separately payable drugs and 

biologicals. In addition, we proposed that any redistribution of pharmacy overhead cost 

that may arise from the CY 2010 final rule data would occur only from some drugs and 

biologicals to other drugs and biologicals, thereby maintaining the estimated total cost of 
CMS-1589-FC 610 

drugs and biologicals that we calculate based on the charges and costs reported by 

hospitals on claims and cost reports. As a result of this approach, no redistribution of 

cost would occur from other services to drugs and biologicals or vice versa. 

While we had no way of assessing whether this current distribution of overhead 

cost to coded packaged drugs and biologicals with an ASP was appropriate, we 

acknowledged that the established method of converting billed charges to costs had the 

potential to “compress” the calculated costs to some degree. Further, we recognized that 

the attribution of pharmacy overhead costs to packaged or separately payable drugs and 

biologicals through our standard drug payment methodology of a combined payment for 

acquisition and pharmacy overhead costs depends, in part, on the treatment of all drugs 

and biologicals each year under our annual drug packaging threshold. Changes to the 

packaging threshold may result in changes to payment for the overhead cost of drugs and 

biologicals that do not reflect actual changes in hospital pharmacy overhead cost for 

those products. For these reasons, we stated that we believed some portion, but not all, of 

the total overhead cost that is associated with coded packaged drugs and biologicals (the 

difference between aggregate cost for those drugs and biologicals on the claims and ASP 

dollars for the same drugs and biologicals), based on our standard drug payment 

methodology, should, at least for CY 2010, be attributed to separately payable drugs and 

biologicals. 

We acknowledged that the observed combined payment for acquisition and 

pharmacy overhead costs of ASP-2 percent for separately payable drugs and biologicals 

may be too low and ASP+247 percent for coded packaged drugs and biologicals with 
CMS-1589-FC 611 

reported ASP data in the CY 2010 claims data may be too high (74 FR 35327 and 

35328). Therefore, we stated that a middle ground would represent the most accurate 

redistribution of pharmacy overhead cost. Our assumption was that approximately 

one-third to one-half of the total pharmacy overhead cost currently associated with coded 

packaged drugs and biologicals in the CY 2008 claims data offered a more appropriate 

allocation of drug and biological cost to separately payable drugs and biologicals 

(74 FR 35328). One third of the $395 million of pharmacy overhead cost associated with 

packaged drugs and biologicals was $132 million, whereas one-half was $198 million. 

Within the one-third to one-half parameters, we proposed reallocating 

$150 million in drug and biological cost observed in the claims data from coded 

packaged drugs and biologicals with an ASP to separately payable drugs and biologicals 

for CY 2010 for their pharmacy overhead costs. Based on this redistribution, we 

proposed a CY 2010 payment rate for separately payable drugs and biologicals of ASP+4 

percent. 

In the CY 2010 OPPS final rule with comment period, we adopted a transitional 

payment rate of ASP+4 percent based on a pharmacy overhead adjustment methodology 

for CY 2010 that redistributed $200 million from packaged drug and biological cost to 

separately payable drug cost (74 FR 60499 through 60518). This $200 million included 

the proposed $150 million redistribution from the pharmacy overhead cost of coded 

packaged drugs and biologicals for which an ASP is reported and an additional $50 

million dollars from the total uncoded drug and biological cost to separately payable 

drugs and biologicals as a conservative estimate of the pharmacy overhead cost of 
CMS-1589-FC 612 

uncoded packaged drugs and biologicals that should be appropriately associated with the 

cost of separately payable drugs and biologicals (74 FR 60517). We stated that this was 

an intentionally conservative estimate as we could not identify definitive evidence that 

uncoded packaged drug and biological cost included a pharmacy overhead amount 

comparable to that of coded packaged drugs and biologicals with an ASP. We stated that 

we could not know the amount of overhead associated with these drugs without making 

significant assumptions about the amount of pharmacy overhead cost associated with the 

drugs and biologicals captured by these uncoded packaged drug costs (74 FR 60511 

through 60513). In addition, as in prior years, we reiterated our commitment to continue 

in our efforts to refine our analyses. 

For CY 2011, we continued the CY 2010 pharmacy overhead adjustment 

methodology (74 FR 60500 through 60512). Consistent with our supposition that the 

combined payment for average acquisition and pharmacy overhead costs under our 

standard methodology may understate the cost of separately payable drugs and 

biologicals and related pharmacy overhead for those drugs and biologicals, we 

redistributed $150 million from the pharmacy overhead cost of coded packaged drugs and 

biologicals with an ASP and redistributed $50 million from the cost of uncoded packaged 

drugs and biologicals, for a total redistribution of $200 million from costs for coded and 

uncoded packaged drugs to separately payable drugs and biologicals, with the result that 

we pay separately paid drugs and biologicals at ASP+5 percent for CY 2011. The 

redistribution amount of $150 million in overhead cost from coded packaged drugs and 

biologicals with an ASP and $50 million in costs from uncoded packaged drugs and 
CMS-1589-FC 613 

biologicals without an ASP were within the parameters established in the CY 2010 

OPPS/ASC final rule. In addition, as in prior years, we described some of our work to 

improve our analyses during the preceding year, including an analysis of uncoded 

packaged drug and biological cost and our evaluation of the services with which uncoded 

packaged drug cost appears in the claims data. We conducted this analysis in an effort to 

assess how much uncoded drugs resemble coded packaged drugs (75 FR 71966). We 

stated that, in light of this information, we were not confident that the drugs captured by 

uncoded drug cost are the same drugs captured by coded packaged drug cost, and 

therefore, we did not believe we could assume that they are the same drugs, with 

comparable overhead and handling costs. Without being able to calculate the ASP for 

these uncoded packaged drugs and biologicals and without being able to gauge the 

magnitude of overhead complexity associated with these drugs and biologicals, we did 

not believe that we should have assumed that the same amount of proportional overhead 

should be redistributed between coded and uncoded packaged drugs, and therefore, we 

redistributed $50 million from uncoded packaged drugs and $150 million from coded 

packaged drugs (75 FR 71966). We reiterated our commitment to continue to refine our 

drug pricing methodology and noted that we would continue to pursue the most 

appropriate methodology for establishing payment for drugs and biologicals under the 

OPPS and continue to evaluate the appropriateness of this methodology when we 

establish each year’s payment for drugs and biologicals under the OPPS (75 FR 71967). 

For CY 2012, we continued our overhead adjustment methodology of 

redistributing 1/3 to 1/2 of allocated overhead for coded packaged drugs or $150 million 
CMS-1589-FC 614 

plus an additional $50 million in allocated overhead for uncoded packaged drugs. 

Additionally, we finalized a policy to update these amounts by the PPI for 

pharmaceuticals and redistributed $161 million in allocated overhead from coded 

packaged drugs and $54 million from uncoded packaged drugs. We further finalized a 

policy to hold the redistributed proportion of packaged drugs constant between the 

proposed and the final rule, which increased the final redistribution amount in the 

CY 2012 final rule to $240.3 million ($169 million from coded packaged drugs and 

$71.3 million from uncoded packaged drugs). This approach resulted in a final payment 

rate of ASP+4 percent for separately payable drugs. 

b. CY 2013 Payment Policy 

In reexamining our current drug payment methodology for the CY 2013 

OPPS/ASC proposed rule, we reviewed our past efforts to determine an appropriate 

payment methodology for drugs and biologicals, as described above. Since the inception 

of the OPPS, we have remained committed to establishing a drug payment methodology 

that is predictable, accurate, and appropriate. Pharmacy stakeholders and the hospital 

community have also, throughout the years, continually emphasized the importance of 

both predictable and accurate payment rates for drugs, noting that a payment 

methodology that emphasizes predictability and accuracy leads to appropriate payment 

rates that reflect the cost of drugs and biologicals (including overhead) in HOPDs. 

Pertinent stakeholders also have noted that predictable and accurate payment rates 

minimize the effect of anomalies in the claims data that may incorrectly influence the 
CMS-1589-FC 615 

future payment for services. We understand that, with predictable payment rates, 

hospitals are better able to plan for the future. 

As discussed above, since CY 2006, we have attempted to establish a drug 

payment methodology that reflects hospitals’ acquisition costs for drugs and biologicals 

while taking into account relevant pharmacy overhead and related handling expenses. 

We have attempted to collect more data on hospital overhead charges for drugs and 

biologicals by making several proposals that would require hospitals to change the way 

they report the cost and charges for drugs. None of these proposals were adopted due to 

significant stakeholder concern, including that hospitals stated that it would be 

administratively burdensome to report hospital overhead charges. We established a 

payment policy for separately payable drugs and biologicals, authorized by section 

1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is calculated by 

comparing the estimated aggregate cost of separately payable drugs and biologicals in our 

claims data to the estimated aggregate ASP dollars for separately payable drugs and 

biologicals, using the ASP as a proxy for average acquisition cost (70 FR 68642). As we 

previously stated, we refer to this methodology as our standard drug payment 

methodology. 

In CY 2010, taking into consideration comments made by the pharmacy 

stakeholders and acknowledging the limitations of the reported data due to charge 

compression and hospitals’ reporting practices, we added an “overhead adjustment” (an 

internal adjustment of the data) by redistributing cost from coded and uncoded packaged 

drugs and biologicals to separately payable drugs in order to provide more appropriate 
CMS-1589-FC 616 

payments for drugs and biologicals in the HOPD. We continued this overhead 

adjustment methodology through CY 2012, and further refined our overhead adjustment 

methodology by finalizing a policy to update the redistribution amount for inflation and 

keep the redistribution ratio constant between the proposed rule and the final rule. 

Application of the standard drug payment methodology, with the overhead 

adjustment, has always yielded a finalized payment rate in the range of ASP+4 percent to 

ASP+6 percent for nonpass-through separately payable drugs. We believe that the 

historic ASP+4 to ASP+6 percentage range is an appropriate payment rate for separately 

payable drugs and biologicals administered within the HOPD, including acquisition and 

pharmacy overhead and related expenses. However, because of continuing uncertainty 

about the full cost of pharmacy overhead and acquisition cost, based in large part on the 

limitations of the submitted hospital charge and claims data for drugs, we are concerned 

that the continued use of our current standard drug payment methodology (including the 

overhead adjustment) still may not appropriately account for average acquisition and 

pharmacy overhead cost and, therefore, may result in payment rates that are not as 

predictable, accurate, or appropriate as they could be. 

Section 1833(t)(14)(A)(iii)(II) of the Act requires an alternative methodology for 

determining payment rates for SCODs wherein, if hospital acquisition cost data are not 

available, payment shall be equal (subject to any adjustment for overhead costs) to 

payment rates established under the methodology described in section 1842(o), section 

1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as 

necessary. Considering stakeholder and provider feedback, continued limitations of the 
CMS-1589-FC 617 

hospital claims and cost data on drugs and biologicals, and Panel recommendations, in 

the CY 2013 OPPS/ASC proposed rule (77 FR 45140), we proposed for CY 2013 to pay 

for separately payable drugs and biologicals at ASP+6 percent based on section 

1833(t)(14)(A)(iii)(II) of the Act, hereinafter referred to as the statutory default. 

As noted above, 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, physician Part 

B drugs are paid at ASP+6 percent. We believe that proposing the statutory default of 

ASP+6 percent is appropriate at this time as it yields increased predictability in payment 

for separately payable drugs and biologicals under the OPPS. We believe that ASP+6 

percent is an appropriate payment amount because it is consistent with payment amounts 

yielded by our drug payment methodologies over the past 7 years. We proposed that the 

ASP+6 percent payment amount for separately payable drugs and biologicals requires no 

further adjustment, and represents the combined acquisition and pharmacy overhead 

payment for drugs and biologicals for CY 2013. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45140), we proposed that 

payments for separately payable drugs and biologicals are included in the budget 

neutrality adjustments, under the requirements in section 1833(t)(9)(B) of the Act, and 

that the budget neutral weight scaler is not applied in determining payments for these 

separately paid drugs and biologicals. 
CMS-1589-FC 618 

Comment: Commenters strongly supported CMS’ proposal to pay for separately 

payable drugs and biologicals based on the statutory default rate of ASP+6 percent. The 

commenters stated that ASP+6 percent is administratively simple, improves stability of 

drug and biological payments, and better covers the costs of drug acquisition and 

pharmacy overhead than the payment rates CMS has finalized in previous years. The 

commenters noted that, by contrast, the current payment methodology involves complex 

calculations and an annual overhead adjustment in which costs are redistributed from 

packaged drugs to separately payable drugs. Another commenter supported CMS’ 

proposal to pay for separately payable drugs and biologicals because it believed that this 

change in the payment methodology will prevent the inappropriate shifting of overhead 

costs from contrast agents. One commenter also expressed support for the proposal and 

noted the importance of finalizing the proposal, as more hospitals seek to access preferred 

drug pricing under the 340B program. 

One commenter noted that the implementation of the survey of hospital drug costs 

required by section 1833(t)(14)(D)(iii), instead of the proposed statutory default rate of 

ASP+6 percent, would impose a costly administrative burden on both hospitals and CMS 

without demonstrating an equivalent benefit compared to the use of the average sales 

price that is based on the certified sales price of the drugs and biologicals. Other 

commenters supported CMS’ proposal to pay for drugs and biologicals at ASP+6 percent 

because neither the GAO nor CMS have conducted the periodic surveys required by the 

statute since CY 2005 on average acquisition costs. They argued that, in the absence of 

current survey data on average acquisition costs, the statute requires that payment be set 
CMS-1589-FC 619 

at the statutory default rate of ASP+6 percent and that an additional adjustment for 

overhead be made. 

Several commenters agreed with CMS and noted that this proposal allowed for 

stable and predictable payment rates for separately paid drugs and biologicals while 

removing the need to address charge compression and other issues. One commenter 

noted, in particular, that the proposal eliminates the issues related to the inclusion of 

340B sales in the rate calculation. The commenter further recommended that CMS 

continue its policy of paying 340B and non-340B hospitals at the same rate for separately 

paid drugs and biologicals. Other commenters noted that payment for the acquisition and 

overhead costs of drugs and biologicals at ASP+6 percent will help to protect patients’ 

access to care in the most clinically appropriate setting. The commenters also argued that 

this payment rate would create parity with the physician office setting. 

Finally, many of the comments supported CMS’ goal to establish a payment 

methodology that accurately and predictably estimates acquisition and overhead costs for 

separately paid drugs and biologicals. 

Response: We appreciate the commenters’ support. For several years, we have 

attempted to identify a methodology for paying for the average acquisition cost and 

pharmacy overhead costs for SCODs in a manner that is both appropriate and that is not 

burdensome to hospitals. After several years of refining a payment methodology, which 

has included the standard payment methodology and the overhead adjustment 

methodology, we determined in the CY 2013 OPPS/ASC proposed rule (77 FR 45140) 

that, because of continuing uncertainty about the full cost of pharmacy overhead and 
CMS-1589-FC 620 

acquisition cost, based in large part on the limitations of the submitted hospital charge 

and claims data for drugs, the continued use of our current standard drug payment 

methodology (including the overhead adjustment) still may not appropriately account for 

average acquisition and pharmacy overhead cost and therefore may result in payment 

rates that are not as predictable, accurate, or appropriate as they could be. Therefore, we 

proposed to pay for separately payable drugs and biologicals at the statutory default rate 

of ASP+6 percent, as is consistent with section 1833(t)(14)(iii)(II) of the Act which 

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 the payment rates established under the methodology 

described in section 1842(o), section 1847A, or section 1847B of the Act, as calculated 

and adjusted by the Secretary as necessary. 

In the past, commenters, pertinent stakeholders, and the HOP Panel (previously 

known as the APC Panel) have strongly advocated for the use of the statutory default 

payment rate of ASP+6 percent. As we stated in the proposed rule, we believe that our 

proposal is consistent with these previous comments and we agree with the commenters 

that proposing a payment rate of ASP+6 percent based on the statutory default for 

separately payable drugs and biologicals is appropriate at this time. We agree with 

commenters that the statutory default obviates both the need to utilize complex 

calculations for acquisition and overhead costs and the requirement to collect data from 

hospital surveys, which would prove to be burdensome to both hospitals and to CMS. 

Additionally, we agree with commenters that the statutory default payment rate of ASP+6 
CMS-1589-FC 621 

percent eliminates the 340B program concerns many commenters have expressed in the 

past. Therefore, we believe that the statutory default payment rate of ASP+6 percent is 

appropriate for CY 2013. 

Comment: Several commenters supported CMS’ proposal of ASP+6 percent but 

stated their concerns that this level of payment is not sufficient to cover both drug 

acquisition and pharmacy overhead cost. The commenters stated that they considered 

this an improvement over the rate used in previous years and that this payment rate 

should be the minimum level of payment, or the payment floor, necessary to cover 

acquisition costs alone. Therefore, the commenters recommended that CMS finalize 

ASP+6 percent as the payment rate for acquisition costs alone and provide an additional, 

separate payment for hospital pharmacy overhead costs. One commenter also expressed 

concern whether ASP+6 percent is sufficient to cover both acquisition and handling. 

However, the commenter stated that the ASP+6 percent proposed payment rate is 

preferable to CMS continuing to attempt to determine what level of redistribution from 

packaged drugs to separately payable drugs should occur on an annual basis. One 

commenter reaffirmed the notion that ASP+6 percent should be the minimum level of 

payment that should be provided to cover hospitals’ drug acquisition costs but the 

commenter recommended that CMS reconsider ASP+6 percent to be the minimum 

payment level to cover drug acquisition costs in both the physician’s office and the 

hospital outpatient setting. The commenter argued that this would create payment parity 

and also enable the creation of a supplemental system to make a separate and additional 

ASP plus percentage amount to hospitals to cover their significant overhead costs. 
CMS-1589-FC 622 

One commenter supported CMS’ proposal and stated that if CMS should finalize 

its policy to pay for separately payable drugs and biologicals at ASP+6 percent, CMS 

should not pay for pharmacy overhead, which is permitted but not required by section 

1833(t)(14)(E)(iii) of the Act, in addition to the ASP+6 percent payment because 

payment at ASP+6 percent already includes payment for pharmacy overhead equal to 5 

percent of ASP (the difference between ASP+6 percent and the ASP+1 percent that the 

OIG found to be the average acquisition cost of hospital drugs and biologicals in a study 

conducted by the OIG in 2010) (https://oig.hhs.gov/oei/reports/oei-03-09-00420.pdf). 

Moreover, the commenter further noted that payment for separately payable drugs and 

biologicals under section 1842(o) of the Act at 106 percent of ASP includes payment for 

the services of the pharmacy from which the physician purchases the drugs and 

biologicals. Therefore, the commenter further noted, if CMS pays hospitals ASP+6 

percent for separately paid drugs and biologicals, it is also paying for the associated 

pharmacy overhead and should pay nothing more. 

Response: We disagree with the commenters who stated that ASP+6 percent 

should be the payment for the acquisition cost alone and that separate payment for 

overhead should be made. We note that while the statute states that payment for SCODs 

under section 1833(t)(14)(A)(iii)(II) of the Act equals the payment rates established in the 

physician’s office, subject to any adjustment for overhead costs, the statute does not 

mandate that such an adjustment for overhead be made. We believe that the payment rate 

of ASP+6 percent includes a sufficient amount for overhead costs for separately payable 

drugs and biologicals and we see no further evidence that any additional adjustment for 
CMS-1589-FC 623 

overhead is required. As we stated in the proposed rule, we believe that the historic 

ASP+4 to ASP+6 percentage range is an appropriate payment rate for separately payable 

drugs and biologicals administered within the HOPD, including acquisition and 

pharmacy overhead and related expenses, and we have not seen any evidence to indicate 

that these rates have limited beneficiary access to drugs, insufficiently paid for 

acquisition and overhead costs for drugs administered in the HOPD, or caused a 

migration of care from the hospital outpatient setting to the physician’s office. To the 

contrary, we continue to see increases in the utilization of drugs and biologicals 

administered in the outpatient department in our claims data, even at payment rates of 

ASP+4 or 5 percent. Therefore, we believe that ASP+6 percent is an appropriate 

payment rate for separately payable drugs and biologicals. 

Additionally, we agree with the commenter who cited the OIG study conducted in 

2010, which used first quarter 2009 Medicare payment amounts compared to first quarter 

2009 hospital acquisition costs for 33 separately payable drugs. The OIG concluded that, 

in the aggregate, Medicare payments were 1 percent higher than acquisition costs 

amounts for the responding non-340B hospitals for the selected separately payable drugs. 

This study supports our position that the ASP+6 percentage amount proposed for 

CY 2013 sufficiently pays for overhead and acquisition costs for drugs and requires no 

further adjustment. 

We continue to believe that ASP+6 percent based on the statutory default is 

appropriate for hospitals for CY 2013 and that this percentage amount includes payment 

for acquisition and overhead cost. Furthermore, many hospitals and major hospital 
CMS-1589-FC 624 

associations supported our proposed ASP+6 percent for CY 2013 and made no request 

for additional payment for overhead costs in their comments to the CY 2013 OPPS/ASC 

proposed rule. Therefore, we believe that a payment rate of ASP+6 percent is appropriate 

for CY 2013. 

Comment: A few commenters supported CMS’ proposal, but recommended that 

CMS examine ways to compensate hospitals for the unique, higher overhead and 

handling costs associated with therapeutic radiopharmaceuticals. 

Response: As we stated above, we continue to believe that ASP+6 percent based 

on the statutory default is appropriate for hospitals for CY 2013 and that this percentage 

amount includes payment for acquisition and overhead cost. We see no evidence that an 

additional overhead adjustment is required for separately payable drugs, biologicals and 

therapeutic radiopharmaceuticals for CY 2013. 

Comment: One commenter remained concerned that the comparison of ASP to 

cost is not an “apple to apples” comparison because the cost data incorporate data from 

hospitals that receive 340B program discounts from drugs they purchase. The 

commenter further stated that the ASP calculation excludes 340B program sales, which 

underestimates the aggregate costs of drugs for most hospitals and the ASP-based rate 

that CMS produces by comparing aggregate costs to ASP is too low. The commenter 

asked that CMS review its cost calculation to ASP to ensure that 340B program drugs are 

not artificially reducing the CMS calculation. 

Response: For CY 2013, we proposed to pay for separately payable drugs and 

biologicals at ASP+6 percent based on the statutory default established in section 
CMS-1589-FC 625 

1833(t)(14)(A)(iii)(II) of the Act. While we understand that commenters were previously 

concerned about the impact of 340B hospital data on our previous standard and overhead 

adjustment methodology calculations, we did not in fact propose to continue these 

methodologies for CY 2013. 

Comment: One commenter supported CMS’ proposal to increase the payment 

rate for SCODs to ASP+6 percent for CY 2013. However, the commenter believed that 

the law requires that SCOD payment rates, other than the ASP+6 percent default rate, 

must be set on a drug by drug basis, as mandated by section 1833(t)(14)(A)(iii)(I) of the 

Act. Therefore, the commenter recommended that CMS perform an individualized, drug 

by drug determination for the payment rate for each SCOD. 

Response: Section 1833(t)(14)(A)(iii)(I) of the Act requires that payment for 

SCODs in CY 2006 and subsequent years be equal to the average acquisition cost for the 

drug for that year, subject to any adjustment of overhead costs. If hospital acquisition 

cost data are not available, section 1833(t)(14)(A)(iii)(II) of the Act requires that payment 

be equal to payment rates established under the methodology described in section 

1842(o), section 1847A, or section 1847B of the Act, as calculated and adjusted by the 

Secretary as necessary. Previously under the standard methodology and the overhead 

adjustment methodology, we established ASP as a proxy for the average acquisition cost. 

However, we did not propose to use the authority given under section 

1833(t)(14)(A)(iii)(I) of the Act to pay for SCODs for CY 2013. For CY 2013, we 

instead proposed to pay for separately payable drugs and biologicals based on the 

statutory authority established in section 1833(t)(14)(A)(iii)(II) of the Act. 
CMS-1589-FC 626 

Comment: One commenter recommended that CMS design a payment strategy 

that would maintain one formula for health care prescribers, but develop a multi-tiered 

reimbursement strategy that would encourage the use of generic drugs over their branded 

counterparts, using ASP+6 percent as an appropriate base for the most expensive drugs 

and providing additional reimbursement for multi-source generic drugs. Another 

commenter recommended that CMS adopt a new policy of assigning each “branded 

prescription drug” a unique HCPCS code, so that Part B utilization of these drugs can be 

accurately determined. 

Response: We made no such proposal to develop a multi-tiered payment strategy 

that would encourage the use of generic drugs over their branded counterparts, using 

ASP+6 percent as an appropriate base for the most expensive drugs and providing 

additional payment for multi-source generic drugs. The commenters’ recommendation to 

assign a unique HCPCS code for each “branded prescription drug” is outside the scope of 

this final rule with comment period. 

Comment: One commenter asked that, for CY 2014, CMS consider paying for 

influenza and PPV vaccines at 106 percent of ASP. 

Response: This comment is outside the scope of the CY 2013 OPPS/ASC final 

rule. However, we plan to address this issue in an upcoming rulemaking cycle. 

Comment: One commenter supported CMS’ proposal to pay for separately 

payable drugs at ASP+6 percent, but the commenter urged CMS to consider the effect of 

its coding practices on brand manufacturers’ annual fee payment under section 9008 of 

the Patient Protection and Affordable Care Act (ACA) and asked that CMS support the 
CMS-1589-FC 627 

exclusion of wholesaler prompt pay discounts from the ASP calculations of separately 

payable drugs. 

Response: Comments about individual ASP calculations for drugs and 

biologicals, or the inclusion or exclusion of prompt pay discounts in these calculations, 

are outside the scope of this final rule with comment period. 

At its February 2012 Panel meeting, the Panel made four recommendations on 

drugs and biologicals paid under the OPPS. First, the Panel recommended that CMS 

require hospitals to bill all drugs that are described by Healthcare Common Procedure 

Coding System (HCPCS) codes under revenue code 0636. While we agree that drugs 

and biologicals may be reported under revenue code 0636, we believe that drugs and 

biologicals may also be appropriately reported in revenue code categories other than 

revenue code 0636, including but not limited to, revenue codes 025x and 062x. As we 

stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71966), we 

recognize that hospitals may carry the costs of drugs and biologicals in multiple cost 

centers and that it may not be appropriate to report the cost of all drugs and biologicals in 

one specified revenue code. Additionally, we generally require hospitals to follow 

National Uniform Billing Committee (NUBC) guidance for the choice of an appropriate 

revenue code that is also appropriate for the hospital’s internal accounting processes. 

Therefore, we are not accepting the Panel’s recommendation to require hospitals to bill 

all drugs that are described by HCPCS codes under revenue code 0636. However, we 

continue to believe that OPPS ratesetting is most accurate when hospitals report charges 

for all items and services that have HCPCS codes using those HCPCS codes, regardless 
CMS-1589-FC 628 

of whether payment for the items and services is packaged. It is our standard ratesetting 

methodology to rely on hospital cost report and charge information as it is reported to us 

through the claims data. We continue to believe that more complete data from hospitals 

identifying the specific drugs that were provided during an episode of care may improve 

payment accuracy for drugs in the future. Therefore, we continue to encourage hospitals 

to change their reporting practices if they are not already reporting HCPCS codes for all 

drugs and biologicals furnished, when specific HCPCS codes are available for those 

drugs and biologicals. 

Comment: Some commenters recommended that CMS require hospitals to bill all 

drugs with HCPCS codes under revenue code 0636 in order to improve its data on 

packaged drugs. One commenter recommended that CMS not require hospitals to report 

the HCPCS code for each drug and biological in revenue code 0636 because to do so 

would impose an unreasonable burden on hospitals without a commensurate benefit to 

the accuracy of Medicare payment for drugs and biologicals under the OPPS if CMS 

finalizes its proposal to pay separately paid drugs at ASP+6 percent. Moreover, the 

commenter continued, in the case of packaged drugs and biologicals, the charges that are 

reported with revenue codes but without HCPCS codes are reduced to costs by 

application of the CCR for the cost center that applies to the revenue code under which 

the charges are reported and are packaged into the cost of the service. The commenter 

further stated that, therefore, to require that all drugs and biologicals be reported under 

any specific revenue code would require hospitals to revise their cost accounting systems 

to accommodate such a change because the revenue code in which charges are reported 
CMS-1589-FC 629 

must correspond to the cost center in which the costs are reported on the cost report for 

the cost report to be completed correctly and for the cost of packaged drugs and 

biologicals to be calculated correctly. 

Response: We do not accept the commenter’s recommendation that CMS require 

drugs and biologicals to be reported under revenue code 0636. We do agree with the 

commenter who recommended that CMS not require hospitals to report the HCPCS code 

for each drug and biological in revenue code 0636 because doing so would impose an 

unreasonable burden on hospitals. Further, we agree that charges that are reported with 

revenue codes but without HCPCS codes are reduced to costs by application of the CCR 

for the cost center that applies to the revenue code under which the charges are reported 

and are packaged into the cost of the service. As we stated in the CY 2013 OPPS/ASC 

proposed rule, we believe that drugs and biologicals may also be appropriately reported 

in revenue code categories other than revenue code 0636, including, but not limited to, 

revenue codes 025x and 062x. As we stated in the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71966), we recognize that hospitals may carry the costs of drugs 

and biologicals in multiple cost centers and that it may not be appropriate to report the 

cost of all drugs and biologicals in one specified revenue code. Additionally, we 

generally require hospitals to follow National Uniform Billing Committee (NUBC) 

guidance for the choice of an appropriate revenue code that is also appropriate for the 

hospital’s internal accounting processes. Therefore, we are not accepting the Panel’s 

recommendation to require hospitals to bill all drugs that are described by HCPCS codes 

under revenue code 0636. 
CMS-1589-FC 630 

However, we are reiterating once again in this CY 2013 OPPS/ASC final rule 

with comment period that the OPPS ratesetting as a whole, not just for drugs and 

biologicals, is most accurate when hospitals report charges for all items and services that 

have HCPCS codes using those HCPCS codes, regardless of whether payment for the 

items and services is packaged. Therefore, we continue to encourage hospitals to report a 

charge for each service they furnish, either by billing the HCPCS code and a charge for 

that service if separate reporting is consistent with CPT and CMS instructions or by 

reporting the charge for the packaged service with an appropriate revenue code but 

without a HCPCS code, when specific HCPCS codes are unavailable. 

Second, the Panel recommended that CMS exclude data from hospitals that 

participate in the 340B program from its ratesetting calculations for drugs. Under the 

proposed statutory default payment rate of ASP+6 percent, hospitals’ 340B status does 

not affect the drug payment rate. 

Third, the Panel recommended that CMS freeze the packaging threshold at $75 

until the drug payment issue is more equitably addressed. The OPPS is based on the 

concept of payment for groups of services that share clinical and resource characteristics. 

We believe that the packaging threshold is reasonable based on the initial establishment 

in law of a $50 threshold for the CY 2005 OPPS, that updating the $50 threshold is 

consistent with industry and government practices, and that the PPI for Prescription 

Drugs is an appropriate mechanism to gauge Part B drug inflation. Therefore, we are not 

accepting the Panel’s recommendation to freeze the packaging threshold at $75 until the 

drug payment issue is more equitably addressed. Instead, as discussed in section V.B.2. 
CMS-1589-FC 631 

of the proposed rule and this final rule with comment period, we proposed and are 

finalizing an OPPS drug packaging threshold for CY 2013 of $80. However, we do 

believe that we have addressed the drug payment issue by proposing to pay for separately 

paid drugs and biologicals at ASP+6 percent for CY 2013 based upon the statutory 

default. 

Finally, the Panel recommended that CMS pay hospitals for separately payable 

drugs at a rate of ASP+6 percent. This Panel recommendation is consistent with our 

CY 2013 proposed payment rate based upon the statutory default under section 

1833(t)(14)(A)(iii)(II) of the Act, which authorizes us to pay for drugs and biologicals 

under the OPPS at ASP+6 percent, when hospital acquisition cost data are not available. 

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

proposal, without modification, to pay for separately payable drugs and biologicals at 

ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) of the Act, hereinafter referred to 

as the statutory default. The ASP+6 percent payment amount for separately payable 

drugs and biologicals requires no further adjustment and represents the combined 

acquisition and pharmacy overhead payment for drugs and biologicals for CY 2013. As 

we stated in the proposed rule (77 FR 45140), our goals continue to be to develop a 

methodology that accurately and predictably estimates acquisition and overhead costs for 

separately payable drugs and biologicals in order to pay for them appropriately. If a 

better payment methodology is developed in the future then the proposed policy to pay 

ASP+6 percent according to the statutory default would be an interim step in the 

development of this payment policy. We recognize the challenges in doing so given the 
CMS-1589-FC 632 

current data sources and the object of maintaining the smallest administrative burden 

possible. 

In addition, we are finalizing our proposal which states that payment for 

separately payable drugs and biologicals be included in the budget neutrality adjustments, 

under the requirements of section 1833(t)(9)(B) of the Act, and that the budget neutral 

weight scaler is not applied in determining payment of these separately paid drugs and 

biologicals. 

We note that separately payable drug and biological payment rates listed in 

Addenda A and B to this final rule with comment period, which illustrate the final 

CY 2013 payment of ASP+6 percent for separately payable nonpass-through drugs and 

biologicals and ASP+6 percent for pass-through drugs and biologicals, reflect either ASP 

information that is the basis for calculating payment rates for drugs and biologicals in the 

physician’s office setting effective October 1, 2012, or WAC, AWP or mean unit cost 

from 2011 claims data and updated cost report information available for this final rule 

with comment period. In general, these published payment rates are not reflective of 

actual January 2013 payment rates. This is because payment rates for drugs and 

biologicals with ASP information for January 2013 will be determined through the 

standard quarterly process where ASP data submitted by manufacturers for the third 

quarter of 2012 (July 1, 2012 through September 30, 2012) are used to set the payment 

rates that are released for the quarter beginning in January 2013 near the end of 

December 2012. In addition, payment rates for drugs and biologicals in Addenda A and 

B to this final rule with comment period for which there was no ASP information 
CMS-1589-FC 633 

available for October 2012 are based on mean unit cost in the available CY 2011 claims 

data. If ASP information becomes available for payment for the quarter beginning in 

January 2013, we will price payment for these drugs and biologicals based on their newly 

available ASP information. Finally, there may be drugs and biologicals that have ASP 

information available for this final rule with comment period (reflecting October 2012 

ASP data) that do not have ASP information available for the quarter beginning in 

January 2013. These drugs and biologicals will then be paid based on mean unit cost 

data derived from CY 2011 hospital claims. Therefore, the payment rates listed in 

Addenda A and B to this final rule with comment period are not for January 2013 

payment purposes and are only illustrative of the CY 2013 OPPS payment methodology 

using the most recently available information at the time of issuance of this final rule 

with comment period. 

4. Payment Policy for Therapeutic Radiopharmaceuticals 

Beginning in CY 2010 and continuing for CY 2012, we established a policy to 

pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology 

adopted for separately payable drugs and biologicals. We allow manufacturers to submit 

the ASP data in a patient-specific dose or patient-ready form in order to properly 

calculate the ASP amount for a given HCPCS code. If ASP information is unavailable 

for a therapeutic radiopharmaceutical, then we base therapeutic radiopharmaceutical 

payment on mean unit cost data derived from hospital claims. We believe that the 

rationale outlined in the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60524 through 60525) for applying the principles of separately payable drug 
CMS-1589-FC 634 

pricing to therapeutic radiopharmaceuticals continues to be appropriate for 

nonpass-through separately payable therapeutic radiopharmaceuticals in CY 2013. 

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45141), we proposed for CY 

2013 to pay all nonpass-through, separately payable therapeutic radiopharmaceuticals at 

ASP+6 percent, based on the statutory default described in section 1833(t)(14)(A)(iii)(II) 

of the Act. We proposed to continue to set payment rates for therapeutic 

radiopharmaceuticals based on ASP information, if available, for a “patient ready” dose 

and updated on a quarterly basis for products for which manufacturers report ASP data. 

For a full discussion of how a “patient ready” dose is defined, we refer readers to the CY 

2010 OPPS/ASC final rule with comment period (74 FR 60520 through 60521). We also 

proposed to rely on CY 2011 mean unit cost data derived from hospital claims data for 

payment rates for therapeutic radiopharmaceuticals for which ASP data are unavailable 

and to update the payment rates for separately payable therapeutic radiopharmaceuticals, 

according to our usual process for updating the payment rates for separately payable 

drugs and biologicals, on a quarterly basis if updated ASP information is available. For a 

complete history of the OPPS payment policy for therapeutic radiopharmaceuticals, we 

refer readers to the CY 2005 OPPS final rule with comment period (69 FR 65811), the 

CY 2006 OPPS final rule with comment period (70 FR 68655), and the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60524). 

Comment: Commenters supported CMS’ proposal to pay for separately payable 

therapeutic radiopharmaceuticals under the statutory default payment rate of ASP+6 

percent, if ASP data is submitted to CMS. The commenters also supported CMS’ 
CMS-1589-FC 635 

proposal to continue to set payment rates for therapeutic radiopharmaceuticals based on 

ASP information, if available, for a “patient ready” dose. One commenter recommended 

that CMS use its discretion and continue to pay on the basis of hospital specific 

reasonable cost-finding where ASP information is not available. 

Response: We appreciate the commenters’ support. We continue to believe that 

providing payment for therapeutic radiopharmaceuticals based on ASP or mean unit cost 

if ASP information is not available would provide appropriate payment for these 

products. When ASP data are not available, we believe that paying for therapeutic 

radiopharmaceuticals using mean unit cost would appropriately pay for the average 

hospital acquisition and associated handling costs of nonpass-through separately payable 

therapeutic radiopharmaceuticals. As we stated in the CY 2010 OPPS/ASC final rule 

with comment period (74 FR 60523), although using mean unit cost for payment for 

therapeutic radiopharmaceuticals when ASP data are not available is not the usual OPPS 

process (the usual process relies on alternative data sources such as WAC or AWP when 

ASP information is temporarily unavailable, prior to defaulting to the mean unit cost 

from hospital claims data), we continue to believe that WAC or AWP is not an 

appropriate proxy to provide OPPS payment for average therapeutic radiopharmaceutical 

acquisition cost and associated handling costs when manufacturers are not required to 

submit ASP data. In addition, we do not believe that we should provide payment at 

charges reduced to cost or reasonable cost when ASP data are not available. We have 

stated previously, in the CY 2008 OPPS/ASC final rule with comment period, that we 

continue to believe that payment on a claims-specific basis is not consistent with the 
CMS-1589-FC 636 

payment of times and services on a prospective basis under the OPPS and may lead to 

extremely high or low payment to hospitals for radiopharmaceuticals, even when those 

products would be expected to have relatively predictable and consistent acquisition and 

holding costs across individual clinical cases and hospitals. For CY 2013, Medicare pays 

for only a few outpatient services at reasonable cost. These services include, but are not 

limited to, corneal tissue acquisition and influenza vaccines, and are paid at reasonable 

cost in part because the input costs for future years are highly unpredictable and to set a 

prospective payment rate for them may result in payment that is so deficient that hospitals 

would not be able to provide the services and the general public could be denied the 

benefits. In particular, it is not possible to forecast with confidence what the cost of 

influenza vaccine would be a year in advance because the composition of the vaccine is 

not constant from year to year. In contrast, however, the input costs of therapeutic 

radiopharmaceuticals are not hugely unpredictable. Therefore, we do not believe that 

therapeutic radiopharmaceuticals should be paid in the same manner as the few outpatient 

services paid at reasonable cost. We continue to believe that when ASP data are 

unavailable, therapeutic radiopharmaceutical payment based on mean unit cost is an 

appropriate proxy for hospitals’ acquisition and handling data. 

Comment: One commenter requested that CMS create a HCPCS J-code for 

tositumomab, currently provided under a radioimmunotherapy regimen and billed as part 

of HCPCS code G3001 (Administration and supply of tositumomab, 450 mg). The 

commenter argued that because tositumomab is approved by the FDA as part of the 

BEXXAR® regimen and has its own National Drug Code (NDC), it should be 
CMS-1589-FC 637 

recognized as a drug and, therefore, be paid as other drugs are paid under the OPPS 

methodology, instead of having a payment rate determined by hospital claims data. The 

commenter recommended that payment for all of the BEXXAR® drug components be 

paid as a SCOD. 

Response: We have consistently noted that unlabeled tositumomab is not 

approved as either a drug or a radiopharmaceutical. It is a supply that is required as part 

of the radioimmunotherapy treatment regimen (as noted in the CY 2009 OPPS/ASC final 

rule with comment period (73 FR 68658), the CY 2008 OPPS final rule with comment 

period (72 FR 66765), the CY 2006 OPPS final rule with comment period 

(70 FR 68654), and the CY 2004 OPPS final rule with comment period (68 FR 63443)). 

We do not make separate payment for supplies used in services provided under the 

OPPS. Payments for necessary supplies are packaged into payments for the separately 

payable services provided by the hospital. Payment for unlabeled tositumomab is 

included in the payment for the administration procedure (described by HCPCS code 

G3001). Therefore, we do not agree with the commenter’s recommendation that we 

should assign a separate HCPCS code to unlabeled tositumomab, which is a packaged 

supply. 

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

proposal, without modification, to continue to pay all nonpass-through, separately 

payable therapeutic radiopharmaceuticals based on ASP information, if available, for a 

“patient ready” dose and updated on a quarterly basis for products for which 

manufacturers report ASP data. For CY 2013, therapeutic radiopharmaceuticals will be 
CMS-1589-FC 638 

paid based on the statutory default payment rate of ASP+6 percent. The final CY 2013 

payment rates for nonpass-through separately payable therapeutic radiopharmaceuticals 

are included in Addenda A and B to the proposed rule (which is available via the Internet 

on the CMS Web site). 

5. Payment for Blood Clotting Factors 

For CY 2012, we provided payment for blood clotting factors under the same 

methodology as other nonpass-through separately payable drugs and biologicals under 

the OPPS and continued paying an updated furnishing fee. That is, for CY 2012, we 

provided payment for blood clotting factors under the OPPS at ASP+4 percent, plus an 

additional payment for the furnishing fee. We note that when blood clotting factors are 

provided in physicians’ offices under Medicare Part B and in other Medicare settings, a 

furnishing fee is also applied to the payment. The CY 2012 updated furnishing fee is 

$0.181 per unit. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45141), we proposed to pay for 

blood clotting factors at ASP+6 percent, consistent with our proposed payment policy for 

other nonpass-through separately payable drugs and biologicals, and to continue our 

policy for payment of the furnishing fee using an updated amount. Our policy to pay for 

a furnishing fee for blood clotting factors under the OPPS is consistent with the 

methodology applied in the physician office and inpatient hospital setting, and first 

articulated in the CY 2006 OPPS final rule with comment period (70 FR 68661) and later 

discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765). 

The proposed furnishing fee update was based on the percentage increase in the 
CMS-1589-FC 639 

Consumer Price Index (CPI) for medical care for the 12-month period ending with June 

of the previous year. Because the Bureau of Labor Statistics releases the applicable CPI 

data after the MPFS and OPPS/ASC proposed rules are published, we were not able to 

include the actual updated furnishing fee in the proposed rules. Therefore, in accordance 

with our policy, as finalized in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66765), we proposed to announce the actual figure for the percent change in the 

applicable CPI and the updated furnishing fee calculated based on that figure through 

applicable program instructions and posting on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html. 

Comment: Commenters supported CMS’ proposal to continue to apply the 

furnishing fee for blood clotting factors provided in the OPD. One commenter stated that 

the furnishing fee helps ensure patient access to blood clotting factors by increasing the 

payment rate for these items. These commenters also supported CMS’ proposal to pay 

for separately payable drugs at ASP+6 percent based on the statutory default, for 

CY 2013. 

Response: We appreciate the commenters’ support. We continue to believe that 

applying the furnishing fee for blood clotting factors is appropriate for CY 2013. In 

addition, because we recognize that there is additional work involved in acquiring the 

product that is neither acquisition cost nor pharmacy overhead, we believe that it 

continues to be appropriate to pay a furnishing fee for blood clotting factors under the 

OPPS as is done in the physician’s office setting and the inpatient hospital setting. 
CMS-1589-FC 640 

Additionally, for the reasons discussed in section V.B.3. of this final rule with comment 

period, we agree with the commenters that ASP+6 percent based on the statutory default 

is an appropriate payment rate for CY 2013. 

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

proposal, without modification, to provide payment for blood clotting factors under the 

same methodology as other separately payable drugs and biologicals under the OPPS and 

to continue payment of an updated furnishing fee. We will announce the actual figure of 

the percent change in the applicable CPI and the updated furnishing fee calculation based 

on that figure through the applicable program instructions and posting on the CMS Web 

site. 

6. Payment for Nonpass-Through Drugs, Biologicals, and Radiopharmaceuticals with 

HCPCS Codes but without OPPS Hospital Claims Data 

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 

(Pub. L. 108-173) did not address the OPPS payment in CY 2005 and after for drugs, 

biologicals, and radiopharmaceuticals that have assigned HCPCS codes, but that do not 

have a reference AWP or approval for payment as pass-through drugs or biologicals. 

Because there is no statutory provision that dictated payment for such drugs, biologicals, 

and radiopharmaceuticals in CY 2005, and because we had no hospital claims data to use 

in establishing a payment rate for them, we investigated several payment options for 

CY 2005 and discussed them in detail in the CY 2005 OPPS final rule with comment 

period (69 FR 65797 through 65799). 
CMS-1589-FC 641 

For CYs 2005 to 2007, we implemented a policy to provide separate payment for 

new drugs, biologicals, and radiopharmaceuticals with HCPCS codes (specifically those 

new drug, biological, and radiopharmaceutical HCPCS codes in each of those calendar 

years that did not crosswalk to predecessor HCPCS codes) but which did not have 

pass-through status, at a rate that was equivalent to the payment they received in the 

physician’s office setting, established in accordance with the ASP methodology for drugs 

and biologicals, and based on charges adjusted to cost for radiopharmaceuticals. For 

CYs 2008 and 2009, we finalized a policy to provide payment for new drugs (excluding 

contrast agents and diagnostic radiopharmaceuticals) and biologicals (excluding 

implantable biologicals for CY 2009) with HCPCS codes, but which did not have 

pass-through status and were without OPPS hospital claims data, at ASP+5 percent and 

ASP+4 percent, respectively, consistent with the final OPPS payment methodology for 

other separately payable drugs and biologicals. New therapeutic radiopharmaceuticals 

were paid at charges adjusted to cost based on the statutory requirement for CY 2008 and 

CY 2009 and payment for new diagnostic radiopharmaceuticals was packaged in both 

years. 

For CY 2010, we continued to provide payment for new drugs (excluding contrast 

agents) and nonimplantable biologicals with HCPCS codes that do not have pass-through 

status and are without OPPS hospital claims data at ASP+4 percent, consistent with the 

CY 2010 payment methodology for other separately payable nonpass-through drugs and 

nonimplantable biologicals. We also finalized a policy to extend the CY 2009 payment 

methodology to new therapeutic radiopharmaceutical HCPCS codes, consistent with our 
CMS-1589-FC 642 

final policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60581 

through 60526), providing separate payment for therapeutic radiopharmaceuticals that do 

not crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and are 

without OPPS hospital claims data at ASP+4 percent. This policy was continued in the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 71970 through 71973), 

paying for new drugs, nonimplantable biologicals, and radiopharmaceuticals that do not 

crosswalk to CY 2010 HCPCS codes, do not have pass-through status, and are without 

OPPS hospital claims data at ASP+5 percent and the CY 2012 OPPS/ASC final rule with 

comment period at ASP+4 percent (76 FR 74330 through 74332). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45142), we proposed to provide 

payment for new CY 2013 drugs (excluding contrast agents and diagnostic 

radiopharmaceuticals), nonimplantable biologicals, and therapeutic radiopharmaceuticals, 

at ASP+6 percent, consistent with the proposed CY 2013 payment methodology for other 

separately payable nonpass-through drugs, nonimplantable biologicals, and therapeutic 

radiopharmaceuticals to pay at ASP+6 percent based on the statutory default. We believe 

this proposed policy would ensure that new nonpass-through drugs, nonimplantable 

biologicals and therapeutic radiopharmaceuticals would be treated like other drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals under the OPPS. 

We also proposed to continue to package payment for all new nonpass-through 

diagnostic radiopharmaceuticals and contrast agents with HCPCS codes but without 

claims data (those new CY 2013 diagnostic radiopharmaceuticals, contrast agents, and 

implantable biological HCPCS codes that do not crosswalk to predecessor HCPCS 
CMS-1589-FC 643 

codes). This is consistent with the proposed policy packaging all existing nonpassthrough diagnostic radiopharmaceuticals and contrast agents, as discussed in more detail 

in section II.A.3.g. of this final rule with comment period. 

In accordance with the OPPS ASP methodology, in the absence of ASP data, for 

CY 2013, we proposed to continue the policy we implemented beginning in CY 2005 of 

using the WAC for the product to establish the initial payment rate for new 

nonpass-through drugs and biologicals with HCPCS codes, but which are without OPPS 

claims data and are not diagnostic radiopharmaceuticals and contrast agents. However, 

we noted that if the WAC is also unavailable, we would make payment at 95 percent of 

the product’s most recent AWP. We also proposed to assign status indicator “K” (for 

separately paid nonpass-through drugs and nonimplantable biologicals, including 

therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and nonimplantable 

biologicals without OPPS claims data and for which we have not granted pass-through 

status. With respect to new, nonpass-through drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals for which we do not have ASP data, we proposed that 

once their ASP data become available in later quarterly submissions, their payment rates 

under the OPPS would be adjusted so that the rates would be based on the ASP 

methodology and set to the finalized ASP-based amount (proposed for CY 2013 at 

ASP+6 percent) for items that have not been granted pass-through status. This proposed 

policy, which utilizes the ASP methodology that requires us to use WAC data when ASP 

data are unavailable and 95 percent of AWP when WAC and ASP data are unavailable, 

for new nonpass-through drugs and biologicals with an ASP, is consistent with prior 
CMS-1589-FC 644 

years’ policies for these items, and would ensure that new nonpass-through drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals would be treated like 

other drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals under the 

OPPS, unless they are granted pass-through status. 

Similarly, we proposed to continue to base the initial payment for new therapeutic 

radiopharmaceuticals with HCPCS codes, but which do not have pass-through status and 

are without claims data, on the WACs for these products if ASP data for these therapeutic 

radiopharmaceuticals are not available. If the WACs are also unavailable, we proposed 

to make payment for new therapeutic radiopharmaceuticals at 95 percent of the products’ 

most recent AWP because we would not have mean costs from hospital claims data upon 

which to base payment. As we proposed with new drugs and biologicals, we proposed to 

continue our policy of assigning status indicator “K” to HCPCS codes for new 

therapeutic radiopharmaceuticals without OPPS claims data for which we have not 

granted pass-through status. 

Consistent with other ASP-based payment, for CY 2013 we proposed to announce 

any changes to the payment amounts for new drugs and biologicals in this CY 2013 

OPPS/ASC final rule with comment period and also on a quarterly basis on the CMS 

Web site during CY 2013 if later quarter ASP submissions (or more recent WACs or 

AWPs) indicate that changes to the payment rates for these drugs and biologicals are 

necessary. The payment rates for new therapeutic radiopharmaceuticals would also be 

changed accordingly based on later quarter ASP submissions. We note that the new 

CY 2013 HCPCS codes for drugs, biologicals and therapeutic radiopharmaceuticals were 
CMS-1589-FC 645 

not available at the time of development of the proposed rule. However, these agents are 

included in Addendum B to this CY 2013 OPPS/ASC final rule with comment period 

(which is available via the Internet on the CMS Web site), where they are assigned 

comment indicator “NI.” This comment indicator reflects that their interim final OPPS 

treatment is open to public comment in this CY 2013 OPPS/ASC final rule with comment 

period. 

There are several nonpass-through drugs and biologicals that were payable in 

CY 2011 and/or CY 2012 for which we did not have CY 2011 hospital claims data 

available for the proposed rule and for which there are no other HCPCS codes that 

describe different doses of the same drug, but which have pricing information available 

for the ASP methodology. We note that there are currently no therapeutic 

radiopharmaceuticals in this category. In order to determine the packaging status of these 

products for CY 2013, we calculated an estimate of the per day cost of each of these 

items by multiplying the payment rate of each product based on ASP+6 percent, similar 

to other nonpass-through drugs and biologicals paid separately under the OPPS, by an 

estimated average number of units of each product that would typically be furnished to a 

patient during one day in the hospital outpatient setting. This rationale was first adopted 

in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68666 and 68667). 

We did not receive any public comments on our proposal to use estimated per day 

costs for these drugs and biologicals or on the resulting packaging status of these drugs 

and biologicals. Therefore, for the reasons described in our proposed rule, we are 

finalizing our CY 2013 proposal, with modification, to use the estimated number of units 
CMS-1589-FC 646 

per day included in Table 37 below to determine estimated per day costs for the 

corresponding drugs and biologicals for CY 2013. For those drugs and biologicals 

without CY 2011 claims data that we determine to be separately payable in CY 2013, 

payment will be made at ASP+6 percent. If ASP information is not available, payment 

will be based on WAC, or 95 percent of the most recently published AWP if WAC is not 

available. 

The proposed estimated units per day and status indicators for these items were 

displayed in Table 27 of the proposed rule (77 FR 45143). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45143), we proposed to 

package items for which we estimated the per day administration cost to be less than or 

equal to $80, which is the general packaging threshold that we proposed for drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals in CY 2013. We 

proposed to pay separately for items with an estimated per day cost greater than $80 

(with the exception of diagnostic radiopharmaceuticals and contrast agents, which we 

proposed to continue to package regardless of cost as discussed in more detail in section 

II.A.3.d. of this final rule with comment period) in CY 2013. We proposed that the 

CY 2013 payment for separately payable items without CY 2011 claims data would be 

ASP+6 percent, similar to payment for other separately payable nonpass-through drugs 

and biologicals under the OPPS. In accordance with the ASP methodology paid in the 

physician’s office setting, in the absence of ASP data, we proposed to use the WAC for 

the product to establish the initial payment rate. However, we note that if the WAC is 
CMS-1589-FC 647 

also unavailable, we would make payment at 95 percent of the most recent AWP 

available. 

Although we did not receive any specific public comments regarding our 

proposed payment for nonpass-through drugs, biologicals, and radiopharmaceuticals with 

HCPCS codes, but without OPPS hospital claims data, many commenters supported our 

proposal to pay for separately payable drugs at ASP+6 percent under the statutory 

default. However, these comments were not specific to new drugs and biologicals with 

HCPCS codes but without OPPS claims data. For more information regarding payment 

for separately payable drugs, including general public comments and our responses, we 

refer readers to section V.B.3.b. of this final rule with comment period. In addition, 

commenters responding to the CY 2013 OPPS/ASC proposed rule objected to packaging 

payment for diagnostic radiopharmaceuticals and contrast agents in general, but these 

comments were not directed to new diagnostic radiopharmaceuticals or contrast agent 

with HCPCS codes but without OPPS claims data. We summarize these comments and 

provide our response in section II.A.3.e. of this final rule with comment period. We are 

finalizing our CY 2013 proposal, without modification, as follows: payment for new 

drugs (excluding contrast agents and diagnostic radiopharmaceuticals), nonimplantable 

biologicals, and therapeutic radiopharmaceuticals with HCPCS codes that do not 

crosswalk to CY 2012 HCPCS codes, but which do not have pass-through status and for 

which we do not have OPPS hospital claims data, will be made at ASP+6 percent for 

CY 2013, consistent with the final CY 2013 payment methodology for other new 

separately payable nonpass-through drugs, nonimplantable biologicals and therapeutic 
CMS-1589-FC 648 

radiopharmaceuticals, described in section V.B.3.b. of this final rule with comment 

period. In cases where ASP information is not available, payment will be made using 

WAC, and, if WAC is also unavailable, payment will be made at 95 percent of the 

product’s most recent AWP. Further, payment for all new nonpass-through diagnostic 

radiopharmaceuticals, contrast agents, and implantable biologicals with HCPCS codes 

but for which we do not have OPPS claims data will be packaged for CY 2013. Finally, 

we are assigning status indicator “K” to HCPCS codes for new drugs and nonimplantable 

biologicals for which we do not have OPPS claims data and for which we have not 

granted pass-through status for CY 2012. With respect to new items for which we do not 

have ASP data, once their ASP data become available in later quarterly submissions, their 

payments will be adjusted so that the rates will be based on the ASP methodology and set 

to the finalized ASP amount of ASP+4 percent. This policy will ensure that payment is 

made for actual acquisition cost and pharmacy overhead for these new products. 

For CY 2013, we also proposed to continue our CY 2012 policy to base payment 

for new therapeutic radiopharmaceuticals with HCPCS codes, but which do not have 

pass-through status and for which we do not have claims data, on the WACs for these 

products if ASP data for these therapeutic radiopharmaceuticals are not available. If the 

WACs are also unavailable, we proposed to make payment for a new therapeutic 

radiopharmaceutical at 95 percent of the product’s most recent AWP because we would 

not have mean costs from hospital claims data upon which to base payment. Analogous 

to new drugs and biologicals, we proposed to continue our policy of assigning status 
CMS-1589-FC 649 

indicator “K” to HCPCS codes for new therapeutic radiopharmaceuticals without OPPS 

claims data for which we have not granted pass-through status. 

We did not receive any public comments specific to our proposal for new 

therapeutic radiopharmaceuticals with HCPCS codes but without pass-through status. 

However, commenters responding to the CY 2013 OPPS/ASC proposed rule were 

generally supportive of the ASP methodology for payment for therapeutic 

radiopharmaceuticals in the HOPD, and we are finalizing an ASP payment methodology 

for separately payable therapeutic radiopharmaceuticals for CY 2013, as discussed in 

section V.B.3.c. of this final rule with comment period. 

We are finalizing our CY 2013 proposals, without modification, to provide 

payment based on WAC for new therapeutic radiopharmaceuticals with HCPCS codes 

but without pass-through status and for which we do not have claims data, if ASP data for 

these therapeutic radiopharmaceuticals are not available. If WAC information is also 

unavailable, we will make payment for new therapeutic radiopharmaceuticals at 95 

percent of the product’s most recent AWP. In addition, we are assigning status indicator 

“K” to HCPCS codes for new therapeutic radiopharmaceuticals without claims data in 

CY 2013 that do not have pass-through status. 

Consistent with other ASP-based payments, for CY 2013, we proposed to 

announce any changes to the payment amounts for new drugs and biologicals in the 

CY 2013 OPPS/ASC final rule with comment period and also on a quarterly basis on the 

CMS Web site during CY 2013 if later quarter ASP submissions (or more recent WACs 

or AWPs) indicate that changes to the payment rates for these drugs and biologicals are 
CMS-1589-FC 650 

necessary. The payment rates for new therapeutic radiopharmaceuticals will also be 

changed accordingly, based on later quarter ASP submissions. We note that the new 

CY 2013 HCPCS codes for drugs, biologicals, and therapeutic radiopharmaceuticals were 

not available at the time of development of the proposed rule. However, they are 

included in Addendum B to this CY 2013 OPPS/ASC final rule with comment period. 

They are assigned comment indicator “NI” in Addendum B to reflect that their interim 

final OPPS treatment is open to public comment on this CY 2013 OPPS/ASC final rule 

with comment period. 

We did not receive any public comments on our proposal to announce, via the 

CMS Web site, any changes to the OPPS payment amounts for new drugs and biologicals 

on a quarterly basis. Therefore, for the reasons described in the CY 2013 proposed rule, 

we are finalizing our proposal and will update payment rates for new drugs, biologicals, 

and therapeutic radiopharmaceuticals, as necessary, in association with our quarterly 

update process and provide this information on the CMS Web site. 

TABLE 36.—DRUGS AND BIOLOGICALS WITHOUT CY 2011 CLAIMS DATA 

CY 

2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Estimated 

Average 

Number 

of Units 

Per Day 

CY 2013 

SI 

CY 2013 

APC 

C9367 

Skin substitute, Endoform Dermal Template, 

per square centimeter 55 K 9367 

J0630 Injection, calcitonin salmon, up to 400 units 1.5 K 1433 

J2793 Injection, Rilonacept 320 K 1291 

J7196 Injection, antithrombin recombinant, 50 IU 268 K 1332 
CMS-1589-FC 651 

CY 

2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Estimated 

Average 

Number 

of Units 

Per Day 

CY 2013 

SI 

CY 2013 

APC 

J8562 Fludarabine phosphate, oral, 10 mg 1 K 1339 

J9065 Injection, cladribine, per 1 mg 10 K 0858 

J9151 

Injection, daunorubicin citrate, liposomal 

formulation, 10 mg 5 K 0821 

J0205 Injection, alglucerase, per 10 units 420 K 0900 

J2724 

Injection, protein c concentrate, intravenous, 

human, 10 iu 1540 K 1139 

Q0515 Injection, sermorelin acetate, 1 microgram 70 K 3050 

J2513 Injection, pentastarch, 10% solution, 100 ml 4 N N/A 

J3355 Injection, urofollitropin, 75 IU 2 K 1741 

90581 

Anthrax vaccine, for subcutaneous or 

intramuscular use 1 K 1422 

J2265 Injection, minocycline hydrochloride, 1 mg 300 K 1423 

J8650 Nabilone, oral, 1 mg 4 K 1424 

 Finally, there were 19 drugs and biologicals, shown in Table 28 of the proposed 

rule (77 FR 45144), that were payable in CY 2011, but for which we lacked CY 2011 

claims data and any other pricing information for the ASP methodology for the CY 2013 

OPPS/ASC proposed rule. In CY 2009, for similar items without CY 2007 claims data 

and without pricing information for the ASP methodology, we stated that we were unable 

to determine their per day cost and we packaged these items for the year, assigning these 

items status indicator “N.” 

For CY 2010, we finalized a policy to change the status indicator for drugs and 

biologicals previously assigned a payable status indicator to status indicator “E” (Not 

paid by Medicare when submitted on outpatient claims (any outpatient bill type)) 

whenever we lacked claims data and pricing information and were unable to determine 
CMS-1589-FC 652 

the per day cost. In addition, we noted that we would provide separate payment for these 

drugs and biologicals if pricing information reflecting recent sales became available 

mid-year in CY 2010 for the ASP methodology. If pricing information became available, 

we would assign the products status indicator “K” and pay for them separately for the 

remainder of CY 2010. We continued this policy for CY 2011 and CY 2012 

(75 FR 71973 and 76 FR 74334). 

For CY 2013, we proposed to continue to assign status indicator “E” to drugs and 

biologicals that lack CY 2011 claims data and pricing information for the ASP 

methodology. All drugs and biologicals without CY 2011 hospital claims data and data 

based on the ASP methodology that are assigned status indicator “E” on this basis at the 

time of the proposed rule for CY 2013 were displayed in Table 28 of the proposed rule 

(77 FR 45144). If pricing information becomes available, we proposed to assign the 

products status indicator “K” and pay for them separately for the remainder of CY 2013. 

Comment: Several commenters disagreed with CMS’ proposal to assign a status 

indicator “E” to HCPCS code Q4102 (Talymed, per square centimeter) for CY 2013. 

The commenters requested a status indicator of “K” to more closely align the product 

with others on the market, such as the products represented by HCPCS code Q4101 and 

Q4102. The commenters indicated that a status indicator of “E” would make it 

impossible for the necessary claims data and pricing to be collected. 

The manufacturers of the product that is described by HCPCS code Q4101 

assured CMS that they will be submitting ASP data shortly and anticipate that CMS will 
CMS-1589-FC 653 

replace the status indicator “E” with the status indicator “K” upon submission of this 

data. 

Response: For this final rule with comment period, we have not received ASP 

pricing information in order to assign a status indicator of “K” to HCPCS code Q4101. 

Therefore, according to our longstanding policy, we will continue to assign HCPCS code 

Q4101 to a status indicator of “E.” If pricing information becomes available, we will 

assign HCPCS code Q4101 a status indicator “K” and pay for it separately for the 

remainder of CY 2013. We cannot assign a payable status indicator to products that have 

no available payment information. 

Comment: One commenter who responded to the CY 2012 OPPS/ASC final rule 

with comment period expressed concern that the assignment of status indicator “E” to 

HCPCS code Q4128 was a technical error that should have been changed to status 

indicator “K” effective January 1, 2012. 

Response: For the CY 2012 OPPS/ASC final rule with comment period, HCPCS 

code Q4128 (Flexhd or allopatch hd, per square centimeter) was not erroneously assigned 

a status indicator of “E” because we did not have ASP pricing information available to us 

at the time of the publication of the final rule. However, during CY 2012, we received 

pricing information for HCPCS code Q4128 and assigned status indicator “K” to this 

code. For CY 2013, this HCPCS code continues to have a status indicator of “K” and the 

price is published in Addendum B of this final rule with comment period. 

After the proposed rule was published, we were able to use updated CY 2011 

claims data and ASP pricing information for HCPCS code J1452 (Injection, fomivirsen 
CMS-1589-FC 654 

sodium, intraocular, 1.65 mg), HCPCS code J1835 (Injection, itraconazole, 50 mg), and 

HCPCS code J9212 (Injection, interferon alfacon-1, recombinant, 1 microgram). 

Therefore, we are assigning HCPCS code J1452, HCPCS code J1835, and HCPCS code 

J9212 a status indicator of “K” for CY 2013. The revised status indicators for these 

HCPCS codes are included in Addendum B to this CY 2013 OPPS/ASC final rule with 

comment period (which is available via the Internet on the CMS Web site). 

Further, as we have used updated claims data and ASP pricing information for 

this final rule with comment period, we have newly identified HCPCS codes Q4134 

(Hmatrix, per square centimeter), Q4135 (Mediskin, per square centimeter), and Q4136 

(Ez-derm, per square centimeter) as lacking CY 2011 claims data and any other pricing 

information for the ASP methodology. Therefore, in addition to the HCPCS codes for 

which we proposed to assign status indicator “E” for CY 2013 due to a lack of claims 

data and any other pricing information in the proposed rule, we are assigning status 

indicator “E” to HCPCS codes Q4134, Q4135, and Q4136. 

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

proposal, without modification, to assign status indicator “E” to these drugs and 

biologicals. As was our policy in CY 2012, if pricing information becomes available for 

these products in CY 2013, we will assign the products status indicator “K” and pay for 

them separately for the remainder of CY 2013. 

All drugs and biologicals without CY 2011 hospital claims data and data based on 

the ASP methodology that are assigned status indicator “E” on this basis at the time of 

this final rule with comment period for CY 2013 are displayed in Table 37 below. 
CMS-1589-FC 655 

TABLE 37.—DRUGS AND BIOLOGICALS WITHOUT CY 2011 CLAIMS DATA 

AND WITHOUT PRICING INFORMATION FOR THE ASP METHODOLOGY 

CY 2013 

HCPCS Code CY 2013 Long Descriptor CY 2013 SI 

90296 Diphtheria antitoxin, equine, any route E 

90393 Vaccina immune globulin, human, for intramuscular use E 

J3305 Injection, trimetrexate glucuronate, per 25 mg E 

90706 Rubella virus vaccine, live, for subcutaneous use E 

90725 Cholera vaccine for injectable use E 

90727 Plague vaccine, for intramuscular use E 

J0190 Injection, biperiden lactate, per 5 mg E 

J2670 Injection, tolazonline hcl, up to 25 mg E 

J2940 Injection, somatrem, 1 mg E 

J3305 Injection, trimetrexate glucuronate, per 25 mg E 

J3320 Injection, spectinomycin dihydrochloride, up to 2 gm E 

J9165 Injection, diethylstilbestrol diphosphate, 250 mg E 

Q4117 Hyalomatrix, per square centimeter E 

Q4120 Matristem Burn matrix, per square centimeter E 

Q4126 Memoderm, per square centimeter E 

Q4127 Talymed, per square centimeter E 

Q4134 Hmatrix, per square centimeter E 

Q4135 Mediskin, per square centimeter E 

Q4136 Ez-derm, per square centimeter E 
CMS-1589-FC 656 

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

Radiopharmaceuticals, and Devices 

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount of transitional 

pass-through payments for drugs, biologicals, radiopharmaceuticals, and categories of 

devices for a given year to an “applicable percentage,” currently not to exceed 2.0 percent 

of total program payments estimated to be made for all covered services under the OPPS 

furnished for that year. 

If we estimate before the beginning of the calendar year that the total amount of 

pass-through payments in that year would exceed the applicable percentage, 

section 1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction in the 

amount of each of the transitional pass-through payments made in that year to ensure that 

the limit is not exceeded. We estimate the pass-through spending to determine whether 

payments exceed the applicable percentage and the appropriate pro rata reduction to the 

conversion factor for the projected level of pass-through spending in the following year 

to ensure that total estimated pass-through spending for the prospective payment year is 

budget neutral, as required by section 1833(t)(6)(E) of the Act. 

For devices, developing an estimate of pass-through spending in CY 2013 entails 

estimating spending for two groups of items. The first group of items consists of device 

categories that were recently made eligible for pass-through payment and that will 

continue to be eligible for pass-through payment in CY 2013. The CY 2008 OPPS/ASC 

final rule with comment period (72 FR 66778) describes the methodology we have used 
CMS-1589-FC 657 

in previous years to develop the pass-through spending estimate for known device 

categories continuing into the applicable update year. The second group of items consists 

of items that we know are newly eligible, or project may be newly eligible, for device 

pass-through payment in the remaining quarters of CY 2012 or beginning in CY 2013. 

The sum of the CY 2013 pass-through estimates for these two groups of device categories 

equals the total CY 2013 pass-through spending estimate for device categories with 

pass-through status. We base the device pass-through estimated payments for each 

device category on the amount of payment as established in section 1833(t)(6)(D)(ii) of 

the Act, and as outlined in previous rules, including the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74335 through 74336). We note that, beginning in 

CY 2010, the pass-through evaluation process and pass-through payment for implantable 

biologicals newly approved for pass-through payment beginning on or after 

January 1, 2010, that are surgically inserted or implanted (through a surgical incision or a 

natural orifice), is the device pass-through process and payment methodology 

(74 FR 60476). As has been our past practice (76 FR 74335), we include an estimate of 

any implantable biologicals eligible for pass-through payment in our estimate of 

pass-through spending for devices. 

For drugs and nonimplantable biologicals eligible for pass-through payment, 

section 1833(t)(6)(D)(i) of the Act establishes the pass-through payment amount as the 

amount by which the amount authorized under section 1842(o) of the Act (or, if the drug 

or biological is covered under a competitive acquisition contract under section 1847B of 

the Act, an amount determined by the Secretary equal to the average price for the drug or 
CMS-1589-FC 658 

biological for all competitive acquisition areas and year established under such section as 

calculated and adjusted by the Secretary) exceeds the portion of the otherwise applicable 

fee schedule amount that the Secretary determines is associated with the drug or 

biological. We note that the Part B drug CAP program has been postponed since 

CY 2009, and such a program was not proposed to be reinstated for CY 2013. Because 

we will pay for most nonpass-through separately payable drugs and nonimplantable 

biologicals under the CY 2013 OPPS at ASP+6 percent, as we discussed in section 

V.B.3. of this final rule with comment period, which represents the otherwise applicable 

fee schedule amount associated with most pass-through drugs and nonimplantable 

biologicals, and because we will pay for CY 2013 pass-through drugs and 

nonimplantable biologicals at ASP+6 percent, as we discussed in section V.A. of this 

final rule with comment period, our estimate of drug and nonimplantable biological passthrough payment for CY 2013 for this group of items is zero, as discussed below. 

Furthermore, payment for certain drugs, specifically diagnostic radiopharmaceuticals and 

contrast agents, without pass-through status, will always be packaged into payment for 

the associated procedures because these products will never be separately paid. 

However, all pass-through diagnostic radiopharmaceuticals and contrast agents with 

pass-through status approved prior to CY 2013 will be paid at ASP+6 percent like other 

pass-through drugs and nonimplantable biologicals. Therefore, our estimate of passthrough payment for all diagnostic radiopharmaceuticals and contrast agents with passthrough status approved prior to CY 2013 is not zero. In section V.A.4. of this final rule 

with comment period, we discuss our policy to determine if the cost of certain “policy-
CMS-1589-FC 659 

packaged” drugs, including diagnostic radiopharmaceuticals and contrast agents, are 

already packaged into the existing APC structure. If we determine that a “policypackaged” drug approved for pass-through payment resembles predecessor diagnostic 

radiopharmaceuticals or contrast agents already included in the costs of the APCs that are 

associated with the drug receiving pass-through payment, we are offsetting the amount of 

pass-through payment for diagnostic radiopharmaceuticals or contrast agents. For these 

drugs, the APC offset amount is the portion of the APC payment for the specific 

procedure performed with the pass-through radiopharmaceuticals or contrast agents, 

which we refer to as the “policy-packaged” drug APC offset amount. If we determine 

that an offset is appropriate for a specific diagnostic radiopharmaceutical or contrast 

agent receiving pass-through payment, we reduce our estimate of pass-through payment 

for these drugs by this amount. 

Similar to pass-through estimates for devices, the first group of drugs and 

nonimplantable biologicals requiring a pass-through payment estimate consists of those 

products that were recently made eligible for pass-through payment for CY 2012 and that 

will continue to be eligible for pass-through payment in CY 2013. The second group 

contains drugs and nonimplantable biologicals that we know are newly eligible, or 

project will be newly eligible, in the remaining quarters of CY 2012 or beginning in 

CY 2013. The sum of the CY 2013 pass-through estimates for these two groups of drugs 

and nonimplantable biologicals equals the total CY 2013 pass-through spending estimate 

for drugs and nonimplantable biologicals with pass-through status. 

B. Estimate of Pass-Through Spending
CMS-1589-FC 660 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45145), we proposed to set the 

applicable pass-through payment percentage limit at 2.0 percent of the total projected 

OPPS payments for CY 2013, consistent with section 1833(t)(6)(E)(ii)(II) of the Act, and 

our OPPS policy from CY 2004 through CY 2012 (76 FR 74336). 

For the first group of devices for pass-through payment estimation purposes, there 

currently are three device categories eligible for pass-through payment for CY 2013: 

C1830 (Powered bone marrow biopsy needle); C1840 (Lens, intraocular (telescopic)); 

and C1886 (Catheter, extravascular tissue ablation, any modality (insertable). In the 

proposed rule, we estimated that CY 2013 pass-through expenditures related to these 

three eligible device categories would be approximately $42 million. In estimating our 

CY 2013 pass-through spending for device categories in the second group, we include: 

device categories that we knew at the time of the development of the proposed rule will 

be newly eligible for pass-through payment in CY 2013 (of which there are none); 

additional device categories that we estimate could be approved for pass-through status 

subsequent to the development of the proposed rule and before January 1, 2013; and 

contingent projections for new device categories established in the second through fourth 

quarters of CY 2013. We proposed to use the general methodology described in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking 

into account recent OPPS experience in approving new pass-through device categories. 

For the proposed rule, the estimate of CY 2013 pass-through spending for this second 

group of device categories was $10 million. Using our established methodology, we 

proposed that the total estimated pass-through spending for device categories for 
CMS-1589-FC 661 

CY 2013 (spending for the first group of device categories ($42 million) plus spending 

for the second group of device categories ($10 million)) would be $52 million. 

We did not receive any public comments regarding our proposed pass-through 

spending estimate for devices. Therefore, for CY 2013, we are continuing to use our 

established methodology for estimating pass-through spending for device categories. For 

this final rule with comment period, using our established methodology and updated data 

and information, we estimate CY 2013 pass-through spending for the first group of 

device categories to be $42, and the CY 2013 pass-through spending for the second group 

of device categories to be $10 million. The total estimated pass-through spending for 

device categories for CY 2013 (spending for the first group of device categories 

($42 million) plus spending for the second group of device categories ($10 million)) is 

$52 million. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45146), to estimate CY 2013 

pass-through spending for drugs and nonimplantable biologicals in the first group, 

specifically those drugs (including radiopharmaceuticals and contrast agents) and 

nonimplantable biologicals recently made eligible for pass-through payment and 

continuing on pass-through status for CY 2013, we proposed to utilize the most recent 

Medicare physician’s office data regarding their utilization, information provided in the 

respective pass-through applications, historical hospital claims data, pharmaceutical 

industry information, and clinical information regarding those drugs or nonimplantable 

biologicals, to project the CY 2013 OPPS utilization of the products. 
CMS-1589-FC 662 

For the known drugs and nonimplantable biologicals (excluding diagnostic 

radiopharmaceuticals and contrast agents) that will be continuing on pass-through status 

in CY 2013, in the proposed rule (77 FR 45145), we estimated the pass-through payment 

amount as the difference between ASP+6 percent and the payment rate for nonpassthrough drugs and nonimplantable biologicals that will be separately paid at ASP+6 

percent, which is zero for this group of drugs. Because payment for a diagnostic 

radiopharmaceutical or contrast agent is packaged if the product was not paid separately 

due to its pass-through status, we proposed to include in the CY 2013 pass-through 

estimate the difference between payment for the drug or biological at ASP+6 percent (or 

WAC+6 percent, or 95 percent of AWP, if ASP or WAC information is not available) 

and the “policy-packaged” drug APC offset amount, if we determined that the diagnostic 

radiopharmaceutical or contrast agent approved for pass-through payment resembles 

predecessor diagnostic radiopharmaceuticals or contrast agents already included in the 

costs of the APCs that are associated with the drug receiving pass-through payment. In 

the proposed rule, using the proposed methodology described above, we calculated a 

CY 2013 proposed spending estimate for this first group of drugs and nonimplantable 

biologicals of approximately $13 million. 

We did not receive any public comments on our proposed methodology for 

calculating the spending estimate for the first group of drugs and nonimplantable 

biologicals. Therefore, for this final rule with comment period, we are finalizing our 

proposed methodology. Using our established methodology and updated data and 
CMS-1589-FC 663 

information, we calculated a final CY 2013 spending estimate for the first group of drugs 

and nonimplantable biologicals of approximately $15 million. 

In the proposed rule (77 FR 45146), to estimate CY 2013 pass-through spending 

for drugs and nonimplantable biologicals in the second group (that is, drugs and 

nonimplantable biologicals that we knew at the time of development of the proposed rule 

are newly eligible for pass-through payment in CY 2013, additional drugs and 

nonimplantable biologicals that we estimate could be approved for pass-through status 

subsequent to the development of the proposed rule and before January 1, 2013, and 

projections for new drugs and nonimplantable biologicals that could be initially eligible 

for pass-through payment in the second through fourth quarters of CY 2013), we 

proposed to use utilization estimates from pass-through applicants, pharmaceutical 

industry data, clinical information, recent trends in the per unit ASPs of hospital 

outpatient drugs, and projected annual changes in service volume and intensity as our 

basis for making the CY 2013 pass-through payment estimate. We also proposed to 

consider the most recent OPPS experience in approving new pass-through drugs and 

nonimplantable biologicals. Using our proposed methodology for estimating CY 2013 

pass-through payments for this second group of drugs, we calculated a proposed spending 

estimate for this second group of drugs and nonimplantable biologicals of approximately 

$19 million. 

We did not receive any public comments on our proposed methodology for 

estimating CY 2013 pass-through payments for this second group of drugs and 

nonimplantable biologicals. Therefore, for this final rule with comment period, are 
CMS-1589-FC 664 

finalizing our proposed methodology. Using that methodology and updated data and 

information, we calculated a final CY 2013 spending estimate for this second group of 

drugs and implantable biologicals of approximately $7 million. 

As discussed in section V.A. of this final rule with comment period, 

radiopharmaceuticals are considered drugs for pass-through purposes. Therefore, we 

include radiopharmaceuticals in our CY 2013 pass-through spending estimate for drugs 

and nonimplantable biologicals. Our CY 2013 estimate for total pass-through spending 

for drugs and nonimplantable biologicals (spending for the first group of drugs and 

nonimplantable biologicals ($15 million) plus spending for the second group of drugs and 

nonimplantable biologicals ($7 million)) equals $22 million. 

In summary, in accordance with the methodology described above in this section, 

for this final rule with comment period, we estimate that total pass-through spending for 

the device categories and the drugs and nonimplantable biologicals that are continuing to 

receive pass-through payment in CY 2013 and those device categories, drugs, and 

biologicals that first become eligible for pass-through payment during CY 2013 will be 

approximately $74 million (approximately $52 million for device categories and 

approximately $22 million for drugs and nonimplantable biologicals), which represents 

0.15 percent of total projected OPPS payments for CY 2013. We estimate that 

pass-through spending in CY 2013 will not amount to 2.0 percent of total projected OPPS 

CY 2013 program spending. 
CMS-1589-FC 665 

VII. OPPS Payment for Hospital Outpatient Visits 

A. Background

Currently, hospitals report HCPCS visit codes to describe three types of OPPS 

services: clinic visits, emergency department visits, and critical care services, including 

trauma team activation. As we proposed in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45146 through 45148), for CY 2013, we are continuing to recognize these CPT 

and HCPCS codes describing clinic visits, Type A and Type B emergency department 

visits, and critical care services, which are listed below in Table 38, for CY 2013. We 

refer readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74338 

through 74346) for a full discussion of our longstanding policy on OPPS payment for 

hospital outpatient visits. 

TABLE 38.—HCPCS CODES USED TO REPORT CLINIC AND EMERGENCY 

DEPARTMENT VISITS AND CRITICAL CARE SERVICES 

CY 2013 

HCPCS 

Code 

CY 2013 Descriptor 

Clinic Visit HCPCS Codes

99201 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 1) 

99202 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 2) 

99203 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 3) 

99204 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 4) 

99205 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 5) 

99211 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 1) 
CMS-1589-FC 666 

99212 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 2) 

99213 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 3) 

99214 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 4) 

99215 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 5) 

Emergency Department Visit HCPCS Codes 

99281 

Emergency department visit for the evaluation and management of a 

patient 

(Level 1) 

99282 

Emergency department visit for the evaluation and management of a 

patient 

(Level 2) 

99283 

Emergency department visit for the evaluation and management of a 

patient 

(Level 3) 

99284 

Emergency department visit for the evaluation and management of a 

patient 

(Level 4) 

99285 

Emergency department visit for the evaluation and management of a 

patient 

(Level 5) 

G0380 Type B emergency department visit (Level 1) 

G0381 Type B emergency department visit (Level 2) 

G0382 Type B emergency department visit (Level 3) 

G0383 Type B emergency department visit (Level 4) 

G0384 Type B emergency department visit (Level 5) 

Critical Care Services HCPCS Codes 

99291 

Critical care, evaluation and management of the critically ill or 

critically injured patient; first 30-74 minutes 

99292 

Critical care, evaluation and management of the critically ill or 

critically injured patient; each additional 30 minutes 

G0390 Trauma response associated with hospital critical care service 
CMS-1589-FC 667 

 At its August 27-28, 2012 meeting, the HOP Panel recommended that CMS move 

HCPCS code G0379 (Direct admission of patient for hospital observation care) to 

APC 0608 (Level 5 Hospital Clinic Visits). We are accepting this recommendation, as 

discussed below in this section. 

B. Policies for Hospital Outpatient Visits

We proposed in the CY 2013 OPPS/ASC proposed rule (77 FR 45147 through 

45148), for CY 2013, to continue our longstanding policies related to hospital outpatient 

visits, which includes clinic visits, emergency department visits, and critical care 

services. Specifically, we proposed to continue to recognize the definitions of a new 

patient and an established patient, which are based on whether the patient has been 

registered as an inpatient or outpatient of the hospital within the 3 years prior to a visit. 

We also proposed to continue to apply our policy of calculating costs for clinic visits 

under the OPPS using historical hospital claims data through five levels of clinic visit 

APCs (APCs 0604 through 0608). In addition, we proposed to continue to recognize 

Type A emergency departments and Type B emergency departments for payment 

purposes under the OPPS, and to pay for Type A emergency department visits based on 

their costs through the five levels of Type A emergency department APCs (APCs 0609 

and 0613 through 0616) and to pay for Type B emergency department visits based on 

their costs through the five levels of Type B emergency department APCs (APCs 0626 

through 0630). We refer readers to Addendum B to this final rule with comment period 

(which is available via the Internet on the CMS Web site) for the APC assignments and 

payment rates for these hospital outpatient visits. Finally, we proposed to continue to 
CMS-1589-FC 668 

instruct hospitals to report facility resources for clinic and emergency department hospital 

outpatient visits using the CPT E/M codes and to develop internal hospital guidelines for 

reporting the appropriate visit level. We note that our continued expectation is that 

hospitals’ internal guidelines will comport with the principles listed in the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66805). We encourage hospitals with 

specific questions related to the creation of internal guidelines to contact their servicing 

fiscal intermediary or MAC. We refer readers to the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74338 through 74346) for a full historical discussion of these 

longstanding policies. We note recent reports in the public media of billing inaccuracies 

in hospital outpatient clinic visits, and remind hospitals that we are committed to 

vigorously enforcing our payment policies and will pursue appropriate action against any 

potentially fraudulent activities we identify. 

We also proposed to continue the methodology established in the CY 2011 

OPPS/ASC final rule with comment period for calculating a payment rate for critical care 

services that includes packaged payment of ancillary services. For CY 2010 and in prior 

years, the AMA CPT Editorial Panel defined critical care CPT codes 99291 (Critical 

care, evaluation and management of the critically ill or critically injured patient; first 

30-74 minutes) and 99292 (Critical care, evaluation and management of the critically ill 

or critically injured patient; each additional 30 minutes (List separately in addition to 

code for primary service)) to include a wide range of ancillary services such as 

electrocardiograms, chest X-rays and pulse oximetry. As we have stated in manual 

instruction, we expect hospitals to report in accordance with CPT guidance unless we 
CMS-1589-FC 669 

instruct otherwise. For critical care in particular, we instructed hospitals that any services 

that the CPT Editorial Panel indicates are included in the reporting of CPT code 99291 

(including those services that would otherwise be reported by and paid to hospitals using 

any of the CPT codes specified by the CPT Editorial Panel) should not be billed 

separately. Instead, hospitals were instructed to report charges for any services provided 

as part of the critical care services. In establishing payment rates for critical care 

services, and other services, CMS packages the costs of certain items and services 

separately reported by HCPCS codes into payment for critical care services and other 

services, according to the standard OPPS methodology for packaging costs (Medicare 

Claims Processing Manual, Pub. 100-04, Chapter 4, Section 160.1). 

For CY 2011, the AMA CPT Editorial Panel revised its guidance for the critical 

care codes to specifically state that, for hospital reporting purposes, critical care codes do 

not include the specified ancillary services. Beginning in CY 2011, hospitals that report 

in accordance with the CPT guidelines should report all of the ancillary services and their 

associated charges separately when they are provided in conjunction with critical care. 

Because the CY 2011 payment rate for critical care services was based on hospital claims 

data from CY 2009, during which time hospitals would have reported charges for any 

ancillary services provided as part of the critical care services, we stated in the CY 2011 

OPPS/ASC final rule with comment period that we believed it was inappropriate to pay 

separately in CY 2011 for the ancillary services that hospitals may now report in addition 

to critical care services (75 FR 71988). Therefore, for CY 2011, we continued to 

recognize the existing CPT codes for critical care services and established a payment rate 
CMS-1589-FC 670 

based on historical data, into which the cost of the ancillary services was intrinsically 

packaged. We also implemented claims processing edits that conditionally package 

payment for the ancillary services that are reported on the same date of service as critical 

care services in order to avoid overpayment. We noted in the CY 2011 OPPS/ASC final 

rule with comment period that the payment status of the ancillary services would not 

change when they are not provided in conjunction with critical care services. We 

assigned status indicator “Q3” (Codes That May Be Paid Through a Composite APC) to 

the ancillary services to indicate that payment for these services is packaged into a single 

payment for specific combinations of services and made through a separate APC payment 

or packaged in all other circumstances, in accordance with the OPPS payment status 

indicated for status indicator “Q3” in Addendum D1 to the CY 2011 OPPS/ASC final 

rule with comment period. The ancillary services that were included in the definition of 

critical care prior to CY 2011 and that are conditionally packaged into the payment for 

critical care services when provided on the same date of service as critical care services 

for CY 2011 were listed in Addendum M to that final rule with comment period. 

Because the CY 2012 costs for critical care services were based upon CY 2010 

claims data, which reflect the CPT billing guidance that was in effect prior to CY 2011, 

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74343 through 

74344), we continued the methodology established in the CY 2011 OPPS/ASC final rule 

with comment period of calculating a payment rate for critical care services based on our 

historical claims data, into which the cost of the ancillary services is intrinsically 

packaged for CY 2012. We also continued to implement claims processing edits that 
CMS-1589-FC 671 

conditionally package payment for the ancillary services that are reported on the same 

date of service as critical care services in order to avoid overpayment. 

As we discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45148), the 

CY 2011 hospital claims data on which the CY 2013 payment rates are based reflect the 

first year of claims billed under the revised CPT guidance to allow the reporting of all the 

ancillary services and their associated charges separately when they are provided in 

conjunction with critical care. Because our policy to establish relative payment weights 

based on geometric mean cost data for CY 2013 represents a change from our historical 

practice to base payment rates on median costs, and because we now have hospital claims 

data for the first time reflecting the revised coding guidance for critical care, we reviewed 

the CY 2011 hospital claims data available for the proposed rule and determined that the 

data show increases in both the mean and median line item costs as well as the mean and 

median line item charges for CPT code 99291, when compared to CY 2010 hospital 

claims data. Specifically, the mean and median line item costs increased 13 percent and 

16 percent, respectively, and the mean and median line item charges increased 11 percent 

and 14 percent, respectively. Additionally, when compared to CY 2010 hospital claims 

data, CY 2011 hospital claims data showed no substantial change in the ancillary services 

that are present on the same claims as critical care services, and also showed continued 

low volumes of many ancillary services. We stated in the proposed rule that, had the 

majority of hospitals changed their billing practices to separately report and charge for 

the ancillary services formerly included in the definition of critical care CPT codes 99291 

and 99292, we would have expected to see a decrease in the costs and charges for these 
CMS-1589-FC 672 

CPT codes, and a significant increase in ancillary services reported on the same claims. 

We indicated that the lack of a substantial change in the services reported on critical care 

claims, along with the increases in the line item costs and charges for critical care 

services, strongly suggests that many hospitals did not change their billing practices for 

CPT code 99291 following the revision to the CPT coding guidance effective 

January 1, 2011. 

In light of not having claims data to support a significant change in hospital 

billing practices, we stated in the proposed rule that we continue to believe that it is 

inappropriate to pay separately in CY 2013 for the ancillary services that hospitals may 

now report in addition to critical care services. Therefore, for CY 2013, we proposed, to 

continue our CY 2011 and CY 2012 policy to recognize the existing CPT codes for 

critical care services and establish a payment rate based on historical claims data. We 

also proposed to continue to implement claims processing edits that conditionally 

package payment for the ancillary services that are reported on the same date of service 

as critical care services in order to avoid overpayment. We stated that we will continue 

to monitor the hospital claims data for CPT code 99291 in order to determine whether 

revisions to this policy are warranted based on changes in hospitals’ billing practices. 

Comment: One commenter indicated that because hospitals have used internal, 

hospital-defined guidelines for over 10 years, CMS should not move to standard national 

guidelines. In the absence of national guidelines for visit reporting, some commenters 

urged CMS to support a request to the AMA’s CPT Editorial Panel to create unique CPT 

codes for hospital reporting of emergency department and clinic visits. 
CMS-1589-FC 673 

Response: We agree with the commenter that we should not move to national 

guidelines for visits in CY 2013. As we have in the past (76 FR 74345 through 74346), 

we acknowledge that it would be desirable to many hospitals to have national guidelines. 

However, we also understand that it would be disruptive and administratively 

burdensome to other hospitals that have successfully adopted internal guidelines to 

implement any new set of national guidelines while we address the problems that would 

be inevitable in the case of any new set of guidelines that would be applied by thousands 

of hospitals. As we have also stated in the past (76 FR 74346), if the AMA were to 

create facility-specific CPT codes for reporting visits provided in HOPDs [based on 

internally developed guidelines], we would consider such codes for OPPS use. 

Comment: One commenter recommended that CMS reassign HCPCS code 

G0379 to APC 0608 (Level 5 Hospital Clinic Visits) because of the consistent 2 times 

rule violation in APC 0604 (Level 1 Hospital Clinic Visits) and HCPCS code G0379’s 

similarity in both mean cost and clinical characteristics to CPT code 99205 (Office or 

other outpatient visit for the evaluation and management of a new patient (Level 5)). The 

commenter pointed out that the mean cost for HCPCS code G0379 is more similar to the 

mean cost for APC 0608 than it is to the mean cost for APC 0604. The commenter 

argued that the resources associated with HCPCS code G0379 resemble those expended 

for high-level clinic visits more than resources for low-level clinic visits, and noted that 

CMS’ claims logic for composite APC 8002 (Level I Extended Assessment and 

Management) treats HCPCS code G0379 similarly to high-level clinic visit CPT codes 
CMS-1589-FC 674 

99205 and 99215 (Office or other outpatient visit for the evaluation and management of 

an established patient (Level 5)). 

Response: We agree with the rationale set forth by the commenter and with the 

Panel, which recommended CMS reassign HCPCS code G0379 from APC 0604 to APC 

0608. Therefore, we are reassigning HCPCS code G0379 to APC 0608 for CY 2013. 

Comment: Commenters recommended that CMS, in setting the payment rate for 

critical care services by estimating the costs of the packaged ancillary services, establish 

a methodology that includes review of multiple cost report revenue centers. 

Response: The methodology the commenters recommended is consistent with the 

methodology we already have in place. As discussed in section II.A.1.c. of this final rule 

with comment period, we calculate hospital-specific overall ancillary CCRs and 

hospital-specific departmental CCRs for each hospital for which we have claims data. 

We apply the hospital-specific CCR to the hospital’s charges at the most detailed level 

possible, based on a revenue code-to- cost center crosswalk that contains a hierarchy of 

CCRs used to estimate costs from charges for each revenue code. Therefore, we base our 

cost estimation of each packaged ancillary service on the most specific cost center to 

which the revenue code reported with that service maps. We then package the cost that 

we estimate as a result of that process into the mean cost calculation for critical care. 

Comment: One commenter argued that the ancillary services associated with 

critical care do not meet CMS’ criteria for packaging. The commenter suggested that, 

rather than packaging the ancillary services associated with critical care, CMS use 
CMS-1589-FC 675 

CY 2008 cost data for CPT code 99291 updated with an overall inflation factor to 

recalculate the cost of critical care exclusive of bundled ancillary services. 

Response: As we discussed above in this section and in the CY 2013 OPPS/ASC 

proposed rule (76 45147 through 45148), the policy to package ancillary services 

associated with critical care was implemented in CY 2011 and resulted from a change in 

CPT guidance effective January 1, 2011. We packaged the ancillary services because the 

costs of those ancillary services were already intrinsically included in the cost calculated 

for critical care; to pay for the ancillary services separately result in overpayment. 

Because the claims data for critical care for CY 2011 do not reflect that hospitals have 

changed their billing practices in response to the revised CPT guidance effective 

January 1, 2011–that is, they have not adjusted their charging practices to reflect that the 

ancillary services are no longer included in the definition of critical care–we continue to 

believe that the costs of the ancillary services continue to be reflected in the hospitals’ 

charges for critical care, and that to pay separately for the ancillary services would be 

inappropriate. We also do not agree with the commenter that we should use claims data 

from CY 2008 to calculate costs for critical care. We remind the commenter that the 

OPPS is a system of averages, in which the costs of services, calculated from the most 

recent year’s claims data, are weighted relative to the other services in the system, for 

that given year. To utilize a payment rate derived from claims outside of the most recent 

claims data, despite any update by the overall inflation factor, would be inconsistent with 

the standard methodology of the OPPS, and would not allow for that service to be 

appropriately valued relative to the other services in the OPPS. 
CMS-1589-FC 676 

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

CY 2013 proposals related hospital outpatient visits, with one modification. As described 

above, we are reassigning HCPCS code G0379 to APC 0608 for CY 2013. 
CMS-1589-FC 677 

C. Transitional Care Management

In the CY 2013 MPFS proposed rule (77 FR 44774 through 44780), we discussed 

a multiple year strategy exploring the best means to encourage the provision of primary 

care and care coordination services to Medicare beneficiaries. As part of the strategy 

discussed in that proposed rule, we proposed to address the non-face-to-face work 

involved in hospital or SNF discharge care coordination by creating a HCPCS G-code for 

care management involving the transition of a beneficiary from care furnished by a 

treating physician during a hospital stay (inpatient, outpatient observation services, or 

outpatient partial hospitalization), SNF stay, or CMHC partial hospitalization program to 

care furnished by the beneficiary’s physician or qualified nonphysician practitioner in the 

community. As discussed in the CY 2013 MPFS proposed rule, care management 

involving the transition of a beneficiary from care furnished by a treating physician 

during a hospital or a SNF stay to the beneficiary’s primary physician or qualified 

nonphysician practitioner in the community could avoid adverse events such as 

readmissions or subsequent illnesses, improve beneficiary outcomes, and avoid a 

financial burden on the health care system. Successful efforts to improve hospital 

discharge care coordination and care transitions could improve the quality of care while 

simultaneously decreasing costs. 

The proposed HCPCS G-code included in the CY 2013 MPFS proposed rule, 

GXXX1, specifically describes post-discharge transitional care management services, 

which include all non-face-to-face services related to the transitional care management, 

furnished by the community physician or nonphysician practitioner within 30 calendar 
CMS-1589-FC 678 

days following the date of discharge from an inpatient acute care hospital, psychiatric 

hospital, LTCH, SNF, and IRF; discharge from hospital outpatient observation or partial 

hospitalization services; or discharge from a PHP at a CMHC, to the community-based 

care. The post-discharge transitional care management services include non-face-to-face 

care management services provided by clinical staff member(s) or office-based case 

manager(s) under the supervision of the community physician or qualified nonphysician 

practitioner. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45148 through 45159), we 

stated that while we do not pay for physician or nonpractitioner professional services 

under the OPPS (42 CFR 419.22), we recognize that certain elements of the transitional 

care coordination services described by proposed HCPCS code GXXX1 could be 

provided to a hospital outpatient as an ancillary or supportive service in conjunction with 

a primary diagnostic or therapeutic service that would be payable under the OPPS, such 

as a clinic visit. We stated that, as described in section II.A.3. of the proposed rule, we 

package payment for services that are typically ancillary and supportive to a primary 

service. While we do not make separate payment for such services, their costs are 

included in the costs of other services furnished by the hospital to the beneficiary on the 

same day. We indicated in the CY 2013 OPPS/ASC proposed rule that, because 

transitional care management services described by HCPCS code GXXX1 may be 

ancillary and supportive to a primary service provided to a hospital outpatient, we 

proposed to assign HCPCS code GXXX1 a status indicator of “N” (Items and Services 
CMS-1589-FC 679 

Packaged into APC Rates), signifying that its payment would be packaged 

(77 FR 45159). 

Comment: The majority of commenters supported the proposed development of a 

HCPCS G-code to identify the non-face-to-face work involved in hospital or SNF 

discharge care coordination. Some commenters supported establishing a HCPCS G-code 

as a short-term solution to capture the non-face-to-face services, but suggested that in the 

long term, CMS consider generating new CPT codes specific to the post-discharge 

transitional care management that would also capture face-to-face components of 

transitional care. Some commenters also stated that the requirements for billing the 

post-discharge transitional care services (regardless of whether they are identified with 

the new HCPCS G-code or a CPT code) should not be arduous or complex. A few 

commenters expressed concern that the proposed HCPCS G-code for transitional care 

management would be duplicative of discharge day management services described by 

other CPT codes. Some commenters requested that CMS establish a separate APC for 

the proposed HCPCS G-code with a status indicator of “S” or “X” for transitional care 

management services or assign the HCPCS G-code to APC 0605 (Level 2 Hospital Clinic 

Visits). 

Response: For the reasons outlined in the CY 2013 MPFS final rule with 

comment period, we are adopting the following CPT transitional care management codes 

in place of the proposed HCPCS G-code: CPT code 99495 (Transitional care 

management services w/ moderate medical decision complexity; Face to face visit within 

14 days) and CPT code 99496 (Transitional care management services w/ high medical 
CMS-1589-FC 680 

decision complexity; Face to face visit within 7 days). We agree with the commenters 

that the requirements for billing the post-discharge transitional care management services 

should not be arduous or complex, and we refer readers to the CY 2013 MPFS final rule 

with comment period for a full discussion of the billing requirements for CPT codes 

99495 and 99496. We also refer readers to the CY 2013 MPFS final rule with comment 

period for a full discussion of why we do not believe that recognition of the transitional 

care management services described by CPT codes 99495 and 99496 is duplicative of 

services described by other CPT codes. 

The CPT transitional care management code 99495 includes the following 

required elements: 

● Communication (direct contact, telephone, electronic) with the patient and/or 

caregiver within 2 business days of discharge; 

● Medical decision-making of at least moderate complexity during the service 

period; and 

● Face-to-face visit, within 14 calendar days of discharge. 

CPT code 99496 includes the following required elements: 

● Communication (direct contact, telephone, electronic) with the patient and/or 

caregiver within 2 business days of discharge; 

● Medical decision-making of high complexity during the service period; and 

● Face-to-face visit, within 7 calendar days of discharge. 

As we describe in the CY 2013 MPFS final rule with comment period, the 

services described by CPT codes 99495 and 99496 are for an established patient whose 
CMS-1589-FC 681 

medical and/or psychosocial problems require moderate or high complexity medical 

decision-making during transitions in care from an inpatient hospital setting (including 

acute hospital, rehabilitation hospital, long-term acute care hospital), partial hospital, 

observation status in a hospital, or SNF/nursing facility, to the patient’s community 

setting (home, domiciliary, rest home, or assisted living). Transitional care management 

commences upon the date of discharge and continues for the next 29 days. 

Transitional care management is comprised of one face-to-face visit within the 

specified timeframes, in combination with non-face-to-face services that may be 

performed by the physician or other qualified health care professional and/or licensed 

clinical staff under his or her direction. Because the transitional care management 

services described by CPT codes 99495 and 99496 involve at least one face-to-face visit, 

(unlike the proposed HCPCS G-code), we believe that CPT codes 99495 and 99496 

represent a primary, independent service that should be separately payable under the 

OPPS. We are assigning CPT code 99495 to APC 0605 (Level 2 Hospital Clinic Visit) 

and CPT code 99496 to APC 0606 (Level 3 Hospital Clinic Visit) on an interim basis for 

CY 2013. As with all new CPT codes, these interim assignments are open to public 

comment for a period of 60 days following the publication of this final rule with 

comment period. 

As we discuss in the CY 2013 MPFS final rule with comment period, we are 

adopting these new transitional care management codes to provide a separate reporting 

mechanism to the community physician for these services in the context of the broader 

CMS multi-year strategy to recognize and support primary care and care management. 
CMS-1589-FC 682 

We wish to emphasize again that the policies we are finalizing in this final rule with 

comment period may be short-term payment strategies that may be modified and/or 

revised over time to be consistent with broader primary care and care management 

initiatives. We refer readers to the CY 2013 MPFS final rule with comment period for a 

full discussion of post-discharge transitional care management services in particular and, 

more broadly, the multiple year strategy exploring the best means to encourage primary 

care and care coordination services. 
CMS-1589-FC 683 

VIII. Payment for Partial Hospitalization Services 

A. Background

Partial hospitalization is an intensive outpatient program of psychiatric services 

provided to patients as an alternative to inpatient psychiatric care for individuals who 

have an acute mental illness. Section 1861(ff)(1) of the Act defines partial 

hospitalization services as “the items and services described in paragraph (2) prescribed 

by a physician and provided under a program described in paragraph (3) under the 

supervision of a physician pursuant to an individualized, written plan of treatment 

established and periodically reviewed by a physician (in consultation with appropriate 

staff participating in such program), which plan sets forth the physician’s diagnosis, the 

type, amount, frequency, and duration of the items and services provided under the plan, 

and the goals for treatment under the plan.” Section 1861(ff)(2) of the Act describes the 

items and services included in partial hospitalization services. Section 1861(ff)(3)(A) of 

the Act specifies that a partial hospitalization program (PHP) is a program furnished by a 

hospital to its outpatients or by a community mental health center (CMHC) (as defined in 

subparagraph (B)), and “which is a distinct and organized intensive ambulatory treatment 

service offering less than 24-hour-daily care other than in an individual’s home or in an 

inpatient or residential setting.” Section 1861(ff)(3)(B) of the Act defines community 

mental health center. 

Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the authority to 

designate the OPD services to be covered under the OPPS. The Medicare regulations 

that implement this provision specify, at 42 CFR 419.21, that payments under the OPPS 
CMS-1589-FC 684 

will be made for partial hospitalization services furnished by CMHCs as well as 

Medicare Part B services furnished to hospital outpatients designated by the Secretary, 

which include partial hospitalization services (65 FR 18444 through 18445). 

Section 1833(t)(2)(C) of the Act, in pertinent part, requires the Secretary to 

“establish relative payment weights for covered OPD services (and any groups of such 

services described in subparagraph (B)) based on median (or, at the election of the 

Secretary, mean) hospital costs” using data on claims from 1996 and data from the most 

recent available cost reports. In pertinent part, subparagraph (B) provides that the 

Secretary may establish groups of covered OPD services, within a classification system 

developed by the Secretary for covered OPD services, so that services classified within 

each group are comparable clinically and with respect to the use of resources. In 

accordance with these provisions, we have developed the APCs. Section 1833(t)(9)(A) 

of the Act requires the Secretary to “review not less often than annually and revise the 

groups, the relative payment weights, and the wage and other adjustments described in 

paragraph (2) to take into account changes in medical practice, changes in technology, 

the addition of new services, new cost data, and other relevant information and factors.” 

Because a day of care is the unit that defines the structure and scheduling of 

partial hospitalization services, we established a per diem payment methodology for the 

PHP APCs, effective for services furnished on or after July 1, 2000 (65 FR 18452 

through 18455). Under this methodology, the median per diem costs have been used to 

calculate the relative payment weights for PHP APCs. 
CMS-1589-FC 685 

From CY 2003 through CY 2006, the median per diem costs for CMHCs 

fluctuated significantly from year to year, while the median per diem costs for 

hospital-based PHPs remained relatively constant. We were concerned that CMHCs may 

have increased and decreased their charges in response to Medicare payment policies. 

Therefore, we began efforts to strengthen the PHP benefit through extensive data analysis 

and policy and payment changes in the CY 2008 update (72 FR 66670 through 66676). 

We made two refinements to the methodology for computing the PHP median: the first 

remapped 10 revenue codes that are common among hospital-based PHP claims to the 

most appropriate cost centers; and the second refined our methodology for computing the 

PHP median per diem cost by computing a separate per diem cost for each day rather 

than for each bill. We refer readers to a complete discussion of these refinements in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 through 66676). 

In CY 2009, we implemented several regulatory, policy, and payment changes, 

including a two-tiered payment approach for PHP services under which we paid one 

amount for days with 3 services (APC 0172 (Level I Partial Hospitalization)) and a 

higher amount for days with 4 or more services (APC 0173 (Level II Partial 

Hospitalization)). We refer readers to section X.B. of the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68688 through 68693) for a full discussion of the two-tiered 

payment system. In addition, for CY 2009, we finalized our policy to deny payment for 

any PHP claims submitted for days when fewer than 3 units of therapeutic services are 

provided (73 FR 68694). 
CMS-1589-FC 686 

Furthermore, for CY 2009, we revised the regulations at 42 CFR 410.43 to codify 

existing basic PHP patient eligibility criteria and to add a reference to current physician 

certification requirements at 42 CFR 424.24 to conform our regulations to our 

longstanding policy (73 FR 68694 through 68695). These changes have helped to 

strengthen the PHP benefit. We also revised the partial hospitalization benefit to include 

several coding updates. We refer readers to section X.C.3. of the CY 2009 OPPS/ASC 

final rule with comment period (73 FR 68695 through 68697) for a full discussion of 

these requirements. 

For CY 2010, we retained the two-tiered payment approach for PHP services and 

used only hospital-based PHP data in computing the APC per diem payment rates. We 

used only hospital-based PHP data because we were concerned about further reducing 

both PHP APC per diem payment rates without knowing the impact of the policy and 

payment changes we made in CY 2009. Because of the 2-year lag between data 

collection and rulemaking, the changes we made in CY 2009 were reflected for the first 

time in the claims data that we used to determine payment rates for the CY 2011 

rulemaking (74 FR 60556 through 60559). 

In CY 2011, in accordance with section 1301(b) of the Health Care and Education 

Reconciliation Act of 2010 (HCERA 2010), we amended the description of a PHP in our 

regulations to specify that a PHP must be a distinct and organized intensive ambulatory 

treatment program offering less than 24-hour daily care “other than in an individual’s 

home or in an inpatient or residential setting.” In addition, in accordance with section 

1301(a) of HCERA 2010, we revised the definition of a CMHC in the regulations to 
CMS-1589-FC 687 

conform to the revised definition now set forth at section 1861(ff)(3)(B) of the Act. We 

discussed our finalized policies for these two provisions of HCERA 2010 in section X.C. 

of the CY 2011 OPPS/ASC final rule with comment period (75 FR 71990). 

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71994), we 

also established four separate PHP APC per diem payment rates, two for CMHCs (for 

Level I and Level II services) and two for hospital-based PHPs (for Level I and Level II 

services). In the CY 2011 OPPS/ASC proposed rule, we proposed that CMHC APC 

medians would be based only on CMHC data and hospital-based PHP APC medians 

would be based only on hospital-based PHP data (75 FR 46300). As stated in the 

CY 2011 OPPS/ASC proposed rule (75 FR 46300) and the final rule with comment 

period (75 FR 71991), for CY 2011, using CY 2009 claims data, CMHC costs had 

significantly decreased again. We attributed the decrease to the lower cost structure of 

CMHCs compared to hospital-based PHP providers, and not the impact of CY 2009 

policies. CMHCs have a lower cost structure than hospital-based PHP providers, in part 

because the data showed that CMHCs provide fewer PHP services in a day and use less 

costly staff than hospital-based PHPs. Therefore, it was inappropriate to continue to treat 

CMHCs and hospital-based providers in the same manner regarding payment, 

particularly in light of such disparate differences in costs. We also were concerned that 

paying hospital-based PHPs at a lower rate than their cost structure reflects could lead to 

hospital-based PHP closures and possible access problems for Medicare beneficiaries, 

given that hospital-based PHPs offer the widest access to PHP services because they are 

located across the country. Creating the four payment rates (two for CMHCs and two for 
CMS-1589-FC 688 

hospital-based PHPs) based on each provider’s data supported continued access to the 

PHP benefit, while also providing appropriate payment based on the unique cost 

structures of CMHCs and hospital-based PHPs. In addition, separation of data by 

provider type was supported by several hospital-based PHP commenters who responded 

to the CY 2011 OPPS/ASC proposed rule (75 FR 71992). 

For CY 2011, we instituted a 2-year transition period for CMHCs to the CMHC 

APC per diem payment rates based solely on CMHC data. For CY 2011, under the 

transition methodology, CMHC APC Level I and Level II per diem costs were calculated 

by taking 50 percent of the difference between the CY 2010 final hospital-based PHP 

medians and the CY 2011 final CMHC medians and then adding that number to the 

CY 2011 final CMHC medians. A 2-year transition under this methodology moved us in 

the direction of our goal, which is to pay appropriately for PHP services based on each 

provider type’s data, while at the same time allowing providers time to adjust their 

business operations and protect access to care for beneficiaries. We also stated that we 

would review and analyze the data during the CY 2012 rulemaking cycle and may, based 

on these analyses, further 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. 

After publication of the CY 2011 OPPS/ASC final rule with comment period, a 

CMHC and one of its patients filed an application for a preliminary injunction, 

challenging the OPPS payment rates for PHP services provided by CMHCs in CY 2011 

as adopted in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71995). 
CMS-1589-FC 689 

We refer readers to the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius, No. 

10-949, 2011 WL 3102049 (W.D.Tex. 2011), aff’d, No. 11-50682, 2012 WL 2161137 

(5th Cir. June 15, 2012) (Paladin). The plaintiffs in the Paladin case challenged the 

agency’s use of cost data derived from both hospitals and CMHCs in determining the 

relative payment weights for the OPPS payment rates for PHP services furnished by 

CMHCs, alleging that section 1833(t)(2)(C) of the Act requires that such relative 

payment weights be based on cost data derived solely from hospitals. As discussed 

above, section 1833(t)(2)(C) of the Act requires CMS to “establish relative payment 

weights for covered OPD services (and any groups of such services . . .) . . . based on . . . 

hospital costs.” Numerous courts have held that “based on” does not mean “based 

exclusively on.” On July 25, 2011, the District Court dismissed the plaintiffs’ complaint 

and application for preliminary injunction for lack of subject-matter jurisdiction, which 

the plaintiffs appealed to the United States Court of Appeals for the Fifth Circuit. On 

June 15, 2012, the Court of Appeals affirmed the District Court’s dismissal for lack of 

subject-matter jurisdiction and found that the Secretary’s payment rate determinations for 

PHP services are not a facial violation of a clear statutory mandate. (Paladin at *6). 

For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74348 through 74352), we determined the relative payment weights for 

PHP services provided by CMHCs based on data derived solely from CMHCs and the 

relative payment weights for hospital-based PHP services based exclusively on hospital 

data. The statute is reasonably interpreted to allow the relative payment weights for the 

OPPS payment rates for PHP services provided by CMHCs to be based solely on CMHC 
CMS-1589-FC 690 

data and relative payment weights for hospital-based PHP services to be based 

exclusively on hospital data. Section 1833(t)(2)(C) of the Act requires the Secretary to 

“establish relative payment weights for covered OPD services (and any groups of such 

services described in subparagraph (B)) based on . . . hospital costs.” In pertinent part, 

subparagraph (B) provides that “the Secretary may establish groups of covered OPD 

services . . . so that services classified within each group are comparable clinically and 

with respect to the use of resources.” In accordance with subparagraph (B), we 

developed the APCs, as set forth in 42 CFR 419.31 of the regulations (65 FR 18446 and 

18447; 63 FR 47559 through 47562 and 47567 through 47569). As discussed above, 

PHP services are grouped into APCs. 

Based on section 1833(t)(2)(C) of the Act, we believe that the word “establish” 

can be interpreted as applying to APCs at the inception of the OPPS in 2000 or whenever 

a new APC is added to the OPPS. In creating the original APC for PHP services 

(APC 0033), we did “establish” the initial relative payment weight for PHP services, 

provided in both hospital-based and CMHC-based settings, only on the basis of hospital 

data. Subsequently, from CY 2003 through CY 2008, the relative payment weights for 

PHP services were based on a combination of hospital and CMHC data. For CY 2009, 

we established new APCs for PHP services based exclusively on hospital data. 

Specifically, we adopted a two-tiered APC methodology (in lieu of the original APC 

0033) under which CMS paid one rate for days with 3 services (APC 0172) and a 

different payment rate for days with 4 or more services (APC 0173). These two new 

APCs were established using only hospital data. For CY 2011, we added two new APCs 
CMS-1589-FC 691 

(APCs 0175 and 0176) for PHP services provided by hospitals and based the relative 

payment weights for these APCs solely on hospital data. APCs 0172 and 0173 were 

designated for PHP services provided by CMHCs and were based on a mixture of 

hospital and CMHC data. As the Secretary argued in the Paladin case, the courts have 

consistently held that the phrase “based on” does not mean “based exclusively on.” Thus, 

the relative payment weights for the two APCs for PHP services provided by CMHCs in 

CY 2011 were “based on” hospital data, no less than the relative payment weights for the 

two APCs for hospital-based PHP services. 

Although we used hospital data to establish the relative payment weights for 

APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we believe that we have the 

authority to discontinue the use of hospital data in determining the OPPS relative 

payment weights for PHP services provided by CMHCs. Other parts of section 

1833(t)(2)(C) of the Act make plain that the data source for the relative payment weights 

is subject to change from one period to another. Section 1833(t)(2)(C) of the Act 

provides that, in establishing the relative payment weights, “the Secretary shall [ ] us[e] 

data on claims from 1996 and us[e] data from the most recent available cost reports.” 

However, we used 1996 data (plus 1997 data) in determining only the original relative 

payment weights for 2000; in the ensuing calendar year updates, we continually used 

more recent cost report data. 

Moreover, section 1833(t)(9)(A) of the Act requires the Secretary to “review not 

less often than annually and revise the groups, the relative payment weights, and the 

wage and other adjustments described in paragraph (2) to take into account changes in 
CMS-1589-FC 692 

medical practice, changes in technology, the addition of new services, new cost data, and 

other relevant information and factors.” For purposes of the CY 2012 update, we 

exercised our authority under section 1833(t)(9)(A) of the Act to change the data source 

for the relative payment weights for PHP services provided by CMHCs based on “new 

cost data, and other relevant information and factors.” 

B. PHP APC Update for CY 2013

In the CY 2013 OPPS/ASC proposed rule (77 FR 45094 through 45098 and 

45151), we proposed to develop the relative payment weights that underpin the OPPS 

using geometric means rather than the current median-based methodology. We stated 

that this proposal to base the relative payment weights on geometric means would also 

apply to the per diem costs used to determine the relative payment weights for the four 

PHP APCs (77 FR 45151). We stated that, for PHP APCs, as with all other OPPS APCs, 

the proposal to base the relative payment weights on geometric means rather than 

medians would not affect the general process to establish appropriate claims for 

modeling. We stated that, as with the current median-based methodology, the PHP APC 

per diem payment rates would continue to be calculated by computing a separate per 

diem cost for each day of PHP service. When there are multiple days of PHP services 

entered on a claim, a unique cost would continue to be computed for each day of care. 

However, a geometric mean would be used to calculate the per diem costs rather than a 

median. We stated that the process would still be repeated separately for CMHCs and 

hospital-based PHPs using that provider’s claims data for the two categories of days with 

3 services and days with 4 or more services. We stated that the four PHP APC per diem 
CMS-1589-FC 693 

costs would continue to be included in the scaling of all APCs under the OPPS to the 

mid-level office visit (APC 0606). For a detailed discussion of the CY 2013 OPPS 

weight scaler, we refer readers to section II.A.4. of this final rule with comment period. 

In the CY 2013 OPPS/ASC proposed rule, for CY 2013, using CY 2011 claims 

data, we computed proposed CMHC PHP APC geometric mean per diem costs for Level 

I (3 services per day) and Level II (4 or more services per day) services using only CY 

2011 CMHC claims data, and hospital-based PHP APC geometric mean per diem costs 

for Level I and Level II services using only CY 2011 hospital-based PHP claims data. 

These proposed geometric mean per diem costs were shown in Table 30 of the CY 2013 

OPPS/ASC proposed rule (77 FR 45151) and are reprinted below. 

REPRINTED TABLE 30.--PROPOSED CY 2013 GEOMETRIC MEAN PER 

DIEM COSTS FOR CMHC AND HOSPITAL-BASED PHP SERVICES, BASED 

ON CY 2011 CLAIMS DATA 

APC 

 

Group Title 

 

Proposed 

Geometric 

Mean Per Diem Costs 

0172 Level I Partial Hospitalization (3 

services) for CMHCs 

$87.76

0173 Level II Partial Hospitalization (4 or 

more services) for CMHCs 

111.89

0175 Level I Partial Hospitalization (3 

services) for hospital-based PHPs 

182.66

0176 Level II Partial Hospitalization (4 or 

more services) for hospital-based PHPs 

232.74

Under the CY 2013 proposal to base the OPPS relative payment weights on 

geometric mean costs, the proposed geometric mean per diem costs for CMHCs would 

continue to be substantially lower than the proposed geometric mean per diem costs for 

hospital-based PHPs for the same units of service. For CY 2013, the proposed geometric 

mean per diem costs for days with 3 services (Level I) were approximately $88 for 
CMS-1589-FC 694 

CMHCs and approximately $183 for hospital-based PHPs. The proposed geometric 

mean per diem costs for days with 4 or more services (Level II) were approximately $112 

for CMHCs and approximately $233 for hospital-based PHPs. We stated that this 

analysis indicated that there continue to be fundamental differences between the cost 

structures of CMHCs and hospital-based PHPs. 

The CY 2013 proposed geometric mean per diem costs for CMHCs calculated 

under the proposed CY 2013 methodology using CY 2011 claims data also have 

decreased compared to the CY 2012 final median per diem costs for CMHCs established 

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74352), with per diem 

costs for Level I services decreasing from approximately $98 to approximately $88, and 

costs for Level II services decreasing from approximately $114 to approximately $112. 

In contrast, the CY 2013 proposed geometric mean per diem costs for hospital-based 

PHPs calculated under the proposed CY 2013 methodology using CY 2011 claims data 

have increased compared to the CY 2012 final median per diem costs for hospital-based 

PHPs, with per diem costs for Level I services increasing from approximately $161 to 

approximately $183, and per diem costs for Level II services increasing from 

approximately $191 to approximately $233. 

To provide a comparison in the CY 2013 OPPS/ASC proposed rule, we also 

calculated PHP median per diem costs for CY 2013 using CY 2011 claims data 

(77 FR 45151 through 45152). We computed median per diem costs for each provider 

type using that provider's claims data for Level I services and for Level II services. 
CMS-1589-FC 695 

These comparative median per diem costs were shown in Table 31 of the CY 2013 

OPPS/ASC proposed rule (77 FR 45152) and are reprinted and discussed below. 

REPRINTED TABLE 31.--COMPARATIVE PHP MEDIAN PER DIEM COSTS 

FOR CMHC AND HOSPITAL-BASED PHP SERVICES, BASED ON CY 2011 

CLAIMS DATA AS SET FORTH IN THE CY 2013 OPPS/ASC PROPOSED 

RULE 

APC 

 

Group Title 

 

Comparative 

Median 

Per Diem Costs 

0172 Level I Partial Hospitalization (3 

services) for CMHCs 

$87.52

0173 Level II Partial Hospitalization (4 or 

more services) for CMHCs 

121.27

0175 Level I Partial Hospitalization (3 

services) for hospital-based PHPs 

163.86

0176 Level II Partial Hospitalization (4 or 

more services) for hospital-based 

PHPs 

224.57

The proposed geometric mean per diem costs for hospital-based PHPs for Level I 

and Level II services calculated under the proposed CY 2013 methodology using 

CY 2011 claims data would be higher than the median per diem costs calculated under 

the current median-based methodology, using CY 2011 claims data. For hospital-based 

PHPs, the per diem costs would increase from approximately $164 under the current 

median-based methodology to approximately $183 under the proposed geometric 

mean-based methodology for Level I services, and from approximately $225 to 

approximately $233 for Level II services. 

The proposed geometric mean per diem costs for CMHCs for Level I services 

calculated under the proposed CY 2013 methodology using CY 2011 claims data would 

be approximately the same as the median per diem costs calculated under the current 

median-based methodology, using CY 2011 claims data. The proposed geometric mean 
CMS-1589-FC 696 

per diem costs for CMHCs for Level II services calculated under the proposed CY 2013 

methodology using CY 2011 claims data would be slightly lower than the median per 

diem costs calculated under the current median-based methodology, using CY 2011 

claims data. For CMHCs, the per diem costs would be approximately $88 under both the 

current median-based methodology and the proposed geometric mean-based 

methodology for CMHC Level I services, and would decrease from approximately $121 

under the current median-based methodology to approximately $112 under the proposed 

geometric mean-based methodology for CMHC Level II services. 

We stated that the data analysis also shows that the median per diem costs for 

CMHCs continue to be substantially lower than the median per diem costs for hospitalbased PHPs for the same units of service provided. The median per diem costs for Level 

I services were approximately $88 for CMHCs and approximately $164 for 

hospital-based PHPs. The median per diem costs for Level II services were 

approximately $121 for CMHCs and approximately $225 for hospital-based PHPs. We 

stated that the significant difference in per diem costs between CMHCs and hospitalbased PHPs emphasizes the distinct cost structures between the two provider types. 

Finally, we stated that the data analysis indicates that CMHC median per diem 

costs for Level I services would have decreased from CY 2012 final median per diem 

costs (using CY 2010 claims data) (established in the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74352)) to CY 2013 (using CY 2011 claims data) from 

approximately $98 to approximately $88, using only CMHC claims data. The CMHC 

median per diem costs for Level II services would have slightly increased from CY 2012 
CMS-1589-FC 697 

final median per diem costs (using CY 2010 claims data) to CY 2013 (using CY 2011 

claims data) from approximately $114 to approximately $121, using only CMHC claims 

data. Hospital-based PHP median per diem costs for Level I and Level II services would 

have increased from the CY 2012 final median per diem costs (using CY 2010 claims 

data) to CY 2013 (using CY 2011 claims data) from approximately $161 to 

approximately $164 for Level I services and from approximately $191 to approximately 

$225 for Level II services, using only hospital claims data. 

In summary, while we have historically based the OPPS payments on median 

costs for services in the APC groups, for CY 2013, we proposed to calculate the relative 

payment weights for the OPPS APCs using geometric means, including the four PHP 

APCs, as discussed in section II.A.2.f. of the proposed rule. We invited public comments 

on these proposals. 

Comment: A few commenters representing CMHCs opposed the proposed 

conversion from the historically applied median-based methodology to the geometric 

mean-based methodology and the resulting CMHC payment rates. The commenters 

believed that the median cost approach is more stable and less sensitive to extreme 

observations and, therefore, a more appropriate methodology. One CMHC commenter 

preferred the median-based methodology because it resulted in a higher payment rate for 

the CMHC APC for Level II services than when calculated using a geometric 

mean-based methodology. The commenters recommended that CMS continue using a 

median-based methodology and not change to a geometric mean-based methodology for 

calculating the per diem costs. 
CMS-1589-FC 698 

Response: We acknowledge the commenters’ concern about the change from the 

median-based methodology to the geometric mean-based methodology and its impact on 

CMHCs. In the CY 2013 OPPS/ASC proposed rule, we proposed to develop the OPPS 

relative payment weights using geometric mean cost for all APCs that were previously 

calculated using median cost, including the PHP APCs (77 FR 45094 through 45098 and 

45151). Under the CY 2013 proposal, OPPS payments to CMHCs for partial 

hospitalization also would be calculated based on geometric mean per diem costs, rather 

than the previous use of median per diem costs. This would help ensure that the relativity 

of the OPPS payment weights was properly aligned. As discussed in section II.A.2.f. of 

this final rule with comment period, we do not believe that paying for some services 

based on median costs while using geometric mean costs for other services is appropriate, 

equitable, or consistent with statute. Therefore, our CY 2013 proposal was to develop the 

OPPS relative payment weights using geometric mean costs for any services previously 

calculated using median costs, whether that was on a standard, per diem, or line item 

basis (77 FR 45097). 

In the CY 2013 OPPS/ASC proposed rule, we recognized that median costs had 

historically served as an appropriate measure on which to establish relative payment 

weights. However, in our proposal to establish the CY 2013 OPPS relative payment 

weights using geometric mean cost, we discussed a number of reasons why we believed 

that changing to geometric mean cost would represent an incremental improvement as 

well as be appropriate. These reasons included changes CMS has made throughout the 

history of the OPPS with the goal of deriving more accurate information from available 
CMS-1589-FC 699 

claims and cost report data, as well as benefits of using a metric that more accurately 

describes the range of costs associated with providing services. 

While commenters have suggested that medians are more appropriate because 

they are less sensitive to outlier observations, in particular for CMHCs, we believe that 

including those outlier observations in developing the weights and capturing the full 

range of service costs will lead to more accurate relative payment weights. In addition to 

better incorporating those cost values that surround the median and, therefore, describing 

a broader range of cost patterns, basing the relative payment weights on geometric mean 

costs may also promote better stability in the payment system by making OPPS payments 

more reflective of the range of costs associated with providing services. In the short 

term, geometric mean-based relative payment weights would make the relative payment 

weights more reflective of the service costs. However, making this change also may 

promote more payment stability in the long term by including a broader range of 

observations in the relative payment weights, making them less susceptible to gaps in 

estimated cost near the median observation and also making changes in the relative 

payment weight a better function of changes in estimated service costs. 

We note that using the geometric means would increase the relative payment 

weights for some services and decrease the relative payment weights for others. We 

believe those updated relative payment weights to be more reflective of the costs 

associated with providing those services, which is consistent with the goal of developing 

relative payment weights that accurately describe service costs. As described in the 

CY 2013 OPPS/ASC proposed rule, we have made a number of changes in the history of 
CMS-1589-FC 700 

the OPPS to derive more information from what is available to us and ensure that the cost 

information we use for ratesetting is as accurate as possible. We believe that making 

changes consistent with those goals is preferable, rather than choosing one methodology 

or another simply due to the numeric payment rates that arise from any different 

methodology. 

Thus, for the reasons discussed above, we believe that using geometric mean costs 

to calculate the relative payment weights for the OPPS represents an improvement to our 

cost estimation process and will lead to relative payment weights that are more reflective 

of service cost patterns. For these reasons, we disagree with the commenters’ assertion 

that use of the median-based methodology is a preferable option. We believe that this 

change is appropriate and requires all OPPS services previously paid through 

median-based calculations (including CMHC based per diem costs) to transition together 

to geometric mean cost calculations to establish accurate cost relativity in the system. 

Therefore, we are finalizing the geometric mean-based methodology in this final rule 

with comment period. For a more detailed discussion of geometric mean-based relative 

payment weights, we refer readers to section II.A.2.f. of this final rule with comment 

period. 

Comment: Several hospital-based PHP providers supported the conversion from 

a median-based methodology to a geometric mean-based methodology and the resulting 

hospital-based PHP per diem payments. These commenters also recommended that CMS 

continue to recognize the cost structure differences between hospital-based PHPs and 

CMHCs by calculating four separate PHP APCs based on each providers’ own unique 
CMS-1589-FC 701 

data, and stated that it was a necessary improvement to help ensure PHP access in 

hospital-based settings for the future. The commenters also encouraged CMS to continue 

to refine data analysis strategies that help bring payment accuracy as well as stability to 

the partial hospitalization benefit in order to allow programs that meet the needs of 

Medicare beneficiaries to exist. 

Response: We appreciate the commenters’ support of the two-tiered, four PHP 

APC per diem payment rates based on each providers’ own unique data. We continue to 

believe that it is important to calculate PHP APC per diem payment rates based on the 

data for each type of provider in order to appropriately pay for PHP services, which will 

support continued access to quality services. We are constantly monitoring the OPPS in 

search of potential refinements that would improve the accuracy and stability of the 

payment system. Over the past several years, we have made changes to PHP APC per 

diem payment rates to more accurately align the payments with costs. These changes 

have included establishing separate APC per diem payment rates for CMHCs and 

hospital-based providers based on each providers’ costs as well as a two-tiered APC per 

diem payment rate for both CMHC and hospital-based PHPs under which we pay one 

amount for days with 3 services and another amount for days with 4 or more services. As 

discussed in the CY 2013 OPPS/ASC proposed rule, we believe that the use of geometric 

mean costs rather than median costs in the ratesetting process is another improvement, 

because it allows the payment metric to consider a broader range of service costs among 

other factors (77 FR 45097). We will continue to monitor the impact of our payment 

policies on the PHP benefit and providers. 
CMS-1589-FC 702 

Comment: A few CMHC providers requested that CMS suspend implementation 

of the proposed PHP APC per diem payment rates for CMHCs and maintain the current 

CY 2012 CMHC PHP APC per diem payment rates as a means to preserve CMHCs. The 

commenters stated that many of the CMHCs throughout the country have already closed 

due to CMS’ ongoing payment rate reductions. Another commenter stated that no 

business in the United States or anywhere else in the world can survive and continue to 

operate after such a decrease over 3 years. The commenter further stated that it appeared 

that the goal of CMS was to substantially reduce the total number of CMHCs 

participating in the Medicare program and consequentially reduce payments nationwide. 

One commenter expressed concern that, instead of being rewarded, CMHCs are being 

targeted and punished for providing more cost-effective services than the hospital-based 

PHPs. This same commenter was “highly offended” by the following sentence from the 

CY 2012 OPPS/ASC proposed rule (77 FR 45150): “CMHCs have a lower cost structure 

than hospital-based PHP providers, in part because the data showed that CMHCs provide 

fewer PHP services in a day and use less costly staff than hospital-based PHPs.” The 

commenter stated that the sentence implies “CMHCs provide less valuable services than 

hospital-based PHPs, hire less qualified staff, and overall perform very poorly compared 

to hospital based PHPs.” 

Several commenters expressed concern that the proposed reductions to the CMHC 

PHP APC per diem payment rates could further erode the viability of the safety net 

system, and make it more difficult for patients to receive needed mental health care and 
CMS-1589-FC 703 

services. One of these commenters also stated that if patients are unable to receive care 

in a CMHC, many will have only the emergency departments as a last resort. 

Response: We understand the concerns raised by the commenters regarding 

CMHC APC per diem payment rate reductions. We are not targeting or trying to punish 

specific providers, and we are not trying to reduce the number of CMHCs participating in 

the Medicare program. However, we continue to believe that it is important to calculate 

PHP APC per diem payment rates based on the data for each type of provider in order to 

appropriately pay for services. CMHCs’ costs have fluctuated significantly and then 

generally declined over the years. CMHCs’ costs also have remained significantly lower 

than hospital-based PHPs’ costs, which have been relatively stable since the inception of 

the OPPS. In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74347), 

we stated that CMHCs have a lower cost structure than hospital-based PHP providers 

because the data showed and continue to show that CMHCs provide fewer PHP services 

in a day and use less costly staff than hospital-based PHPs. In other words, 

hospital-based providers have traditionally provided more services than CMHCs during a 

PHP day. Providing fewer services during a PHP day results in less overhead expense for 

the provider; that is, less time the provider needs to pay staff, less time the provider needs 

to heat the building, and less time the provider needs to light the building. Therefore, 

providing fewer PHP services during a day directly contributes to a lower overall cost 

structure. We did not intend to offend any of our providers. We also did not mean to 

imply that, in comparison to hospital-based PHPs, CMHCs provide inferior, less valuable 
CMS-1589-FC 704 

or poor quality services; we were only stating the differences in these providers’ cost 

structures based on our cost analysis. 

In light of these differences in cost structures between provider types, it was 

inappropriate to continue to treat CMHCs and hospital-based PHP providers in the same 

manner. We were concerned that paying hospital-based PHPs at a lower rate than their 

cost structure reflects could lead to closures and possible access problems for hospitalbased programs providing services to Medicare beneficiaries, given that hospital-based 

PHPs offer the widest access to PHP services because they are located across the country. 

Paying providers based on the four PHP APC per diem payment rates supports continued 

access to the PHP benefit, while also providing appropriate payment based on the unique 

cost structures of CMHCs and hospital-based PHPs. We believe that the CMHC APC 

per diem payment rates accurately reflect the cost data of the CMHCs. 

The PHP APC per diem payment rates are directly related to the accuracy of the 

claims and cost reports submitted by providers. It is imperative that providers submit 

accurate claims and cost reports in order for the payment rates to most accurately reflect 

the providers’ costs. The resulting PHP APC per diem payment rates reflect the cost of 

what providers expend to maintain such programs. So, it is unclear why this would lead 

to program or business closures. As we stated in the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74350), the closure of PHPs may be due to any number of 

reasons, such as poor business management or marketing decisions, competition, oversaturation of certain geographic areas, and Federal and State fraud and abuse efforts, 
CMS-1589-FC 705 

among others. It does not directly imply that closure could be due to reduced payment 

rates alone, especially when these payment rates reflect the costs of PHP providers. 

In response to the commenters’ concerns that further reduction in the CMHC PHP 

APC per diem payment rates could further erode the viability of the safety net system and 

make it more difficult for patients to receive needed mental health services, we take such 

concerns seriously. Currently, we monitor facility closings and openings to make sure 

that access issues do not exist, and we will continue to do so in the future. We also 

remain steadfast in our concern regarding access to care for all beneficiaries, while also 

providing appropriate payments for such care. A PHP is not the only program in which a 

Medicare beneficiary is able to receive needed mental health care. Although not 

equivalent to a PHP, Medicare provides payment for outpatient mental health services in 

addition to PHP services. Many beneficiaries in need of mental health treatment receive 

other outpatient services generally from hospital programs which are available 

nationwide, and no evidence suggests that there is an increase in adverse outcomes due to 

lack of access to care. Other forms of access to mental health services remain available. 

We continue to believe that it is important to calculate PHP APC per diem payment rates 

based on the data of each type of provider in order to appropriately pay for PHP services, 

which will support continued access to quality services. 

Commenters also requested that we suspend implementation of the proposed 

CY 2013 PHP APC per diem payment rates for CMHCs, and that we pay based on the 

CY 2012 per diem payment rates to preserve CMHCs. As discussed above, we cannot 

establish payment rates that do not accurately reflect the current cost data. We believe 
CMS-1589-FC 706 

that having separate payment rates for CMHCs and hospital-based providers based on 

each providers’ costs as well as a two-tiered APC per diem payment rate for both CMHC 

and hospital-based PHPs under which we pay one amount for days with 3 services and 

another amount for days with 4 or more services along with using geometric means to 

more accurately reflect the costs associated with providing OPPS services supports the 

PHP benefit and pays providers appropriately for the services that they provide. For 

these reasons, we are not suspending implementation of the CY 2013 PHP APC per diem 

payment rates for CMHCs. 

Comment: One commenter stated that the database of claim payments used in 

calculating the new payment rates includes at least two providers indicted for fraud, and 

recommended that these claims be removed. 

Response: We strive to ensure that the claims we use for modeling the OPPS 

payment rates contain accurate cost information on services. In addition, we note that 

providers with questionable data are subject to further investigation. We request that the 

commenter provide us with more details regarding those providers. 

Comment: One commenter suggested that, instead of calculating the PHP APC 

per diem payment rates using claims data, CMS should use the quality of the provided 

services to base payments, including record reviews, denials due to lack of medical 

necessity or inadequate documentation, site visits, interviews with patients, and most 

importantly patient outcomes. Another commenter recommended that CMS establish 

quality and outcome criteria to judge performance that would influence future ratesetting, 

and provide rewards to individual providers for outstanding quality and outcomes. 
CMS-1589-FC 707 

Response: Sections 1833(t)(2) and 1833(t)(9) of the Act set forth the 

requirements for establishing and adjusting the OPPS payment rates, including the PHP 

payment rates. The existing policies and procedures implementing these statutory 

provisions do not consider quality measures when setting base payment rates. However, 

we note that section 1833(t)(17) of the Act implements an outpatient quality reporting 

program for subsection (d) hospitals that applies a payment reduction for hospitals that 

fail to meet the program requirements. 

Comment: One commenter requested that CMS establish a ratesetting task force 

to review the CMS ratesetting methodology and CMHCs’ and hospital-based PHPs’ costs 

as a means to identify fair and adequate payment rates for both. Another commenter 

requested an open discussion with CMS and associations whose members are PHP 

providers. 

Response: We maintain positive working relationships with various industry 

leaders representing both CMHCs and hospital-based PHP providers with whom we have 

consistently met over the years to discuss industry concerns and ideas. These 

relationships have provided significant and valued input regarding PHP ratesetting. We 

also hold Hospital Outpatient Open Door Forum calls monthly, in which all individuals 

are welcome to participate and/or submit questions regarding specific issues, including 

questions related to PHPs. 

Furthermore, we initiate rulemaking annually, through which we receive public 

comments on proposals set forth in a proposed rule and respond to those comments in a 
CMS-1589-FC 708 

final rule. All individuals are provided an opportunity to comment, and we give 

consideration to each comment that we receive. 

Given the relationships that we have established with various industry leaders and 

the various means for us to receive comments and recommendations, we believe that we 

receive adequate input regarding ratesetting and take that input into consideration when 

establishing the payment rates. We continue to welcome any input and information that 

the industry is willing to provide. 

Comment: A few commenters addressed issues related to the costs used to 

calculate the PHP APC per diem payment rates. One commenter expressed concern that 

CMS’ ratesetting methodology does not take into consideration the array of services that 

are delivered in PHPs, such as assisting with appointments regarding social security and 

Medicare; housing searches; primary healthcare; eye and dental services; working with 

families; obtaining prescription medications; and accessing transportation, food banks 

and food stamps. 

Two commenters expressed concern that CMHCs must retain the same level of 

licensed staff as hospital-based PHPs, yet the discrepancy between the proposed CMHC 

and hospital-based PHP per diem payment rates is now significant. The commenters 

stated that because all PHPs must hire psychiatrists, licensed clinicians, licensed 

supervisors, and bachelor-level case managers, it is difficult to understand why and how 

CMS calculated such different payment rates for essentially the same services. 

Lastly, one commenter further questioned why a licensed therapist in a 

community-based treatment setting can be paid $110.27 for a 45 to 50 minute individual 
CMS-1589-FC 709 

counseling session, while a CMHC is expected to deliver up to 6 hours of care per day 

including treatment, food, transportation, among others, for $111.89 per day (for 4 or 

more services). 

Response: Section 1861(ff) of the Act and 42 CFR 410.43 describe the items and 

services included in partial hospitalization services. As set forth in these sections, partial 

hospitalization services generally consist of a variety of group, individual, and family 

psychotherapy sessions, supplemented with occupational therapy, the services of social 

workers, trained psychiatric nurses, and other staff trained to work with psychiatric 

patients, drugs and biologicals furnished for therapeutic purposes that cannot be selfadministered, diagnostic services, education and training, and certain activity therapies 

designed to stabilize an acute episode of mental illness. The PHP APC per diem payment 

rate is the bundled payment for these partial hospitalization services. Physician services 

that meet the requirements of § 415.102(a) for payment on a fee schedule basis, physician 

assistant services, nurse practitioner and clinical nurse specialist services, and qualified 

psychologist services are separately covered (as are services furnished to skilled nursing 

facility residents as defined in § 411.15(p)) and are not paid as partial hospitalization 

services (§ 410.43(b)). Further, section 1861(ff)(2)(I) of the Act explicitly excludes 

meals and transportation from the items and services included in partial hospitalization 

services. 

Regarding the concern about the discrepancy between the proposed CMHC and 

hospital-based PHP per diem payment rates, as discussed above, we believe that it is 

important to calculate PHP APC per diem payment rates based on the data for each type 
CMS-1589-FC 710 

of provider in order to appropriately pay for services. We base the PHP APC per diem 

payment rates on claims and cost reports submitted by providers. The resulting PHP 

APC per diem payment rates reflect the cost of what providers expend to maintain such 

programs. 

In response to the commenter who questioned why the payment to a CMHC for a 

full day of mental health treatment is about the same as the amount a therapist is paid for 

one individual counseling session, we believe the commenter is comparing the 

professional fee the therapist is paid under the MPFS for providing a therapy service 

($110.27, according to the commenter) to the proposed Level II APC per diem payment 

rate to a CMHC under the OPPS for CY 2013 ($111.89). We believe that this is not an 

appropriate comparison because these payments are for completely different services. It 

is important to note that CMHCs receive the per diem amount per person per day. Thus, 

assuming the PHP has 10 patients, the facility is receiving over $1,000 for the day. That 

amount, which is intended to cover the facility’s per diem cost for a day of PHP, includes 

the cost of staff who are not authorized to bill Medicare Part B as discussed above. 

Again, we base the PHP APC per diem payment rates on claims and cost reports 

submitted by providers. Thus, resulting PHP APC per diem payment rates reflect the cost 

of what providers expend to maintain such programs. 

In summary, after consideration of the public comments we received, we are 

finalizing our CY 2013 proposal, without modification, to update the four PHP APC per 

diem payment rates based on geometric mean cost levels calculated using the most recent 

claims data for each provider type. The updated PHP APCs geometric mean per diem 
CMS-1589-FC 711 

costs for PHP services that we are finalizing for CY 2013 are shown in Tables 39 and 40 

below. We will continue our efforts to explore payment reforms that will support quality 

and result in greater payment accuracy and reduction of fraud and abuse within the partial 

hospitalization program. 

TABLE 39.--CY 2013 GEOMETRIC MEAN PER DIEM COSTS FOR 

CMHC PHP SERVICES 

APC Group Title Mean Per Diem 

Costs 

0172 Level I Partial Hospitalization (3 services) for 

CMHCs 

$87.39

0173 Level II Partial Hospitalization (4 or more 

services) for CMHCs 

$112.82

TABLE 40.--CY 2013 GEOMETRIC MEAN PER DIEM COSTS FOR 

HOSPITAL-BASED PHP SERVICES 

APC Group Title Mean Per Diem 

Costs 

0175 Level I Partial Hospitalization (3 services) for 

hospital-based PHPs 

$185.90

0176 Level II Partial Hospitalization (4 or more 

services) for hospital-based PHPs 

$234.81

C. Coding Changes

CPT codes are established by the AMA and the Level II HCPCS codes are 

established by the CMS HCPCS Workgroup. CPT and Level II HCPCS codes are used 

to report procedures, services, and items and supplies under the hospital OPPS. These 

codes are updated and changed throughout the year. 
CMS-1589-FC 712 

Subsequent to the publication of the CY 2013 OPPS/ASC proposed rule, the 

AMA’s CPT Editorial Panel deleted 28 psychiatric CPT codes, including those related to 

PHP services, and replaced them with 12 new CPT codes, effective January 1, 2013. For 

a detailed explanation of the OPPS treatment of new, deleted or revised CPT and Level II 

HCPCS codes we refer readers to section III.A. of this final rule with comment period. 

As a result of the AMA’s CPT coding changes to the psychiatric CPT codes, we are 

making corresponding changes to the PHP code set that is used for billing and 

documenting PHP services. Specifically, we are making the following changes: 

● The initial E/M codes are being separated based on whether the service was 

completed by a physician (CPT code 90792 (Initial evaluation with medical services done 

by a physician)), or a nonphysician (CPT code 90791 (Initial evaluation done by a nonphysician)). Currently, for PHPs, E/M services are billed under: CPT codes 90801 

(Psychiatric diagnostic interview examination) and 90802 (Interactive psychiatric 

diagnostic interview). Effective January 1, 2013, CPT codes 90801 and 90802 will be 

deleted and the E/M services will be billed using the following CPT codes: CPT code 

90791 (Psychiatric diagnostic evaluation (no medical services) when completed by a nonphysician) and CPT code 90792 (Psychiatric diagnostic evaluation (with medical 

services) when completed by a physician). 

● The psychotherapy codes will no longer be for a range of time, but for a 

specific period of time. The following CPT codes that are currently used to bill for and 

document PHP individual psychotherapies will be deleted in CY 2013: CPT code 90816 

(Psytx hosp 20-30 min); CPT code 90817 (Psytx hosp 20-30 min w/e&m); CPT code 
CMS-1589-FC 713 

90818 (Psytx hosp 45-50 min); CPT code 90819 (Psytx hosp 45-50 min w/e&m); CPT 

code 90821 (Psytx hosp 75-80 min); CPT code 90822 (Psytx hosp 75-80 min w/e&m); 

CPT code 90823 (Intac psytx hosp 20-30 min); CPT code 90824 (Intac psytx hsp 20-30 

w/e&m); CPT code 90826 (Intac psytx hosp 45-50 min); CPT code 90827 (Intac psytx 

hsp 45-50 w/e&m); CPT code 90828 (Intac psytx hosp 75-80 min); and CPT code 90829 

(Intac psytx hsp 75-80 w/e&m). These codes will be replaced with the following new 

psychotherapy CPT codes: CPT codes 90832 (Psychotherapy, 30 minutes); CPT codes 

90834 (Psychotherapy, 45 minutes); and CPT codes 90837 (Psychotherapy, 60 minutes). 

If the time spent for psychotherapy is more than half the time of the code, then that code 

can be used to bill for PHP services. For example, if the time spent for psychotherapy is 

16 minutes up to 37 minutes, CPT code 90832 (Psychotherapy, 30 minutes) would be 

used. For psychotherapy lasting 38 to 52 minutes, CPT code 90834 (Psychotherapy, 45 

minutes) would be used, and for psychotherapy lasting 53 minutes or more, CPT code 

90837 (Psychotherapy, 60 minutes) would be used. When psychotherapy is provided 

during the same encounter as an E/M service, there will be timed add-on CPT codes for 

psychotherapy that are to be used by psychiatrists to indicate that psychotherapy was 

provided during the same encounter as an E/M service. When E/M services are 

completed with psychotherapy, the following CPT codes may be used effective 

January 1, 2013: Appropriate E/M code (not selected on basis of time) and CPT code 

+90833 (30-minute psychotherapy add-on code); Appropriate E/M code (not selected on 

basis of time) and CPT code +90836 (45-minute psychotherapy add-on code); and 

Appropriate E/M code (not selected on basis of time) and CPT code +90838 (60-minute 
CMS-1589-FC 714 

psychotherapy add-on code). The following table provides a list of the PHP-related 

individual psychotherapy CPT codes that will be deleted December 31, 2012. 

TABLE 41.—INDIVIDUAL PSYCHOTHERAPY CPT CODES THAT 

WILL BE DELETED DECEMBER 31, 2012 

CY 2012 

CPT Code Long Descriptor 

90816 

Individual psychotherapy, insight oriented, behavior modifying and/or 

supportive, in an inpatient hospital, partial hospital or residential care 

setting, approximately 20 to 30 minutes face-to-face with the patient 

90817 

Individual psychotherapy, insight oriented, behavior modifying and/or 

supportive, in an inpatient hospital, partial hospital or residential care 

setting, approximately 20 to 30 minutes face-to-face with the patient; 

with medical evaluation and management services 

90818 

Individual psychotherapy, insight oriented, behavior modifying and/or 

supportive, in an inpatient hospital, partial hospital or residential care 

setting, approximately 45 to 50 minutes face-to-face with the patient 

90819 

Individual psychotherapy, insight oriented, behavior modifying and/or 

supportive, in an inpatient hospital, partial hospital or residential care 

setting, approximately 45 to 50 minutes face-to-face with the patient; 

with medical evaluation and management services 

90821 

Individual psychotherapy, insight oriented, behavior modifying and/or 

supportive, in an inpatient hospital, partial hospital or residential care 

setting, approximately 75 to 80 minutes face-to-face with the patient 

90822 

Individual psychotherapy, insight oriented, behavior modifying and/or 

supportive, in an inpatient hospital, partial hospital or residential care 

setting, approximately 75 to 80 minutes face-to-face with the patient; 

with medical evaluation and management services 

90823 

Individual psychotherapy, interactive, using play equipment, physical 

devices, language interpreter, or other mechanisms of non-verbal 

communication, in an inpatient hospital, partial hospital or residential 

care setting, approximately 20 to 30 minutes face-to-face with the 

patient 
CMS-1589-FC 715 

CY 2012 

CPT Code Long Descriptor 

90824 

Individual psychotherapy, interactive, using play equipment, physical 

devices, language interpreter, or other mechanisms of non-verbal 

communication, in an inpatient hospital, partial hospital or residential 

care setting, approximately 20 to 30 minutes face-to-face with the 

patient; with medical evaluation and management services 

90826 

Individual psychotherapy, interactive, using play equipment, physical 

devices, language interpreter, or other mechanisms of non-verbal 

communication, in an inpatient hospital, partial hospital or residential 

care setting, approximately 45 to 50 minutes face-to-face with the 

patient 

90827 

Individual psychotherapy, interactive, using play equipment, physical 

devices, language interpreter, or other mechanisms of non-verbal 

communication, in an inpatient hospital, partial hospital or residential 

care setting, approximately 45 to 50 minutes face-to-face with the 

patient; with medical evaluation and management services 

90828 

Individual psychotherapy, interactive, using play equipment, physical 

devices, language interpreter, or other mechanisms of non-verbal 

communication, in an inpatient hospital, partial hospital or residential 

care setting, approximately 75 to 80 minutes face-to-face with the 

patient 

90829 

Individual psychotherapy, interactive, using play equipment, physical 

devices, language interpreter, or other mechanisms of non-verbal 

communication, in an inpatient hospital, partial hospital or residential 

care setting, approximately 75 to 80 minutes face-to-face with the 

patient; with medical evaluation and management services 

● Instead of separate codes for interactive psychotherapy, there is now an add-on 

CPT code for interactive complexity, which may be used when the patient encounter is 

more complex because of the need to involve people other than the patient (CPT code 

+90785). This add-on CPT code can be used with initial evaluation codes, with the 

psychotherapy codes, with the nonfamily group psychotherapy code, and with the E/M 

codes when they are used in conjunction with psychotherapy services. The CPT manual 
CMS-1589-FC 716 

includes specific guidelines as to what constitutes interactive complexity that should be 

understood before this add-on CPT code is used. Documentation must clearly indicate 

exactly what that complexity was. 

Beginning on January 1, 2013, interactive psychotherapy should be billed using 

the psychiatric evaluation codes, the psychotherapy and psychotherapy add-on CPT 

codes, and the group (nonfamily) psychotherapy CPT code +90785 (Interactive 

psychotherapy). 

Relevant coding requirements must be followed. We recommend learning how to 

accurately bill for and document these new codes. More information may be found on 

the CPT/AMA Web site: http://www.ama-assn.org/ama/pub/physicianresources/solutions-managing-your-practice/coding-billing-insurance/cpt.page.

All other PHP CPT and HCPCS codes will remain unchanged and active for 

billing and documentation of PHP services. We refer readers to the table below that 

highlights which PHP CPT/HCPCS codes are changing and which PHP CPT/HCPCS 

codes will remain unchanged and active for billing and documentation of services. 

The following Table 42 provides a crosswalk between the CPT/HCPCS code 

options in CY 2012 and the CPT/HCPCS code options that are effective on 

January 1, 2013. 

TABLE 42.—CROSSWALK OF DELETED AND NEW PHP CPT AND HCPCS 

BILLABLE CODES FOR 2013 

CURRENT CPT/HCPCS CODE NEW CPT/HCPCS CODE 

90801 (Psychiatric diagnostic interview) 90791 (psychiatric diagnostic evaluation 

(no medical services) 

90792 (psychiatric diagnostic evaluation 
CMS-1589-FC 717 

CURRENT CPT/HCPCS CODE NEW CPT/HCPCS CODE 

with medical services) 

90802 (Intac psychiatric diagnostic 

interview) 

90791 or 90792, with 

+90785 (interactive complexity add-on 

code) 

90816 ( Psytx hosp 20-30 min) 90832 psychotherapy, 30 min. (with 

patient and/or family) 

90817 ( Psytx hosp 20-30 min w/e&m) Appropriate inpatient E/M code (not 

selected on basis of time), and 

+90833, 30-minute psychotherapy add-on 

code (with patient and/or family) 

90818 ( Psytx hosp 45-50 min) 90834 psychotherapy, 45 min. (with 

patient and/or family) 

90819 ( Psytx hosp 45-50 min w/e&m) Appropriate inpatient E/M code (not 

selected on basis of time), and 

+90836, 45-minute psychotherapy add-on 

code (with patient and/or family) 

90821 ( Psytx hosp 75-80 min) 90837 psychotherapy, 60 min. (with 

patient and/or family) 

90822 (Psytx hosp 75-80 min w/e&m) Appropriate inpatient E/M code (not 

selected on basis of time), and 

+90838, 60-minute psychotherapy add-on 

code (with patient and/or family) 

90823 (Intac psytx hosp 20-30 min) 90832, psychotherapy, 30 min. 

+90785, interactive complexity add-on 

code (with patient and/or family) 

90824 (Intac psytx hsp 20-30 w/e&m) Appropriate inpatient E/M code (not 

selected on basis of time), and 

+90833, 30-minute psychotherapy add-on 

code, and 

+90785, interactive complexity add-on 

code (with patient and/or family) 

90826 (Intac psytx hosp 45-50 min) 90834, psychotherapy, 45 min. 

+90785, interactive complexity add-on 

code (with patient and/or family) 

90827 (Intac psytx hsp 45-50 w/e&m) Appropriate inpatient E/M code (not 

selected on basis of time), and 
CMS-1589-FC 718 

CURRENT CPT/HCPCS CODE NEW CPT/HCPCS CODE 

+90836, 45-minute psychotherapy add-on 

code, and 

+90785, interactive complexity add-on 

code (with patient and/or family) 

90828 (Intac psytx hosp 75-80 min) 90837, psychotherapy, 60 min. 

+90785, interactive complexity add-on 

code (with patient and/or family) 

90829 (Intac psytx hsp 75-80 w/e&m) Appropriate inpatient E/M code (not 

selected on basis of time), and 

+90838, 60-minute psychotherapy add-on 

code, and 

+90785, interactive complexity add-on 

code (with patient and/or family) 

90845 (Psychoanalysis) Retained/No changes 

90846 (Family psytx w/o patient) Retained/No changes 

90847 (Family psytx w/patient) Retained/No changes 

90865 (Narcosynthesis) Retained/No changes 

90880 (Hypnotherapy) Retained/No changes 

96101 (Psycho testing by psych/phys) Retained/No changes 

96102 (Psycho testing by technician) Retained/No changes 

96103 (Psycho testing admin by comp) Retained/No changes 

96116 (Neurobehavioral status exam) Retained/No changes 

96118 (Neuropsych tst by psych/phys) Retained/No changes 

96119 (Neuropsych testing by tec) Retained/No changes 

96120 (Neuropsych tst admin w/comp) Retained/No changes 

G0129 (Partial hosp prog service) Retained/No changes 

G0176 (OPPS/PHP;activity therapy) Retained/No changes 

G0177 (OPPS/PHP; train & educ serv) Retained/No changes 

G0410 (Grp psych partial hosp 45-50) Retained/No changes 

G0411 (Inter active grp psych parti) Retained/No changes 

The following Table 43 shows all of the billable PHP revenue and CPT/HCPCS 

codes effective on January 1, 2013. This table is also located in the Medicare Claims 

Processing Manual, Pub. 100–04, Chapter 4, Section 260.1, which is available on the 
CMS-1589-FC 719 

CMS Web site at: http://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Downloads/clm104c04.pdf. 

TABLE 43.—PARTIAL HOSPITALIZATION BILLABLE CODES 

Revenue 

Codes Description CPT/HCPCS Codes 

043X Occupational Therapy G0129 

0900 Behavioral Health 

Treatment/Services 

90791 or 90792 

0904 Activity Therapy G0176 

0914 Individual 

Psychotherapy 90785, 90832, 90833, 90834, 90836, 90837, 

90838, 90845, 90865, or 90880 

0915 Group Therapy G0410 or G0411 

0916 Family Psychotherapy 90846 or 90847 

0918 Psychiatric Testing 96101, 96102, 96103, 96116, 96118, 96119, 

or 96120 

0942 Education/Training G0177 

D. Separate Threshold for Outlier Payments to CMHCs

In the CY 2004 OPPS final rule with comment period (68 FR 63469 through 

63470), we indicated that, given the difference in charges for PHP services provided 

between hospitals and CMHCs, we did not believe it was appropriate to make outlier 

payments to CMHCs using the outlier percentage target amount and threshold established 

for hospitals. Prior to that time, there was a significant difference in the amount of outlier 

payments made to hospitals and CMHCs for PHP services. Therefore, we designated a 

portion of the estimated OPPS outlier target amount specifically for CMHCs, consistent 

with the percentage of projected payments to CMHCs under the OPPS each year, 

excluding outlier payments. In addition, further analysis indicated that using the same 

OPPS outlier threshold for both hospitals and CMHCs did not limit outlier payments to 
CMS-1589-FC 720 

high-cost cases and resulted in excessive outlier payments to CMHCs. Therefore, 

beginning in CY 2004, we established a separate outlier threshold for CMHCs. The 

separate outlier threshold for CMHCs has resulted in more commensurate outlier 

payments. 

The separate outlier threshold for CMHCs resulted in $1.8 million in outlier 

payments to CMHCs in CY 2004, and $0.5 million in outlier payments to CMHCs in 

CY 2005. In contrast, in CY 2003, more than $30 million was paid to CMHCs in outlier 

payments. We believe this difference in outlier payments indicates that the separate 

outlier threshold for CMHCs has been successful in keeping outlier payments to CMHCs 

in line with the percentage of OPPS payments made to CMHCs. 

We proposed in the CY 2013 OPPS/ASC proposed rule (77 FR 45153) to 

continue our policy of identifying 1.0 percent of the aggregate total payments under the 

OPPS for outlier payments for CY 2013. We proposed that a portion of that 1.0 percent, 

an amount equal to 0.12 percent of outlier payments (or 0.0012 percent of total OPPS 

payments) would be allocated to CMHCs for PHP outlier payments. In section II.G. of 

the CY 2013 OPPS/ASC proposed rule, for the hospital outpatient outlier payment 

policy, we proposed to set a dollar threshold in addition to an APC multiplier threshold 

(77 FR 45110 through 45111). Because the PHP APCs are the only APCs for which 

CMHCs may receive payment under the OPPS, we would not expect to redirect outlier 

payments by imposing a dollar threshold. Therefore, we did not propose to set a dollar 

threshold for CMHC outlier payments. We proposed to set the outlier threshold for 

CMHCs for CY 2013 at 3.40 times the APC payment amount and the CY 2013 outlier 
CMS-1589-FC 721 

payment percentage applicable to costs in excess of the threshold at 50 percent. 

Specifically, we proposed to establish that if a CMHC’s cost for partial hospitalization 

services, paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment rate 

for APC 0173, the outlier payment will be calculated as 50 percent of the amount by 

which the cost exceeds 3.40 times the APC 0173 payment rate. We invited public 

comments on these proposals. 

We did not receive any public comments regarding our proposed outlier policy. 

Therefore, we are finalizing our CY 2013 proposal to set a separate outlier threshold for 

CMHCs. As discussed in section II.G. of this final rule with comment period, using more 

recent data for this final rule with comment period, we set the target for hospital 

outpatient outlier payments at 1.00 percent of total estimated OPPS payments. We 

allocated a portion of that 1.00 percent, an amount equal to 0.12 percent of outlier 

payments or 0.0012 percent of total estimated OPPS payments to CMHCs for PHP outlier 

payments. For CY 2013, as proposed, we are setting the outlier threshold at 3.40 

multiplied by the APC payment amount and the CY 2013 outlier percentage applicable to 

costs in excess of the threshold at 50 percent. 
CMS-1589-FC 722 

IX. Procedures That Would Be Paid Only as Inpatient Procedures

A. Background

We refer readers to the CY 2012 final rule with comment period (76 FR 74352 

through 74353) for a full historical discussion of our longstanding policies on how we 

identify procedures that are typically provided only in an inpatient setting (referred to as 

the inpatient list) and, therefore, will not be paid by Medicare under the OPPS; and on the 

criteria that we use to review the inpatient list each year to determine whether or not any 

procedures should be removed from the list. 

B. Changes to the Inpatient List

In the CY 2013 OPPS/ASAC proposed rule (77 FR 45153), for CY 2013, we 

proposed to use the same methodology (described in the November 15, 2004 final rule 

with comment period (69 FR 65835)) of reviewing the current list of procedures on the 

inpatient list to identify any procedures that are being performed a significant amount of 

the time on an outpatient basis, and appropriately may be removed from the list. The 

established criteria upon which we make such a determination are as follows: 

1. Most outpatient departments are equipped to provide the services to the 

Medicare population. 

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. 
CMS-1589-FC 723 

4. A determination is made that the procedure is being performed in numerous 

hospitals on an outpatient basis. 

5. A determination is made that the procedure can be appropriately and safely 

performed in an ASC, and is on the list of approved ASC procedures or has been 

proposed by us for addition to the ASC list. 

Using this methodology, we identified two procedures that potentially could be 

removed from the inpatient list for CY 2013: CPT code 22856 (Total disc arthroplasty 

(artificial disc), anterior approach, including discectomy with end plate preparation 

(includes osteophytectomy for nerve root or spinal cord decompression and 

microdissection), single interspace, cervical); and CPT code 27447 (Arthroplasty, knee, 

condyle and plateau; medical and lateral compartments with or without patella 

resurfacing (total knee arthroplasty)). We then reviewed the clinical characteristics and 

related evidence for these two potential procedures for possible removal from the 

inpatient list and found them to be appropriate candidates for removal from the inpatient 

list. For CY 2013, we proposed to remove the procedures described by CPT codes 22856 

and 27447 from the inpatient list because we believe that the procedures may be 

appropriately provided as hospital outpatient procedures for some Medicare beneficiaries, 

based upon the evaluation criteria mentioned above and should thus be paid under the 

OPPS. 

The two procedures that we proposed to remove from the inpatient list for 

CY 2013 and their CPT codes, long descriptors, proposed APC assignments, and 

proposed status indictors were displayed in Table 34 of the proposed rule. 
CMS-1589-FC 724 

Comment: A few commenters supported CMS’ proposal to remove CPT code 

27447 (Total knee arthroplasty) from the list of inpatient procedures, and asserted that 

this procedure may be appropriately provided on an outpatient basis for some Medicare 

beneficiaries, given thorough preoperative screening by medical teams with significant 

experience and expertise involving knee replacement procedures. The commenters 

referenced a study presented at the American Academy of Orthopedic Surgeons 2009 

annual meeting, which noted recent advances in total knee replacement procedures, 

including improved perioperative anesthesia, and expedited rehabilitation protocols, as 

well as significant enhancements to the postoperative process, such as improvements in 

pain management, early mobilization, careful monitoring, and that early preventive 

intervention for the most common medical complications have decreased the average 

length of hospital stays to the point that total knee arthroplasty can now be performed on 

an outpatient basis in certain cases. The commenters noted significant success involving 

same day discharge for patients who met the screening criteria and whose experienced 

medical teams were able to perform the procedure early enough in the day for the patients 

to achieve postoperative goals, allowing home discharge by the end of the day. The 

commenters remarked that the benefits of providing total knee arthroplasty on an 

outpatient basis will lead to significant enhancements in patient well-being and cost 

savings to the Medicare program, including shorter hospital stays resulting in fewer 

medical complications, improved results, and enhanced patient satisfaction. 

A few commenters urged CMS to group total knee arthroplasty into a new APC 

with unicompartmental knee replacement or to group these two procedures with other 
CMS-1589-FC 725 

clinically similar orthopedic implant procedures from APC 0425 to create a more 

clinically homogenous APC for resource-intensive arthroplasty, if CMS finalized its 

proposal to remove total knee arthroplasty from the inpatient list. One commenter 

requested CMS to assign CPT code 27447 a status indicator of “S.” 

The majority of commenters asked that CMS retract its proposal to remove CPT 

code 27447 from the inpatient list. Commenters argued that CPT code 27447 is not being 

performed in numerous hospitals on an outpatient basis and noted that the published 

average length of stay for this procedure is over 3 days, with a recommended best 

practice target of 3 days when no complications exist. Commenters stated that removing 

CPT code 27447 from the inpatient list will create a dangerous situation for Medicare 

beneficiaries, who are older and more medically complex patients, as there are serious 

potential adverse effects, including inadequate pain management, unsafe ambulation, and 

risk for falls. Commenters also noted that patients undergoing total knee replacement 

often have several comorbidities and increased risks, such as death, loss of a limb, nerve 

damage resulting from neurovascular injury, myocardial infarction (MI), pulmonary 

embolism (PE), deep vein thrombosis (DVT), and infection and loss of mobility, as well 

as anaphylaxis, obstructive sleep apnea, and aspiration of stomach contents into the 

lungs. Several commenters stated that many patients will require some type of sub acute 

rehabilitation, which could include a SNF, and if these patients are not admitted, they will 

not meet their qualifying 3-day inpatient stay and will not be eligible for SNF care, which 

likely will lead to poor outcomes postoperatively. Some commenters stated that 

Medicare patients require greater than 24 hours of inpatient hospital care following total 
CMS-1589-FC 726 

knee replacement procedures for clinical reasons, including anesthesia recovery, physical 

therapy, blood loss monitoring, and pain control, which often includes intravenous pain 

medications for 24 to 48 hours following the procedure, and the outpatient setting cannot 

handle the high acuity for the extended postoperative care that this type of patient 

requires. Other commenters stated that they do not believe that the clinical characteristics 

of CPT code 27447 justify its selection as an appropriate candidate for removal from the 

inpatient list. 

Commenters pointed out that, while Medicare's definition of outpatient surgery 

specified that it includes the care provided during the normal recovery period, which is 

defined as less than 24 hours, the length of stay for total knee arthroplasty patients is 

markedly longer than 24 hours for outpatient surgery recovery. In addition, the 

commenters noted that, according to the Medicare Claims Processing Manual, Chapter 4, 

section 180.7, ‘“Inpatient only’ services are generally, but not always, surgical services 

that require inpatient care because of the nature of the procedure, the typical underlying 

physical condition of patients who require the service, or the need for at least 24 hours of 

postoperative recovery time or monitoring before the patient can be safely discharged.” 

Several commenters cited the lack of any evidence-based publications supporting 

outpatient total knee arthroplasty in patients over the age of 65 and asserted that patients 

having total knee replacement surgery as outpatients were significantly more likely to die 

or need readmission within 90 days, compared with inpatients remaining in the hospital 

for 3 to 4 days, according to a study presented at the February 2012 American 

Association of Orthopedic Surgery meeting. Commenters also noted, according to the 
CMS-1589-FC 727 

same study, the rates of subsequent revision surgery were nearly doubled in patients 

having 1-day hospital stays compared with the 3- to-4-day standard. 

Commenters further noted that performing total knee arthroplasty in the outpatient 

setting may impact the types of rehabilitation services available to patients upon 

completion of the surgery, and may make justifying the medical necessity of inpatient 

rehabilitation more difficult. Furthermore, commenters expressed concern that 

commercial carriers will change total knee arthroplasty to an outpatient procedure, 

thereby making it more difficult to get such a procedure authorized. 

Commenters also stated that all hospitals do not have the robotics available for 

less invasive surgical technique and only a few centers across the country are routinely 

doing knee replacement as outpatients, and even those hospitals are doing them on 

specific patient types. One commenter remarked that, while outpatient joint replacements 

are possible in hospitals in major cities with large resources and an educated skilled 

support staff, it would be dangerous to the patient to perform outpatient total knee 

arthroplasties in small rural communities, as there are limited nurses, therapists, and other 

support staff in many communities across the country. 

Some commenters expressed concern about the effects of CMS’ proposed 

removal of CPT 27447 on participants in the CMS Innovation Center’s (CMMI’s) 

Bundled Payments for Care Improvement (BPCI) initiative. 

Response: We appreciate all of the public comments we received on the removal 

of CPT code 27447 from the inpatient list. In light of all of these public comments, for 

CY 2013, we have decided not to remove CPT code 27447 from the inpatient list as we 
CMS-1589-FC 728 

proposed. Based on the public comments, we have concerns regarding whether this 

procedure may be appropriately provided as a hospital outpatient procedure for some 

Medicare beneficiaries based upon the evaluation criteria above. 

Comment: The majority of commenters supported CMS’ proposal to provide 

payment for CPT code 22856 in the hospital outpatient setting, but recommended 

assigning CPT code 22856, as well as CPT codes 22551 and 22554, to APC 0052 (Level 

IV Musculoskeletal Procedures Except Hand and Foot), APC 0425 (Level II Arthroplasty 

or Implantation of Prosthesis), or a newly created APCs in order to appropriately 

compensate hospitals for their costs associated with this procedure. One commenter 

believed that CPT code 22856, for patient safety reasons, should remain on the inpatient 

list. 

Response: We appreciate commenters’ support of our proposal to provide 

payment for CPT code 22856 in the hospital outpatient setting. We believe that this 

procedure may be appropriately provided as a hospital outpatient procedure for some 

Medicare beneficiaries based upon the evaluation criteria above. However, we do not 

agree with the commenters’ recommendation to assign CPT code 22856, as well as CPT 

codes 22551 and 22554, to APC 0052, 0425, or a newly created APC. We believe that 

CPT code 22856, as well as CPT codes 22551 and 22554, are appropriately placed in 

APC 0208. 

Comment: Several commenters requested that CMS remove 39 additional CPT 

codes from the CY 2012 inpatient list based on their own experience, specialty society 
CMS-1589-FC 729 

recommendation, or designation of a procedure as safe in the outpatient setting under one 

of the many clinical guidelines available. 

Response: We reevaluated data on the 39 additional CPT codes requested by the 

commenters, using more recent utilization data and further clinical review by CMS 

medical advisors. These codes are listed in Table 44 below. As a result of the 

reevaluation, we remain convinced that these procedures can be safely performed only in 

the inpatient setting. 

TABLE 44.—ADDITIONAL PROCEDURES REQUESTED BY COMMENTERS 

TO BE REMOVED FROM THE INPATIENT ONLY LIST FOR CY 2013 

HCPCS 

Code Long Descriptor 

CY 2013 

Status 

Indicator 

0075T 

Transcatheter placement of extracranial vertebral or intrathoracic 

carotid artery stent(s), including radiologic supervision and 

interpretation, percutaneous; initial vessel 

C 

20661 Application of halo, including removal; cranial C

20664 

Application of halo, including removal, cranial, 6 or more pins 

placed, for thin skull osteology (eg, pediatric patients, 

hydrocephalus, osteogenesis imperfecta), requiring general 

anesthesia 

C

20936 

Autograft for spine surgery only (includes harvesting the graft); 

local (eg, ribs, spinous process, or laminar fragments) obtained 

from same incision (List separately in addition to code for 

primary procedure) 

C

20937 

Autograft for spine surgery only (including harvesting the graft); 

morselized (through separate skin or fascial incision) (list 

separately in addition to code for primary procedure) 

C

20938 

Autograft for spine surgery only (including harvesting the graft); 

structural, bicortical or tricortical (through separate skin or 

fascial incision) (list separately in addition to code for primary 

procedure) 

C

21141 Reconstruction midface, LeFort I; single piece, segment 

movement in any direction, without bone graft C

21196 Reconstruction of mandibular rami & body with sag split & int 

fix C

22114 Partial excision of vertebral body, for intrinsic bony lesion, C
CMS-1589-FC 730 

HCPCS 

Code Long Descriptor 

CY 2013 

Status 

Indicator 

without decompression of spinal cord or nerve root(s), single 

vertebral segment; lumbar 

22552 

Arthrodesis, anterior interbody, including disc space preparation, 

discectomy, osteophytectomy and decompression of spinal cord 

and/or nerve roots; cervical below C2, each additional interspace 

(List separately in addition to code for separate procedure). 

C

22558 

Arthrodesis, anterior interbody technique, including minimal 

discectomy to prepare interspace (other than for decompression); 

lumbar. 

C

22585 

Arthrodesis, anterior interbody technique, including minimal 

discectomy to prepare interspace (other than for decompression); 

each additional interspace (List separately in addition to code for 

primary procedure 

C

22845 Anterior instrumentation; 2 to 3 vertebral segments (list 

separately in addition to code for primary procedure) C

22862 Revision including replacement of total disc arthroplasty 

(artificial disc), anterior approach, single interspace; lumbar C

22840 

Posterior nonsegmental instrumentation (eg, Harrington rod 

technique, pedicle fixation across 1 interspace, atlantoaxial 

transarticular screw fixation, sublaminar wiring at C1, facet 

screw fixation) (List separately in addition to code for primary 

procedure) 

C

23472 Arthroplasty, glenohumeral joint total shoulder (glenoid and 

proximal humeral replacement) C

35221 Repair blood vessel, direct; intra-abdominal C

35372 Thromboendarterectomy, including patch graft, if performed; 

deep (profunda) femoral C

35721 Exploration (not followed by surgical repair), with or without 

lysis of artery; femoral artery C

35800 Exploration for post op hemorrhage, thrombosis or infection; 

neck C

37182 TIPS procedure C

37617 Ligation, major artery; abdomen C

38562 Limited lymphadenectomy for staging (separate procedure); 

pelvic and para-aortic C

43840 Gastrorrhaphy, suture of perforated duodenal or gastric ulcer, 

wound, or injury C

44300 Open jejunostomy following a diagnostic laparoscopy C

44314 Revision of ileostomy; complicated (reconstruction indepth) 

(separate procedure) C

44345 Revision of colostomy; complicated (reconstruction indepth) C
CMS-1589-FC 731 

HCPCS 

Code Long Descriptor 

CY 2013 

Status 

Indicator 

(separate procedure) 

44346 Revision of colostomy; with repair of paracolostomy hernia 

(separate procedure) C

44602 Suture of small intestine accidental laceration C

49010 Exploration, retroperitoneal area with or without biopsy(s) 

(separate procedure) C

49255 Omentectomy, epiploectomy, resection of omentum C

51840 Anterior vesicourethropexy , or urethropexy (eg, MarshallMarchetti-Krantz, Burch); simple C

54411 Removal and replacement of a multi-component inflatable penile 

prosthesis through an infected field at the same operative session C

54417 

Removal and replacement of a non-inflatable (semi-rigid) or 

inflatable (self-contained) penile prosthesis through an infected 

field at the same operative session 

C

56630 Vulvectomy, radical, partial; C

61624 Transcatheter permanent occlusion or embolization, 

percutaneous, any method; central nervous system C

63044 

Laminotomy (hemilaminectomy ), with decompression of nerve 

root(s), including partial facetectomy, foraminotomy and/or 

excision of herniated intervertebral disc, reexploration, single 

interspace; each additional lumbar interspace (List separately in 

addition to code for primary procedure) 

C

63267 Laminectomy for excision or evacuation of intraspinal lesion 

other than neoplasm, extradural; lumbar C

63710 Dural graft, spinal C

Comment: Some commenters requested that CMS add CPT codes 44206 

(Laparoscopy, surgical; colectomy, partial, with end colostomy and closure of distal 

segment (Hartmann type procedure)), 44207 (Laparoscopy, surgical; colectomy, partial, 

with anastomosis, with coloproctostomy (low pelvic anastomosis)), 44208 (Laparoscopy, 

surgical; colectomy, partial, with anastomosis, with coloproctostomy (low pelvic 

anastomosis) with colostomy), and 44213 (Laparoscopy, surgical, mobilization (take-
CMS-1589-FC 732 

down) of splenic flexure performed in conjunction with partial colectomy (List separately 

in addition to primary procedure)) to the inpatient list. 

Response: We note that CPT codes 44206, 44207, 44208, and 44213 have been 

payable in the outpatient setting for a number of years without significant concern raised 

by the public. Therefore, we find no reason to reassign CPT codes 44206, 44207, 44208, 

and 44213 to the inpatient list at this time. 

Comment: A number of commenters requested that the inpatient list be 

eliminated in its entirety, and if the inpatient list cannot be eliminated in its entirety, an 

appeals process be developed. Commenters also requested that the inpatient list be 

reviewed clinically. In addition, commenters expressed concern about the way Recovery 

Audit Contractors (RACs) target procedures removed from the inpatient list and 

encouraged CMS to provide a period to allow hospitals to make the appropriate 

adjustments without being at risk of an audit. The commenters urged CMS to provide, in 

both regulatory language and transmittals, that procedures with APC payment rates can

be performed, covered, and paid by Medicare on an inpatient basis when medical 

necessity is documented and the physician has ordered inpatient status. 

Response: We appreciate these comments and thoughtful suggestions. We 

continue to believe that the inpatient list is a valuable tool for ensuring that the OPPS 

only pays for services that can safely and appropriately be performed in the hospital 

outpatient setting, and we will not eliminate the inpatient only list at this time. We do not 

plan to adopt a specific appeals process for claims related to inpatient procedures 

performed in the HOPD in light of the added administrative burden, and the existing 
CMS-1589-FC 733 

processes established for a beneficiary or a provider to appeal a specific claim remain in 

effect. We are committed to clinically reviewing the inpatient list timely to reflect 

changes in medical practice, and we plan to continue our current practice of reviewing 

procedures for removal from the inpatient list through the formal notice-and-comment 

rulemaking process. The inpatient list is made available to the public through the OPPS 

/ASC final rule with comment period at least 60 days prior to its effective date of January 

1 of the upcoming year. We believe that the 60 days between the release of the OPPS/ 

ASC final rule with comment period and the effective date of January 1 of the upcoming 

year provide sufficient time for hospitals to make the appropriate adjustments to reflect 

the upcoming year’s inpatient list. As we have stated in Section 180.7 of Chapter 4 of the 

Medicare Claims Processing Manual, procedures removed from the inpatient list may be 

appropriately furnished in either the inpatient or outpatient settings and such procedures 

continue to be payable when furnished in the inpatient setting. 

Comment: One commenter who responded to the CY 2012 OPPS/ASC final rule 

with comment period supported CMS’ decision to assign a status indicator of “C” to 

Category III codes 0293T (Insertion of left atrial hemodynamic monitor; complete 

system, includes implanted communication module and pressure sensor lead in left 

atrium including transseptal access, radiological supervision and interpretation, and 

associated injection procedures, when performed) and 0294T (Insertion of left atrial 

hemodynamic monitor; pressure sensor lead at time of insertion of pacing cardioverterdefibrillator pulse generator including radiological supervision and interpretation and 
CMS-1589-FC 734 

associated injection procedures, when performed (list separately in addition to primary 

procedure)). 

Response: We appreciate the commenter’s support. 

At its August 27- 28, 2012 meeting, the Panel recommended that CMS remove 

HCPCS code 22856 from the list of inpatient procedures. We are accepting this 

recommendation. 

After consideration of the public comments we received, we are modifying our 

proposal and only removing CPT code 22856 from the CY 2013 inpatient list. CPT code 

27447 will remain on the inpatient list for CY 2013. 

The procedure that we are removing from the inpatient list for CY 2013 and its 

CPT code, long descriptor, APC assignment, and status indictor are displayed in Table 45 

below. 

TABLE 45.—PROCEDURE REMOVED FROM THE INPATIENT ONLY 

LIST AND ITS APC ASSIGNMENTS FOR CY 2013 

HCPCS 

Code 

Long Descriptor CY 2013 

APC 

Assignment 

CY 2013 

Status 

Indicator 

22856 

Total disc arthroplasty (artificial disc), anterior 

approach, including discectomy with end plate 

preparation (includes osteophytectomy for nerve 

root or spinal cord decompression and 

microdissection), single interspace, cervical 

0208 T 
CMS-1589-FC 735 

The complete list of codes to be paid by Medicare in CY 2013 only as inpatient 

procedures is included as Addendum E to this final rule with comment period (which is 

available via the Internet on the CMS Web site). 
CMS-1589-FC 736 

X. Policies for the Supervision of Outpatient Services in Hospitals and CAHs 

A. Conditions of Payment for Physical Therapy, Speech-Language Pathology, and 

Occupational Therapy Services in Hospitals and CAHs

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74360 through 

74371), we clarified that hospital outpatient therapeutic services and supplies, including 

those described by benefit categories other than the hospital outpatient “incident to” 

category under section 1861(s)(2)(B) of the Act, are subject to the conditions of payment 

in 42 CFR 410.27 when they are paid under the OPPS or paid to CAHs under section 

1834(g) of the Act. We issued this clarification in response to inquiries regarding the 

application of these conditions of payment to radiation therapy services that are described 

under section 1861(s)(4) of the Act when these services are furnished to hospital 

outpatients. 

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74369), in our 

response to public comments on the CY 2012 OPPS/ASC proposed rule, we indicated 

that the supervision and other requirements of § 410.27 do not apply to professional 

services or to services that are paid under other fee schedules such as the Clinical 

Laboratory Fee Schedule (CLFS). After the publication of the CY 2012 OPPS/ASC final 

rule with comment period, we continued to receive questions about the applicability of 

the regulations to physical therapy (PT), speech-language pathology (SLP), and 

occupational therapy (OT) services furnished in CAHs. Several stakeholders expressed 

concern that the rules could be applied differently in CAHs than in OPPS hospitals. The stakeholders 

were concerned that OPPS hospitals, which are paid for outpatient therapy services at the applicable 

amount based on the Medicare Physician Fee Schedule (MPFS), would not be subject to the regulations, 
CMS-1589-FC 737 

but that CAHs, which are paid for outpatient therapy services on a reasonable cost basis, would be subject 

to them. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45154), we clarified that it was not our 

intent in the CY 2012 OPPS/ASC final rule with comment period to establish different 

requirements for CAHs and for OPPS hospitals for the same services. We clarified that 

the limited set of PT/SLP/OT services that are paid under the OPPS are subject to the 

supervision requirements in § 410.27, whether they are furnished in OPPS hospitals or 

CAHs. The PT/SLP/OT services that are not paid under the OPPS and are paid instead at 

the applicable amount based on the MPFS are not subject to the supervision requirements 

in § 410.27, whether they are furnished in OPPS hospitals or in CAHs. 

Comment: Commenters expressed appreciation and support for the clarification 

in the proposed rule. One commenter requested that CMS rescind the requirement of 

direct supervision for all PT/SLP/OT services, regardless of whether they are furnished as 

therapy services and paid at the applicable amount under the MPFS or are furnished as 

nontherapy services and paid under the OPPS. 

Response: Stakeholders may direct requests for changes in the minimum required 

level of supervision for therapeutic services, including therapy or other services that are 

hospital outpatient services, to the independent review process that we established for 

considering such requests in the CY 2012 OPPS/ASC final rule with comment period. 

The instructions for submitting a request are discussed in the CY 2012 final rule with 

comment period and are available on the CMS Web site at: 

http://www.cms.gov/Regulations-and-
CMS-1589-FC 738 

Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGro

ups.html. 

In this final rule with comment period, we are clarifying that the supervision and 

other requirements of the regulation at § 410.27 apply to facility services that are paid to 

hospitals under the OPPS and to these same services when they are furnished in CAHs 

and paid on a reasonable cost basis. In OPPS hospitals, the requirements of § 410.27 do 

not apply to professional services that are separately billed under the MPFS or to PT, 

SLP, and OT services that are billed by the hospital as therapy services and are paid at the 

applicable amount based on the MPFS. The requirements of § 410.27 also do not apply 

to these same professional and PT, SLP, and OT services when they are furnished in 

CAHs. 

In OPPS hospitals, a small subset of “sometimes therapy” PT, SLP, and OT 

services are paid under the OPPS when they are not furnished as therapy, meaning not 

under a certified therapy plan of care. Because the supervision and other conditions of 

payment under § 410.27 apply to this subset of “sometimes therapy” services when they 

are furnished in OPPS hospitals as nontherapy services (because they are paid under the 

OPPS and not based on the MPFS), those conditions of payment also apply to this subset 

of “sometimes therapy” services when they are furnished as nontherapy in CAHs. When 

OPPS hospitals and CAHs furnish these services as therapy services (under a therapy 

plan of care by a qualified therapist), the conditions of payment under § 410.27 do not 

apply because OPPS hospitals are paid for these services based on the MPFS and not 

under the OPPS. As we did in the CY 2013 OPPS/ASC proposed rule, we are providing 
CMS-1589-FC 739 

a list of the “sometimes therapy” services that may be paid under the OPPS in Table 46 

below. 

TABLE 46.--“SOMETIMES THERAPY” SERVICES THAT ARE PAID UNDER 

THE OPPS WHEN NOT FURNISHED AS THERAPY SERVICES 

HCPCS 

Code 

Descriptor 

97597 Debridement (eg, high pressure waterjet with/without suction, sharp 

selective debridement with scissors, scalpel and forceps), open wound, 

(eg, fibrin, devitalized epidermis and/or dermis, exudate, debris, biofilm), 

including topical application(s), wound assessment, use of a whirlpool, 

when performed and instruction(s) for ongoing care, per session, total 

wound(s) surface area; first 20 sq cm or less

97598 Debridement (eg, high pressure waterjet with/without suction, sharp 

selective debridement with scissors, scalpel and forceps), open wound, 

(eg, fibrin, devitalized epidermis and/or dermis, exudate, debris, biofilm), 

including topical application(s), wound assessment, use of a whirlpool, 

when performed and instruction(s) for ongoing care, per session, total 

wound(s) surface area; each additional 20 sq cm, or part thereof (list 

separately in addition to code for primary procedure) 

97602 Removal of devitalized tissue from wound(s), non-selective debridement, 

without anesthesia (eg, wet-to-moist dressings, enzymatic, abrasion), 

including topical application(s), wound assessment, and instruction(s) for 

ongoing care, per session 

97605 Negative pressure wound therapy (eg, vacuum assisted drainage 

collection), including topical application(s), wound assessment, and 

instruction(s) for ongoing care, per session; total wound(s) surface area 

less than or equal to 50 square centimeters 

97606 Negative pressure wound therapy (eg, vacuum assisted drainage 

collection), including topical application(s), wound assessment, and 

instruction(s) for ongoing care, per session; total wound(s) surface area 

greater than 50 square centimeters 

0183T Low frequency, non-contact, non-thermal ultrasound, including topical 

application(s), when performed, wound assessment, and instruction(s) for 

ongoing care, per day 
CMS-1589-FC 740 

B. Enforcement Instruction for the Supervision of Outpatient Therapeutic Services in 

CAHs and Certain Small Rural Hospitals

As we indicated in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74371), we extended through CY 2012 the notice of nonenforcement of the 

requirement for direct supervision of outpatient therapeutic services furnished in CAHs 

and small rural hospitals having 100 or fewer beds (available on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html?redirect=/HospitalOutpatientPPS/01_

overview.asp). We extended this enforcement instruction to our contractors for another 

year, through CY 2012, to allow time for the initiation of supervision reviews by the 

Advisory Panel on Hospital Outpatient Payment (the Panel), which began in early 2012 

and are continuing in accordance with the provisions of the CY 2012 OPPS/ASC final 

rule with comment period. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45154), we requested that 

CAHs and small rural hospitals submit to CMS for potential evaluation by the Panel at its 

summer meeting any services for which they anticipate difficulty complying with the 

direct supervision standard in CY 2013. We stated that, in developing evaluation 

requests, hospitals should refer to the evaluation criteria that we finalized in the CY 2012 

OPPS/ASC final rule with comment period. In order to give hospitals additional 

opportunity during CY 2012 to become familiar with the new submission and review 

process at the summer Panel meeting, and to allow hospitals time to meet the required 

supervision levels for the services that would be considered for CY 2013, we indicated 
CMS-1589-FC 741 

that we anticipated extending the nonenforcement instruction one additional year through 

CY 2013. We stated that we expect that CY 2013 will be the final year for the 

instruction, regardless of the services reviewed by the Panel during its summer meeting. 

Comment: Most commenters supported an extension of the enforcement 

instruction another year through CY 2013, and reiterated requests made in previous years 

that we limit CAHs to the requirements in their staffing Conditions of Participation 

(CoPs) by making the definition of “direct supervision” in § 410.27 consistent with the 

CAH staffing CoPs. These CoPs require that a doctor of medicine or osteopathy, nurse 

practitioner, clinical nurse specialist, or physician assistant be available to furnish patient 

care services at all times the CAH operates (§ 485.631) and be available on site within 30 

minutes (§ 485.618). They apply to all services that are furnished by a CAH. In contrast, 

for payment of most outpatient therapeutic services, under § 410.27 the CAH (like all 

OPPS hospitals) must furnish direct supervision, meaning the supervising physician or 

appropriate nonphysician practitioner is immediately available to furnish assistance and 

direction for the duration of the service. The requirement in § 410.27 does not apply to 

CAH inpatient services or to CAH outpatient diagnostic services.) Some commenters 

similarly requested that CMS require only general supervision in CAHs and small rural 

hospitals, meaning the services would be furnished under the supervising physician’s or 

appropriate nonphysician practitioner’s overall direction and control but he or she need 

not be physically present. 

One commenter stated that while the commenter understands the need to allow 

CAHs and small rural hospitals to become compliant with the recent clarifications 
CMS-1589-FC 742 

regarding the outpatient supervision requirements, and while the commenter shares the 

concerns of these facilities regarding the available supply of certain types of physicians, 

the supervision requirements should be applied uniformly across all care settings for 

reasons of patient safety. In addition, several commenters offered suggestions for 

improving the subregulatory supervision review process. 

Response: We appreciate the suggestions for improving the supervision review 

process and will take them into consideration for future Panel meetings. Regarding the 

supervision requirements for payment of hospital and CAH outpatient services, we 

previously discussed in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74362) that the Act applies the same regulations to hospitals and CAHs when 

appropriate (CAHs are included if “the context otherwise requires” under section 1861(e) 

of the Act). As we indicated in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72000 through 72005), we elected not to limit the CAHs to their CoPs or to 

exclude them from the direct supervision requirement for payment because we believe 

that Medicare should purchase outpatient services from CAHs and other hospitals that are 

of the same basic level of safety and quality. In addition, while CoPs apply to all services 

that a hospital or a CAH furnishes, the payment rule in § 410.27 applies only to 

outpatient therapeutic services. 

Regarding the enforcement instruction, as we discussed in the CY 2013 

OPPS/ASC proposed rule, we will extend the enforcement instruction one additional year 

through CY 2013. This additional year, which we expect to be the final year of the 

extension, will provide additional opportunities for stakeholders to bring their issues to 
CMS-1589-FC 743 

the Panel, and for the Panel to evaluate and provide us with recommendations on those 

issues. 

The Panel held its second meeting on supervision levels for outpatient therapeutic 

services in August 2012, and considered several stakeholder requests for a reduction in 

the minimum required level of supervision for certain services. These included 

observation services; administration of certain drugs and agents; and selected bladder, 

skin/wound care, injection/infusion, intravenous and central venous access services. In 

accordance with the subregulatory review process finalized in the CY 2012 OPPS/ASC 

final rule with comment period, we are currently reviewing public comments on the 

agency’s preliminary decisions regarding supervision levels for these services based upon 

the Panel’s recommendations. We will issue our final decisions on these services prior to 

January 1, 2013 on the CMS Web site at: http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/index.html. 
CMS-1589-FC 744 

XI. Outpatient Status: Solicitation of Public Comments in the CY 2013 OPPS/ASC 

Proposed Rule 

A. Background

Under section 402(a)(1)(A) of the Social Security Amendments of 1967 (Pub. L. 

90-248), the Secretary is permitted to engage in demonstration projects to determine 

whether changes in the methods of payment for health care and services under the 

Medicare program would increase the efficiency and economy of those services through 

the creation of incentives to those ends without adversely affecting the quality of such 

services. Under this statutory authority, CMS has implemented the Medicare Part A to 

Part B Rebilling (AB Rebilling) Demonstration, which allows participating hospitals to 

receive 90 percent of the allowable Part B payment for Part A short-stay claims that are 

denied on the basis that the inpatient admission was not reasonable and necessary. 

Participating hospitals can rebill these denied Part A claims under Part B and be paid for 

additional Part B services than would usually be payable when an inpatient admission is 

deemed not reasonable and necessary. This demonstration is slated to last for 3 years, 

from CY 2012 through CY 2014. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45155 through 45157), we 

provided an update of the status of the demonstration. In addition, we solicited public 

comments on a related issue: potential policy changes we could make to improve clarity 

and consensus among providers, Medicare, and other stakeholders regarding the 

relationship between admission decisions and appropriate Medicare payment, such as 
CMS-1589-FC 745 

when a Medicare beneficiary is appropriately admitted to the hospital as an inpatient and 

the cost to hospitals associated with making this decision. 

In the proposed rule, we discussed that when a Medicare beneficiary arrives at a 

hospital in need of medical or surgical care, the physician or other qualified practitioner 

must decide whether to admit the beneficiary for inpatient care or treat him or her as an 

outpatient. In some cases, when the physician admits the beneficiary and the hospital 

provides inpatient care, a Medicare claims review contractor, such as the Medicare 

Administrative Contractor (MAC), the Recovery Audit Contractor (RAC), or the 

Comprehensive Error Rate Testing (CERT) Contractor, determines that inpatient care 

was not reasonable and necessary under section 1862(a)(1)(A) of the Act and denies the 

hospital inpatient claim for payment. In these cases, under Medicare’s longstanding 

policy, hospitals may rebill a separate inpatient claim for only a limited set of Part B 

services, referred to as “Inpatient Part B” or “Part B Only” services (Section 10, Chapter 

6 of the Medicare Benefit Policy Manual (Pub. 100-02)). The hospital also may bill 

Medicare Part B for any outpatient services that were provided in the 3-day payment 

window prior to the admission (Section 10.12, Chapter 4 of the Medicare Claims 

Processing Manual (Pub. 100-04)). These claims are subject to the timely filing 

restrictions. 

Once a Medicare beneficiary is discharged from the hospital, the hospital cannot 

change the beneficiary’s patient status from inpatient to outpatient and then submit an 

outpatient claim because of the potentially significant impact on beneficiary liability. As 

we discuss below, hospital inpatients have significantly different Medicare benefits and 
CMS-1589-FC 746 

liabilities than hospital outpatients, notably coverage of self-administered drugs and, for 

patients who are admitted to the hospital as inpatients for 3 or more consecutive calendar 

days, Medicare coverage of postacute SNF care (to the extent all other SNF coverage 

requirements are met). To enable beneficiaries to make informed financial and other 

decisions prior to hospital discharge, Medicare allows the hospital to change a 

beneficiary’s inpatient status to outpatient (using condition code 44 on an outpatient 

claim) and bill all medically necessary services that it provided to Part B as outpatient 

services, but only if the change in patient status is made prior to discharge, the hospital 

has not submitted a Medicare claim for the admission, and both the practitioner 

responsible for the care of the patient and the utilization review committee concur with 

the decision (Section 50.3, Chapter 1 of the Medicare Claims Processing Manual (Pub. 

100-04); MLN Matters article SE0622, Clarification of Medicare Payment Policy When 

Inpatient Admission Is Determined Not To Be Medically Necessary, Including the Use of 

Condition Code 44: “Inpatient Admission Changed to Outpatient,” September 2004). 

Medicare beneficiaries are provided with similar protections, which are outlined in the 

Hospital Conditions of Participation (CoPs). For example, in accordance with 

42 CFR 482.13(b), Medicare beneficiaries have the right to participate in the 

development and implementation of their plan of care and treatment, to make informed 

decisions, and to accept or refuse treatment. Informed discharge planning between the 

patient and the physician is important for patient autonomy and for achieving efficient 

outcomes. 
CMS-1589-FC 747 

In the proposed rule, we stated that while the limited scope of allowed rebilling 

for “Inpatient Part B” services protects Medicare beneficiaries and provides disincentives 

for hospitals to admit patients inappropriately, hospitals have expressed concern that this 

policy provides inadequate payment for resources that they have expended to take care of 

the beneficiary in need of medically necessary hospital care, although not necessarily at 

the level of inpatient care. A significant proportion of the Medicare CERT error rate 

consists of short (1- or 2-day) stays where the beneficiary received medically necessary 

services that the CERT contractor determined should have been provided as outpatient 

services and not as inpatient services. Hospitals have indicated that often they do not 

have the necessary staff (for example, utilization review (UR) staff or case managers) on 

hand after normal business hours to confirm the physician’s decision to admit the 

beneficiary. Thus, for a short-stay admission, the hospital may be unable to timely 

review and change a beneficiary’s patient status from inpatient to outpatient prior to 

discharge in accordance with the condition code 44 requirements. 

In the proposed rule, we indicated that we have heard from various stakeholders 

that hospitals appear to be responding to the financial risk of admitting Medicare 

beneficiaries for inpatient stays that may later be denied upon contractor review by 

electing to treat beneficiaries as outpatients receiving observation services, often for 

longer periods of time, rather than admitting them as inpatients. In recent years, the 

number of cases of Medicare beneficiaries receiving observation services for more than 

48 hours, while still small, has increased from approximately 3 percent in 2006 to 

approximately 7.5 percent in 2010. This trend is concerning because of its effect on 
CMS-1589-FC 748 

Medicare beneficiaries. There could be significant financial implications for Medicare 

beneficiaries of being treated as outpatients rather than being admitted as inpatients, of 

which CMS has informed beneficiaries.1 For instance, if a beneficiary is admitted as an 

inpatient, the beneficiary pays a one-time deductible for all hospital services provided 

during the first 60 days in the hospital. As a hospital inpatient, the beneficiary would not 

pay for self-administered drugs or have any copayments for the first 60 days; whereas if 

the beneficiary is treated as an outpatient, the beneficiary has a copayment for each 

individual outpatient hospital service received. While the Medicare copayment for a 

single outpatient hospital service cannot be more than the inpatient hospital deductible, 

the beneficiary’s total copayment for all outpatient services received may be more than 

the inpatient hospital deductible. In addition, usually self-administered drugs provided in 

an outpatient setting are not covered by Medicare Part B and hospitals may charge the 

beneficiary for them. Also, the time spent in the hospital as an outpatient is not counted 

towards the 3-day qualifying inpatient stay that section 1861(i) of the Act requires for 

Medicare Part A coverage of postacute care in a SNF. 

As a result of these concerns related to the impact of extended time as an 

outpatient on Medicare beneficiaries, the CERT error rate, and the impact on hospitals of 

a later inpatient denial, CMS initiated the AB Rebilling Demonstration for a 3-year 

period for hospitals. This demonstration is voluntary and allows participating hospitals to 

rebill outside of the usual timely filing requirements for services relating to all inpatient 

short-stay claims that are denied for lack of medical necessity because the inpatient 

 

1

 CMS Pamphlets: “Are You a Hospital Inpatient or Outpatient? If You Have Medicare - Ask!”, CMS 

Product No. 11435, Revised, February 2011; “How Medicare Covers Self-Administered Drugs Given in 

Hospital Outpatient Settings,” CMS Product No. 11333, Revised, February 2011.
CMS-1589-FC 749 

admission was not medically necessary. Under the demonstration, hospitals may receive 

90 percent of the Medicare allowable payment for all Part B services that would have 

been medically necessary had the beneficiaries originally been treated as outpatients and 

not admitted as inpatients. We note that hospitals cannot rebill for observation services, 

which, by definition, must be ordered prospectively to determine whether an inpatient 

admission is necessary (Chapter 1, Section 50.3.2 of the Medicare Claims Processing 

Manual (Pub. 100-04); FAQ 2723, available on the CMS Web site at 

https://questions.cms.gov/faq.php?id=5005&faqId=2723). Hospitals that participate in 

the AB Rebilling Demonstration will waive any appeal rights associated with the denied 

inpatient claims eligible for rebilling. Under the demonstration, Medicare beneficiaries 

are protected from any adverse impacts of expanded rebilling. For example, hospitals 

cannot bill beneficiaries for self-administered drugs or additional cost-sharing that would 

be required under Medicare Part B. The demonstration will inform us on the impact that 

expanded rebilling may have on the Medicare Trust Funds, beneficiaries, hospitals, and 

the CERT error rate. The demonstration is designed to evaluate potential impacts of 

expanded rebilling on admission and utilization patterns, including whether expanded 

rebilling would reduce hospitals’ incentive to make appropriate initial admission 

decisions. 

Hospitals expressed significant interest in the AB Rebilling Demonstration, which 

began on January 1, 2012. The demonstration was approved to accept up to 380 

hospitals. In order to participate in the demonstration, a hospital must not be receiving 

periodic interim payments from CMS, and must be a Medicare-participating hospital as 
CMS-1589-FC 750 

defined by section 1886(d) of the Act, a category that includes all hospitals paid under the 

Medicare IPPS, but excludes hospitals paid under the IPF PPS, the IRF PPS, and the 

LTCH PPS, and cancer hospitals, CAHs, and children’s hospitals. 

The hospitals that volunteered to participate and were accepted in the 

demonstration began rebilling in early spring of 2012. More information about the 

demonstration is available on the CMS Web site at: http://www.cms.gov/ResearchStatistics-Data-and-Systems/MonitoringPrograms/CERT/Part_A_to_Part_B_Rebilling_Demonstration.html. We stated in the 

proposed rule that we plan to conduct an evaluation of the demonstration during and after 

its completion. 

B. Summary of Public Comments Received

While we are implementing the AB Rebilling Demonstration, we also solicited 

public comments in the CY 2013 OPPS/ASC proposed rule on other actions that we 

could potentially undertake to address stakeholders’ concerns. In the proposed rule, we 

stated that there may be several ways of approaching the multifaceted issues that have 

been raised in recent months around a beneficiary’s patient status and Medicare hospital 

payment. Given the complexity of this topic, we sought public perspectives on potential 

options the agency might adopt to provide more clarity and consensus regarding patient 

status for purposes of Medicare payment. We invited commenters to draw on their 

knowledge of these issues to offer any suggestions that they believe would be most 

helpful to them in addressing the current challenges, while keeping in mind the various 

impacts in terms of recently observed increases in the length of time for which patients 
CMS-1589-FC 751 

receive observation services, beneficiary liability, Medicare spending, and the feasibility 

of implementation of any suggested changes for both the Medicare program and 

hospitals. 

We received approximately 350 public comments in response to our solicitation 

in the CY 2013 OPPS/ASC proposed rule from hospitals and hospital associations, 

physician associations, rehabilitative and long-term care facilities, beneficiaries, 

beneficiary advocacy organizations, Quality Improvement Organizations (QIOs), 

organizations specializing in medical necessity review, and other interested parties. The 

commenters provided significant input, and the majority requested that CMS not 

implement a comprehensive solution or set of solutions regarding patient status in the 

CY 2013 OPPS/ASC final rule with comment period. Instead, many commenters 

recommended that CMS develop an informed course of action in the upcoming months 

through a formal, ongoing dialogue with all interested stakeholders (for example, through 

open door forums or a task force). A few commenters recommended a more immediate 

course of action to limit beneficiary liability for SNF care and for the difference in 

beneficiary cost-sharing between hospital inpatient and outpatient services.

In this section, we summarize the feedback we received in response to our 

solicitation of public comments in the CY 2013 OPPS/ASC proposed rule. We are not 

providing responses to the public comments we received because in the proposed rule we 

strictly solicited public comments, and did not propose any changes in policy. We will 

consider the feedback we received from the public as we move forward. We structured 

our summary of the public comments around key suggestions that we have heard from 
CMS-1589-FC 752 

stakeholders in the following areas: (1) Part A to Part B Rebilling; (2) Clarifying Current 

Admission Instructions or Establishing Specified Clinical Criteria; (3) Hospital 

Utilization Review; (4) Prior Authorization; (5) Time-Based Criteria for Inpatient 

Admission; (6) Payment Alignment; and (7) Public Comments on Other Topics 

(including Rules for External Review of Inpatient Claims, Improving Beneficiary 

Protections, and Revising the Qualifying Criteria for SNF Coverage). We summarize the 

public comments below in the context of each of these suggestions. 

1. Part A to Part B Rebilling 

Some stakeholders have suggested that, when a Part A inpatient claim is denied 

because an inpatient level of care was not reasonable and necessary although some 

medical care was necessary, CMS allow hospitals to rebill Medicare and receive payment 

for all Part B services that would have been payable had the patient originally been 

treated as an outpatient rather than an inpatient. As we describe above, the AB Rebilling 

Demonstration allows participating providers to receive 90 percent of the allowable 

payment amount for such services (except observation services) as Part B Inpatient 

services. Because establishing such a policy on a national basis could result in increases 

in Medicare expenditures and could affect beneficiary liability for hospital care, CMS 

implemented the demonstration to assess Medicare spending and other outcomes while 

protecting beneficiaries from any increase in liability. 

Comments: Commenters expressed some support for the AB Rebilling 

Demonstration as an important step in determining what types of policy clarifications are 

needed. The commenters noted that the beneficiary protections against changes in 
CMS-1589-FC 753 

liability are a key benefit of the demonstration. While some commenters expressed 

appreciation for the opportunity for increased Part B payment to hospitals, they disagreed 

with the demonstration’s requirement to forego appeals of the denied inpatient claims 

eligible for rebilling. One commenter requested that CMS provide interim reports to 

stakeholders describing the demonstration’s evaluation criteria and its progress towards 

meeting its goals. 

Some commenters recommended that CMS establish a national policy allowing 

the rebilling of all Part B services that would have been payable if the patient had been 

treated as an outpatient rather than admitted as an inpatient because, according to the 

commenters, outpatient and inpatient services are sometimes indistinguishable. The 

commenters believed that the Medicare statute does not preclude such a policy and that, 

due to the recent focus on claims audit and review, hospitals would have no incentive to 

admit beneficiaries inappropriately in response to a more generous rebilling policy. 

However, other commenters expressed concern that there would be such an incentive. 

They indicated that allowing expanded rebilling with a change in bill type from a Part A 

claim to a Part B claim would remove the incentive to bill accurately, as hospitals would 

file more inpatient claims under Part A in order to receive the (typically higher) 

Diagnosis-Related Group (DRG) payment under the IPPS, knowing that, in the event of 

the inpatient claim being denied, they could rebill under Part B and receive the same 

(typically lower) OPPS payment they would have received if they had billed an 

outpatient claim initially. 
CMS-1589-FC 754 

Several commenters suggested that allowing full Part B rebilling would negate 

and undermine the designs of the OPPS and the IPPS. The commenters stated that OPPS 

payments are established to compensate hospitals for the care provided in the outpatient 

setting, and that they act as a natural complement to the IPPS. They indicated that 

making the two payment systems retroactively interchangeable would result in the 

payment rates calculated under each system being miscalibrated and failing to adjust 

appropriately over time to migration of services from the inpatient to the outpatient 

setting. In addition, according to the commenters, a national policy allowing full Part B 

rebilling would provide an unfair market advantage to providers who make inappropriate 

inpatient admission determinations over those who do not. The commenters reasoned 

that Medicare’s current policies are well-founded, longstanding, widely known and 

largely followed, and that the current challenges do not warrant the extensive resources 

that full rebilling and other policy changes would entail. 

Some commenters indicated that a national policy allowing full Part B rebilling 

following the denial of an inpatient claim would have limited utility because typically the 

timely filing period has lapsed by the time the inpatient claim is denied, providers could 

not appeal the inpatient claim, and providers would not receive the Part A payment that 

they seek. In addition, according to the commenters, the manual process of recoding the 

inpatient claim as an outpatient claim is costly. A few commenters suggested that CMS 

allow rebilling of all Part B services but apply a penalty by limiting payment to a 

discounted amount. Other commenters were concerned about the significant financial 
CMS-1589-FC 755 

burden of Part B rebilling for beneficiaries who have Part A coverage but do not have 

coverage for Part B services. 

Some commenters also suggested that CMS allow hospitals to change a 

beneficiary’s inpatient status to outpatient after discharge in order to submit a Part B 

outpatient claim either prior to or after submitting an inpatient claim. Other commenters 

recommended that CMS extend the timely filing deadline to 1 year from the date of 

service or 6 months to 1 year from the date of the inpatient claim denial, whichever is 

later. Some commenters suggested that CMS extend the timely filing deadline only for 

claims that are denied after a significant amount of time has passed since the date of 

service. 

Commenters suggested mechanisms to protect beneficiaries from increases in 

their liability associated with any of these policy changes. For example, several 

commenters believed that hospitals could waive any increases in beneficiary cost-sharing 

or that CMS could provide coverage for self-administered drugs in the outpatient 

department, cap the sum of outpatient services at the inpatient deductible, or establish 

annual maximum out-of-pocket costs. Many commenters also recommended the 

modernization and reform of the SNF qualification criteria (we describe these comments 

further below). 

2. Clarifying Current Admission Instructions or Establishing Specified Clinical Criteria 

In recent months, we have heard from some stakeholders who suggested a need 

for us to clarify our current instructions regarding the circumstances under which 

Medicare will pay for an admission in order to improve hospitals’ ability to make 
CMS-1589-FC 756 

appropriate admission decisions. Stakeholders have suggested the establishment of more 

specific clinical criteria for admission and payment such as adopting specific clinical 

measures because, according to the commenters, the current criteria are not clear-cut. We 

have issued longstanding instructions that the need for admission is a complex medical 

judgment that depends upon multiple factors, including an expectation that the 

beneficiary will require an overnight stay in the hospital or need more than 24 hours of 

care, the patient's medical history and current medical needs, the types of facilities 

available to inpatients and to outpatients, the hospital’s policies, the relative 

appropriateness of outpatient and inpatient treatment, and other factors (Section 10, 

Chapter 1 of the Medicare Benefit Policy Manual (Pub. 100-02)). We stated in the 

CY 2013 OPPS/ASC proposed rule that we are interested in receiving public comments 

and suggestions regarding whether and how we might improve our current instructions 

and clarify the application of Medicare payment policies for both hospitals and 

physicians, keeping in mind the challenges of implementing national standards that are 

broad enough to contemplate the range of clinical scenarios but prescriptive enough to 

provide greater clarity. 

Comments: The public comments reflected a widespread understanding and 

agreement with CMS’ guidance that the inpatient admission decision is ultimately a 

complex medical judgment that involves the consideration of many factors. Many 

commenters indicated that if Medicare adopted more specific guidelines or criteria, the 

clinical judgment of the treating physician should have primacy. A recurrent comment 

was that this judgment would always be necessary in certain cases, and should take 
CMS-1589-FC 757 

precedence over other criteria that may be used. Many commenters were concerned that 

decision-making tools (such as Interqual Clinical Decision Support or the Milliman Care 

Guidelines, alternatively described by commenters as commercial or proprietary 

screening tools), which are designed for use as guidelines rather than prescriptive tools, 

do not take into account patient “risk” and may undermine the physician’s judgment. 

In addition, many commenters believed that any selected criteria must apply 

equally to Medicare contractors, hospitals, and others and should match the audit review 

criteria. Many commenters expressed concern that Medicare’s claims review contractors 

inappropriately disregard the physician’s judgment, and do not employ a physician in 

making their determinations. (We describe the comments on external review criteria in 

further detail below). One commenter indicated that commercial screening tools do not 

always comport with Medicare rules. The commenter provided as an example that one 

popular tool fails to distinguish scheduled replacement pacemaker procedures from the 

placement of a new pacemaker on an emergency basis. Some of the public comments 

received from physicians identified what they characterized as significant problems with 

the accuracy, validity, and transparency of proprietary screening tools, including use of 

appropriateness standards that are not accepted by the relevant physician specialties and 

failure to follow Medicare payment policy. 

Nevertheless, many commenters expressed support for various types of national 

criteria. These criteria included evidence-based guidelines such as the Agency for 

Healthcare Research and Quality's National Clearinghouse Guidelines or other rules 

developed in consultation with physician societies. Some commenters supported the use 
CMS-1589-FC 758 

of specific proprietary screening tools such as Interqual Clinical Decision Support or the 

Milliman Care Guidelines. Other commenters favored more transparent criteria similar 

to the Correct Coding Initiative (CCI) that are adapted for Medicare and are developed 

using physician input. One commenter indicated that the CCI edits have proven more 

cost-effective than proprietary tools. A few commenters suggested that use of the 

Program for Evaluating Payment Patterns Electronic Report (PEPPER) reports, which 

provide hospital-specific Medicare data statistics for discharges that are vulnerable to 

improper payments, would allow for continuous improvement in utilization and coding. 

One commenter noted that it would be useful to choose the set of criteria that are used by 

Medicaid and other payers, in order to facilitate uniform documentation that supports the 

specific criteria required by the various screening tools. 

Some commenters pointed out process improvements that hospitals and 

physicians should make, regardless of whether CMS adopts specific clinical criteria or 

issues more specific admission instructions. Several commenters stated that physicians 

should improve their documentation in support of the patient status that they order, and 

that sometimes it is not clear whether the physician ordered inpatient admission or 

outpatient observation services. The commenters suggested that physicians document the 

need for admission in a standardized field on electronic health records or elsewhere. 

Other commenters emphasized the importance of the role of the hospital in selecting 

patient status for purposes of billing because they believed that the physician is focused 

on ordering the necessary care and, for good reason according to the commenters, is not 

occupied with the nuances of patient status designation for payment purposes. 
CMS-1589-FC 759 

3. Hospital Utilization Review 

In the proposed rule, we asked commenters to consider the responsibility of 

hospitals to utilize all of the tools necessary to make appropriate initial admission 

decisions. We stated that we believe this is important because some hospitals have 

indicated that simply having case management and UR staff available to assist in 

decision-making outside of regular business hours may improve the accuracy of 

admission decisions. 

Comments: Several commenters stated that some hospitals do not have UR staff 

on hand outside normal business hours or on weekends to assist with patient status 

determinations, and that this is especially problematic for patients with short inpatient 

stays. The commenters expressed varying opinions on hospital UR. Some commenters 

recognized that Medicare’s regulations require the collaboration of the treating physician 

and the hospital’s UR staff in making the appropriate patient status determination, and 

believed that neither party is dispensable. Several commenters indicated that 24-hour, 

7 days a week availability of hospital UR and/or case management staff should be a 

hospital best practice, as it assists in making appropriate admission determinations for 

short-stay cases where the need for admission is unclear. Several commenters opined 

that Medicare should require the availability of hospital UR on a 24-hour/7 days a week 

basis. One commenter stated that CMS should develop a certification process of 

“deeming” acceptable individual hospital UR processes, using a standard of 24-hour/7 

days a week availability, confirmation by an external physician, and adherence to the 

hospital CoPs. Another commenter recommended the use of a condition code on claims 
CMS-1589-FC 760 

to track whether UR confirmation of appropriate patient status is associated with fewer 

claim denials. Some commenters preferred reinforcement of hospital UR over the 

institution of external guidelines for admission. 

However, several commenters indicated that Medicare’s current UR requirements 

in the CoPs should be eliminated because of the administrative cost to the hospital, or 

because they do not result in more accurate admission determinations that are 

commensurate with their associated cost. One association believed that hospital UR will 

have limited utility as long as admission criteria are unclear. Yet another physician 

professional association stated that hospitals should be required to submit their claims 

based on the admitting physician’s judgment rather than the opinion of another physician 

in the hospital.

4. Prior Authorization 

In our proposed rule, we also invited public comments on the potential use of 

prior authorization for payment of a hospital inpatient admission. 

Comments: Many commenters believed that the concept of using prior 

authorization on a targeted basis was promising and worthy of consideration. To 

facilitate administrative feasibility, many commenters suggested that it be used 

selectively for elective procedures, specific services that are not designated as inpatientonly services under the OPPS, or conditions that are at high-risk for inappropriate 

inpatient admission. The commenters were concerned that mandatory prior authorization 

could become a barrier to the provision of urgent care, and some recommended that CMS 

exclude patients in the emergency department or those receiving critical care. 
CMS-1589-FC 761 

Alternatively, the commenters suggested that prior authorization be used as an adjunct 

method for cases not meeting the admission criteria of commercial screening tools. 

Several commenters believed that prior authorization is feasible because hospitals 

already have an infrastructure for obtaining prior authorization for commercial insurers. 

The commenters suggested that CMS could similarly redirect current resources towards a 

prior authorization program. Several commenters suggested an online tool for prior 

authorization. 

A few commenters opposed prior authorization altogether based on administrative 

burden, and many commenters believed that it would need to result in guaranteed 

payment in order to be useful. One commenter observed that retrospective review is still 

required in many cases when prior authorizations are obtained from commercial insurers, 

due to incomplete or inaccurate prior authorization information and changes in what was 

planned or expected when the initial clinical information was submitted. The commenter 

stated that for this reason, commercial insurers reserve the right to perform, and often do 

perform, retrospective audits based on the completed medical record. In addition, the 

commenter stated that the CERT error rate evidences that the vast majority of providers 

understand and follow the current Medicare statutes and rules. Thus, according to the 

commenter, requiring prior authorization will add significant cost to the program without 

eliminating the inpatient error rate, at a time when the Medicare Trust Fund is at risk. 

5. Time-Based Criteria for Inpatient Admission 

In the proposed rule, we stated that some stakeholders have suggested that CMS 

has authority to define whether a patient is an inpatient or an outpatient. They believed 
CMS-1589-FC 762 

that it may be permissible and appropriate for us to redefine “inpatient” using parameters 

in addition to medical necessity and a physician order that we currently use, such as 

length of stay (LOS) or other variables. For example, currently a beneficiary’s 

anticipated LOS at the hospital may be a factor in determining whether the beneficiary 

should be admitted to the hospital, but is not the only factor. We have issued instructions 

that state that, typically, the decision to admit should be made within 24 to 48 hours, and 

that expectation of an overnight stay may be a factor in the admission decision (Section 

20.6, Chapter 6 and Section 10, Chapter 1 of the Medicare Benefit Policy Manual (Pub. 

100-02)). However, we stated in the proposed rule that we are interested in hearing from 

stakeholders regarding whether it may be appropriate and useful to establish a point in 

time after which the encounter becomes an inpatient stay if the beneficiary is still 

receiving medically necessary care to treat or evaluate his or her condition. We indicated 

that such a policy could potentially limit the amount of time that a beneficiary is treated 

as an outpatient receiving observation services before the hospital encounter becomes 

inpatient, provided the additional time in the hospital is medically necessary. Currently, 

we do not specify a limit on the time a beneficiary may be an outpatient receiving 

observation services, although, in the past, we have limited payment of observation 

services to a specific timeframe, such as 24 or 48 hours. Some in the hospital community 

have indicated that it may be helpful for the agency to establish more specific criteria for 

patient status in terms of how many hours the beneficiary is in the hospital, or to provide 

a limit on how long a beneficiary receives observation services as an outpatient. We 

invited public comments regarding whether there would be more clarity regarding patient 
CMS-1589-FC 763 

status under such alternative approaches to defining inpatient status. We also noted that 

it is important for CMS to maintain its ability to audit and otherwise carry out its 

statutory obligation to ensure that the Medicare program pays only for reasonable and 

necessary care. We asked that commenters consider opportunities for inappropriately 

taking advantage of the Medicare system that time-based and other changes in criteria for 

patient status may create. 

Comments: Some commenters expressed interest and support for criteria that are 

strictly time-based, based largely on a primary goal of eliminating extended observation 

cases. These commenters supported defining a patient as an inpatient after 24, 48, or 72 

hours, and noted that such a policy could improve the problem of beneficiaries not 

qualifying for needed SNF care due to their outpatient status. One commenter believed 

that a 48-hour benchmark made sense because it is consistent with the activities that are 

required under the CoPs within the first 48 hours of a hospital stay. Another commenter 

suggested establishing a second decision point during the observation period, when the 

physician must reevaluate whether the patient needs to be admitted as an inpatient. 

However, the commenter noted that this may increase administrative complexity without 

commensurate benefit. 

Some commenters representing the hospital community believed that patients 

who have been actively monitored for more than 24 to 48 hours as outpatients under 

observation and cannot be safely discharged are likely sufficiently complex cases that 

would benefit from being admitted as an inpatient, regardless of whether they technically 

meet inpatient admission criteria. The commenters posited that observation services are 
CMS-1589-FC 764 

more comparable to inpatient care than they are to other outpatient services, and that this 

fact would be more accurately reflected by a time-based admission policy. A few 

commenters suggested that CMS limit observation care to 24 hours, with exceptions for 

physician discretion. Several commenters suggested that CMS clarify the definition and 

parameters of outpatient observation services to help stakeholders determine when it is 

appropriate to furnish observation services and for how long. Another commenter 

suggested that CMS limit a patient’s time in observation by requiring additional 

assessments and increased documentation of involvement by the physician. 

In contrast, many commenters expressed reservations about a time-based 

approach. Some commenters posited that inpatient and outpatient services are different 

in nature. One physician association stated that the primary difference between the 

inpatient and outpatient setting is the availability of nurses (and related staff) and 

advanced technology in the inpatient setting, which accounts for the added cost of 

inpatient care. The commenter recommended structuring an inpatient DRG payment 

around short-stay admissions where the physician believes that these added components 

of care are necessary. Other commenters were concerned that under a time-based policy, 

the level of service would no longer be taken into account in hospital payment and that 

such a policy would inappropriately negate the need for medical necessity review. Some 

commenters stated that the medical review would simply shift to assessing the necessity 

of the patient’s LOS as an outpatient or whether the patient needed continuing hospital 

care at the time they became an inpatient. Some commenters believed that a time-based 

policy would result in additional short inpatient stays than under current Medicare 
CMS-1589-FC 765 

guidance. Therefore, these commenters believed that hospitals would continue to be 

subject to audit risk and that short-stay audits would simply increase. 

Another commenter expressed concern that hospitals may be substituting 

outpatient observation services for inpatient admissions in order to maximize their 

outpatient drug revenues under the Federal 340B Drug Pricing Program. The commenter 

recommended that CMS modify the definitions of “outpatient” and “inpatient” to 

explicitly clarify that a patient’s status determination should be based solely on 

appropriate clinical judgment, and should not be influenced by financial motives under 

programs such as the 340B Drug Pricing Program. 

Some commenters opposed time-based rules because, according to the 

commenters, it would undermine the judgment of the treating physician. Other 

commenters noted that the absence of objective clinical criteria for choosing a timeframe 

would render time-based criteria for admission arbitrary. Several commenters opposed 

limiting observation services to 24 hours because hospitals often need more time 

(particularly up to 48 hours) to evaluate diagnostic testing and develop the right treatment 

plan. They noted that practice patterns vary widely nationally and among facilities in the 

same region. Other commenters were concerned that a policy of never counting certain 

days as inpatient days could actually reduce beneficiary access to SNF care. Other 

commenters believed that a time-based policy would need refinement around issues like 

requirement of a physician order for inpatient admission. 

Several commenters opposed time-based criteria because such criteria may 

conflict with the provision of inpatient surgical care for patients who require only short 
CMS-1589-FC 766 

admissions. The commenters pointed out that such a policy could conflict with 

Medicare’s inpatient only list, and that as the standard of practice evolves to enable 

longer inpatient services to be furnished during short (1- or 2-day) inpatient stays, those 

services would no longer qualify as inpatient services. One commenter stated that there 

are some procedures that are so inherently complex that they may be performed only on 

an inpatient basis, regardless of how long (or short) the time was that the patient spent in 

the hospital. The commenter stated that establishing a bright-line time rule could create a 

situation whereby these services could be denied solely on the basis of the time spent in 

the hospital while ignoring the level of service required for subjecting a patient to an 

inherently risky procedure. The commenter expressed concern that CMS might require 

that all patients, regardless of clinical presentation, first undergo a period of 48 hours of 

observation before being admitted as inpatients to the hospital, despite the fact that their 

medical condition and treatment plan may be wholly consistent with an inpatient 

admission upon presentation to the hospital. 

Several commenters recommended that rather than limiting the timeframe for 

observation services, observation care should be furnished in dedicated observation units 

in emergency departments rather than on floor units. They cited studies showing that the 

dedicated units save costs compared to inpatient care and demonstrate shorter timeframes 

than the floor units for diagnosing or discharging. 

6. Payment Alignment 

In the proposed rule, we asked commenters to consider how aligning payment 

rates more closely with the resources expended by a hospital when providing outpatient 
CMS-1589-FC 767 

care versus inpatient care of short duration might reduce payment disparities and 

influence financial incentives and disincentives to admit. 

Comments: Commenters expressed significant interest in various means of 

improving the alignment of payment for what they termed equivalent outpatient and short 

inpatient hospital stays. Most of the commenters who supported payment alignment 

suggested developing a DRG for short inpatient stays, although several commenters 

recommended an expanded outpatient APC payment in addition to or in lieu of a 

short-stay DRG. Some commenters suggested basing the payment for short-stay 

inpatient admissions on a percentage of the related DRG by mean LOS. For example, if 

the mean LOS for a given DRG is 3 days, then the hospital would be paid one-third of 

that DRG for an inpatient admission with a 1-day stay. Several commenters suggested a 

short-stay outlier policy similar to the LTCH PPS, or a policy similar to the IPPS transfer 

policy. Other commenters more broadly suggested developing a resource-based payment 

structure specifically for short-stay, lower acuity admissions. 

Some commenters noted, however, that aligning payment rates would reduce but 

not eliminate the financial risk of claim denial. According to the commenters, a payment 

alignment approach would not eliminate the potential for continued use of observation 

care over inpatient admission. One commenter asserted that the resources expended by a 

hospital for inpatient and outpatient care are already aligned when the care is billed 

appropriately. 

7. Public Comments on Other Topics 

We received a number of public comments on other related issues. 
CMS-1589-FC 768 

a. Rules for the External Review of Inpatient Claims 

Comments: Many commenters expressed concerns about the criteria that are used 

by Medicare’s contractors to determine the medical necessity of hospital inpatient 

admissions. The commenters were concerned that the review criteria being utilized by 

contractors do not match the admission criteria set forth in Medicare’s guidance. In 

particular, according to the commenters, contractors are not employing physicians in 

making their medical necessity determinations, even though Medicare instructs that the 

admission decision is a complex medical judgment that involves forecasting a potential 

(not definite) need for an overnight stay or more than 24 hours of hospital care, or the risk 

of harm to the patient if not admitted (predictability of an adverse event). The 

commenters asserted that, as a result, claims reviewers inappropriately base their 

judgment on information that was not predictable or available to the physician at the time 

of admission. 

Many commenters recommended that CMS increase its oversight of the Agency’s 

medical review contractors, and ensure that its review rules are being followed. 

Commenters asked that CMS require all review contractors to use the same criteria to 

determine medical necessity that physicians and hospitals are required to use in making 

the inpatient admission decision; to use a physician reviewer in accordance with the QIO 

claim review standard, or to consult with the treating physician or a physician in the same 

specialty as the admitting physician; and to provide justification to the treating physician 

in support of a claim denial. According to the commenters, the review criteria that are 

used should apply uniformly to Medicare contractors, hospitals, and others. 
CMS-1589-FC 769 

Several commenters indicated that physician payment for professional services 

should be denied whenever inpatient hospital payment is denied, due to the role of the 

physician in the admission decision. In contrast, some physician commenters were 

concerned that they already are often inappropriately at risk for denial of their Part B 

claim when a hospital inpatient claim is denied, or when a hospital changes a patient’s 

status to outpatient without their knowledge such that the place of service on the 

physician claim does not match that claimed by the hospital. They stated that, in some 

cases, the hospital does not bill Medicare, so there is no companion claim at all. 

Similarly, some physicians expressed concern that hospitals use “black box” proprietary 

tools to identify allegedly inappropriate admissions and change the patient’s status to 

outpatient without the knowledge of the patient or the physician. These commenters also 

expressed concern for any adverse impact on beneficiary liability. 

b. Improving Beneficiary Protections 

Comments: Many commenters suggested means of improving beneficiary 

protections against unforeseen changes in his or her liability. These included providing 

Medicare coverage for self-administered drugs in the hospital outpatient department, 

waiving beneficiary coinsurance, capping the sum of outpatient services at the inpatient 

deductible, or establishing annual maximum out-of-pocket costs. Some commenters 

suggested that Medicare clarify and strengthen beneficiary notification and appeal rights 

regarding changes in patient status and the receipt of observation care. For example, 

according to the commenters, Medicare should require a straightforward explanation to 

beneficiaries of the cost-sharing implications of being an outpatient receiving observation 
CMS-1589-FC 770 

services compared to being an inpatient. One QIO noted that as part of their case review 

activities, QIOs review beneficiary appeals of inpatient hospital discharges to assure that 

patients are medically ready to move to the next level of care. The QIO believed that if a 

beneficiary receives only outpatient observation services and is not an inpatient, he or she 

has no right to appeal his or her discharge from the hospital to the QIO. The QIO stated 

that it often receives complaints from beneficiaries who believe they are being discharged 

prematurely, only to find out that the QIO cannot review that care because the hospital 

classified the stay as observation rather than inpatient. 

Some commenters suggested means of penalizing hospitals for inappropriate 

admission patterns. They provided examples such as developing quality measures with 

payment penalties to identify instances of inappropriate use of observation care for 

patients meeting inpatient admission criteria, or counting time spent receiving 

observation services as inpatient time for the purposes of hospital readmission penalties. 

Other commenters recommended improving physician education regarding the 

beneficiary liabilities that are associated with patient status to facilitate patient status 

determinations that take beneficiary cost-sharing into account. 

c. Revising the Qualifying Criteria for Skilled Nursing Facility (SNF) Coverage 

Comments: Many commenters recommended that Congress and/or CMS 

modernize and revise the SNF qualification rules. Many beneficiaries, beneficiary 

representatives, SNFs, and others requested that CMS count the time a beneficiary spends 

as an outpatient receiving observation services towards the 3-day hospital inpatient stay 

that is required for coverage of SNF care. Many commenters indicated that the statutory 
CMS-1589-FC 771 

time-based rule that requires a beneficiary to have a 3-day inpatient hospital stay in order 

to qualify for SNF care is obsolete, given the advances in medical care, the trend towards 

reduced LOS, and the migration of services from inpatient to outpatient over the course 

of the Medicare program’s history. These commenters recommended that this rule be 

replaced with clinically meaningful criteria that are not time-based or based on patient 

status. 

A few commenters asserted that CMS could use its statutory authority under 

section 1812(f) of the Act (as enacted by section 123 of the Tax Equity and Fiscal 

Responsibility Act of 1982, Pub. L. 97-248) to waive the 3-day qualification rule. Some 

commenters asserted that the criteria for using this authority would be met, namely that 

there would be no increase in associated costs to the Medicare program and that the acute 

nature of the SNF benefit would be maintained. The Act provides that the Secretary shall 

provide for coverage of extended care services which are not post-hospital extended care 

services at such time and for so long as the Secretary determines that the inclusion of 

such services will not result in any increase in the total payments made under Title XVIII, 

and will not alter the acute care nature of the SNF benefit. Other commenters believed 

that new statutory authority would be required to change the SNF criteria, and they 

expressed their support for bills they stated have been introduced in the Congress to count 

time in observation as inpatient time for purposes of SNF qualification. Some 

commenters recommended waiving the 3-day rule for certain diagnoses that benefit from 

short inpatient stays and speedy access to postacute rehabilitative services. They 

indicated that some beneficiaries require only a brief hospital assessment, rather than a 
CMS-1589-FC 772 

lengthy stay in acute care, prior to long-term skilled care, and that it is not uncommon for 

patients with hospital stays of less than 3 days to require follow up care in a SNF. 

C. Summary

We appreciate all of the public comments that we received on this multi-faceted 

topic. We will take all of the public comments that we received into consideration as we 

consider future actions that we could potentially undertake to provide more clarity and 

consensus regarding patient status for purposes of Medicare payment. 
CMS-1589-FC 773 

XII. CY 2013 OPPS Payment Status and Comment Indicators 

A. CY 2013 OPPS Payment Status Indicator Definitions

Payment status indicators (SIs) that we assign to HCPCS codes and APCs play an 

important role in determining payment for services under the OPPS. They indicate 

whether a service represented by a HCPCS code is payable under the OPPS or another 

payment system and also whether particular OPPS policies apply to the code. The 

CY 2013 status indicator assignments for APCs and HCPCS codes are shown in 

Addendum A and Addendum B, respectively, on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. We note that, in the past, a majority of the 

Addenda referred to throughout the preamble of our OPPS/ASC proposed and final rules 

appeared in the printed version of the Federal Register as part of the annual 

rulemakings. However, beginning with the CY 2012 OPPS/ASC proposed rule, the 

Addenda will no longer appear in the printed version of the OPPS/ASC rules that are 

found in the Federal Register. Instead, these Addenda will be published and available 

only via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/HospitalOutpatientPPS/index.html. 

We did not receive any public comments related to the definitions of the OPPS 

status indicators, and therefore, as we proposed in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45157), for CY 2013, we are not making any changes to the definitions of status 

indicators that were listed in Addendum D1 of the CY 2012 OPPS/ASC final rule with 
CMS-1589-FC 774 

comment period. We believe that these definitions of the OPPS status indicators continue 

to be appropriate for CY 2013. 

The complete list of the final CY 2013 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. 

B. CY 2013 Comment Indicator Definitions

In the CY 2013 OPPS/ASC proposed rule (77 FR 45158), for the CY 2013 OPPS, 

we proposed to use the same two comment indicators that are in effect for the CY 2012 

OPPS. 

● “CH”—Active HCPCS codes in current and next calendar year; status indicator 

and/or APC assignment have changed or active HCPCS code that will be discontinued at 

the end of the current calendar year. 

● “NI”—New code for the next calendar year or existing code with substantial 

revision to its code descriptor in the next calendar year as compared to current calendar 

year, interim APC assignment; comments will be accepted on the interim APC 

assignment for the new code. 

We proposed to use the “CH” comment indicator in the CY 2013 OPPS/ASC 

proposed rule to indicate HCPCS codes for which the status indicator or APC 

assignment, or both, are proposed for change in CY 2013 compared to their assignment 

as of June 30, 2012. We stated that we believed that using the “CH” indicator in the CY 

2013 OPPS/ASC proposed rule would facilitate the public’s review of the changes that 
CMS-1589-FC 775 

we were proposing for CY 2013. We stated that the use of the comment indicator “CH” 

in association with a composite APC indicates that the configuration of the composite 

APC is proposed to be changed in the CY 2013 OPPS/ASC final rule with comment 

period. 

We proposed to use the “CH” comment indicator in the CY 2013 OPPS/ASC 

final rule with comment period to indicate HCPCS codes for which the status indicator or 

APC assignment, or both, would change in CY 2013 compared to their assignment as of 

December 31, 2012. 

In addition, any existing HCPCS codes with substantial revisions to the code 

descriptors for CY 2013 compared to the CY 2012 descriptors are labeled with comment 

indicator “NI” in Addendum B to the CY 2013 OPPS/ASC final rule with comment 

period. However, as we stated in the proposed rule, in order to receive the comment 

indicator “NI,” the CY 2013 revision to the code descriptor (compared to the CY 2012 

descriptor) must be significant such that the new code descriptor describes a new service 

or procedure for which the OPPS treatment may change. We use comment indicator 

“NI” to indicate that these HCPCS codes are open for comment as part of the CY 2013 

OPPS/ASC final rule with comment period. Like all codes labeled with comment 

indicator “NI,” as we stated in the CY 2013 OPPS/ASC proposed rule, we will respond to 

public comments and finalize their OPPS treatment in the CY 2014 OPPS/ASC final rule 

with comment period. 
CMS-1589-FC 776 

In accordance with our usual practice, CPT and Level II HCPCS codes that are 

new for CY 2013 are also labeled with comment indicator “NI” in Addendum B to the 

CY 2013 OPPS/ASC final rule with comment period. 

Only HCPCS codes with comment indicator “NI” in this CY 2013 OPPS/ASC 

final rule with comment period are subject to comment. HCPCS codes that do not appear 

with comment indicator “NI” in this CY 2013 OPPS/ASC final rule with comment period 

are not open to public comment, unless we specifically request additional comments 

elsewhere in this final rule with comment period. The CY 2013 treatment of HCPCS 

codes that appear in this CY 2013 OPPS/ASC final rule with comment period to which 

comment indicator “NI” is not appended was open for public comment during the 

comment period for the proposed rule, and we indicated that we would respond to those 

comments in this CY 2013 OPPS/ASC final rule with comment period. 

We did not receive any public comments on the proposed comment indicators. 

We believe that the CY 2012 definitions of the OPPS status indicators continue to be 

appropriate for CY 2013, and therefore, as proposed, we are continuing to use those 

definitions without modification for CY 2013. The final definitions are listed in 

Addendum D2 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient PPS/index.html. 
CMS-1589-FC 777 

XIII. OPPS Policy and Payment Recommendations 

A. MedPAC Recommendations

The Medicare Payment Advisory Commission (MedPAC) was established under 

section 1805 of the Act to advise the Congress on issues affecting the Medicare program. 

As required under the statute, MedPAC submits reports to Congress no later than March 

and June of each year that contain its Medicare payment policy recommendations. In our 

CY 2013 OPPS/ASC proposed rule, we noted several recommendations regarding the 

OPPS from the March 2012 report (“Report to the Congress: Medicare Payment Policy,” 

available on MedPAC’s Web site at: 

http://www.medpac.gov/documents/Mar12_EntireReport.pdf). Since the publication of 

the proposed rule, MedPAC has not made any other recommendations regarding the 

OPPS, although we discuss MedPAC’s public comments to our proposed rule in the 

applicable sections of this final rule with comment period. 

In its March report, MedPAC recommended that Congress increase payment rates 

for the OPPS in CY 2013 by 1.0 percent. We discuss our final policy to follow the 

statutory requirements for the CY 2013 OPD fee schedule increase factor in section II.B 

of this final rule with comment period. 

In addition, MedPAC recommended that Congress enact legislation to reduce 

payment rates for evaluation and management office visits provided in hospital outpatient 

departments to the rates paid for these services in physician offices. MedPAC 

recommended that the change be phased in over 3 years. During the phase-in, MedPAC 

stated that the associated payment reductions to hospitals with a disproportionate share 
CMS-1589-FC 778 

patient percentage at or above the median should be limited to 2 percent of overall 

Medicare payments. MedPAC also recommended that the Secretary of Health and 

Human Services conduct a study by January 2015 to examine whether this policy change 

would reduce access to ambulatory physician and other services for low-income patients. 

Congress has not enacted such legislation. 

B. GAO Recommendations

Congress established the U.S. Government Accountability Office (GAO) under 

the Budget and Accounting Act of 1921 (Pub. L. 67-13) as an independent agency that 

advises Congress and the heads of Executive agencies regarding Federal program 

expenditures. The GAO conducts audits and other analyses to ensure that Federal funds 

are being spent efficiently and effectively. Since the issuance of the CY 2012 

OPPS/ASC final rule with comment period, the GAO has not released any reports 

regarding the OPPS. 

C. OIG Recommendations

The mission of the Office of the Inspector General (OIG) as mandated by 

Pub. L. 95–452 (as amended) is to protect the integrity of the Department of Health and 

Human Services programs and the health and welfare of program beneficiaries. The OIG 

conducts independent audits, inspections, and investigations to improve the efficiency of 

these programs and to identify and prevent fraud, waste and abuse. Since the issuance of 

the CY 2012 OPPS/ASC final rule with comment period, the OIG has not made any 

recommendations regarding the OPPS. 
CMS-1589-FC 779 

XIV. Updates to the Ambulatory Surgical Center (ASC) Payment System 

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment 

System 

For a detailed discussion of the legislative history and statutory authority related 

to ASCs, we refer readers to the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74377 through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through 

32292). For a discussion of prior rulemaking on the ASC payment system, we refer 

readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74378 through 

74379). 

2. Policies Governing Changes to the Lists of Codes and Payment Rates for ASC 

Covered Surgical Procedures and Covered Ancillary Services 

Under § 416.2 and § 416.166 of the regulations, subject to certain exclusions, 

covered surgical procedures are surgical procedures that are separately paid under the 

OPPS, that would not be expected to pose a significant risk to beneficiary safety when 

performed in an ASC, and that would not be expected to require active medical 

monitoring and care at midnight following the procedure (“overnight stay”). We adopted 

this standard for defining which surgical procedures are covered under the ASC payment 

system as an indicator of the complexity of the procedure and its appropriateness for 

Medicare payment in ASCs. We use this standard only for purposes of evaluating 

procedures to determine whether or not they are appropriate for Medicare beneficiaries in 

ASCs. We define surgical procedures as those described by Category I CPT codes in the 
CMS-1589-FC 780 

surgical range from 10000 through 69999, as well as those Category III CPT codes and 

Level II HCPCS codes that directly crosswalk or are clinically similar to ASC covered 

surgical procedures (72 FR 42478). 

In the August 2, 2007 final rule, we also established our policy to make separate 

ASC payments for the following ancillary items and services when they are provided 

integral to ASC covered surgical procedures: (1) brachytherapy sources; (2) certain 

implantable items that have pass-through status under the OPPS; (3) certain items and 

services that we designate as contractor-priced, including, but not limited to, procurement 

of corneal tissue; (4) certain drugs and biologicals for which separate payment is allowed 

under the OPPS; and (5) certain radiology services for which separate payment is allowed 

under the OPPS. These covered ancillary services are specified in § 416.164(b) and, as 

stated previously, are eligible for separate ASC payment (72 FR 42495). Payment for 

ancillary items and services that are not paid separately under the ASC payment system is 

packaged into the ASC payment for the covered surgical procedure. 

We update the lists of, and payment rates for, covered surgical procedures and 

covered ancillary services in conjunction with the annual proposed and final rulemaking 

process to update the OPPS and the ASC payment system (§ 416.173; 72 FR 42535). In 

addition, as discussed in detail in section XIV.B. of this final rule with comment period, 

because we base ASC payment policies for covered surgical procedures, drugs, 

biologicals, and certain other covered ancillary services on the OPPS payment policies, 

we also provide quarterly update change requests (CRs) for ASC services throughout the 

year (January, April, July, and October). CMS releases new Level II codes to the public 
CMS-1589-FC 781 

or recognizes the release of new CPT codes by the AMA and makes these codes effective 

(that is, the codes are recognized on Medicare claims) outside of the formal rulemaking 

process via these ASC quarterly update CRs. Thus, the updates are to implement newly 

created Level II HCPCS and Category III CPT codes for ASC payment and to update the 

payment rates for separately paid drugs and biologicals based on the most recently 

submitted ASP data. New Category I CPT codes, except vaccine codes, are released only 

once a year and, therefore, are implemented only through the January quarterly update. 

New Category I CPT vaccine codes are released twice a year and, therefore, are 

implemented through the January and July quarterly updates. We refer readers to Table 

41 in the CY 2012 OPPS/ASC proposed rule for the process used to update the HCPCS 

and CPT codes (76 FR 42291). 

In our annual updates to the ASC list of, and payment rates for, covered surgical 

procedures and covered ancillary services, we undertake a review of excluded surgical 

procedures (including all procedures newly proposed for removal from the OPPS 

inpatient list), new procedures, and procedures for which there is revised coding, to 

identify any that we believe meet the criteria for designation as ASC covered surgical 

procedures or covered ancillary services. Updating the lists of covered surgical 

procedures and covered ancillary services, as well as their payment rates, in association 

with the annual OPPS rulemaking cycle is particularly important because the OPPS 

relative payment weights and, in some cases, payment rates, are used as the basis for the 

payment of covered surgical procedures and covered ancillary services under the revised 

ASC payment system. This joint update process ensures that the ASC updates occur in a 
CMS-1589-FC 782 

regular, predictable, and timely manner. We did not receive any public comments on this 

process. Therefore, we are continuing our established process without modification for 

determining the list of codes and payment rates for ASC covered surgical procedures and 

covered ancillary services. 

B. Treatment of New Codes

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

HCPCS Codes 

CPT and Level II HCPCS codes are used to report procedures, services, items, 

and supplies under the ASC payment system. Specifically, we recognize the following 

codes on ASC claims: (1) Category I CPT codes, which describe surgical procedures; 

(2) Category III CPT codes, which describe new and emerging technologies, services, 

and procedures; and (3) Level II HCPCS codes, which are used primarily to identify 

products, supplies, temporary procedures, and services not described by CPT codes. 

We finalized a policy in the August 2, 2007 final rule to evaluate each year all 

new Category I and Category III CPT codes and Level II HCPCS codes that describe 

surgical procedures, and to make preliminary determinations during the annual 

OPPS/ASC rulemaking process regarding whether or not they meet the criteria for 

payment in the ASC setting as covered surgical procedures and, if so, whether or not they 

are office-based procedures (72 FR 42533 through 42535). In addition, we identify new 

codes as ASC covered ancillary services based upon the final payment policies of the 

revised ASC payment system. 
CMS-1589-FC 783 

We have separated our discussion below into two sections based on whether we 

proposed to solicit public comments in the CY 2013 OPPS/ASC proposed rule (and 

respond to those comments in this CY 2013 OPPS/ASC final rule with comment period) 

or whether we are soliciting public comments in this CY 2013 OPPS/ASC final rule with 

comment period (and responding to those comments in the CY 2014 OPPS/ASC final 

rule with comment period). 

We note that we sought public comment in the CY 2012 OPPS/ASC final rule 

with comment period on the new CPT and Level II HCPCS codes that were effective 

January 1, 2012. We also sought public comments in the CY 2012 OPPS/ASC final rule 

with comment period on the new Level II HCPCS codes effective October 1, 2011. 

These new codes, with an effective date of October 1, 2011, or January 1, 2012, were 

flagged with comment indicator “NI” in Addenda AA and BB to the CY 2012 

OPPS/ASC final rule with comment period to indicate that we were assigning them an 

interim payment status and payment rate, if applicable, which were subject to public 

comment following publication of the CY 2012 OPPS/ASC final rule with comment 

period. In the proposed rule, we stated that we would respond to public comments and 

finalize the ASC treatment of these codes in this CY 2013 OPPS/ASC final rule with 

comment period. 

We did not receive any public comments regarding our process for recognizing 

new Category I and Category III CPT codes and Level II HCPCS codes under the ASC 

payment system and are implementing our proposed policy as final, without 

modification, for CY 2013. 
CMS-1589-FC 784 

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

in April and July 2012 for Which We Solicited Public Comments in the CY 2013 

OPPS/ASC Proposed Rule 

In the April and July CRs, we made effective for April 1, 2012 or July 1, 2012, 

respectively, a total of 12 new Level II HCPCS codes and 5 new Category III CPT codes 

that were not addressed in the CY 2012 OPPS/ASC final rule with comment period. The 

12 new Level II HCPCS codes describe covered ancillary services. 

In the April 2012 ASC quarterly update (Transmittal 2425, CR 7754, dated 

March 16, 2012), we added one new radiology Level II HCPCS code and four new drug 

and biological Level II HCPCS codes to the list of covered ancillary services. 

Specifically, as displayed in Table 36 of the CY 2013 OPPS/ASC proposed rule 

(77 FR 45160), we added the following codes to the list of covered ancillary services: 

● HCPCS code C9288 (Injection, centruroides (scorpion) immune f(ab)2 

(equine), 1 vial); 

● HCPCS code C9289 (Injection, asparaginase Erwinia chrysanthemi, 

1,000international units (I.U.)); 

● HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg); 

● HCPCS code C9291 (Injection, aflibercept, 2 mg vial); and 

● HCPCS code C9733 (Non-ophthalmic fluorescent vascular angiography). 

In the July 2012 quarterly update (Transmittal 2479, Change Request 7854, dated 

May 25, 2012), we added seven new drug and biological Level II HCPCS codes to the 

list of covered ancillary services. Specifically, as displayed in Table 37 of the CY 2013 
CMS-1589-FC 785 

OPPS/ASC proposed rule (77 FR 45161), we added the following codes to the list of 

covered ancillary services: 

● HCPCS code C9368 (Grafix core, per square centimeter); 

● HCPCS code C9369 (Grafix prime, per square centimeter); 

● HCPCS code Q2034 (Influenza virus vaccine, split virus, for intramuscular use 

(Agriflu)); 

● HCPCS code Q2045 (Injection, human fibrinogen concentrate, 1 mg); 

● HCPCS code Q2046 (Injection, aflibercept, 1 mg); 

● HCPCS code Q2048 (Injection, doxorubicin hydrochloride, liposomal, doxil, 

10 mg); and 

● HCPCS code Q2049 (Injection, doxorubicin hydrochloride, liposomal, 

imported lipodox, 10 mg). 

We noted that HCPCS code Q2045 replaced code J1680, HCPCS code Q2046 

replaced code C9291, and HCPCS code Q2048 replaced code J9001 beginning 

July 1, 2012. 

We assigned payment indicator “K2” (Drugs and biologicals paid separately when 

provided integral to a surgical procedure on the ASC list; payment based on OPPS rate) 

to the 10 new Level II HCPCS codes that are separately paid when provided in ASCs. 

We assigned payment indicator “L1” (Influenza vaccine; pneumococcal vaccine; 

packaged item/service; no separate payment made) or payment indicator “N1” (Packaged 

service/item; no separate payment made) to the two new Level II HCPCS codes that are 

packaged when provided in ASCs. In the CY 2013 OPPS/ASC proposed rule 
CMS-1589-FC 786 

(77 FR 45160), we solicited public comment on the proposed CY 2013 ASC payment 

indicators and payment rates for the covered ancillary services listed in Tables 36 and 37 

of the proposed rule (77 FR 45160 through 45161). Those HCPCS codes became 

payable in ASCs, beginning in April or July 2012, and are paid at the ASC rates posted 

for the appropriate calendar quarter on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/11_Addenda_Updates.html. 

The HCPCS codes listed in Table 36 of the proposed rule were included in 

Addendum BB to the proposed rule (which was available via the Internet on the CMS 

Web site). We noted that all ASC addenda are only available via the Internet on the CMS 

Web site. Because the payment rates associated with the new Level II HCPCS codes that 

became effective for July 2012 (listed in Table 37 of the proposed rule) were not 

available to us in time for incorporation into the Addenda to the OPPS/ASC proposed 

rule, our policy is to include these HCPCS codes and their proposed payment indicators 

and payment rates in the preamble to the proposed rule but not in the Addenda to the 

proposed rule. These codes and their final payment indicators and rates are included in 

the appropriate Addendum to this CY 2013 OPPS/ASC final rule with comment period. 

Thus, the codes implemented by the July 2012 ASC quarterly update CR and their 

proposed CY 2013 payment rates (based on July 2012 ASP data) that were displayed in 

Table 37 were not included in Addendum BB to the proposed rule (which was available 

via the Internet on the CMS Web site). The final list of covered ancillary services and the 

associated payment weights and payment indicators is included in Addendum BB to this 
CMS-1589-FC 787 

CY 2013 OPPS/ASC final rule with comment period, consistent with our annual update 

policy. We solicited public comment on these proposed payment indicators and the 

proposed payment rates for the new Level II HCPCS codes that were newly recognized 

as ASC covered ancillary services in April and July 2012 through the quarterly update 

CRs, as listed in Tables 36 and 37 of the proposed rule. We proposed to finalize their 

payment indicators and their payment rates in this CY 2013 OPPS/ASC final rule with 

comment period. 

We did not receive any public comments regarding our proposals. We are 

adopting as final for CY 2013 the ASC payment indicators for the ancillary services 

described by the new Level II HCPCS codes implemented in April and July 2012 through 

the quarterly update CRs as shown below, in Tables 47 and 48, respectively. These new 

HCPCS codes are also displayed in Addendum BB to this final rule with comment 

period. We note that after publication of the CY 2013 OPPS/ASC proposed rule, the 

CMS HCPCS Workgroup created permanent HCPCS J-codes for CY 2013 to replace 

certain temporary HCPCS C-codes made effective for CY 2012. These permanent 

CY 2013 HCPCS J-codes are listed alongside the temporary CY 2012 HCPCS C-codes in 

Tables 47 and 48 below. 

TABLE 47.—NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY 

SERVICES IMPLEMENTED IN APRIL 2012

CY 2012 

HCPCS 

Code 

CY 2013 

HCPCS 

Code CY 2013 Long Descriptor 

Final 

CY 2013 

Payment 

Indicator 

C9288 J0716 Injection, centruroides immune f(ab)2, up to 120 

milligrams K2 
CMS-1589-FC 788 

CY 2012 

HCPCS 

Code 

CY 2013 

HCPCS 

Code CY 2013 Long Descriptor 

Final 

CY 2013 

Payment 

Indicator 

C9289 J9019 Injection, asparaginase (Erwinaze), 1,000 IU K2 

C9290 C9290 Injection, bupivacaine liposome, 1 mg K2 

C9291* J0178 Injection, aflibercept, 1 mg K2 

C9733 C9733 Non-ophthalmic fluorescent vascular angiography N1 

*Note: Level II HCPCS code C9291 (Injection, aflibercept, 2 mg vial) was deleted June 30, 2012, and 

replaced with HCPCS code Q2046 (Injection, aflibercept, 1 mg), effective July 1, 2012. HCPCS code 

Q2046 was deleted December 31, 2012, and replaced with HCPCS code J0178 effective January 1, 

2013.

TABLE 48.—NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY 

SERVICES IMPLEMENTED IN JULY 2012

CY 2012 

HCPCS 

Code 

CY 2013 

HCPCS 

Code CY 2013 Long Descriptor 

Final 

CY 2013 

Payment 

Indicator 

C9368 Q4132 Grafix core, per square centimeter K2 

C9369 Q4133 Grafix prime, per square centimeter K2 

Q2034 Q2034 Influenza virus vaccine, split virus, for 

intramuscular use (Agriflu) L1 

Q2045* J7178 Injection, human fibrinogen concentrate, 1 mg K2 

Q2046* J0178 Injection, aflibercept, 1 mg K2 

Q2048* J9002 Injection, doxorubicin hydrochloride, liposomal, 

doxil, 10 mg K2 

Q2049 Q2049 Injection, doxorubicin hydrochloride, liposomal, 

imported lipodox, 10 mg K2 

*Note: HCPCS code Q2045 replaced HCPCS code J1680, HCPCS code Q2046 replaced HCPCS code 

C9291, and HCPCS code Q2048 replaced HCPCS code J9001 beginning July 1, 2012. 

Through the July 2012 quarterly update CR, we also implemented ASC payment 

for five new Category III CPT codes as ASC covered surgical procedures, effective 

July 1, 2012. These codes were listed in Table 38 of the CY 2013 OPPS/ASC proposed 
CMS-1589-FC 789 

rule (77 FR 45161), along with their proposed payment indicators and proposed payment 

rates for CY 2013. Because the payment rates associated with the new Category III CPT 

codes that became effective for July were not available to us in time for incorporation 

into the Addenda to the OPPS/ASC proposed rule, our policy is to include the codes, 

their proposed payment indicators, and proposed payment rates in the preamble to the 

proposed rule but not in the Addenda to the proposed rule. The codes listed in Table 38 

of the proposed rule and their final payment indicators and rates are included in 

Addendum AA to this CY 2013 OPPS/ASC final rule with comment period. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45161), we proposed to assign 

payment indicator “G2” (Non-office-based surgical procedure added in CY 2008 or later; 

payment based on OPPS relative payment weight) to three of the five new Category III 

CPT codes implemented in July 2012 and to assign payment indicator “J8” 

(Device-intensive procedure added to ASC list in CY 2008 or later; paid at adjusted rate) 

to the remaining two new Category III CPT codes implemented in July 2012. We believe 

that these procedures would not be expected to pose a significant safety risk to Medicare 

beneficiaries or would not be expected to require an overnight stay if performed in ASCs. 

We solicited public comment on these proposed payment indicators and the payment 

rates for the new Category III CPT codes that were newly recognized as ASC covered 

surgical procedures in July 2012 through the quarterly update CR, as listed in Table 38 of 

the proposed rule (77 FR 45161). We proposed to finalize their payment indicators and 

their payment rates in this CY 2013 OPPS/ASC final rule with comment period. 
CMS-1589-FC 790 

We did not receive any public comments regarding this proposal. We are 

adopting as final for CY 2013 the ASC payment indicators for the covered surgical 

procedures described by the new Category III CPT codes implemented in the July 2012 

CR as shown below in Table 49. The new CPT codes implemented in July 2012 are also 

displayed in Addendum AA to this final rule with comment period (which is available via 

the Internet on the CMS Web site). 
CMS-1589-FC 791 

TABLE 49.—NEW CATEGORY III CPT CODES IMPLEMENTED IN JULY 

2012 AS ASC COVERED SURGICAL PROCEDURES

CY 2013 

CPT 

Code

CY 2013 Long Descriptor

Final 

CY 2013 

Payment 

Indicator

0302T 

Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging supervision 

and interpretation when performed and intra-operative 

interrogation and programming when performed; complete 

system (includes device and electrode) 

J8 

0303T 

Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging supervision 

and interpretation when performed and intra-operative 

interrogation and programming when performed; electrode 

only 

G2 

0304T 

Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging supervision 

and interpretation when performed and intra-operative 

interrogation and programming when performed; device only 

J8 

0307T Removal of intracardiac ischemia monitoring device G2 

0308T* Insertion of ocular telescope prosthesis including removal of 

crystalline lens G2 

*CPT code 0308T replaced HCPCS code C9732 beginning July 1, 2012. 

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

We Are Soliciting Public Comments in this CY 2013 OPPS/ASC Final Rule With 

Comment Period 

As has been our practice in the past, we incorporate those new Category I and 

Category III CPT codes and new Level II HCPCS codes that are effective January 1 in 

the final rule with comment period updating the ASC payment system for the following 

calendar year. These codes are released to the public via the CMS HCPCS (for Level II 

HCPCS codes) and AMA Web sites (for CPT codes), and also through the January ASC 

quarterly update CRs. In the past, we also have released new Level II HCPCS codes that 
CMS-1589-FC 792 

are effective October 1 through the October ASC quarterly update CRs and incorporated 

these new codes in the final rule with comment period updating the ASC payment system 

for the following calendar year. All of these codes are flagged with comment indicator 

‘‘NI’’ in Addenda AA and BB to the OPPS/ASC final rule with comment period to 

indicate that we are assigning them an interim payment status which is subject to public 

comment. The payment indicator and payment rate, if applicable, for all such codes 

flagged with comment indicator ‘‘NI’’ are open to public comment in the OPPS/ASC 

final rule with comment period, and we respond to these comments in the final rule with 

comment period for the next calendar year’s OPPS/ASC update. In the CY 2013 

OPPS/ASC proposed rule (77 FR 45161 through 45162), we proposed to continue this 

process for CY 2013. Specifically, for CY 2013, we proposed to include in Addenda AA 

and BB to the CY 2013 OPPS/ASC final rule with comment period the new Category I 

and III CPT codes effective January 1, 2013, that would be incorporated in the January 

2013 ASC quarterly update CR and the new Level II HCPCS codes, effective 

October 1, 2012 or January 1, 2013, that would be released by CMS in its October 2012 

and January 2013 ASC quarterly update CRs. We stated that these codes would be 

flagged with comment indicator “NI” in Addenda AA and BB to this CY 2013 

OPPS/ASC final rule with comment period to indicate that we have assigned them an 

interim payment status. We also stated that their payment indicators and payment rates, 

if applicable, would be open to public comment in the CY 2013 OPPS/ASC final rule 

with comment period and would be finalized in the CY 2014 OPPS/ASC final rule with 

comment period. 
CMS-1589-FC 793 

We did not receive any public comments regarding this proposed process. For 

CY 2013, we are finalizing our proposal, without modification, to continue our 

established process for recognizing and soliciting public comments on new Level II 

HCPCS codes and Category I and III CPT codes that become effective for the following 

year, as described above. 

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

Services

1. Covered Surgical Procedures 

a. Additions to the List of ASC Covered Surgical Procedures 

We conducted a review of all HCPCS codes that currently are paid under the 

OPPS, but not included on the ASC list of covered surgical procedures, to determine if 

changes in technology and/or medical practice changed the clinical appropriateness of 

these procedures for the ASC setting. In the CY 2013 OPPS/ASC proposed rule 

(77 FR 45162), we proposed to update the list of ASC covered surgical procedures by 

adding 16 procedures to the list. We determined that these 16 procedures would not be 

expected to pose a significant safety risk to Medicare beneficiaries and would not be 

expected to require an overnight stay if performed in ASCs. 

The 16 procedures that we proposed to add to the ASC list of covered surgical 

procedures, including their HCPCS code long descriptors and proposed CY 2013 

payment indicators, were displayed in Table 39 of the proposed rule (77 FR 45162). We 

invited public comment on this proposal. 
CMS-1589-FC 794 

Comment: Many commenters supported the addition of the procedures listed in 

Table 39 of the CY 2013 OPPS/ASC proposed rule to the list of ASC covered surgical 

procedures. 

One commenter believed that CPT codes 0299T (Extracorporeal shock wave for 

integumentary wound healing, high energy, including topical application and dressing 

care; initial wound) and 0300T (Extracorporeal shock wave for integumentary wound 

healing, high energy, including topical application and dressing care) should not be added 

to the list of ASC covered surgical procedures. The commenter agreed with CMS that 

these codes would not pose a significant safety risk to Medicare beneficiaries and would 

not be expected to require an overnight stay if performed in an ASC. However, the 

commenter believed that additional information on the clinical efficacy and outcomes of 

these services should be collected before adding these procedures to the list of ASC 

covered surgical procedures. 

Response: We appreciate commenters’ support of the proposed addition of the 

procedures listed in Table 39 of the CY 2013 OPPS/ASC proposed rule to the list of ASC 

covered surgical procedures for CY 2013. With regard to the commenter’s belief that 

CPT codes 0299T and 0300T should not be added to the list of ASC covered surgical 

procedures until additional information regarding the clinical efficacy and outcomes of 

these services is collected, our policy is to review all HCPCS codes that are currently 

paid under the OPPS to identify any procedures that are currently excluded from the ASC 

list of covered procedures that we believe would not pose a safety risk to Medicare 

beneficiaries and would not require an overnight stay if performed in an ASC (42 CFR 
CMS-1589-FC 795 

416.166). We do not make our assessment regarding what codes should be included on 

the list of covered surgical procedures based on data regarding the clinical efficacy and 

outcomes of the services. Because it is our expectation that the procedures identified by 

CPT codes 0299T and 0300T would not pose a significant safety risk to Medicare 

beneficiaries or require an overnight stay if performed in an ASC, we do not agree with 

the commenter that these procedures should continue to be excluded from the list of ASC 

covered surgical procedures. 

Comment: One commenter reiterated a previous request that, with knowledge of 

the anatomic location, CMS should apply the safety criteria to the entire spectrum of 

services reportable by an unlisted code. The commenter believed that under such an 

analysis, CMS would determine that the following unlisted codes associated with eye 

procedures would not compromise patient safety and, therefore, should be added to the 

list of ASC covered surgical procedures: CPT code 66999 (Unlisted procedure, anterior 

segment of eye), CPT code 67299 (Unlisted procedure, posterior segment);, CPT code 

67399 (Unlisted procedure, ocular muscle); CPT code 67999 (Unlisted procedure, 

eyelids); CPT code 68399 (Unlisted procedure, conjunctiva); and CPT code 68899 

(Unlisted procedure, lacrimal system). 

Response: As we have stated in the past (72 FR 42484 through 42486; 75 FR 

72032; and 76 FR 74380, and 74399), procedures that are reported by the CPT unlisted 

codes are not eligible for addition to the ASC list because our charge requires us to 

evaluate each surgical procedure for potential safety risk and expected need for overnight 

monitoring and to exclude such procedures from ASC payment. It is not possible to 
CMS-1589-FC 796 

evaluate procedures that would be reported by unlisted CPT codes according to these 

criteria. This final policy is discussed in detail in the August 2, 2007 final rule 

(72 FR 42484 through 42486). 

Comment: In addition to the procedures listed in Table 39 of the CY 2013 

OPPS/ASC proposed rule, commenters requested that CMS add the procedures described 

by the 57 CPT codes displayed in Table 50 below to the list of ASC covered surgical 

procedures. Commenters argued that these procedures are as safe as procedures that are 

currently on the list of ASC covered procedures and, based on a survey, ASCs report 

positive outcomes when these procedures are performed on non-Medicare patients.

TABLE 50.--PROCEDURES REQUESTED FOR ADDITION TO THE CY 2013 

LIST OF ASC COVERED SURGICAL PROCEDURES 

CY 2013 

CPT 

Code CY 2013 Short Descriptor 

0274T Perq lamot/lam crv/thrc 

0275T Perq lamot/lam lumbarbar 

21141* Reconstruct midface lefort 

21142* Reconstruct midface lefort 

22551 Neck spine fuse&remov bel c2 

22552* Addl neck spine fusion 

22554 Neck spine fusion 

22612 Lumbar spine fusion 

22845* Insert spine fixation device 

22846* Insert spine fixation device 

22851 Apply spine prosth device 

23470 Reconstruct shoulder joint 

22856 Cerv artific diskectomy 

27096 Inject sacroiliac joint 

27125* Partial hip replacement 

27130* Total hip arthroplasty 

27415 Osteochondral knee allograft 

27447* Total knee arthroplasty 

27524 Treat kneecap fracture 
CMS-1589-FC 797 

CY 2013 

CPT 

Code CY 2013 Short Descriptor 

27556* Treat knee dislocation 

27558* Treat knee dislocation 

27702* Reconstruct ankle joint 

27703* Reconstruct ankle joint 

27715* Revision of lower leg 

54332 Revise penis/urethra 

54336 Revise penis/urethra 

54411* Remov/replc penis pros comp 

54417* Remv/replc penis pros compl 

54535 Extensive testis surgery 

54650 Orchiopexy (Fowler-Stephens) 

57310 Repair urethrovaginal lesion 

58541 Lsh uterus 250 g or less 

58542 Lsh w/t/o ut 250 g or less 

58570 Tlh uterus 250 g or less 

58571 Tlh w/t/o 250 g or less 

63001 Removal of spinal lamina 

63003 Removal of spinal lamina 

63005 Removal of spinal lamina 

63012 Removal of spinal lamina 

63015 Removal of spinal lamina 

63017 Removal of spinal lamina 

63020 Neck spine disk surgery 

63030 Low back disk surgery 

63035 Spinal disk surgery add-on 

63042 Laminotomy single lumbar 

63043* Laminotomy addl cervical 

63047 Removal of spinal lamina 

63048 Remove spinal lamina add-on 

63050* Cervical laminoplasty 

63056 Decompress spinal cord 

63075 Neck spine disk surgery 

63076 Neck spine disk surgery 

63081* Removal of vertebral body 

63265* Excise intraspinal lesion 

63267* Excise intraspinal lesion 

63275* Biopsy/excise spinal tumor 

63277* Biopsy/excise spinal tumor 
CMS-1589-FC 798 

 *Indicates that these procedures are paid only as inpatient procedures. 

Response: We reviewed all of the eligible surgical procedures that commenters 

requested for addition to the ASC list of covered surgical procedures. Of the 

57 requested procedures, we did not review the 22 procedures that are reported by CPT 

codes that are on the OPPS inpatient list. These procedures are not paid under the OPPS 

and, therefore, are not eligible for addition to the list of ASC covered procedures. The 

procedures that are paid only as inpatient procedures are identified with an asterisk in 

Table 50. In addition, the procedure that is identified by CPT code 27096 (Injection 

procedure for sacroiliac joint, anesthetic/steroid, with image guidance (fluoroscopy or ct) 

including arthrography when performed) is not paid under the OPPS and, therefore, is not 

eligible for addition to the list of ASC covered procedures. 

With regard to the remaining procedures in Table 50 that commenters requested 

be added to the list of ASC covered surgical procedures, we do not agree that most of the 

procedures are appropriate for provision to Medicare beneficiaries in ASCs. Although 

the commenters asserted that the procedures they were requesting for addition to the list 

are as safe as procedures already on the list, our review did not support those assertions. 

We exclude from ASC payment any procedure for which standard medical practice 

dictates that the beneficiary who undergoes the procedure would typically be expected to 

require active medical monitoring and care at midnight following the procedure 

(overnight stay) as well as all surgical procedures that our medical advisors determine 

may be expected to pose a significant safety risk to Medicare beneficiaries when 

performed in an ASC. The criteria used under the revised ASC payment system to 
CMS-1589-FC 799 

identify procedures that would be expected to pose a significant safety risk when 

performed in an ASC include, but are not limited to, those procedures that: generally 

result in extensive blood loss; require major or prolonged invasion of body cavities; 

directly involve major blood vessels; are emergent or life threatening in nature; 

commonly require systemic thrombolytic therapy; are designated as requiring inpatient 

care under § 419.22(n); can only be reported using a CPT unlisted surgical procedure 

code; or are otherwise excluded under § 411.15 (we refer readers to § 416.166). 

In our review of the procedures listed in Table 50, we found that most of the 

procedures either may be expected to pose a threat to beneficiary safety or require active 

medical monitoring at midnight following the procedure. Specifically, we found that 

prevailing medical practice called for inpatient hospital stays for beneficiaries undergoing 

many of the procedures and that some of the procedures directly involve major blood 

vessels and/or may result in extensive blood loss. Several of the urology procedures 

appear to require major invasion of a body cavity. However, we agree with commenters 

that the procedures described by CPT codes 0274T, 0275T, 58541, 58542, 58570, 58571, 

63001, 63003, and 63005 meet the criteria under § 416.166 and would be safely 

performed in the ASC setting and would not require overnight stays. We are adding 

these CPT codes to the ASC list of covered surgical procedures for CY 2013. 

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

addition of the 16 procedures that we proposed to add to the list of ASC covered surgical 

procedures for CY 2013. We are also adding 9 of the procedures requested by the 
CMS-1589-FC 800 

commenters to the CY 2013 list of ASC covered surgical procedures. The procedures, 

their descriptors, and payment indicators are displayed in Table 51 below.

TABLE 51.—NEW ASC COVERED SURGICAL PROCEDURES FOR CY 2013

CY 

2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Final CY 

2013 ASC 

Payment 

Indicator**

0274T 

Percutaneous laminotomy/laminectomy (interlaminar approach) 

for decompression of neural elements, (with or without 

ligamentous resection, discectomy, facetectomy and/or 

foraminotomy), any method, under indirect image guidance (eg, 

fluoroscopic, ct), with or without the use of an endoscope, 

single or multiple levels, unilateral or bilateral; cervical or 

thoracic 

G2 

0275T 

Percutaneous laminotomy/laminectomy (interlaminar approach) 

for decompression of neural elements, (with or without 

ligamentous resection, discectomy, facetectomy and/or 

foraminotomy), any method, under indirect image guidance (eg, 

fluoroscopic, ct), with or without the use of an endoscope, 

single or multiple levels, unilateral or bilateral; lumbar 

G2 

0299T 

Extracorporeal shock wave for integumentary wound healing, 

high energy, including topical application and dressing care; 

initial wound 

R2* 

0300T Extracorporeal shock wave for integumentary wound healing, 

high energy, including topical application and dressing care R2* 

37205 

Transcatheter placement of an intravascular stent(s) (except 

coronary, carotid, vertebral, iliac, and lower extremity arteries), 

percutaneous; initial vessel 

G2 

37206 

Transcatheter placement of an intravascular stent(s) (except 

coronary, carotid, vertebral, iliac, and lower extremity arteries), 

percutaneous; each additional vessel (list separately in addition 

to code for primary procedure) 

G2 

37224 

Revascularization, endovascular, open or percutaneous, 

femoral, popliteal artery(s), unilateral; with transluminal 

angioplasty 

G2 

37225 

Revascularization, endovascular, open or percutaneous, 

femoral, popliteal artery(s), unilateral; with atherectomy, 

includes angioplasty within the same vessel, when performed 

G2 
CMS-1589-FC 801 

CY 

2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Final CY 

2013 ASC 

Payment 

Indicator**

37226 

Revascularization, endovascular, open or percutaneous, 

femoral, popliteal artery(s), unilateral; with transluminal stent 

placement(s), includes angioplasty within the same vessel, when 

performed 

G2 

37227 

Revascularization, endovascular, open or percutaneous, 

femoral, popliteal artery(s), unilateral; with transluminal stent 

placement(s) and atherectomy, includes angioplasty within the 

same vessel, when performed 

J8 

37228 

Revascularization, endovascular, open or percutaneous, tibial, 

peroneal artery, unilateral, initial vessel; with transluminal 

angioplasty 

G2 

37229 

Revascularization, endovascular, open or percutaneous, tibial, 

peroneal artery, unilateral, initial vessel; with atherectomy, 

includes angioplasty within the same vessel, when performed 

G2 

37230 

Revascularization, endovascular, open or percutaneous, tibial, 

peroneal artery, unilateral, initial vessel; with transluminal stent 

placement(s), includes angioplasty within the same vessel, when 

performed 

G2 

37231 

Revascularization, endovascular, open or percutaneous, tibial, 

peroneal artery, unilateral, initial vessel; with transluminal stent 

placement(s) and atherectomy, includes angioplasty within the 

same vessel, when performed 

J8 

37232 

Revascularization, endovascular, open or percutaneous, tibial/ 

peroneal artery, unilateral, each additional vessel; with 

transluminal angioplasty (list separately in addition to code for 

primary procedure) 

G2 

37233 

Revascularization, endovascular, open or percutaneous, tibial/ 

peroneal artery, unilateral, each additional vessel; with 

atherectomy, includes angioplasty within the same vessel, when 

performed (list separately in addition to code for primary 

procedure) 

G2 

37234 

Revascularization, endovascular, open or percutaneous, tibial/ 

peroneal artery, unilateral, each additional vessel; with 

transluminal stent placement(s), includes angioplasty within the 

same vessel, when performed (list separately in addition to code 

for primary procedure) 

G2 
CMS-1589-FC 802 

CY 

2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Final CY 

2013 ASC 

Payment 

Indicator**

37235 

Revascularization, endovascular, open or percutaneous, tibial/ 

peroneal artery, unilateral, each additional vessel; with 

transluminal stent placement(s) and atherectomy, includes 

angioplasty within the same vessel, when performed (list 

separately in addition to code for primary procedure) 

G2 

58541 Laparoscopy, surgical, supracervical hysterectomy, for uterus 

250 g or less G2 

58542 Laparoscopy, surgical, supracervical hysterectomy, for uterus 

250 g or less; with removal of tube(s) and/or ovary(s) G2 

58570 Laparoscopy, surgical, with total hysterectomy, for uterus 250 g 

or less G2 

58571 Laparoscopy, surgical, with total hysterectomy, for uterus 250 g 

or less; with removal of tube(s) and/or ovary(s) G2 

63001 

Laminectomy with exploration and/or decompression of spinal 

cord and/or cauda equina, without facetectomy, foraminotomy 

or discectomy (eg, spinal stenosis), 1 or 2 vertebral segments; 

cervical 

G2 

63003 

Laminectomy with exploration and/or decompression of spinal 

cord and/or cauda equina, without facetectomy, foraminotomy 

or discectomy (eg, spinal stenosis), 1 or 2 vertebral segments; 

thoracic 

G2 

63005 

Laminectomy with exploration and/or decompression of spinal 

cord and/or cauda equina, without facetectomy, foraminotomy 

or discectomy (eg, spinal stenosis), 1 or 2 vertebral segments; 

lumbar, except for spondylolisthesis 

G2 

*If designation is temporary. 

**Final payment indicators are based on a comparison of the final rates according to the ASC standard 

ratesetting methodology and the MPFS final rates. At the time this final rule with comment period was 

being developed for publication, current law authorizes a negative update to the MPFS payment rates for 

CY 2013. For a discussion of those rates, we refer readers to the CY 2013 MPFS final rule with comment 

period. 

b. Covered Surgical Procedures Designated as Office-Based 

(1) Background 

In the August 2, 2007 ASC final rule, we finalized our policy to designate as 

“office-based” those procedures that are added to the ASC list of covered surgical 
CMS-1589-FC 803 

procedures in CY 2008 or later years that we determine are performed predominantly 

(more than 50 percent of the time) in physicians’ offices based on consideration of the 

most recent available volume and utilization data for each individual procedure code 

and/or, if appropriate, the clinical characteristics, utilization, and volume of related codes. 

In that rule, we also finalized our policy to exempt all procedures on the CY 2007 ASC 

list from application of the office-based classification (72 FR 42512). The procedures 

that were added to the ASC list of covered surgical procedures beginning in CY 2008 that 

we determined were office-based were identified in Addendum AA to that rule by 

payment indicator “P2” (Office-based surgical procedure added to ASC list in CY 2008 

or later with MPFS nonfacility PE RVUs; payment based on OPPS relative payment 

weight); “P3” (Office-based surgical procedures added to ASC list in CY 2008 or later 

with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE RVUs); or 

“R2” (Office-based surgical procedure added to ASC list in CY 2008 or later without 

MPFS nonfacility PE RVUs; payment based on OPPS relative payment weight), 

depending on whether we estimated it would be paid according to the standard ASC 

payment methodology based on its OPPS relative payment weight or at the MPFS 

nonfacility PE RVU-based amount. 

Consistent with our final policy to annually review and update the list of surgical 

procedures eligible for payment in ASCs, each year we identify surgical procedures as 

either temporarily office-based, permanently office-based, or non-office-based, after 

taking into account updated volume and utilization data. 
CMS-1589-FC 804 

(2) Changes for CY 2013 to Covered Surgical Procedures Designated as Office-Based 

In developing the CY 2013 OPPS/ASC proposed rule, we followed our policy to 

annually review and update the surgical procedures for which ASC payment is made and 

to identify new procedures that may be appropriate for ASC payment, including their 

potential designation as office-based. We reviewed CY 2011 volume and utilization data 

and the clinical characteristics for all surgical procedures that are assigned payment 

indicator “G2” (Non-office-based surgical procedure added in CY 2008 or later; payment 

based on OPPS relative payment weight) in CY 2012, as well as for those procedures 

assigned one of the temporary office-based payment indicators, specifically “P2*,” 

“P3*,” or “R2*” in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74400 through 74408). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45163), we stated that our 

review of the CY 2011 volume and utilization data resulted in our identification of six 

covered surgical procedures that we believe meet the criteria for designation as officebased. We stated that the data indicated that the procedures are performed more than 

50 percent of the time in physicians’ offices, and that our medical advisors believed the 

services are of a level of complexity consistent with other procedures performed routinely 

in physicians’ offices. The six CPT codes we proposed to permanently designate as 

office-based were listed in Table 40 of the CY 2013 OPPS/ASC proposed rule 

(77 FR 45163), and are listed in Table 52 below. We invited public comments on this 

proposal. 
CMS-1589-FC 805 

Comment: One commenter disagreed with the policy to make payment at the 

lower of the ASC rate or the MPFS nonfacility PE RVU payment amount for procedures 

that CMS identifies as office-based. This commenter expressed concern that this policy 

does not provide adequate payment for some services performed in an ASC. 

Response: We have responded to this comment in the past and we continue to 

believe that our policy of identifying low complexity procedures that are usually provided 

in physicians’ offices and limiting their payment in ASCs to the physician’s office 

payment amount is necessary and valid. We believe this is the most appropriate approach 

to prevent payment incentives for services to move from physicians’ offices to ASCs for 

the many newly covered low complexity procedures on the ASC list. We refer readers to 

our response to this comment in the CY 2010, CY 2011, and CY 2012 OPPS/ASC final 

rules with comment period (74 FR 60605 through 60607; 75 FR 72034 through 72036; 

and 76 FR 74401, respectively). 

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

CY 2013 proposal to designate the procedures displayed in Table 52 below as 

permanently office-based for CY 2013. 
CMS-1589-FC 806 

TABLE 52.—ASC COVERED SURGICAL PROCEDURES NEWLY 

DESIGNATED AS PERMANENTLY OFFICE-BASED FOR CY 2013 

CY 2013 

CPT 

Code CY 2013 Long Descriptor 

CY 2012 

ASC 

Payment 

Indicator 

Proposed 

CY 2013 

ASC 

Payment 

Indicator* 

Final CY 

2013 ASC 

Payment 

Indicator* 

31295 

Nasal/sinus endoscopy, 

surgical; with dilation of 

maxillary sinus ostium (eg, 

balloon dilation), transnasal 

or via canine fossa 

G2 P2 P2 

31296 

Nasal/sinus endoscopy, 

surgical; with dilation of 

frontal sinus ostium (eg, 

balloon dilation) 

G2 P2 P2 

31297 

Nasal/sinus endoscopy, 

surgical; with dilation of 

sphenoid sinus ostium (eg, 

balloon dilation) 

G2 P2 P2 

53860 

Transurethral radiofrequency 

micro-remodeling of the 

female bladder neck and 

proximal urethra for stress 

urinary incontinence 

G2 P2 P2 

64566 

Posterior tibial 

neurostimulation, 

percutaneous needle 

electrode, single treatment, 

includes programming 

G2 P3 P3 

G0365 

Vessel mapping of vessels 

for hemodialysis access 

(services for preoperative 

vessel mapping prior to 

creation of hemodialysis 

access using an autogenous 

hemodialysis conduit, 

including arterial inflow and 

venous outflow) 

G2 P2 P2 
CMS-1589-FC 807 

*Final payment indicators are based on a comparison of the final rates according to the ASC standard 

ratesetting methodology and the MPFS final rates. At the time this final rule with comment period was 

being developed for publication, current law authorizes a negative update to the MPFS payment rates for 

CY 2013. For a discussion of those rates, we refer readers to the CY 2013 MPFS final rule with comment 

period.

We also reviewed CY 2011 volume and utilization data and other information for 

the eight procedures finalized for temporary office-based status in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74404 through 74408). Among these 

eight procedures, there were very few claims data for six procedures: CPT code 0099T 

(Implantation of intrastromal corneal ring segments); CPT code 0124T (Conjunctival 

incision with posterior extrascleral placement of pharmacological agent (does not include 

supply of medication)); CPT code 0226T (Anoscopy, high resolution (HRA) (with 

magnification and chemical agent enhancement); diagnostic, including collection of 

specimen(s) by brushing or washing when performed); CPT code 0227T (Anoscopy, high 

resolution (HRA) (with magnification and chemical agent enhancement); with 

biopsy(ies)); CPT code C9800 (Dermal injection procedure(s) for facial lipodystrophy 

syndrome (LDS) and provision of Radiesse or Sculptra dermal filler, including all items 

and supplies); and CPT code 67229 (Treatment of extensive or progressive retinopathy, 

one or more sessions; preterm infant (less than 37 weeks gestation at birth), performed 

from birth up to 1 year of age (eg, retinopathy of prematurity), photocoagulation or 

cryotherapy). Consequently, we proposed in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45163) to maintain their temporary office-based designations for CY 2013. 

The volume and utilization data for the remaining two procedures that have 

temporary office-based designations for CY 2012 are sufficient to indicate that these 

procedures are not performed predominantly in physicians’ offices and, therefore, should 
CMS-1589-FC 808 

not be assigned an office-based payment indicator in CY 2013. Consequently, we 

proposed to assign payment indicator “G2” to the following two covered surgical 

procedure codes in CY 2013: 

● CPT code 37761 (Ligation of perforator vein(s), subfascial, open, including 

ultrasound guidance, when performed, 1 leg); and 

● CPT code 0232T (Injection(s), platelet rich plasma, any tissue, including image 

guidance, harvesting and preparation when performed). 

The proposed CY 2013 payment indicator designations for the eight procedures 

that were temporarily designated as office-based in CY 2012 were displayed in Table 41 

of the CY 2013 OPPS/ASC proposed rule (77 FR 45164). The procedures for which the 

proposed office-based designations for CY 2013 are temporary also were indicated by 

asterisks in Addendum AA to the proposed rule (which was available via the Internet on 

the CMS Web site). We invited public comments on this proposal. 

We did not receive any public comments that addressed our proposal to continue 

to designate six of the eight procedures, which were designated as temporarily 

office-based for CY 2012, as temporarily office-based for CY 2013. Therefore, we are 

finalizing our proposal to designate the six procedures listed in Table 41 of the CY 2013 

OPPS/ASC proposed rule (77 FR 45164) and restated in Table 53 below, which were 

designated as temporarily office-based for CY 2012, as temporarily office-based for 

CY 2013. In addition, we did not receive any public comments that addressed our 

proposal to not designate as office-based in CY 2013 the two remaining procedures that 

were designated as temporarily office-based for CY 2012. Therefore, we are finalizing 
CMS-1589-FC 809 

our proposal to not provide an office-based designation to the 2 procedures listed in Table 

41 of the CY 2013 OPPS/ASC proposed rule (77 FR 45164), and restated below in Table 

53, which were designated as temporarily office-based for CY 2012. 
CMS-1589-FC 810 

TABLE 53.—CY 2013 PAYMENT INDICATORS FOR ASC COVERED 

SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY OFFICEBASED IN THE CY 2012 OPPS/ASC FINAL RULE WITH COMMENT PERIOD 

CY 

2013 

CPT 

Code CY 2013 Long Descriptor 

CY 2012 

ASC 

Payment 

Indicator 

CY 2013 

ASC 

Payment 

Indicator**

37761 

Ligation of perforator vein(s), subfascial, open, 

including ultrasound guidance, when performed, 

1 leg 

R2* G2 

67229 

Treatment of extensive or progressive 

retinopathy, one or more sessions; preterm infant 

(less than 37 weeks gestation at birth), performed 

from birth up to 1 year of age (eg, retinopathy of 

prematurity), photocoagulation or cryotherapy 

R2* R2* 

0099T Implantation of intrastromal corneal ring 

segments R2* R2* 

0124T 

Conjunctival incision with posterior extrascleral 

placement of pharmacological agent (does not 

include supply of medication) 

R2* R2* 

0226T 

Anoscopy, high resolution (HRA) (with 

magnification and chemical agent enhancement); 

diagnostic, including collection of specimen(s) by 

brushing or washing when performed 

R2* R2* 

0227T 

Anoscopy, high resolution (HRA) (with 

magnification and chemical agent enhancement); 

with biopsy(ies) 

R2* R2* 

0232T 

Injection(s), platelet rich plasma, any tissue, 

including image guidance, harvesting and 

preparation when performed 

R2* G2 

C9800 

Dermal injection procedure(s) for facial 

lipodystrophy syndrome (LDS) and provision of 

Radiesse or Sculptra dermal filler, including all 

items and supplies 

R2* R2* 

* If designation is temporary. 

** Final payment indicators are based on a comparison of the final rates according to the ASC standard 

ratesetting methodology and the MPFS final rates. At the time this final rule with comment period was 

being developed for publication, current law authorizes a negative update to the MPFS payment rates for 

CY 2013. For a discussion of those rates, we refer readers to the CY 2013 MPFS final rule with comment 

period. 
CMS-1589-FC 811 

c. ASC Covered Surgical Procedures Designated as Device-Intensive 

(1) Background 

As discussed in the August 2, 2007 final rule (72 FR 42503 through 42508), we 

adopted a modified payment methodology for calculating the ASC payment rates for 

covered surgical procedures that are assigned to the subset of OPPS device-dependent 

APCs with a device offset percentage greater than 50 percent of the APC cost under the 

OPPS, in order to ensure that payment for the procedure is adequate to provide packaged 

payment for the high-cost implantable devices used in those procedures. 

(2) Changes to List of Covered Surgical Procedures Designated as Device-Intensive for 

CY 2013 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45164), we proposed for 

CY 2013 to update the ASC list of covered surgical procedures that are eligible for 

payment according to our device-intensive procedure payment methodology, consistent 

with the proposed OPPS device-dependent APC update, reflecting the proposed APC 

assignments of procedures, designation of APCs as device-dependent, and APC device 

offset percentages based on the CY 2011 OPPS claims and cost report data available for 

the proposed rule. The OPPS device-dependent APCs are discussed further in section 

II.A.2.d.(1) of this final rule with comment period. 

The ASC covered surgical procedures that we proposed to designate as 

device-intensive and that would be subject to the device-intensive procedure payment 

methodology for CY 2013 were listed in Table 42 of the CY 2013 OPPS/ASC proposed 

rule (77 FR 45165 through 45166). The CPT code, the CPT code short descriptor, the 
CMS-1589-FC 812 

proposed CY 2013 ASC payment indicator (PI), the proposed CY 2013 OPPS APC 

assignment, the proposed CY 2013 OPPS APC device offset percentage, and an 

indication if the full credit/partial credit (FB/FC) device adjustment policy would apply 

were also listed in Table 42 of the proposed rule. All of these procedures were included 

in Addendum AA to the proposed rule (which was available via the Internet on the CMS 

Web site). We invited public comments on this proposal. 

Comment: Some commenters expressed the same general concerns made in 

previous rulemakings regarding the sufficiency of ASC payment for device-related 

services and recommended modifications to the ASC device-intensive payment 

methodology. The commenters argued that CMS should apply the device-intensive 

payment methodology to all procedures for which CMS can establish a median device 

cost, regardless of whether the procedures are assigned to APCs that are designated as 

device-dependent under the OPPS. In a related suggestion, the commenters urged CMS 

to establish the threshold used to determine device-intensive procedures at 50 percent of 

the “unadjusted” ASC payment rate (OPPS relative weight X ASC conversion factor) 

instead of the OPPS payment rate. The commenters also made the same argument as 

made in prior rulemakings--that CMS should not adjust the device portion of the ASC 

payment for device-intensive procedures by the wage index. 

Response: In the August 2, 2007 final rule (72 FR 42504), we established that the 

modified payment methodology for calculating ASC payment rates for device-intensive 

procedures shall apply to ASC covered surgical procedures that are assigned to 

device-dependent APCs under the OPPS for the same calendar year, where those APCs 
CMS-1589-FC 813 

have a device cost of greater than 50 percent of the APC cost (that is, the device offset 

percentage is greater than 50). We continue to believe these criteria ensure that ASC 

payment rates are adequate to provide packaged payment for high cost implantable 

devices and ensure Medicare beneficiaries have access to these procedures in all 

appropriate settings of care. 

We do not agree with the commenters that the device-intensive methodology 

should be applied to all procedures where a device offset can be established, regardless of 

whether the procedure is assigned to a device-dependent APC under the OPPS. Nor do 

we agree with the commenters who suggest using a threshold to determine deviceintensive procedures that is based on 50 percent of the ASC payment rate instead of the 

OPPS payment rate. We continue to believe that when device costs comprise less than 50 

percent of total procedure costs, those costs are less likely to be as predictable across 

sites-of-service. Accordingly, we believe that it is possible for ASCs to achieve 

efficiencies relative to HOPDs when providing those procedures, and that the application 

of the ASC conversion factor to the entire ASC payment weight is appropriate. We refer 

readers to our response to this comment in the CY 2010, CY 2011, and CY 2012 

OPPS/ASC final rules with comment period (74 FR 60608 and 60609; 75 FR 72039; and 

76 FR 74409, respectively). 

We also continue to believe it would not be appropriate to vary the portion of the 

national payment that is wage-adjusted for different services, such as applying the wage 

index only to the service portion of the ASC payment for device-intensive procedures, as 

the commenters requested. Consistent with the OPPS, we apply the ASC geographic 
CMS-1589-FC 814 

wage adjustment to the entire ASC payment rate for device-intensive procedures. We 

refer readers to our response to this comment in the CY 2009, CY 2010, CY 2011, and 

CY 2012 OPPS/ASC final rules with comment period (73 FR 68735; 74 FR 60608 

through 60609; 75 FR 72039; and 76 FR 74409, respectively). 

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

ASC covered surgical procedures displayed in Table 54 below as device-intensive for 

CY 2013. The CPT code, the CPT code short descriptor, the final CY 2013 ASC 

payment indicator (PI), the final CY 2013 OPPS APC assignment, the final CY 2013 

OPPS APC device offset percentage, and an indication if the full credit/partial credit 

(FB/FC) device adjustment policy will apply are also listed in Table 54 of this final rule 

with comment period. As we discuss in section XIII.B.3. of the CY 2013 OPPS/ASC 

proposed rule (77 FR 45161 through 45162) and this final rule with comment period, we 

incorporate new Category I and Category III CPT codes and new Level II HCPCS codes 

that are effective October 1, 2012 and January 1, 2013 in this final rule with comment 

period. Because these codes were not available to us until after the CY 2013 OPPS/ASC 

proposed rule was published, these codes were not included in that rule. We have 

reviewed these new codes and have added six of these CPT codes to Table 54 because 

they are ASC covered surgical procedures and are assigned to device-dependent APCs 

that meet the ASC device-intensive criteria. Specifically, we added the following new 

codes to the list of ASC device-intensive procedures: CPT code 0316T (Vagus nerve 

blocking therapy (morbid obesity); replacement of pulse generator); CPT code 0319T 

(Insertion or replacement of subcutaneous implantable defibrillator system with 
CMS-1589-FC 815 

subcutaneous electrode); CPT code 0321T (Insertion of subcutaneous implantable 

defibrillator pulse generator only with existing subcutaneous electrode); CPT code 0323T 

(Removal of subcutaneous implantable defibrillator pulse generator with replacement of 

subcutenous implantable defibrillator pulse generator only); CPT code 24370 (Revision 

of total elbow arthroplasty, including allograft when performed; humeral or ulnar 

component); and CPT code 24371 (Revision of total elbow arthroplasty, including 

allograft when performed; humeral and ulnar component). These new device-intensive 

procedures are flagged with comment indicator “NI” in Addendum AA to this 

OPPS/ASC final rule with comment period to indicate that we are assigning them an 

interim payment status which is subject to public comment. We will respond to any 

public comments received in the CY 2014 OPPS/ASC final rule with comment period. 

Each device-intensive procedure is assigned payment indicator “J8.” All of these 

procedures are included in Addendum AA to this final rule with comment period (which 

is available via the Internet on the CMS Web site). The OPPS device-dependent APCs 

are discussed further in section II.A.2.d.(1) of this final rule with comment period. 

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

We generally discuss the no cost/full credit and partial credit devices under the 

heading entitled “ASC Payment for Covered Surgical Procedures.” However, because 

the no cost/full credit and partial credit device policy applies to a subset of deviceintensive procedures, we believe it would be clearer to discuss the device-intensive 

procedure policy and the no cost/full credit and partial credit device policy consecutively 

and to consolidate the tables that we usually publish separately. Our ASC policy with 
CMS-1589-FC 816 

regard to payment for costly devices implanted in ASCs at no cost/full credit or partial 

credit as set forth in § 416.179 is consistent with the OPPS policy. The proposed and 

final CY 2013 OPPS APCs and devices subject to the adjustment policy are discussed in 

section IV.B.2. of this final rule with comment period. The established ASC policy 

adopts the OPPS policy and reduces payment to ASCs when a specified device is 

furnished without cost or with full credit or partial credit for the cost of the device for 

those ASC covered surgical procedures that are assigned to APCs under the OPPS to 

which this policy applies. We refer readers to the CY 2009 OPPS/ASC final rule with 

comment period for a full discussion of the ASC payment adjustment policy for no 

cost/full credit and partial credit devices (73 FR 68742 through 68744). 

Consistent with the OPPS, in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45165), we proposed to update the list of ASC covered device-intensive 

procedures and devices that would be subject to the no cost/full credit and partial credit 

device adjustment policy for CY 2013. Table 42 of the proposed rule (77 FR 45165 

through 45166) displayed the ASC covered device-intensive procedures that we proposed 

would be subject to the no cost/full credit or partial credit device adjustment policy for 

CY 2013. Specifically, we stated that when a procedure that is listed in Table 42 of the 

proposed rule is subject to the no cost/full credit or partial credit device adjustment policy 

and is performed to implant a device that is listed in Table 43 of the proposed rule 

(77 FR 45166 through 45167), where that device is furnished at no cost or with full credit 

from the manufacturer, the ASC would append the HCPCS “FB” modifier on the line 

with the procedure to implant the device. The contractor would reduce payment to the 
CMS-1589-FC 817 

ASC by the device offset amount that we estimate represents the cost of the device when 

the necessary device is furnished without cost to the ASC or with full credit. We would 

provide the same amount of payment reduction based on the device offset amount in 

ASCs that would apply under the OPPS under the same circumstances. We continue to 

believe that the reduction of ASC payment in these circumstances is necessary to pay 

appropriately for the covered surgical procedure being furnished by the ASC. 

For partial credit, we proposed to reduce the payment for implantation procedures 

listed in Table 42 of the proposed rule that are subject to the no cost/full credit or partial 

credit device adjustment policy by one-half of the device offset amount that would be 

applied if a device was provided at no cost or with full credit, if the credit to the ASC is 

50 percent or more of the cost of the new device. The ASC would append the HCPCS 

“FC” modifier to the HCPCS code for a surgical procedure listed in Table 42 of the 

proposed rule 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 listed in Table 43 of the proposed rule. In order to report that they received a 

partial credit of 50 percent or more of the cost of a new device, ASCs would have the 

option of either: (1) submitting the claim for the device replacement procedure to their 

Medicare contractor after the procedure’s performance but prior to manufacturer 

acknowledgment of credit for the device, and subsequently contacting the contractor 

regarding a claim adjustment once the credit determination is made; or (2) holding the 

claim for the device implantation procedure until a determination is made by the 

manufacturer on the partial credit and submitting the claim with the “FC” modifier 
CMS-1589-FC 818 

appended to the implantation procedure HCPCS code if the partial credit is 50 percent or 

more of the cost of the replacement device. Beneficiary coinsurance would continue to 

be based on the reduced payment amount. We invited public comments on these 

proposals 

We did not receive any comments on our CY 2013 proposal to continue the no 

cost/full credit and partial credit device adjustment policy for ASCs. For CY 2013, as we 

proposed, we will reduce the payment for the device implantation procedures listed in 

Table 54 below that are subject to the adjustment by the full device offset amount for no 

cost/full credit cases. ASCs must append the modifier “FB” to the HCPCS procedure 

code when the device furnished without cost or with full credit is listed in Table 55, 

below, and the associated implantation procedure code is listed in Table 54. In addition, 

for CY 2013, we will reduce the payment for implantation procedures listed in Table 54 

that are subject to the adjustment by one half of the device offset amount if a device is 

provided with partial credit, if the credit to the ASC is 50 percent or more of the device 

cost. If the ASC receives a partial credit of 50 percent or more of the cost of a device 

listed in Table 55, the ASC must append the modifier “FC” to the associated implantation 

procedure code if the procedure is listed in Table 54. 

TABLE 54.—ASC COVERED SURGICAL PROCEDURES DESIGNATED AS 

DEVICE-INTENSIVE FOR CY 2013, INCLUDING ASC COVERED SURGICAL 

PROCEDURES FOR WHICH THE NO COST/FULL CREDIT OR PARTIAL 

CREDIT DEVICE ADJUSTMENT POLICY WILL APPLY
CMS-1589-FC 819 

CPT 

Code Short Descriptor 

Final 

CY 2013 

ASC PI 

Final 

CY 2013 

OPPS 

APC 

Final 

CY 2013 

DeviceDependent 

APC 

Offset 

Percent 

FB/FC 

Policy Will 

Apply 

0282T Periph field stimul trial J8 0040 56% Yes 

0283T Periph field stimul perm J8 0318 89% Yes 

0302T Icar ischm mntrng sys compl J8 0089 69% Yes 

0304T Icar isch mntrng sys device J8 0090 71% Yes 

0316T Replc vagus nerve pls gen J8 0039 87% Yes 

0319T Insert subq defib w/eltrd J8 0107 84% Yes 

0321T Insert subq defib pls gen J8 0107 84% Yes 

0323T Rmvl & replc subq pls gen J8 0107 84% Yes 

19296 Place po breast cath for rad J8 0648 50% Yes 

19297 Place breast cath for rad J8 0648 50% Yes 

19298 Place breast rad tube/caths J8 0648 50% Yes 

19325 Enlarge breast with implant J8 0648 50% Yes 

19342 Delayed breast prosthesis J8 0648 50% Yes 

19357 Breast reconstruction J8 0648 50% Yes 

24361 Reconstruct elbow joint J8 0425 59% Yes 

24363 Replace elbow joint J8 0425 59% Yes 

24366 Reconstruct head of radius J8 0425 59% Yes 

24370 Revise reconst elbow joint J8 0425 59% Yes 

24371 Revise reconst elbow joint J8 0425 59% Yes 

25441 Reconstruct wrist joint J8 0425 59% Yes 

25442 Reconstruct wrist joint J8 0425 59% Yes 

25446 Wrist replacement J8 0425 59% Yes 

27446 Revision of knee joint J8 0425 59% Yes 

33206 Insertion of heart pacemaker J8 0089 69% Yes 

33207 Insertion of heart pacemaker J8 0089 69% Yes 

33208 Insertion of heart pacemaker J8 0655 73% Yes 

33212 Insertion of pulse generator J8 0090 71% Yes 

33213 Insertion of pulse generator J8 0654 74% Yes 

33214 Upgrade of pacemaker system J8 0655 73% Yes 
CMS-1589-FC 820 

CPT 

Code Short Descriptor 

Final 

CY 2013 

ASC PI 

Final 

CY 2013 

OPPS 

APC 

Final 

CY 2013 

DeviceDependent 

APC 

Offset 

Percent 

FB/FC 

Policy Will 

Apply 

33221 Insert pulse gen mult leads J8 0654 74% Yes 

33224 Insert pacing lead & connect J8 0655 73% Yes 

33225 Lventric pacing lead add-on J8 0655 73% Yes 

33227 Remove&replace pm gen singl J8 0090 71% Yes 

33228 Remv&replc pm gen dual lead J8 0654 74% Yes 

33229 Remv&replc pm gen mult leads J8 0654 74% Yes 

33230 Insrt pulse gen w/dual leads J8 0107 84% Yes 

33231 Insrt pulse gen w/dual leads J8 0107 84% Yes 

33240 Insert pulse generator J8 0107 84% Yes 

33249 Eltrd/insert pace-defib J8 0108 84% Yes 

33262 Remv&replc cvd gen sing lead J8 0107 84% Yes 

33263 Remv&replc cvd gen dual lead J8 0107 84% Yes 

33264 Remv&replc cvd gen mult lead J8 0107 84% Yes 

33282 Implant pat-active ht record J8 0680 74% Yes 

37227 Fem/popl revasc stnt & ather J8 0319 53% No 

37231 Tib/per revasc stent & ather J8 0319 53% No 

53440 Male sling procedure J8 0385 62% Yes 

53444 Insert tandem cuff J8 0385 62% Yes 

53445 Insert uro/ves nck sphincter J8 0386 70% Yes 

53447 Remove/replace ur sphincter J8 0386 70% Yes 

54400 Insert semi-rigid prosthesis J8 0385 62% Yes 

54401 Insert self-contd prosthesis J8 0386 70% Yes 

54405 Insert multi-comp penis pros J8 0386 70% Yes 

54410 Remove/replace penis prosth J8 0386 70% Yes 

54416 Remv/repl penis contain pros J8 0386 70% Yes 

55873 Cryoablate prostate J8 0674 55% No 

61885 Insrt/redo neurostim 1 array J8 0039 87% Yes 

61886 Implant neurostim arrays J8 0315 88% Yes 

62361 Implant spine infusion pump J8 0227 82% Yes 

62362 Implant spine infusion pump J8 0227 82% Yes 
CMS-1589-FC 821 

CPT 

Code Short Descriptor 

Final 

CY 2013 

ASC PI 

Final 

CY 2013 

OPPS 

APC 

Final 

CY 2013 

DeviceDependent 

APC 

Offset 

Percent 

FB/FC 

Policy Will 

Apply 

63650 Implant neuro-electrodes J8 0040 56% Yes 

63655 Implant neuro-electrodes J8 0061 69% Yes 

63663 Revise spine eltrd perq aray J8 0040 56% Yes 

63664 Revise spine eltrd plate J8 0040 56% Yes 

63685 Insrt/redo spine n generator J8 0039 87% Yes 

64553 Implant neuro-electrodes J8 0040 56% Yes 

64555 Implant neuro-electrodes J8 0040 56% Yes 

64561 Implant neuro-electrodes J8 0040 56% Yes 

64565 Implant neuro-electrodes J8 0040 56% Yes 

64568 Implant neuro-electrodes J8 0318 89% Yes 

64569 Revise/repl vagus n eltrd J8 0040 56% Yes 

64575 Implant neuro-electrodes J8 0061 69% Yes 

64580 Implant neuro-electrodes J8 0061 69% Yes 

64581 Implant neuro-electrodes J8 0061 69% Yes 

64590 Insrt/redo pn/gastr stimul J8 0039 87% Yes 

65770 Revise cornea with implant J8 0293 63% No 

69714 Implant temple bone w/stimul J8 0425 59% Yes 

69715 Temple bne implnt w/stimulat J8 0425 59% Yes 

69717 Temple bone implant revision J8 0425 59% Yes 

69718 Revise temple bone implant J8 0425 59% Yes 

69930 Implant cochlear device J8 0259 84% Yes 

G0448 Place perm pacing cardiovert J8 0108 84% Yes 
CMS-1589-FC 822 

TABLE 55.—DEVICES FOR WHICH THE “FB” OR “FC” MODIFIER 

MUST BE REPORTED WITH THE PROCEDURE CODE IN CY 2013 WHEN 

FURNISHED AT NO COST OR WITH FULL OR PARTIAL CREDIT

CY 2013 

Device HCPCS 

Code CY 2013 Short Descriptor 

C1721 AICD, dual chamber 

C1722 AICD, single chamber 

C1728 Cath, brachytx seed adm 

C1762 Conn tiss, human(inc fascia) 

C1763 Conn tiss, non-human 

C1764 Event recorder, cardiac 

C1767 Generator, neurostim, imp 

C1771 Rep dev, urinary, w/sling 

C1772 Infusion pump, programmable 

C1776 Joint device (implantable) 

C1777 Stent, non-coat/cov w/o del 

C1778 Lead, neurostimulator 

C1779 Lead, pmkr, transvenous VDD 

C1781 Mesh (implantable) 

C1785 Pmkr, dual, rate-resp 

C1786 Pmkr, single, rate-resp 

C1789 Prosthesis, breast, imp 

C1813 Prosthesis, penile, inflatab 

C1815 Pros, urinary sph, imp 

C1820 Generator, neuro rechg bat sys 

C1881 Dialysis access system 

C1882 AICD, other than sing/dual 

C1891 Infusion pump, non-prog, perm 

C1895 Lead, AICD, endo dual coil 

C1897 Lead, neurostim, test kit 

C1898 Lead, pmkr, other than trans 

C1900 Lead coronary venous 

C2618 Probe, cryoablation 

C2619 Pmkr, dual, non rate-resp 

C2620 Pmkr, single, non rate-resp 

C2621 Pmkr, other than sing/dual 

C2622 Prosthesis, penile, non-inf 

C2626 Infusion pump, non-prog, temp 

C2631 Rep dev, urinary, w/o sling 

L8600 Implant breast silicone/eq 
CMS-1589-FC 823 

CY 2013 

Device HCPCS 

Code CY 2013 Short Descriptor 

L8614 Cochlear device/system 

L8680 Implt neurostim elctr each 

L8685 Implt nrostm pls gen sng rec 

L8686 Implt nrostm pls gen sng non 

L8687 Implt nrostm pls gen dua rec 

L8688 Implt nrostm pls gen dua non 

L8690 Aud osseo dev, int/ext comp 

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

CY 2013 

As we discussed in the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68724), we adopted a policy to include in our annual evaluation of the ASC list of 

covered surgical procedures, a review of the procedures that are being proposed for 

removal from the OPPS inpatient list for possible inclusion on the ASC list of covered 

surgical procedures. As stated in the CY 2013 OPPS/ASC proposed rule (77 FR 45167), 

we evaluated each of the two procedures we proposed to remove from the OPPS inpatient 

list for CY 2013 based on the criteria for exclusion from the list of covered ASC surgical 

procedures. As stated in the proposed rule, we believe that these two procedures should 

continue to be excluded from the ASC list of covered surgical procedures for CY 2013 

because they would be expected to pose a significant risk to beneficiary safety or to 

require an overnight stay in ASCs. The CPT codes for these two procedures and their 

long descriptors were listed in Table 44 of the proposed rule (77 FR 45167). We invited 

public comments on this proposal. 
CMS-1589-FC 824 

We did not receive any public comments regarding the procedures that we 

proposed to exclude from the list of ASC covered procedures for CY 2013 that were 

proposed for removal from the CY 2013 OPPS inpatient list. However, as detailed in 

section IX of this final rule with comment period, the proposal to remove the procedure 

described by CPT code 27447 (Arthroplasty, knee, condyle and plateau; medical and 

lateral compartments with or without patella resurfacing (total knee arthroplasty)) from 

the OPPS inpatient list is not being finalized for CY 2013. Based on public comments 

received, CPT code 27447 will remain on the OPPS inpatient list for CY 2013. 

Therefore, we are finalizing our proposal to continue to exclude the procedure described 

by the CPT code 22856, which is listed in Table 56 below, from the list of ASC covered 

surgical procedures for CY 2013. In addition, we are excluding CPT code 27447 because 

it will remain on the OPPS inpatient list for CY 2013. 

TABLE 56.—PROCEDURE EXCLUDED FROM THE ASC LIST OF COVERED 

PROCEDURES FOR CY 2013 THAT WAS REMOVED FROM THE CY 2013 

OPPS INPATIENT LIST

CPT Code Long Descriptor 

22856 

Total disc arthroplasty (artificial disc), anterior approach, 

including discectomy with end plate preparation (includes 

osteophytectomy for nerve root or spinal cord decompression 

and microdissection), single interspace, cervical 

2. Covered Ancillary Services 

Consistent with the established ASC payment system policy, in the CY 2013 

OPPS/ASC proposed rule (77 FR 45167), we proposed to update the ASC list of covered 

ancillary services to reflect the proposed payment status for the services under the 

CY 2013 OPPS. Maintaining consistency with the OPPS may result in proposed changes 
CMS-1589-FC 825 

to ASC payment indicators for some covered ancillary items and services because of 

changes that are being proposed under the OPPS for CY 2013. For example, a covered 

ancillary service that was separately paid under the revised ASC payment system in 

CY 2012 may be proposed for packaged status under the CY 2013 OPPS and, therefore, 

also under the ASC payment system for CY 2013. Comment indicator “CH,” discussed 

in section XIV.F. of the CY 2013 OPPS/ASC proposed rule (77 FR 45172), was used in 

Addendum BB to that proposed rule (which is available via the Internet on the CMS Web 

site) to indicate covered ancillary services for which we proposed a change in the ASC 

payment indicator to reflect a proposed change in the OPPS treatment of the service for 

CY 2013. 

Except for the Level II HCPCS codes listed in Table 37 of the CY 2013 

OPPS/ASC proposed rule (77 FR 45161), all ASC covered ancillary services and their 

proposed payment indicators for CY 2013 were included in Addendum BB to that 

proposed rule. 

We did not receive any public comments on our proposal. Therefore, we are 

finalizing, without modification, our proposal to update the ASC list of covered ancillary 

services to reflect the payment status for the services under the OPPS. All CY 2013 ASC 

covered ancillary services and their final payment indicators are included in Addendum 

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

Web site). 

D. ASC Payment for Covered Surgical Procedures and Covered Ancillary Services
CMS-1589-FC 826 

1. Payment for Covered Surgical Procedures 

a. Background 

Our ASC payment policies for covered surgical procedures under the revised 

ASC payment system are fully described in the CY 2008 OPPS/ASC final rule with 

comment period (72 FR 66828 through 66831). Under our established policy for the 

revised ASC payment system, the ASC standard ratesetting methodology of multiplying 

the ASC relative payment weight for the procedure by the ASC conversion factor for that 

same year is used to calculate the national unadjusted payment rates for procedures with 

payment indicators “G2” and “A2.” Payment indicator “A2” was developed to identify 

procedures that were included on the list of ASC covered surgical procedures in CY 2007 

and were, therefore, subject to transitional payment prior to CY 2011. Although the 

4-year transitional period has ended and payment indicator “A2” is no longer required to 

identify surgical procedures subject to transitional payment, we retained payment 

indicator “A2” because it is used to identify procedures that are exempted from 

application of the office-based designation. 

The rate calculation established for device-intensive procedures (payment 

indicator “J8”) is structured so that the packaged device payment amount is the same as 

under the OPPS, and only the service portion of the rate is subject to the ASC standard 

ratesetting methodology. In the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74377 through 74451), we updated the CY 2011 ASC payment rates for ASC 

covered surgical procedures with payment indicators of “A2,” “G2,” and “J8” using 

CY 2010 data, consistent with the CY 2012 OPPS update. Payment rates for 
CMS-1589-FC 827 

device-intensive procedures also were updated to incorporate the CY 2012 OPPS device 

offset percentages. 

Payment rates for office-based procedures (payment indicators “P2,” “P3,” and 

“R2”) are the lower of the MPFS nonfacility PE RVU-based amount (we refer readers to 

the CY 2013 MPFS final rule with comment period) or the amount calculated using the 

ASC standard ratesetting methodology for the procedure. In the CY 2012 OPPS/ASC 

final rule with comment period, we updated the payment amounts for office-based 

procedures (payment indicators “P2,” “P3,” and “R2”) using the most recent available 

MPFS and OPPS data. We compared the estimated CY 2012 rate for each of the officebased procedures, calculated according to the ASC standard ratesetting methodology, to 

the MPFS nonfacility PE RVU-based amount to determine which was lower and, 

therefore, would be the CY 2012 payment rate for the procedure according to the final 

policy of the revised ASC payment system (§ 416.171(d)). 

b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2013 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45168), we proposed to update 

ASC payment rates for CY 2013 using the established rate calculation methodologies 

under § 416.171. We note that, as discussed in section II.A.2.f. of that proposed rule 

(77 FR 45094 through 45098), because we proposed to base the OPPS relative payment 

weights on geometric mean costs for CY 2013, the ASC system would shift to the use of 

geometric means to determine relative payment weights under the ASC standard 

ratesetting methodology. We proposed to continue to use the amount calculated under 
CMS-1589-FC 828 

the ASC standard ratesetting methodology for procedures assigned payment indicators 

“A2” and “G2.” 

We proposed that payment rates for office-based procedures (payment indicators 

“P2,” “P3,” and “R2”) and device-intensive procedures (payment indicator “J8”) be 

calculated according to our established policies, incorporating the device-intensive 

procedure methodology as appropriate. Thus, we proposed to update the payment 

amounts for device-intensive procedures based on the CY 2013 OPPS proposal that 

reflects updated proposed OPPS device offset percentages, and to make payment for 

office-based procedures at the lesser of the proposed CY 2013 MPFS nonfacility 

PE RVU-based amount or the proposed CY 2013 ASC payment amount calculated 

according to the standard ratesetting methodology. We invited public comments on these 

proposals. 

We did not receive any public comments on our proposal to calculate CY 2013 

payment rates for ASC-covered surgical procedures according to our established 

methodologies. Therefore, we are finalizing our CY 2013 proposal, without 

modification, to calculate the CY 2013 final ASC payment rates for ASC-covered 

surgical procedures according to our established methodologies. 

c. Waiver of Coinsurance and Deductible for Certain Preventive Services 

As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45168), section 

1833(a)(1) and section 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 the Act (excluding electrocardiograms) that are 
CMS-1589-FC 829 

recommended by the United States Preventive Services Task Force (USPSTF) with a 

grade of A or B for any indication or population and that are appropriate for the 

individual. Section 1833(b) of the Act also waives the Part B deductible for colorectal 

cancer screening tests that become diagnostic. In the CY 2011 OPPS/ASC final rule with 

comment period, we finalized our policies with respect to these provisions and identified 

the ASC covered surgical procedures and covered ancillary services that are preventive 

services that are recommended by the USPSTF with a grade of A or B for which the 

coinsurance and the deductible are waived. For a complete discussion of our policies and 

identified services, we refer readers to the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 72047 through 72049). We did not propose any changes to our policies or 

the categories of services in the CY 2013 OPPS/ASC proposed rule. We identify the 

specific services with a double asterisk in Addenda AA and BB to this CY 2013 

OPPS/ASC final rule with comment period. 

d. Payment for the Cardiac Resynchronization Therapy Composite 

Cardiac resynchronization therapy (CRT) uses electronic devices to sequentially 

pace both sides of the heart to improve its output. CRT utilizes a pacing electrode 

implanted in combination with either a pacemaker or an implantable cardioverter 

defibrillator (ICD). CRT performed by the implantation of an ICD along with a pacing 

electrode is referred to as “CRT–D.” 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 and 33249 are performed on the same date of 
CMS-1589-FC 830 

service in an ASC. ASCs use the corresponding HCPCS Level II G-code (G0448) for 

proper reporting when the procedures described by CPT codes 33225 and 33249 are 

performed on the same date of service. For a complete discussion of our policy regarding 

payment for CRT-D services in ASCs, we refer readers to the CY 2012 OPPS/ASC final 

rule with comment period (76 FR 74427 through 74428). We did not propose any 

changes to our current policy regarding ASC payment for CRT-D services for CY 2013. 

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

LDR prostate brachytherapy is a treatment for prostate cancer in which hollow 

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

radioactive sources into the prostate through the needles/catheters. At least two CPT 

codes are used to report the treatment service because there are separate codes that 

describe placement of the needles/catheters and the application of the brachytherapy 

sources: CPT code 55875 (Transperineal placement of needles or catheters into prostate 

for interstitial radioelement application, with or without cystoscopy) and CPT code 77778 

(Interstitial radiation source application; complex). Generally, the component services 

represented by both codes are provided in the same operative session on the same date of 

services to the Medicare beneficiary being treated with LDR brachytherapy for prostate 

cancer. 

As detailed in section II.A.2.e.(2) of the CY 2013 OPPS/ASC proposed rule 

(77 FR 45088 through 45089), in CY 2008 under the OPPS, we began providing a single 

payment for LDR prostate brachytherapy when the composite service, reported as CPT 

codes 55875 and 77778, is furnished in a single hospital encounter. We based the 
CMS-1589-FC 831 

payment for composite APC 8001 (LDR Prostate Brachytherapy Composite) on the cost 

derived from claims for the same date of service that contain both CPT codes 55875 and 

77778 and that do not contain other separately paid codes that are not on the bypass list. 

We implemented this policy in the OPPS because reliance on single procedure claims to 

set payment rates for these services resulted in the use of mainly incorrectly coded claims 

for LDR prostate brachytherapy because a correctly coded claim should include, for the 

same date of service, CPT codes for both needle/catheter placement and application of 

radiation sources, as well as separately coded imaging and radiation therapy planning 

services (72 FR 66652 through 66655). 

Currently under the ASC payment system, ASCs receive separate payment for the 

component services that comprise the LDR Prostate Brachytherapy Composite when the 

two services are provided on the same date of service. Specifically, ASCs that report 

CPT codes 55875 and 77778 on the same date of service receive a payment for CPT code 

55875 where the payment rate is based on the OPPS relative payment weight for single 

procedure claims, and a separate payment for CPT code 77778 where payment is the 

lower of the rate based on the OPPS relative payment weight for single procedure claims 

or the MPFS nonfacility PE-RVU based amount. 

A commenter to the CY 2012 OPPS/ASC proposed rule (76 FR 74429 through 

74430) requested that CMS pay for LDR prostate brachytherapy services under the ASC 

payment system based on the composite OPPS payment rate rather than making two 

separate payments for the service reported by CPT codes 55875 and 77778. The 

commenter asserted that basing ASC payments for the services on the composite APC 
CMS-1589-FC 832 

methodology in which one payment is made for the combination of the two services 

would result in a more accurate payment than is currently being made to ASCs because 

ASC payment is based on costs from single-service claims that CMS has acknowledged 

are mostly incorrectly coded claims. We responded that we would take the commenter’s 

request into consideration in future rulemaking, recognizing the lead time that is 

necessary for the creation of the associated G-code that would be used to identify when 

the procedures in the LDR prostate brachytherapy composite are performed on the same 

date of service in an ASC. 

Because we agree that data from OPPS claims reporting both services required for 

LDR prostate brachytherapy provide the most accurate relative payment weight upon 

which to base ASC payment for the component services, in the CY 2013 OPPS/ASC 

proposed rule (77 FR 45169), we proposed to establish an ASC payment rate that is based 

on the OPPS relative payment weight applicable to APC 8001 when CPT codes 55875 

and 77778 are performed on the same date of service in an ASC. We also proposed to 

create a HCPCS Level II G-code so that ASCs can properly report when the procedures 

described by CPT codes 55875 and 77778 are performed on the same date of service and, 

therefore, receive the appropriate LDR Prostate Brachytherapy Composite payment. We 

stated that the payment rate associated with the LDR prostate brachytherapy composite 

will be temporarily identified by HCPCS G-code “GXXX1” in Addendum AA to the 

CY 2013 OPPS/ASC proposed rule and the permanent HCPCS G-code that will identify 

this composite for ASCs will appear in this final rule with comment period. When not 

performed on the same day as the service described by CPT code 55875, the service 
CMS-1589-FC 833 

described by CPT code 77778 will continue to be assigned to APC 0651. When not 

performed on the same day as the service described by CPT code 77778, the service 

described by CPT code 55875 will continue to be assigned to APC 0163. We invited 

public comment on this proposal. 

Comment: Several commenters supported CMS’ proposal to establish an ASC 

payment rate that is based on the OPPS relative payment weight applicable to APC 8001 

when CPT codes 55875 and 77778 are performed on the same date of service in an ASC. 

Response: We appreciate commenters’ support of our proposal. We are 

finalizing our proposal, without modification, to establish the CY 2013 ASC payment 

rate for LDR prostate brachytherapy services based on the OPPS relative payment weight 

applicable to APC 8001 when CPT codes 55875 and 77778 are performed on the same 

date of service in an ASC. ASCs will use the corresponding HCPCS Level II G-code 

(G0458) for proper reporting when the procedures described by CPT codes 55875 and 

77778 are performed on the same date of service, and therefore receive the appropriate 

LDR prostate brachytherapy composite payment. When not performed on the same day 

as the service described by CPT code 55875, the service described by CPT code 77778 

will continue to be assigned to APC 0651. When not performed on the same day as the 

service described by CPT code 77778, the service described by CPT code 55875 will 

continue to be assigned to APC 0163. 
CMS-1589-FC 834 

2. Payment for Covered Ancillary Services 

a. Background 

Our final payment policies under the revised ASC payment system for covered 

ancillary services vary according to the particular type of service and its payment policy 

under the OPPS. Our overall policy provides separate ASC payment for certain ancillary 

items and services integrally related to the provision of ASC covered surgical procedures 

that are paid separately under the OPPS and provides packaged ASC payment for other 

ancillary items and services that are packaged or conditionally packaged (status 

indicators “N,” “Q1,” and “Q2”) under the OPPS. In the CY 2013 OPPS/ASC proposed 

rule (77 FR 45169), we further clarified our policy regarding the payment indicator 

assignment of codes that are conditionally packaged in the OPPS (status indicators “Q1” 

and “Q2”). Under the OPPS, a conditionally packaged code describes a HCPCS code 

where the payment is packaged when it is provided with a significant procedure but is 

separately paid when the service appears on the claim without a significant procedure. 

Because ASC services always include a surgical procedure, HCPCS codes that are 

conditionally packaged under the OPPS are always packaged (payment indictor “N1”) 

under the ASC payment system. Thus, our final policy aligns ASC payment bundles with 

those under the OPPS (72 FR 42495). In all cases, in order for those ancillary services 

also to be paid, ancillary items and services must be provided integral to the performance 

of ASC covered surgical procedures for which the ASC bills Medicare. 

Our ASC payment policies provide separate payment for drugs and biologicals 

that are separately paid under the OPPS at the OPPS rates, while we generally pay for 
CMS-1589-FC 835 

separately payable radiology services at the lower of the MPFS nonfacility PE 

RVU-based (or technical component) amount or the rate calculated according to the ASC 

standard ratesetting methodology (72 FR 42497). However, as finalized in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72050), payment indicators for all 

nuclear medicine procedures (defined as CPT codes in the range of 78000 through 

78999) that are designated as radiology services that are paid separately when provided 

integral to a surgical procedure on the ASC list are set to “Z2” so that payment is made 

based on the ASC standard ratesetting methodology rather than the MPFS nonfacility PE 

RVU amount, regardless of which is lower. This modification to the ASC payment 

methodology for ancillary services was finalized in response to a comment on the 

CY 2011 OPPS/ASC proposed rule that suggested it is inappropriate to use the 

MPFS-based payment methodology for nuclear medicine procedures because the 

associated diagnostic radiopharmaceutical, although packaged under the ASC payment 

system, is separately paid under the MPFS. We set the payment indicator to “Z2” for 

these nuclear medicine procedures in the ASC setting so that payment for these 

procedures would be based on the OPPS relative payment weight rather than the MPFS 

nonfacility PE RVU-based amount to ensure that the ASC will be compensated for the 

cost associated with the diagnostic radiopharmaceuticals. 

In addition, because the same issue exists for radiology procedures that use 

contrast agents (the contrast agent is packaged under the ASC payment system but is 

separately paid under the MPFS), we finalized in the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74429 through 74430) to set the payment indicator to “Z2” for 
CMS-1589-FC 836 

radiology services that use contrast agents so that payment for these procedures will be 

based on the OPPS relative payment weight and will, therefore, include the cost for the 

contrast agent. 

ASC payment policy for brachytherapy sources mirrors the payment policy under 

the OPPS. ASCs are paid for brachytherapy sources provided integral to ASC covered 

surgical procedures at prospective rates adopted under the OPPS or, if OPPS rates are 

unavailable, at contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs 

have been paid for brachytherapy sources provided integral to ASC covered surgical 

procedures at prospective rates adopted under the OPPS. 

Other separately paid covered ancillary services in ASCs, specifically corneal 

tissue acquisition and device categories with OPPS pass-through status, do not have 

prospectively established ASC payment rates according to the final policies of the revised 

ASC payment system (72 FR 42502 and 42508 through 42509; 42 CFR 416.164(b)). 

Under the revised ASC payment system, corneal tissue acquisition is paid based on the 

invoiced costs for acquiring the corneal tissue for transplantation. Devices that are 

eligible for pass-through payment under the OPPS are separately paid under the ASC 

payment system. Currently, the four devices that are eligible for pass-through payment in 

the OPPS are described by HCPCS code C1749 (Endoscope, retrograde 

imaging/illumination colonoscope device (Implantable)), HCPCS code C1830 (Powered 

bone marrow biopsy needle), HCPCS code C1840 (Lens, intraocular (telescopic)), and 

HCPCS code C1886 (Catheter, extravascular tissue ablation, any modality (insertable)). 

Payment amounts for HCPCS codes C1749, C1830, C1840, and C1886 under the ASC 
CMS-1589-FC 837 

payment system are contractor priced. In the CY 2012 OPPS/ASC final rule with 

comment period, we finalized the expiration of pass-through payment for HCPCS code 

C1749, which will expire after December 31, 2012 (76 FR 74278). Therefore, after 

December 31, 2012, the HCPCS code C1749 device costs will be packaged into the costs 

of the procedures with which the devices are reported in the hospital claims data used in 

the development of the OPPS relative payment weights that will be used to establish ASC 

payment rates for CY 2013. 

b. Payment for Covered Ancillary Services for CY 2013 

For CY 2013, we proposed to update the ASC payment rates and make changes to 

ASC payment indicators as necessary to maintain consistency between the OPPS and 

ASC payment system regarding the packaged or separately payable status of services and 

the proposed CY 2013 OPPS and ASC payment rates (77 FR 45170). The proposed 

CY 2013 OPPS payment methodologies for brachytherapy sources and separately 

payable drugs and biologicals were discussed in section II.A. and section V.B. of that 

proposed rule, respectively, and we proposed to set the CY 2013 ASC payment rates for 

those services equal to the proposed CY 2013 OPPS rates. 

Consistent with established ASC payment policy (72 FR 42497), the proposed 

CY 2013 payment for separately payable covered radiology services was based on a 

comparison of the CY 2013 proposed MPFS nonfacility PE RVU-based amounts (we 

referred readers to the CY 2013 MPFS proposed rule) and the proposed CY 2013 ASC 

payment rates calculated according to the ASC standard ratesetting methodology and 

then set at the lower of the two amounts (except as discussed below for nuclear medicine 
CMS-1589-FC 838 

procedures and radiology services that use contrast agents). Alternatively, payment for a 

radiology service may be packaged into the payment for the ASC covered surgical 

procedure if the radiology service is packaged or conditionally packaged under the OPPS. 

The payment indicators in Addendum BB to the proposed rule indicate whether the 

proposed payment rates for radiology services are based on the MPFS nonfacility PE 

RVU-based amount or the ASC standard ratesetting methodology, or whether payment 

for a radiology service is packaged into the payment for the covered surgical procedure 

(payment indicator “N1”). Radiology services that we proposed to pay based on the ASC 

standard ratesetting methodology are assigned payment indicator “Z2” (Radiology 

service paid separately when provided integral to a surgical procedure on ASC list; 

payment based on OPPS relative payment weight) and those for which the proposed 

payment is based on the MPFS nonfacility PE RVU-based amount are assigned payment 

indicator “Z3” (Radiology service paid separately when provided integral to a surgical 

procedure on ASC list; payment based on MPFS nonfacility PE RVUs). 

As finalized in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72050), payment indicators for all nuclear medicine procedures (defined as CPT 

codes in the range of 78000 through 78999) that are designated as radiology services that 

are paid separately when provided integral to a surgical procedure on the ASC list are set 

to “Z2” so that payment is made based on the OPPS relative payment weights rather than 

the MPFS nonfacility PE RVU-based amount, regardless of which is lower. As finalized 

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74429 through 

74430), payment indicators for radiology services that use contrast agents are set to “Z2” 
CMS-1589-FC 839 

so that payment for these procedures will be based on the OPPS relative payment weight 

and, therefore, will include the cost for the contrast agent. In the CY 2013 OPPS/ASC 

proposed rule (77 FR 45170), we proposed for CY 2013 to continue these modifications 

to the payment methodology and, therefore, set the payment indicator to “Z2” for these 

covered ancillary radiology services that involve nuclear medicine procedures or that use 

contrast agents. 

Most covered ancillary services and their proposed payment indicators were listed 

in Addendum BB to the CY 2013 OPPS/ASC proposed rule (which is available via the 

Internet on the CMS Web site). We invited public comment on these proposals. 

Comment: One commenter expressed appreciation to CMS for its responsiveness 

in the CY 2011 OPPS/ASC final rule with comment period to stakeholder concerns 

regarding ASC payment for nuclear medicine procedures. However, the commenter 

suggested that ASC payment policy for nuclear medicine procedures would be further 

improved by providing separate payment for the diagnostic radiopharmaceuticals that are 

used in nuclear medicine procedures. 

Response: As we stated in the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 72050) regarding separate payment for diagnostic radiopharmaceuticals 

used in ASCs, we do not agree with the commenter that we should establish separate 

payment for diagnostic radiopharmaceuticals under the ASC payment system because we 

follow the OPPS packaging policies which require that payment for these items is always 

packaged. 
CMS-1589-FC 840 

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

CY 2013 payment for covered ancillary services in accordance with the policies finalized 

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74430). Covered 

ancillary services and their final CY 2013 payment indicators are listed in Addendum BB 

(which is available via the Internet on the CMS Web site) to this final rule with comment 

period. 

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Cycle and Evaluation Criteria 

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68176), we 

finalized our current process for reviewing applications to establish new classes of new 

technology intraocular lenses (NTIOLs), and for recognizing new candidate intraocular 

lenses (IOLs) inserted during or subsequent to cataract extraction as belonging to an 

NTIOL class that is qualified for a payment adjustment. Specifically, we established the 

following process: 

● We announce annually in the proposed rule updating the ASC and OPPS 

payment rates for the following calendar year, a list of all requests to establish new 

NTIOL classes accepted for review during the calendar year in which the proposal is 

published. In accordance with section 141(b)(3) of Pub. L. 103-432 and our regulations 

at § 416.185(b), the deadline for receipt of public comments is 30 days following 

publication of the list of requests in the proposed rule. 

● In the final rule updating the ASC and OPPS payment rates for the following 

calendar year, we— 
CMS-1589-FC 841 

○ Provide a list of determinations made as a result of our review of all new 

NTIOL class requests and public comments; and 

○ Announce the deadline for submitting requests for review of an application for 

a new NTIOL class for the following calendar year. 

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68227), we 

finalized our proposal to base our determinations on consideration of the following major 

criteria set out at 42 CFR 416.195: 

● 42 CFR 416.195(a)(1): The IOL is approved by the FDA; 

● 42 CFR 416.195(a)(2): Claims of specific clinical benefits and/or lens 

characteristics with established clinical relevance in comparison with currently available 

IOLs are approved by the FDA for use in labeling and advertising; 

● 42 CFR 416.195(a)(3): The IOL is not described by an active or expired 

NTIOL class; that is, it does not share the predominant, class-defining characteristic 

associated with the improved clinical outcome with designated members of an active or 

expired NTIOL class; and 

● 42 CFR 416.195(a)(4): Evidence demonstrates that use of the IOL results in 

measurable, clinically meaningful, improved outcomes in comparison with use of 

currently available IOLs. The statute requires us to consider the following improved 

outcomes: 

○ Reduced risk of intraoperative or postoperative complication or trauma; 

○ Accelerated postoperative recovery; 

○ Reduced induced astigmatism; 
CMS-1589-FC 842 

○ Improved postoperative visual acuity; 

○ More stable postoperative vision; or 

○ Other comparable clinical advantages. 

Since implementation of the process for adjustment of payment amounts for 

NTIOLs that was established in the June 16, 1999 Federal Register, we have approved 

three classes of NTIOLs, as shown in the table with the associated qualifying IOL 

models, at the link entitled “NTIOL Application Determination Reference document 

Updated 01/06/2012,” posted on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html. 

2. NTIOL Application Process for Payment Adjustment 

For a request to be considered complete, we require submission of the information 

that is found in the guidance document entitled “Application Process and Information 

Requirements for Requests for a New Class of New Technology Intraocular Lens 

(NTIOL)” posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/ASCPayment/NTIOLs.html. For each completed request for a new class that is 

received by the established deadline, a determination is announced annually in the final 

rule updating the ASC and OPPS payment rates for the next calendar year. 

We also summarize briefly in the final rule the evidence that we reviewed, the 

public comments we received timely, and the basis for our determinations in 

consideration of applications for establishment of a new NTIOL class. When a new 

NTIOL class is created, we identify the predominant characteristic of NTIOLs in that 

class that sets them apart from other IOLs (including those previously approved as 
CMS-1589-FC 843 

members of other expired or active NTIOL classes) and that is associated with an 

improved clinical outcome. The date of implementation of a payment adjustment in the 

case of approval of an IOL as a member of a new NTIOL class would be set 

prospectively as of 30 days after publication of the ASC payment update final rule, 

consistent with the statutory requirement. 

3. Requests to Establish New NTIOL Classes for CY 2013 and Deadline for Public 

Comments 

As discussed in the CY 2013 OPPS/ASC proposed rule (77 FR 45171), we did 

not receive any requests for review to establish a new NTIOL class for CY 2013 by the 

March 2, 2012 due date (this due date was stated in the CY 2012 OPPS/ASC final rule 

with comment period at 76 FR 74443). 

4. 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 in the CY 2013 OPPS/ASC proposed rule (77 FR 45171), we did 

not propose to revise the payment adjustment amount for CY 2013. 

5. Revisions to the Major NTIOL Criteria Described in 42 CFR 416.195 

The last significant revisions to the regulations containing the substantive NTIOL 

evaluation criteria under 42 CFR 416.195 occurred in 2007. In the CY 2013 OPPS/ASC 

proposed rule (77 FR 45171), we proposed significant revisions to § 416.195(a)(2) and 

§ 416.195(a)(4). We stated our belief that revising § 416.195 is necessary in order to 
CMS-1589-FC 844 

improve the quality of the NTIOL applications. In recent years, we have received low 

quality NTIOL applications that may have been due in part to overly-broad evaluation 

criteria. 

We proposed to revise § 416.195(a)(2) to require that the IOL’s FDA-approved 

labeling contains a claim of a specific clinical benefit imparted by a new lens 

characteristic. The IOL would have to have a new lens characteristic in comparison to 

currently available IOLs. We also proposed to revise § 416.195(a)(4) to require that any 

specific clinical benefit referred to in § 416.195(a)(2) would have to be supported by 

evidence that demonstrated that the IOL results in a measurable, clinically meaningful, 

improved outcome. Improved outcomes include: (i) reduced risk of intraoperative or 

postoperative complication or trauma; (ii) accelerated postoperative recovery; 

(iii) reduced induced astigmatism; (iv) improved postoperative visual acuity; (v) more 

stable postoperative vision; and (vi) other comparable clinical advantages. 

The proposed revision to § 416.195(a)(2) is necessary because recent NTIOL 

applications have not included FDA labeling claims of clinical benefit. Instead, the 

candidate IOLs have, in most cases, had some characteristic for which the applicant has 

tried to prove clinical relevance through various kinds of evidence that have not been 

evaluated by the FDA because the evidence is not associated with a labeling claim. The 

result has been the submission of low quality evidence that has been insufficient for 

NTIOL status. We believe that the quality of the evidence would improve if applicants 

were required to obtain a labeling claim for the NTIOL benefit and therefore have the 

evidence for such benefit evaluated by FDA. We believe that this proposed approach 
CMS-1589-FC 845 

would better serve CMS, FDA, and the applicants because any ultimate grant of NTIOL 

status would be supported by a labeling claim. The manufacturer could then advertise the 

NTIOL benefit without running afoul of FDA advertising limitations. We would have 

the benefit of an FDA review of the relevant evidence, which would be particularly 

valuable because the FDA has a dedicated team of scientists, physicians, and engineers 

who are experts in evaluating IOLs. 

The proposed revision to § 416.195(a)(4) is necessary to insure that the claim is 

clinically relevant and represents an improved outcome for Medicare beneficiaries. We 

requested public comments on these proposed revisions to the NTIOL regulations. 

Comment: Several commenters supported our proposed changes to the NTIOL 

regulations. These commenters believed that the proposed changes will better insure that 

any grants of NTIOL status will be supported by rigorous scientific evidence. 

Response: We appreciate these comments and the commenters’ support for our 

efforts to require rigor and accountability in the NTIOL program. 

Comment: One commenter disagreed with the proposed revision to 

416.195(a)(2), complaining that obtaining a label claim is difficult and time consuming. 

In addition, this commenter made the following main points: 

● It is not the FDA’s job to review evidence related to an NTIOL application; 

● FDA does not typically evaluate claims of comparative clinical benefits, and is 

not obligated to do so; 

● Clinical studies to support a label claim require substantial time and resources, 

and there is no guarantee that such efforts will be successful; 
CMS-1589-FC 846 

● Other new technology programs, such as transitional pass-through payments, 

do not require a claim of clinical benefit; 

● Requiring a claim of clinical benefit would provide extended exclusivity to the 

first company to establish the NTIOL class; 

● Requiring a claim of clinical benefit will limit patient access to new 

technology. 

Response: We believe that this commenter’s objections reflect at least a partial 

misunderstanding of the proposal. Our current regulations require that the FDA approved 

label contain information about the clinical benefit of a candidate IOL. They provide two 

options for satisfying this requirement; the candidate lens must have either: (1) claims of 

specific clinical benefits in comparison with currently available IOLs approved by the 

FDA for use in labeling and advertising; or (2) lens characteristics with established 

clinical relevance in comparison with currently available IOLs approved by the FDA for 

use in labeling and advertising. Both of these options require evaluation by the FDA. In 

recent years, lens manufacturers have used Option 2 to claim, for example, that the 

applicant lens had a specific lens characteristic (for example, blue filter, availability in 

.25 D increments, absence of glistenings, packaging in a disposable injector) listed 

somewhere in the FDA labeling; however, the manufacturer would provide no 

information about the clinical relevance of this characteristic in the FDA’s labeling. The 

manufacturer would submit to CMS weak or nonexistent evidence of a clinical benefit 

that it claimed could be attributed to the characteristic described on the FDA-approved 

label. We believe that to remedy this problem and to clarify the intent of this regulation it 
CMS-1589-FC 847 

is necessary that the label contain a claim of a clinical benefit, which would be supported 

by evidence evaluated by the FDA. 

Regarding this commenter’s statement about the scope of FDA’s duties, the 

evaluation of clinical evidence in support of a labeling claim is a core function of the 

FDA and is something that they do on a daily basis. There is nothing unusual about the 

FDA’s proposed role as it relates to evaluating evidence in support of a labeling claim 

that could be used to satisfy the requirements for NTIOL status. This rule does not usurp 

or interfere with any functions currently carried out by the FDA. 

Regarding this commenter’s other points, the various new technology payment 

programs we administer have somewhat different requirements, depending on the 

statutory authority and the specific purposes of the various programs. We believe that 

Congress intended that NTIOL status function as an incentive for innovation. If requiring 

a claim of clinical benefit results in a longer period of a single manufacturer utilizing a 

new NTIOL class exclusively, we believe that such extended exclusivity would serve as 

an additional inducement for manufacturers to innovate and seek NTIOL status for their 

innovations. While we agree with the commenter that seeking a label claim requires time 

and effort, we believe that this process will better serve NTIOL applicants in that having 

a claim of a clinical benefit will substantially increase the likelihood of ultimate NTIOL 

approval. 

Finally, this commenter predicted that if we finalize these proposed changes to the 

regulations, then Medicare beneficiaries will have reduced access to new IOL 

technology. We disagree that the proposed changes to the NTIOL regulations will affect 
CMS-1589-FC 848 

patient access to IOLs. For example, one of the 2012 NTIOL candidate IOLs had been 

on the market for 10 years and was the U.S. market leader at the time of NTIOL 

application. Lack of NTIOL status did not limit patient access to this IOL and we believe 

that it would also be unlikely to result in limited access to future IOLs. We also believe 

that having NTIOLs supported by a labeling claim of clinical benefit will increase patient 

confidence that they are receiving a medical device with a real evidence-based benefit 

versus existing technology. 

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

proposed changes to the NTIOL regulations. 

6. Request for Public Comment on the “Other Comparable Clinical Advantages” 

Improved Outcome 

Section 416.195(a)(4)), discussed above, lists the following improved outcomes: 

(i) reduced risk of intraoperative or postoperative complication or trauma; (ii) accelerated 

postoperative recovery; (iii) reduced induced astigmatism; (iv) improved postoperative 

visual acuity; (v) more stable postoperative vision; and (vi) other comparable clinical 

advantages. 

This list is from the original 1994 NTIOL statutory provision. Because this 

provision is almost 20 years old, outcomes (i) through (v) have only limited relevance to 

modern cataract surgery. For example, regarding outcome (i), it is unclear what, if any, 

type of IOL could reduce the risk of complication or trauma associated with cataract 

surgery, or what, if any, contemporary cataract surgery complication could be affected by 

a new type of IOL. As for outcome (ii), postoperative recovery is already rapid in 
CMS-1589-FC 849 

uncomplicated cataract surgery; therefore, it is difficult to see how it could be 

significantly accelerated. Also, regarding outcome (iii), clinically significant induced 

astigmatism would be reflective of poor surgical technique and would not depend upon 

IOL design. Regarding outcome (iv), currently available IOLs provide such high quality 

postoperative visual acuity that it would be difficult to measure clinically significant 

improved postoperative visual acuity due to a new type of IOL. Finally, for outcome (v), 

postoperative vision is typically stable after uncomplicated cataract surgery, so again it 

would be difficult to improve upon this outcome. 

The last of the listed improved outcomes is the nonspecific category described as 

“other comparable clinical advantages.” Given that present-day cataract surgery is such a 

successful procedure that results in significantly improved vision for almost all patients 

who undergo the procedure and who are appropriate candidates for cataract surgery, in 

the CY 2013 OPPS/ASC proposed rule (77 FR 45172), we solicited comments on what 

potential benefits associated with a new IOL could be considered to be a “comparable 

clinical advantage” as compared to the list of the five improved outcomes from the statute 

and regulation described above. 

Comment: Several commenters supported retaining the “comparable clinical 

advantage” outcome as an open-ended category as necessary to accommodate future 

innovations. One commenter offered the following examples of potential comparable 

clinical advantages: 

● Reduced incidence of posterior capsular opacity; 
CMS-1589-FC 850 

● Improved delivery to reduce error and minimize changes to the wound from 

insertion’ 

● Reduced inflammation; 

● Reduced astigmatism; 

● Improved vision; 

● Improved vision stability; and 

● Improved quality of life. 

Response: It is important that companies consider all of the various possibilities 

for new clinical advantages, and we appreciate the range of potential issues that could be 

addressed through new IOL technology. However, some significant questions remain. 

For example, it could be that the incidence of some of these complications so low such 

that it would be impossible to design a study to measure any improvement due to a new 

IOL. It also could be that some surgical complications could be the result of surgical 

technique that could not be easily compensated for with a new IOL design. We also 

remind stakeholders that innovations that provide greater surgeon convenience, but no 

direct patient benefit, would not qualify for NTIOL status. Also, vision improvements 

cannot be merely improved optical performance but must relate to a meaningful 

improved outcome in visual performance. 

The list of improved outcomes in the regulation is statutory and therefore we are 

not modifying it. After consideration of the public comments we received, we are 

adopting, without modification, our NTIOL proposals. 
CMS-1589-FC 851 

7. Announcement of CY 2013 Deadline for Submitting Requests for CMS Review of 

Appropriateness of ASC Payment for Insertion of an NTIOL Following Cataract Surgery 

In accordance with 42 CFR 416.185(a) of our regulations, CMS announces that in 

order to be considered for payment effective January 1, 2014, requests for review of 

applications for a new class of new technology IOLs must be received at CMS by 5 p.m. 

EST, on March 1, 2013. Send requests to ASC/NTIOL, Division of Outpatient Care, 

Mailstop C4–05–17, Centers for Medicare and Medicaid Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. To be considered, requests for NTIOL reviews 

must include the information requested on the CMS Web site at: 

http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf. 

F. ASC Payment and Comment Indicators

1. Background 

In addition to the payment indicators that we introduced in the August 2, 2007 

final rule, we also created final comment indicators for the ASC payment system in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66855). We created 

Addendum DD1 to define ASC payment indicators that we use in Addenda AA and BB 

to provide payment information regarding covered surgical procedures and covered 

ancillary services, respectively, under the revised ASC payment system. The ASC 

payment indicators in Addendum DD1 are intended to capture policy relevant 

characteristics of HCPCS codes that may receive packaged or separate payment in ASCs, 

such as whether they were on the ASC list of covered services prior to CY 2008; payment 

designation, such as device-intensive or office-based, and the corresponding ASC 
CMS-1589-FC 852 

payment methodology; and their classification as separately payable ancillary services 

including radiology services, brachytherapy sources, OPPS pass-through devices, corneal 

tissue acquisition services, drugs or biologicals, or NTIOLs. 

We also created Addendum DD2 that lists the ASC comment indicators. The 

ASC comment indicators used in Addenda AA and BB to the proposed rules and final 

rules with comment period serve to identify, for the revised ASC payment system, the 

status of a specific HCPCS code and its payment indicator with respect to the timeframe 

when comments will be accepted. The comment indicator “NI” is used in the OPPS/ASC 

final rule with comment period to indicate new codes for the next calendar year for which 

the interim payment indicator assigned is subject to comment. The comment indicator 

“NI” is also assigned to existing codes with substantial revisions to their descriptors such 

that we consider them to be describing new services, as discussed in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60622). In this CY 2013 OPPS/ASC 

final rule with comment period, we respond to public comments and finalize the ASC 

treatment of all codes that are labeled with comment indicator “NI” in Addenda AA and 

BB to the CY 2012 OPPS/ASC final rule with comment period. These addenda can be 

found in a file labeled “January 2012 ASC Approved HCPCS Code and Payment Rates” 

in the ASC Addenda Update section of the CMS Web site. 

The “CH” comment indicator was used in Addenda AA and BB to the CY 2013 

OPPS/ASC proposed rule (which were available via the Internet on the CMS Web site) to 

indicate that the payment indicator assignment has changed for an active HCPCS code; 

an active HCPCS code is newly recognized as payable in ASCs; or an active HCPCS 
CMS-1589-FC 853 

code is discontinued at the end of the current calendar year. The “CH” comment 

indicators that are published in the final rule with comment period are provided to alert 

readers that a change has been made from one calendar year to the next, but do not 

indicate that the change is subject to comment. 

2. ASC Payment and Comment Indicators 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45172), we did not propose any 

changes to the definitions of the ASC payment and comment indicators for CY 2013. We 

referred readers to Addenda DD1 and DD2 to the CY 2013 OPPS/ASC proposed rule 

(which were available via the Internet on the CMS Web site) for the complete list of ASC 

payment and comment indicators proposed for the CY 2013 update. 

We did not receive any public comments on the ASC payment and comment 

indicators. Addenda DD1 and DD2 to this final rule with comment period (which are 

available via the Internet on the CMS Web site) contain the complete list of payment and 

commenter indicators for the CY 2013 update. 

G. ASC Policy and Payment Recommendations

MedPAC was established under section 1805 of the Act to advise Congress on 

issues affecting the Medicare program. Subparagraphs (C) and (D) of section 1805(b)(1) 

of the Act require MedPAC to submit reports to Congress not later than March 15 and 

June 15 of each year that present its Medicare payment policy reviews and 

recommendations and its examination of issues affecting the Medicare program, 

respectively. The March 2012 MedPAC “Report to the Congress: Medicare Payment 
CMS-1589-FC 854 

Policy” included the following recommendations relating specifically to the ASC 

payment system for CY 2013: 

Recommendation 5-1: “The Congress should update the payment rates for 

ambulatory surgical centers by 0.5 percent for calendar year 2013. The Congress should 

also require ambulatory surgical centers to submit cost data.” 

Regarding the ASC payment update for CY 2013, MedPAC further stated that: 

“On the basis of our payment adequacy indicators, the lack of ASC cost data, and our 

concerns about the potential effect of ASC growth on overall program spending, we 

believe a moderate update of 0.5 percent is warranted for CY 2013.” With regard to the 

collection of cost data, MedPAC indicated that cost data are needed to fully assess ASC 

payment adequacy under the revised ASC payment system and to examine whether an 

alternative input price index would be an appropriate proxy for ASC costs or whether an 

ASC-specific market basket should be developed to annually update ASC payment rates. 

CMS Response: We note that MedPAC’s recommendation is for the Congress to 

increase ASC payment rates by 0.5 percent in CY 2013 and require ASCs to submit cost 

data. Congress has not yet acted on these recommendations. In the CY 2013 OPPS/ASC 

proposed rule (77 FR 45172), we proposed to continue our current policy to update the 

ASC conversion factor using the CPI-U, and we did not propose to require ASCs to 

submit cost data in the proposed rule. However, as discussed in section XIV.H.2.b. of the 

proposed rule (77 FR 45174), while we believe the CPI-U is appropriate to apply to 

update the ASC payment system, the CPI-U may not best reflect inflation for the goods 

and services provided by ASCs and, therefore, we sought public comment on the type of 
CMS-1589-FC 855 

cost information that would be feasible to collect from ASCs that would assist us in 

determining possible alternatives to using the CPI-U to update ASC payment rates for 

inflation. In section XIV.H.2.b. of this final rule with comment period, we summarize 

and respond to the public comments we received regarding the ASC update and the 

feasibility of collecting ASC cost data. 

H. Calculation of the ASC Conversion Factor and the ASC Payment Rates

1. Background 

In the August 2, 2007 final rule (72 FR 42493), we established our policy to base 

ASC relative payment weights and payment rates under the revised ASC payment system 

on APC groups and the OPPS relative payment weights. Consistent with that policy and 

the requirement at section 1833(i)(2)(D)(ii) of the Act that the revised payment system be 

implemented so that it would be budget neutral, the initial ASC conversion factor 

(CY 2008) was calculated so that estimated total Medicare payments under the revised 

ASC payment system in the first year would be budget neutral to estimated total 

Medicare payments under the prior (CY 2007) ASC payment system (the ASC 

conversion factor is multiplied by the relative payment weights calculated for many ASC 

services in order to establish payment rates). That is, application of the ASC conversion 

factor was designed to result in aggregate Medicare expenditures under the revised ASC 

payment system in CY 2008 equal to aggregate Medicare expenditures that would have 

occurred in CY 2008 in the absence of the revised system, taking into consideration the 

cap on ASC payments in CY 2007 as required under section 1833(i)(2)(E) of the Act 
CMS-1589-FC 856 

(72 FR 42522). We adopted a policy to make the system budget neutral in subsequent 

calendar years (72 FR 42532 through 42533). 

We note that we consider the term “expenditures” in the context of the budget 

neutrality requirement under section 1833(i)(2)(D)(ii) of the Act to mean expenditures 

from the Medicare Part B Trust Fund. We do not consider expenditures to include 

beneficiary coinsurance and copayments. This distinction was important for the CY 2008 

ASC budget neutrality model that considered payments across the OPPS, ASC, and 

MPFS payment systems. However, because coinsurance is almost always 20 percent for 

ASC services, this interpretation of expenditures has minimal impact for subsequent 

budget neutrality adjustments calculated within the revised ASC payment system. 

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 through 

66858), we set out a step-by-step illustration of the final budget neutrality adjustment 

calculation based on the methodology finalized in the August 2, 2007 final rule 

(72 FR 42521 through 42531) and as applied to updated data available for the CY 2008 

OPPS/ASC final rule with comment period. The application of that methodology to the 

data available for the CY 2008 OPPS/ASC final rule with comment period resulted in a 

budget neutrality adjustment of 0.65. 

For CY 2008, we adopted the OPPS relative payment weights as the ASC relative 

payment weights for most services and, consistent with the final policy, we calculated the 

CY 2008 ASC payment rates by multiplying the ASC relative payment weights by the 

final CY 2008 ASC conversion factor of $41.401. For covered office-based surgical 

procedures and covered ancillary radiology services (excluding covered ancillary 
CMS-1589-FC 857 

radiology services involving certain nuclear medicine procedures or involving the use of 

contrast agents, as discussed in section XIV.D.2.b. of this final rule with comment 

period), the established policy is to set the payment rate at the lower of the MPFS 

unadjusted nonfacility PE RVU-based amount or the amount calculated using the ASC 

standard ratesetting methodology. Further, as discussed in the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 66841 through 66843), we also adopted alternative 

ratesetting methodologies for specific types of services (for example, device-intensive 

procedures). 

As discussed in the August 2, 2007 final rule (72 FR 42517 through 42518) and as 

codified at § 416.172(c) of the regulations, the revised ASC payment system accounts for 

geographic wage variation when calculating individual ASC payments by applying the 

pre-floor and pre-reclassified hospital wage indices to the labor-related share, which is 

50 percent of the ASC payment amount. Beginning in CY 2008, CMS accounted for 

geographic wage variation in labor cost when calculating individual ASC payments by 

applying the pre-floor and pre-reclassified hospital wage index values that CMS 

calculates for payment, using updated Core Based Statistical Areas (CBSAs) issued by 

OMB in June 2003. The reclassification provision provided at section 1886(d)(10) of the 

Act is specific to hospitals. We believe that using the most recently available raw prefloor and pre-reclassified hospital wage indices results in the most appropriate adjustment 

to the labor portion of ASC costs. In addition, use of the unadjusted hospital wage data 

avoids further reductions in certain rural statewide wage index values that result from 

reclassification. We continue to believe that the unadjusted hospital wage indices, which 
CMS-1589-FC 858 

are updated yearly and are used by many other Medicare payment systems, appropriately 

account for geographic variation in labor costs for ASCs. 

We note that in certain instances there might be urban or rural areas for which 

there is no IPPS hospital whose wage index data would be used to set the wage index for 

that area. For these areas, our policy has been to use the average of the wage indices for 

CBSAs (or metropolitan divisions as applicable) that are contiguous to the area that has 

no wage index (where “contiguous” is defined as sharing a border). We have applied a 

proxy wage index based on this methodology to ASCs located in CBSA 25980 

Hinesville-Fort Stewart, GA, and CBSA 22 Rural Massachusetts. 

In CY 2011, we identified another area, specifically, CBSA 11340 Anderson, SC

for which there is no IPPS hospital whose wage index data would be used to set the wage 

index for that area. Generally, we would use the methodology described above; however, 

in this situation, all of the areas contiguous to CBSA 11340 Anderson, SC are rural. 

Therefore, in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72058 

through 72059), we finalized our proposal to set the ASC wage index by calculating the 

average of all wage indices for urban areas in the State when all contiguous areas to a 

CBSA are rural and there is no IPPS hospital whose wage index data could be used to set 

the wage index for that area. In other situations, where there are no IPPS hospitals 

located in a relevant labor market area, we will continue our current policy of calculating 

an urban or rural area’s wage index by calculating the average of the wage indices for 

CBSAs (or metropolitan divisions where applicable) that are contiguous to the area with 

no wage index. 
CMS-1589-FC 859 

Comment: Several commenters made the same recommendation that was made 

in the CY 2010 (74 FR 60625), CY 2011 (75 FR 72059), and CY 2012 (76 FR 74446) 

rulemakings--that is, that CMS adopt for the ASC payment system the same wage index 

values used for hospital payment under the OPPS. 

Response: We have responded to this comment in the past, and believe our prior 

rationale for using unadjusted wage indices is still a sound one. We continue to believe 

that the unadjusted hospital wage indices, which are updated yearly and are used by 

almost all Medicare payment systems, appropriately account for geographic variance in 

labor costs for ASCs. We refer readers to our response to this comment in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72059). We discuss our budget 

neutrality adjustment for changes to the wage indices below in section XIV.H.2.b of this 

final rule with comment period. 

After consideration of the public comments we received, we are continuing our 

established policy to account for geographic wage variation in labor cost when 

calculating individual ASC payment by applying the pre-floor and pre-reclassified 

hospital wage index values that CMS calculated for payment, using updated CBSAs. For 

CY 2013, we also are continuing our policy established in the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72058 through 72059) to set the ASC wage index by 

calculating the average of all wage indices for urban areas in the state when there is no 

IPPS hospital whose wage index data could be used to set the wage index for that area, 

and all contiguous areas to the CBSA are rural. 
CMS-1589-FC 860 

2. Calculation of the ASC Payment Rates 

a. Updating the ASC Relative Payment Weights for CY 2013 and Future Years 

We update the ASC relative payment weights each year using the national OPPS 

relative payment weights (and MPFS nonfacility PE RVU-based amounts, as applicable) 

for that same calendar year and uniformly scale the ASC relative payment weights for 

each update year to make them budget neutral (72 FR 42533). We note that, as discussed 

in section II.A.2.f. of the CY 2013 OPPS/ASC proposed rule (45094 through 45098) and 

in this final rule with comment period, because we proposed to base the OPPS relative 

payment weights on geometric mean costs for CY 2013, the ASC system would shift to 

the use of geometric means to determine relative payment weights under the ASC 

standard ratesetting methodology. Consistent with our established policy, in the CY 2013 

OPPS/ASC proposed rule (77 FR 45173), we proposed to scale the CY 2013 relative 

payment weights for ASCs according to the following method. Holding ASC utilization 

and the mix of services constant from CY 2011, we proposed to compare the total 

payment using the CY 2012 ASC relative payment weights with the total payment using 

the CY 2013 relative payment weights to take into account the changes in the OPPS 

relative payment weights between CY 2012 and CY 2013. We proposed to use the ratio 

of CY 2012 to CY 2013 total payment (the weight scaler) to scale the ASC relative 

payment weights for CY 2013. The proposed CY 2013 ASC scaler was 0.9331 

(77 FR 45174) and scaling would apply to the ASC relative payment weights of the 

covered surgical procedures and covered ancillary radiology services for which the ASC 

payment rates are based on OPPS relative payment weights. 
CMS-1589-FC 861 

Scaling would not apply in the case of ASC payment for separately payable 

covered ancillary services that have a predetermined national payment amount (that is, 

their national ASC payment amounts are not based on OPPS relative payment weights), 

such as drugs and biologicals that are separately paid or services that are 

contractor-priced or paid at reasonable cost in ASCs. Any service with a predetermined 

national payment amount would be included in the ASC budget neutrality comparison, 

but scaling of the ASC relative payment weights would not apply to those services. The 

ASC payment weights for those services without predetermined national payment 

amounts (that is, those services with national payment amounts that would be based on 

OPPS relative payment weights) would be scaled to eliminate any difference in the total 

payment between the current year and the update year. 

For any given year’s ratesetting, we typically use the most recent full calendar 

year of claims data to model budget neutrality adjustments. At the time of the CY 2013 

proposed rule, we had available 98 percent of CY 2011 ASC claims data. For this final 

rule with comment period, we have approximately 99 percent of all ASC claims data for 

CY 2011. 

To create an analytic file to support calculation of the weight scaler and budget 

neutrality adjustment for the wage index (discussed below), we summarized available 

CY 2011 ASC claims by ASC and by HCPCS code. We used the National Provider 

Identifier for the purpose of identifying unique ASCs within the CY 2011 claims data. 

We used the supplier zip code reported on the claim to associate State, county, and CBSA 

with each ASC. This file, available to the public as a supporting data file for the 
CMS-1589-FC 862 

proposed rule, is posted on the CMS Web site at: http://www.cms.gov/ResearchStatistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html. 

We did not receive any comments and, therefore, we are finalizing our CY 2013 

ASC relative payment weight scaling methodology, without modification. 

For this final rule with comment period, we used our proposed methodology 

described above to calculate the scaler adjustment using updated ASC claims data. The 

final CY 2013 scaler adjustment is 0.9324. This scaler adjustment is necessary to make 

the difference in aggregate ASC payments calculated using the CY 2012 ASC relative 

payment weights and the CY 2013 relative payment weights budget neutral. We 

calculated the difference in aggregate payments due to the change in relative payment 

weights holding constant the ASC conversion factor, the most recent CY 2011 ASC 

utilization from our claims data, and the CY 2012 wage index values. For this final 

CY 2013 calculation, we used the CY 2012 ASC conversion factor updated by the 

CY 2013 CPI–U, which is projected to be 1.4 percent, less the multifactor productivity 

adjustment of 0.8 percent, as discussed below in section XIV.H.2.b. of this final rule with 

comment period. 

b. Updating the ASC Conversion Factor 

Under the OPPS, we typically apply a budget neutrality adjustment for provider 

level changes, most notably a change in the wage index values for the upcoming year, to 

the conversion factor. Consistent with our final ASC payment policy, for the CY 2013 

ASC payment system, in the CY 2013 OPPS/ASC proposed rule (77 FR 45174), we 

proposed to calculate and apply a budget neutrality adjustment to the ASC conversion 
CMS-1589-FC 863 

factor for supplier level changes in wage index values for the upcoming year, just as the 

OPPS wage index budget neutrality adjustment is calculated and applied to the OPPS 

conversion factor. For CY 2013, we calculated this proposed adjustment for the ASC 

payment system by using the most recent CY 2011 claims data available and estimating 

the difference in total payment that would be created by introducing the proposed 

CY 2013 pre-floor and pre-reclassified hospital wage indices. Specifically, holding 

CY 2011 ASC utilization and service-mix and the proposed CY 2013 national payment 

rates after application of the weight scaler constant, we calculated the total adjusted 

payment using the CY 2012 pre-floor and pre-reclassified hospital wage indices and the 

total adjusted payment using the proposed CY 2013 pre-floor and pre-reclassified 

hospital wage indices. We used the 50-percent labor-related share for both total adjusted 

payment calculations. We then compared the total adjusted payment calculated with the 

CY 2012 pre-floor and pre-reclassified hospital wage indices to the total adjusted 

payment calculated with the proposed CY 2013 pre-floor and pre-reclassified hospital 

wage indices and applied the resulting ratio of 1.0002 (the proposed CY 2013 ASC wage 

index budget neutrality adjustment) to the CY 2012 ASC conversion factor to calculate 

the proposed CY 2013 ASC conversion factor. 

Section 1833(i)(2)(C)(i) of the Act requires that, “if the Secretary has not updated 

amounts established” under the revised ASC payment system in a calendar year, the 

payment amounts “shall be increased by the percentage increase in the Consumer Price 

Index for all urban consumers (U.S. city average) as estimated by the Secretary for the 

12-month period ending with the midpoint of the year involved.” The statute, therefore, 
CMS-1589-FC 864 

does not mandate the adoption of any particular update mechanism, but it requires the 

payment amounts to be increased by the CPI-U in the absence of any update. Because 

the Secretary updates the ASC payment amounts annually, we adopted a policy, which 

we codified at 42 CFR 416.171(a)(2)(ii), to update the ASC conversion factor using the 

CPI-U for CY 2010 and subsequent calendar years. Therefore, the annual update to the 

ASC payment system is the CPI-U (referred to as the CPI-U update factor). 

Stakeholders, as well as MedPAC, have commented throughout the years that the 

CPI-U may not adequately measure inflation for the goods and services provided by 

ASCs (for example, 76 FR 74444, 74448 through 74450; 73 FR 68757; and 

72 FR 66859). While we believe the CPI-U is appropriate to apply to update the ASC 

payment system, we are aware that the CPI-U is highly weighted for housing and 

transportation and may not best reflect inflation in the cost of providing ASC services. In 

developing the CY 2013 OPPS/ASC proposed rule, we considered possible alternatives 

to using the CPI-U to update ASC payment rates for inflation. 

ASC stakeholders have urged us to adopt the hospital market basket to update 

ASC payment rates for inflation when commenting on each proposed rule since the 

beginning of the revised ASC payment system (72 FR 66859; 73 FR 68757; 74 FR 60628 

through 60629; 75 FR 72063; and 76 FR 74449). We considered the hospital market 

basket as an alternative to the CPI-U and, while the items included in the hospital market 

basket seem reflective of the kinds of costs incurred by ASCs, as stated in the CY 2012 

OPPS/ASC final rule with comment period, we believe that the hospital market basket 

does not align with the cost structures of ASCs. A much wider range of services, such as 
CMS-1589-FC 865 

room and board and emergency services, are provided by hospitals but are not reflective 

of costs associated with providing services in ASCs (76 FR 74450). As other possible 

alternatives to the CPI-U update, we considered using the physician’s practice expense 

(PE) component of the Medicare Economic Index (MEI) update, as well as using an 

average of the hospital market basket update and the PE component of the MEI update. 

However, until we have more information regarding the cost inputs of ASCs, we are not 

confident that any of these alternatives are a better proxy for ASC costs than the CPI-U. 

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45174), we proposed a 

continuation of the established policy of basing the ASC update on the CPI-U. In 

addition, we requested public comment on the type of cost information that would be 

feasible to collect from ASCs in the future in order to determine if one of these 

alternative updates or an ASC-specific market basket would be a better proxy for ASC 

cost inflation than the CPI-U. 

Section 3401(k) of the Affordable Care Act amended section 1833(i)(2)(D) of the 

Act by adding a new clause (v) which requires that “any annual update under [the ASC 

payment] system for the year, after application of clause (iv), shall be reduced by the 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II)” of the Act effective 

with the calendar year beginning January 1, 2011. The statute defines the productivity 

adjustment to be equal to the 10-year moving average of changes in annual economywide private nonfarm business multifactor productivity (MFP) (as projected by the 

Secretary for the 10-year period ending with the applicable fiscal year, year, cost 

reporting period, or other annual period) (the “MFP adjustment”). Clause (iv) of section 
CMS-1589-FC 866 

1833(i)(2)(D) of the Act authorizes the Secretary to provide for a reduction in any annual 

update for failure to report on quality measures. Clause (v) of section 1833(i)(2)(D) of 

the Act states that application of the MFP adjustment to the ASC payment system may 

result in the update to the ASC payment system being less than zero for a year and may 

result in payment rates under the ASC payment system for a year being less than such 

payment rates for the preceding year. 

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), we 

finalized a policy that ASCs begin submitting data on quality measures for services 

beginning on October 1, 2012 for the CY 2014 payment determination under the ASCQR 

Program. Section XVI.D. of the CY 2013 OPPS/ASC proposed rule (77 FR 45192 

through 45193) provided a discussion of the proposed payment reduction to the annual 

update for ASCs that fail to meet the ASCQR Program requirements. In summary, we 

proposed to calculate 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. The reduced rates would apply beginning in 

CY 2014. We proposed that application of the 2.0 percentage point reduction to the 

annual update factor, which currently is the CPI-U, may result in the update to the ASC 

payment system being less than zero for a year for ASCs that fail to meet the ASCQR 

Program requirements. We proposed changes to §§ 416.160(a)(1) and 416.171 to reflect 

this proposal. Comments to this proposal are addressed in section XVI.D.2 of this final 

rule with comment period. 
CMS-1589-FC 867 

In accordance with section 1833(i)(2)(C)(i) of the Act, before applying the MFP 

adjustment, the Secretary first determines the “percentage increase” in the CPI-U, which 

we interpret cannot be a negative number. Thus, in the instance where the percentage 

change in the CPI-U for a year is negative, we would hold the CPI-U update factor for the 

ASC payment system to zero. For the CY 2014 payment determination and subsequent 

payment determination years, under section 1833(i)(2)(D)(iv) of the Act, we would 

reduce the annual update by 2.0 percentage points for an ASC that fails to submit quality 

information under the rules established by the Secretary in accordance with section 

1833(i)(7) of the Act. Section 1833(i)(2)(D)(v) of the Act, as added by section 3401(k) 

of the Affordable Care Act, requires that the Secretary reduce the annual update factor, 

after application of any quality reporting reduction by the MFP adjustment, and states 

that application of the MFP adjustment may reduce this percentage change below zero. If 

the application of the MFP adjustment to the annual update factor after application of any 

quality reporting reduction would result in an MFP-adjusted update factor that is less than 

zero, the resulting update to the ASC payment rates would be negative and payments 

would decrease relative to the prior year. Illustrative examples of how the MFP 

adjustment would be applied to the ASC payment system update are found in the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 72062 through 72064). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45175), for the 12-month period 

ending with the midpoint of CY 2013, the CPI-U update was projected to be 2.2 percent. 

Because the ASCQR Program does not affect payment rates until CY 2014, there would 

be no quality reporting reduction to the CPI-U for CY 2013. The MFP adjustment for the 
CMS-1589-FC 868 

period ending with the midpoint of CY 2013 was projected to be 0.9 percent based on the 

methodology for calculating the MFP adjustment finalized in the CY 2011 MPFS final 

rule with comment period (75 FR 73394 through 73396) as revised in the CY 2012 

MPFS final rule with comment period (76 FR 73300 through 73301). We proposed to 

reduce the CPI-U update of 2.2 percent by the MFP adjustment of 0.9 percent, resulting 

in an MFP-adjusted CPI-U update factor of 1.3 percent. Therefore, as stated in the 

CY 2013 OPPS/ASC proposed rule (77 FR 45175), we proposed to apply a 1.3 percent 

MFP-adjusted CPI-U update factor to the CY 2012 ASC conversion factor. 

For CY 2013, we also proposed to adjust the CY 2012 ASC conversion factor 

($42.627) by the wage adjustment for budget neutrality of 1.0002 in addition to the 

MFP-adjusted update factor of 1.3 percent discussed above, which resulted in a proposed 

CY 2013 ASC conversion factor of $43.190 (77 FR 45175). We invited public 

comments on these proposals. 

Comment: Commenters expressed varied opinions regarding the feasibility of 

requiring ASCs to submit cost data to the Secretary. One commenter believes that CMS 

should require ASCs to submit cost data so that an appropriate market basket for ASC 

annual updates can be identified and so that analysts can determine the costs of an 

efficient provider of ASC services. The commenter believes that reporting such data is 

feasible because businesses such as ASCs typically keep record of their costs for filing 

taxes and other purposes. In addition, this commenter pointed out that other small 

providers, including home health agencies and hospices, submit cost data to CMS. 
CMS-1589-FC 869 

Other commenters (predominantly commenters who represent ASCs) opposed a 

requirement that ASCs submit cost data to CMS. The commenters believed that a 

requirement to submit cost data would be both unnecessary and administratively 

burdensome for ASCs. 

Further, some commenters stated that requiring ASCs to submit cost data that 

would not be directly tied to receipt of payment would likely result in the submission of 

data that is unreliable. These commenters also maintained that using cost data to develop 

an ASC-specific market basket would not provide a more accurate reflection of ASC cost 

growth. Commenters believed that creating a single set of cost weights that are 

representative of the industry average would relate to few ASCs as most centers are 

specialized and would have a cost structure that is specific to the procedures they 

provide. These commenters also stated that, by CMS’ own description, the hospital 

market basket itself is an imperfect measure of hospital outpatient costs but CMS has 

rationalized use of the hospital market basket as the best available measure of costs in the 

hospital outpatient setting. The commenters believe that, likewise, the best available 

proxy to measure costs in the ASC setting is the hospital market basket. Commenters 

expressed frustration that CMS has not adopted the hospital market basket to update ASC 

payment rates and urged the agency to not waste precious resources collecting ASC cost 

data when this reasonable measure of input prices is readily available. 

Response: We thank all of the commenters for their thoughts regarding the type 

of cost information that would be feasible to collect from ASCs in the future in order to 

determine if an alternative update or an ASC-specific market basket would be a better 
CMS-1589-FC 870 

proxy for ASC cost inflation compared to the CPI-U. We will keep the commenters’ 

perspectives about collecting cost information from ASCs in mind as we consider this 

issue further. 

Comment: As in previous years, commenters requested that CMS adopt the 

hospital market basket to update the ASC payment system instead of using the CPI-U. 

The commenters explained that the CPI–U does not fairly represent the costs borne by the 

ASC industry because the prices measured in the basket of goods comprising the index 

reflect the types and weights of categories typical of an American household, rather than 

an outpatient surgical provider. Commenters believed that the hospital market basket 

more closely reflects the cost structure of ASCs than does the basket of goods included in 

the CPI-U. Commenters stated that adopting the hospital market basket to update ASC 

payment rates would minimize the divergence in CY 2013 payments in ASCs compared 

to HOPDs and would ensure continued beneficiary access to ASCs. 

Commenters also indicated that the hospital market basket is a more appropriate 

index to use for the ASC update now that CMS is required to apply the MFP adjustment 

to the ASC annual update. Commenters stated that, as an output price index, the CPI-U 

index already accounts for productivity thus ASCs, in essence, are receiving a 

productivity adjustment that is twice that applied to the HOPD update. Because CMS has 

discretion regarding the index used to update ASCs, but is required in statute to adjust the 

ASC update by the MFP, commenters urged CMS to use the hospital market basket, 

which is an input price index that does not already account for productivity, to update 

ASC payment rates and thereby allow the appropriate application of the required 
CMS-1589-FC 871 

productivity adjustment. Commenters also requested that the 10-year MFP measurement 

period be uniform in ASCs and HOPDs so that there is no discrepancy in the estimates of 

the MFP that will provide additional divergence between the ASC and HOPD updates. 

Response: While commenters argue that the items included in the CPI-U index 

may not adequately measure inflation for the goods and services provided by ASCs and 

that use of the hospital market basket would minimize the divergence in the payment 

rates between the OPPS and ASC payment system, we believe that the hospital market 

basket does not align with the cost structures of ASCs. Hospitals provide a much wider 

range of services, such as room and board and emergency services, and the costs 

associated with providing these services are not part of the ASC cost structure. 

Therefore, at this time, we do not believe that it is appropriate to use the hospital market 

basket for the ASC annual update. 

We recognize that the CPI-U is an output price index that accounts for 

productivity. However, section 1833(i)(2)(D)(v) of the Act requires the agency to reduce 

the annual update factor by the MFP adjustment. For the reasons stated above, we do not 

believe that the hospital market basket would appropriately reflect the cost structures of 

ASCs, and because we do not have cost data on ASCs, we are not able to recommend a 

more accurate update. Therefore, the CPI-U remains the most appropriate update. 

Regarding alignment of the MFP adjustment across payment systems, for reasons stated 

in the CY 2011 MPFS final rule with comment period (75 FR 73396), we believe that it 

is more appropriate to align the MFP adjustment with the update timeframes for each 

payment system rather than aligning the MFP adjustment across payment systems. 
CMS-1589-FC 872 

After consideration of the public comments we received, we are applying our 

established methodology for determining the final CY 2013 ASC conversion factor. 

Using more complete CY 2011 data for this final rule with comment period than was 

available for the proposed rule, we calculated a wage index budget neutrality adjustment 

of 1.0008. Based on updated data, the CPI-U for the 12-month period ending with the 

midpoint of CY 2013 is now projected to be 1.4 percent, while the MFP adjustment 

(using the revised IGI series to proxy the labor index used in the MFP forecast 

calculation as discussed and finalized in the CY 2012 MPFS final rule with comment 

period) is 0.8 percent, resulting in an MFP-adjusted CPI-U update factor of 0.6 percent. 

The final ASC conversion factor of $42.917 is the product of the CY 2012 conversion 

factor of $42.627 multiplied by the wage index budget neutrality adjustment of 1.0008 

and the MFP-adjusted CPI-U payment update of 0.6 percent. We also are finalizing 

proposed changes to §§ 416.160(a)(1) and 416.171, without modification, regarding the 

reduction to payment rates beginning in CY 2014 for ASCs that fail to meet the ASCQR 

Program requirements. 

3. Display of CY 2013 ASC Payment Rates 

Addenda AA and BB to this CY 2013 OPPS/ASC final rule with comment period 

(which are available via the Internet on the CMS Web site) display the final updated ASC 

payment rates for CY 2013 for covered surgical procedures and covered ancillary 

services, respectively. These addenda contain several types of information related to the 

CY 2013 payment rates. Specifically, in Addendum AA, a “Y” in the column titled 

“Subject to Multiple Procedure Discounting” indicates that the surgical procedure will be 
CMS-1589-FC 873 

subject to the multiple procedure payment reduction policy. As discussed in the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66829 through 66830), most covered 

surgical procedures are subject to a 50-percent reduction in the ASC payment for the 

lower-paying procedure when more than one procedure is performed in a single operative 

session. Display of the comment indicator “CH” in the column titled “Comment 

Indicator” indicates a change in payment policy for the item or service, including 

identifying discontinued HCPCS codes, designating items or services newly payable 

under the ASC payment system, and identifying items or services with changes in the 

ASC payment indicator for CY 2013. Display of the comment indicator “NI” in the 

column titled “Comment Indicator” indicates that the code is new (or substantially 

revised) and that the payment indicator assignment is an interim assignment that is open 

to comment in this final rule with comment period. 

The values displayed in the column titled “CY 2013 Payment Weight” are the 

relative payment weights for each of the listed services for CY 2013. The payment 

weights for all covered surgical procedures and covered ancillary services whose ASC 

payment rates are based on OPPS relative payment weights were scaled for budget 

neutrality. Thus, scaling was not applied to the device portion of the device-intensive 

procedures, services that are paid at the MPFS nonfacility PE RVU-based amount, 

separately payable covered ancillary services that have a predetermined national payment 

amount, such as drugs and biologicals and brachytherapy sources that are separately paid 

under the OPPS, or services that are contractor-priced or paid at reasonable cost in ASCs. 
CMS-1589-FC 874 

To derive the CY 2013 payment rate displayed in the “CY 2013 Payment” 

column, each ASC payment weight in the “CY 2013 Payment Weight” column was 

multiplied by the CY 2013 conversion factor of $42.917. The conversion factor includes 

a budget neutrality adjustment for changes in the wage index values and the annual 

update factor as reduced by the productivity adjustment (as discussed in section 

XIV.H.2.b. of this final rule with comment period). 

In Addendum BB, there are no relative payment weights displayed in the 

“CY 2013 Payment Weight” column for items and services with predetermined national 

payment amounts, such as separately payable drugs and biologicals. The “CY 2013 

Payment” column displays the CY 2013 national unadjusted ASC payment rates for all 

items and services. The CY 2013 ASC payment rates listed in Addendum BB for 

separately payable drugs and biologicals are based on ASP data used for payment in 

physicians’ offices in October 2012. 

Addendum EE provides the HCPCS codes and short descriptors for surgical 

procedures that are to be excluded from payment in ASCs for CY 2013. 

We did not receive any public comments regarding the continuation of our policy 

to provide CY 2013 ASC payment information as detailed in Addenda AA and BB. 

Therefore, Addenda AA and BB to this final rule with comment period (which are 

available via the Internet on the CMS Web site) display the updated ASC payment rates 

for CY 2013 for covered surgical procedures and covered ancillary services, respectively, 

and provide additional information related to the CY 2013 rates. 
CMS-1589-FC 875 

XV. Hospital Outpatient Quality Reporting Program Updates 

A. Background

1. Overview 

CMS has implemented quality measure reporting programs for multiple settings 

of care. These programs promote higher quality, more efficient health care for Medicare 

beneficiaries. The quality data reporting program for hospital outpatient care, known as 

the Hospital Outpatient Quality Reporting (Hospital OQR) Program, formerly known as 

the Hospital Outpatient Quality Data Reporting Program (HOP QDRP), has been 

generally modeled after the quality data reporting program for hospital inpatient services 

known as the Hospital Inpatient Quality Reporting (Hospital IQR) Program (formerly 

known as the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) 

Program). Both of these quality reporting programs for hospital services have financial 

incentives for the reporting of quality data to CMS.

CMS also has implemented quality reporting programs for long term care 

hospitals, inpatient rehabilitation hospitals, the hospice program, ambulatory surgical 

centers (the Ambulatory Surgical Center Quality Reporting (ASCQR) Program), as well 

as a program for physicians and other eligible professionals, known as the Physician 

Quality Reporting System (PQRS) (formerly known as the Physician Quality Reporting 

Initiative (PQRI)). CMS has recently finalized quality reporting programs for inpatient 

psychiatric facilities and PPS-exempt cancer hospitals.
CMS-1589-FC 876 

Finally, CMS has implemented a Hospital Value-Based Purchasing Program and 

an end-stage renal disease (ESRD) Quality Incentive Program (76 FR 628 through 646) 

that link payment to performance.

In implementing the Hospital OQR Program and other quality reporting 

programs, we have focused on measures that have high impact and support national 

priorities for improved quality and efficiency of care for Medicare beneficiaries as 

reflected in the National Quality Strategy, as well as conditions for which wide cost and 

treatment variations have been reported, despite established clinical guidelines. Our 

ultimate goal is to align the clinical quality measure requirements of the Hospital OQR 

Program and various other programs, such as the Hospital IQR Program, the ASCQR 

Program, and the Medicare and Medicaid Electronic Health Record (EHR) Incentive 

Programs, authorized by the Health Information Technology for Economic and Clinical 

Health Act, so that the burden for reporting will be reduced. As appropriate, we will 

consider the adoption of measures with electronic specifications, to enable the collection 

of this information as part of care delivery. Establishing such an alignment will require 

interoperability between electronic health records (EHRs), and CMS data collection 

systems, with data being calculated and submitted via certified EHR technology; 

additional infrastructural development on the part of hospitals and CMS; and the adoption 

of standards for capturing, formatting, and transmitting the data elements that make up 

the measures. Once these activities are accomplished, the adoption of many measures 

that rely on data obtained directly from EHRs will enable us to expand the Hospital OQR 

Program measure set with less cost and burden to hospitals.
CMS-1589-FC 877 

In implementing this and other quality reporting programs, we generally applied 

the same principles for the development and the use of measures, with some differences: 

● Our overarching goal is to support the National Quality Strategy’s goal of 

better health care for individuals, better health for populations, and lower costs for health 

care. The Hospital OQR Program will help achieve these goals by creating transparency 

around the quality of care at hospital outpatient departments to support patient decisionmaking and quality improvement. Given the availability of well validated measures and 

the need to balance breadth with minimizing burden, measures should take into account 

and address, as fully as possible, the six domains of measurement that arise from the six 

priorities of the National Quality Strategy: Clinical care; Person- and caregiver-centered 

experience and outcomes; Safety; Efficiency and cost reduction; Care coordination; and 

Community/population health. More information regarding the National Quality Strategy 

can be found at: http://www.healthcare.gov/law/resources/reports/. HHS engaged a wide 

range of stakeholders to develop the National Quality Strategy, as required by the 

Affordable Care Act.

● Pay-for-reporting and public reporting should rely on a mix of standards, 

processes, outcomes, efficiency, and patient experience of care measures, including 

measures of care transitions and changes in patient functional status.

● To the extent possible and recognizing differences in payment system maturity 

and statutory authorities, measures should be aligned across Medicare and Medicaid 

public reporting and incentive payment systems to promote coordinated efforts to 

improve quality. The measure sets should evolve so that they include a focused set of 
CMS-1589-FC 878 

measures appropriate to the specific provider category that reflects the level of care and 

the most important areas of service and measures for that provider category.

● We weigh the relevance and the utility of measures compared to the burden on 

hospitals in submitting data under the Hospital OQR Program. The collection of 

information burden on providers should be minimized to the extent possible. To this end, 

we are working toward the eventual adoption of electronically-specified measures so that 

data can be calculated and submitted via certified EHR technology with minimal burden. 

We also seek to use measures based on alternative sources of data that do not require 

chart abstraction or that utilize data already being reported by many hospitals, such as 

data that hospitals report to clinical data registries, or all-payer claims databases. In 

recent years we have adopted measures that do not require chart abstraction, including 

structural measures and claims-based measures that we can calculate using other data 

sources.

● To the extent practicable and feasible, and recognizing differences in statutory 

authorities, measures used by CMS should be endorsed by a national, multi-stakeholder 

organization. We take into account the views of the Measure Application Partnership 

(MAP). The MAP is a public-private partnership convened by the National Quality 

Forum (NQF) for the primary purpose of providing input to HHS on selecting 

performance measures for quality reporting programs and pay for reporting programs. 

The MAP views patient safety as a high priority area and it strongly supports the use of 

NQF-endorsed safety measures. Accordingly, we consider the MAP’s recommendations 

in selecting quality and efficiency measures. Information about the MAP can be found at 
CMS-1589-FC 879 

http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partn

ership.aspx

● Measures should be developed with the input of providers, purchasers/payers, 

consumers, and other stakeholders. Measures should be aligned with best practices 

among other payers and the needs of the end users of the measures. We take into account 

widely accepted criteria established in medical literature.

● HHS Strategic Plan and Initiatives. HHS is the U.S. government’s principal 

agency for protecting the health of all Americans. HHS accomplishes its mission through 

programs and initiatives. Every 4 years HHS updates its Strategic Plan and measures its 

progress in addressing specific national problems, needs, or mission-related challenges. 

The goals of the HHS Strategic Plan for Fiscal Years 2010 through 2015 are to: 

Transform Health Care; Advance Scientific Knowledge and Innovation; Advance the 

Health, Safety, and Well-Being of the American People; Increase Efficiency, 

Transparency, and Accountability of HHS Programs; and Strengthen the Nation’s Health 

and Human Services Infrastructure and Workforce 

(http://www.hhs.gov/about/FY2012budget/strategicplandetail.pdf). HHS prioritizes 

policy and program interventions to address the leading causes of death and disability in 

the United States, including heart disease, cancer, stroke, chronic lower respiratory 

diseases, unintentional injuries and preventable behaviors. Initiatives such as the HHS 

Action Plan to Reduce Healthcare-associated Infections (HAIs) in clinical settings and 

the Partnership for Patients exemplify these programs.
CMS-1589-FC 880 

● CMS Strategic Plan. We strive to ensure that measures for different Medicare 

and Medicaid programs are aligned with priority quality goals, that measure 

specifications are aligned across settings, that outcome measures are used whenever 

possible, and that quality measures are collected from EHRs as appropriate

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74451 through 

74452), we responded to public comment on many of these principles. In the CY 2013 

OPPS/ASC proposed rulemaking, we generally applied the same principals for our 

considerations for future measures, with some differences.

Comment: Many commenters supported CMS’ general principles of measure 

development, selection, and implementation, specifically, CMS’ combined approach of 

using process and outcomes measures, as well as our intent to adopt NQF-endorsed 

measures whenever feasible, and to align measures across settings under different quality 

reporting programs. One commenter stated that CMS should only adopt measures that 

are useful for hospital outpatient departments to improve their quality performance.

A few commenters recommended that the Hospital OQR Program only adopt 

NQF-endorsed measures which undergo established sound, and timely measure 

maintenance and update procedures. Several commenters urged that CMS proceed 

cautiously when considering adopting non-NQF-endorsed measures, which in some cases 

may not have been rigorously field-tested and may end up in subsequent suspension or 

implementation deferral. Commenters requested that CMS delay adoption of measures in 

the future until specification problems are completely ironed out so that hospitals do not 

have to spend resources on preparing for incompletely specified or untested measures.
CMS-1589-FC 881 

Response: As discussed, we usually focus on measures appropriate to the specific 

provider category that reflect the level of care and the most important areas of service and 

measures for that provider category. Section 1833(t)(17)(C)(i) of the Act requires the 

Secretary to ‘‘develop measures that the Secretary determines to be appropriate for the 

measurement of the quality of care (including medication errors) furnished by hospitals in 

outpatient settings and that reflect consensus among affected parties and, to the extent 

feasible and practicable, shall include measures set forth by one or more national 

consensus building entities.’’ This provision does not require that the measures we adopt 

for the Hospital OQR Program be endorsed by any particular entity, and we believe that 

consensus among affected parties can be achieved by means other than endorsement by a 

national consensus building entity, including through the measure development process, 

through broad acceptance and use of the measure(s), and through public comment.

Generally, we prefer to adopt NQF-endorsed measures. We rely on NQF to 

endorse only those measures that have met the rigorous field testing requirement and we 

do not re-test these measures prior to adoption. However, in some circumstances, as with 

OP-19, when we find the specifications require revision after the measure has been 

adopted, CMS chooses to suspend a measure rather than requiring continued data 

collection to alleviate burden on hospitals. 

We strive to field test each measure we use in our programs. However, on rare 

occasions, we adopt measures that were developed and tested by other measure stewards. 

With respect to the commenters who recommended that, in the future, we delay adoption 

of measures until specification problems are completely resolved so that hospitals would 
CMS-1589-FC 882 

not have to spend resources on preparing for incompletely specified or untested 

measures, we believe the commenters may have been referring specifically to one 

measure-- OP-24: Cardiac Rehabilitation Patient Referral from an Outpatient Setting. 

For that measure, we are delaying data collection until January 1, 2014, and its 

application toward a payment determination will be for CY 2015 rather than CY 2014. If 

our interpretation of the comment was correct, we understand the commenter’s concerns. 

However, we clarify that because we have not added any OP-24 measure specifications to 

the Specification Manual yet, it is highly unlikely that hospitals would have spent 

resources in preparing for this measure. 

In instances where we develop our measures, we do proceed with caution, 

employing a rigorous consensus-based measure development and field testing process 

that incorporates broad stakeholder input. Therefore, we believe it is reasonable to adopt 

measures developed in this manner whether or not they achieve NQF endorsement. For 

those measures that we have not developed, we strive to obtain testing information on the 

technical aspects from the developer and to work with the developer to create 

specifications that enable standardized collection in national programs. In the case of 

measures we do not develop, the above specification process may occur after adoption of 

the measure in a reporting program, but prior to implementing data collection.

Comment: Some commenters supported CMS’ goal to align measures in the 

Hospital IQR, Hospital OQR, and Medicare and Medicaid EHR Incentive Programs. 

Commenters also commended CMS for striving for quality reporting that is based upon 

meaningful and comparable measures.
CMS-1589-FC 883 

Response: We thank the commenters for supporting our strategy to align 

measures across settings and programs whenever feasible and to move toward more 

meaningful measures in our programs.

2. Statutory History of the Hospital Outpatient Quality Reporting (Hospital OQR) 

Program 

We refer readers to the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72064) for a detailed discussion of the statutory history of the Hospital OQR 

Program. 

3. Measure Updates and Data Publication 

a. Process for Updating Quality Measures 

Technical specifications for the Hospital OQR Program measures are listed in the 

Hospital OQR Specifications Manual, which is posted on the CMS QualityNet Web site 

at: 

http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage

%2FSpecsManualTemplate&cid=1228772438492. 

We maintain the technical specifications for the measures by updating this 

Hospital OQR Specifications Manual and including detailed instructions and calculation 

algorithms. In some cases where the specifications are available elsewhere, we may 

include links to Web sites hosting technical specifications. These resources are for 

hospitals to use when collecting and submitting data on required measures. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 through 

68767), we established an additional subregulatory process for making updates to the 
CMS-1589-FC 884 

measures we have adopted for the Hospital OQR Program. This process is necessary so 

that the Hospital OQR measures are calculated based on the most up-to-date scientific 

and consensus standards. Under this process, when a national consensus building entity 

updates the specifications for a measure that we have adopted for the Hospital OQR 

Program, we update our specifications for that measure accordingly. For measures that 

are not endorsed by a national consensus building entity, the subregulatory process is 

based on scientific advances as determined necessary by CMS, in part, through our 

measure maintenance process involving Technical Expert Panels (73 FR 68767). We 

provide notice of the updates via the QualityNet Web site, http://www.QualityNet.org, 

and in the Hospital OQR Specifications Manual. 

We generally release the Hospital OQR Specifications Manual every 6 months 

and release addenda as necessary. This release schedule provides at least 3 months of 

advance notice for nonsubstantive changes such as changes to ICD-9, CPT, NUBC, and 

HCPCS codes, and at least 6 months of advance notice for changes to data elements that 

would require significant systems changes. 

Comment: One commenter believed that conversion of measures to use 

ICD-10-CM/PCS and eMeasure formats should be considered a substantial change and 

should warrant the proposed rulemaking process. One commenter asserted that there are 

shortcomings in the CMS subregulatory process. The commenter was concerned that this 

rapid subregulatory process may not include a field review of the measure. Secondly, the 

commenter stated that some measure changes affect data accuracy and completeness, 

such as change of diagnosis, procedure codes and changes to exclusions to the patient 
CMS-1589-FC 885 

population and extended application of the measure to other hospital locations. The 

commenter believed that these are substantive changes rather than non-substantive 

changes as noted by CMS. 

Response: We will be transitioning all of our billing and measurement systems 

from ICD-9 to ICD-10. We intend to solicit public comment on the ICD-10 versions of 

our measure specifications through future rulemaking prior to implementation. We 

normally incorporate coding updates for the measures using our established subregulatory 

process because such updates do not change the basic underlying concepts being 

measured. This is theoretically true of moving from ICD-9 to the ICD-10 coding system 

(or eMeasure format). However, we recognize that in moving to ICD-10 coding (or 

eMeasure format) there may be some nuances in the measures that when translated result 

in unanticipated differences in performance, rendering prior measure results untrendable 

with results for the same measures under the new coding system. We also intend to study 

this effect further once implementation has occurred and data are available to do so. 

In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504), we indicated that 

examples of what we might generally regard as nonsubstantive changes to measures 

might include updated diagnosis or procedure codes, medication updates for categories of 

medications, or a broadening of age ranges. We believe that nonsubstantive changes may 

also include updates to NQF-endorsed measures based upon changes to guidelines upon 

which the measures are based. We note that the NQF process has already incorporated an 

opportunity for public comment and engagement in the measure maintenance process. 
CMS-1589-FC 886 

We will continue to use rulemaking to adopt substantive updates made by the 

NQF to the endorsed measures we have adopted for the Hospital OQR Program. 

Examples of changes that we might generally consider to be substantive would be those 

in which the changes are so significant that the measure is no longer the same measure, or 

when a standard of performance assessed by a measure becomes more stringent (for 

example, changes in acceptable timing of medication, NQF expansion of endorsement of 

a previously endorsed measure to a new setting, procedure/process, or test 

administration). However, these and other changes would need to be evaluated on a 

case-by-case basis to determine whether or not a change to a measure is in fact 

substantive. 

Comment: A few commenters expressed concern that the CMS procedures for 

notifying providers of significant changes to quality measures and general changes to the 

Hospital OQR Program may be problematic at times, as e-mail blasts, one of the CMS 

communication methods, do not always reach the appropriate quality measure personnel. 

The commenters requested consistency in transparency of CMS’ communications to 

hospitals, vendors, and QIOs and requested sufficient notice be given to hospitals 

regarding the new start date of any measure changes. 

Response: We thank these commenters for feedback on communication. We 

endeavor to communicate clearly to all Hospital OQR Program stakeholders. We offer 

e-mail blasts to subscribers who sign up to receive them, indicating they prefer to receive 

information by e-mail. The QualityNet Web site contains a full list of all e-mail blasts 

sent, and it is available for any stakeholder to review at any time. We do not intend the 
CMS-1589-FC 887 

listserv to replace QualityNet as the primary source for information and resources for the 

Hospital OQR Program. 

We offer a helpline that is available weekdays to offer technical support and 

assistance to callers, in an effort to help any caller successfully comply with program 

requirements. Please find this helpline and program contact information by visiting the 

QualityNet Web site at https://www.qualitynet.org. From this page, choose “HospitalsOutpatient” from the drop down menus across the top of the page, then click on “Support 

Contact.” 

Comment: A few commenters appreciated the 6-month advance notice of data 

elements and system changes but noted that the 6-month period for measure update and 

Specifications Manual release may not provide sufficient time for hospitals to make 

changes in data elements and system. Another commenter requested more detailed 

instructions on chart abstraction be provided because the training Qs and As posted on 

the QualityNet Web site are insufficient and appear to contradict the Specifications 

Manual at times. 

Response: Our experience with this and other quality reporting programs 

indicates that 6 months’ notice is sufficient for hospitals and their vendors to 

accommodate data element and system changes. We provide detailed abstraction 

instructions in our measure Specifications Manual, and provide additional guidance 

through Qs and As posted on the QualityNet Web site, and by offering periodic training. 

We will take into consideration the recommendation to provide more detailed 

instructions on chart abstraction due to insufficient Qs and As posted on the QualityNet 
CMS-1589-FC 888 

Web site. We are aware of a specific situation we corrected earlier this year. Under the 

ED Throughput topic, we had two contradictory answers posted within our Qs and As for 

a brief period. We have corrected the situation and we apologize for the confusion it may 

have caused. 

We will address this comment by having our primary support contractor review 

the current and incoming Qs and As to look for opportunities to incorporate answers into 

the Specifications Manual where appropriate. We strive to maintain high quality Qs and 

As that stakeholders can use as a reference for chart abstraction and measure 

specifications. 

b. Publication of Hospital OQR Program Data 

Section 1833(t)(17)(E) of the Act requires that the Secretary establish procedures 

to make data collected under the Hospital OQR Program available to the public. It also 

states that such procedures must ensure that a hospital has the opportunity to review the 

data that are to be made public, with respect to the hospital prior to such data being made 

public. To meet these requirements, data that a hospital has submitted for the Hospital 

OQR Program are typically provided to hospitals for a preview period via QualityNet, 

and then displayed on CMS Web sites such as the Hospital Compare Web site, 

http://www.hospitalcompare.hhs.gov following the preview period. The Hospital 

Compare Web site is an interactive Web tool that assists beneficiaries by providing 

information on hospital quality of care. We believe this information motivates 

beneficiaries to work with their doctors and hospitals to discuss the quality of care 
CMS-1589-FC 889 

hospitals provide to patients, thus providing additional incentives to hospitals to improve 

the quality of care that they furnish. 

Under our current policy, we publish quality data by the corresponding hospital 

CMS Certification Number (CCN), and indicate instances where data from two or more 

hospitals are combined to form the publicly reported measures on the Hospital Compare

Web site. That is, in a situation in which a larger hospital has taken over ownership of a 

smaller hospital, the smaller hospital’s CCN will be replaced by the larger hospital’s 

CCN (the principal CCN). For data display purposes, we will only display data received 

under the principal CCN. If both hospitals are submitting data, those data are not 

distinguishable in the warehouse; and the data is calculated together as one hospital. 

Consistent with our current policy, we make Hospital IQR and Hospital OQR data 

publicly available whether or not the data have been validated for payment purposes. 

The Hospital Compare Web site currently displays information covering process of care, 

structural, ED throughput timing, health IT, and imaging efficiency measure data under 

the Hospital OQR Program. 

In general, we strive to display hospital quality measures on the Hospital 

Compare Web site as soon as possible, after they have been adopted and have been 

reported to CMS. However, if there are unresolved display issues or pending design 

considerations, we may make the data available on other, non-interactive, CMS Web sites 

such as http://www.cms.hhs.gov/HospitalQualityInits/. Publicly reporting the 

information in this manner, though not on the interactive Hospital Compare Web site, 

allows us to meet the requirement under section 1833(t)(17)(E) of the Act for establishing 
CMS-1589-FC 890 

procedures to make quality data submitted available to the public following a preview 

period. When we display hospital quality information on non-interactive CMS Web sites, 

affected parties will be notified via CMS listservs, CMS e-mail blasts, memoranda, 

Hospital Open Door Forums, national provider calls, and QualityNet announcements 

regarding the release of preview reports followed by the posting of data on a Web site 

other than Hospital Compare. 

We also require hospitals to complete and submit a registration form 

(“participation form”) in order to participate in the Hospital OQR Program. With 

submission of this participation form, participating hospitals agree that they will allow 

CMS to publicly report the quality measure data submitted under the Hospital OQR 

Program, including measures that we calculate using Medicare claims. 

Comment: One commenter urged CMS to continue to use both stakeholders and 

focus groups to develop and evaluate terminology to present user-friendly measurement 

data on Hospital Compare. The commenter believed this procedure would help to 

decrease misinformation and unnecessary alarm to patients. Another commenter 

questioned the value of the “old” data and the “outdated time-frame of data collection 

period” presented in Hospital Compare, in facilitating health care decisions by Medicare 

beneficiaries. 

Response: On Hospital Compare, we strive to provide consumers with 

meaningful information that they can use to help make healthcare decisions. When 

warranted, we use formative consumer testing to assure the language and display of 

information makes sense to consumers before posting. Formative testing allows CMS to 
CMS-1589-FC 891 

adjust displays and language so that they are more meaningful to consumers based on 

consumer feedback. At the same time, we believe that it is critical to maintain the 

integrity of the measure intent, thereby not simplifying the data too much as to risk 

making the information so general that it is not meaningful. 

The data we publicly report do not all have the same performance period. For 

example, the process-of-care measures are collected quarterly and are displayed as a 

rolling four quarters of data on Hospital Compare. We allow 4 to 4.5 months after the 

reporting quarter for hospitals to submit their complete data to the CMS clinical data 

warehouse. In contrast, the outcomes measures are calculated using 3 years of data from 

Medicare fee for service claims. 

Comment: One commenter was concerned that the display of the acceptable 

quality range and benchmarks publicly reported for the Outpatient Imaging Efficiency 

(OIE) measures may cause unnecessary alarm to consumers. 

Response: We appreciate the commenter’s concerns. To provide meaningful 

performance benchmarks, we will emphasize the “within range” rates and facility outlier 

results in a facility’s public reporting so as to minimize the potential for negatively 

affecting access to imaging services. In addition, we continue to use both stakeholder 

and focus groups for developing and evaluating terminology for presenting measurement 

data to the public, in order to avoid misleading or alarming patients unnecessarily. 
CMS-1589-FC 892 

B. Process for Retention of Hospital OQR Program Measures Adopted in Previous 

Payment Determinations

In past rulemakings, we have proposed to retain previously adopted measures for 

each payment determination on a year-by-year basis and invited public comments on the 

proposal to retain such measures for all future payment determinations unless otherwise 

specified. In the CY 2013 OPPS/ASC proposed rule (77 FR 45178), for the purpose of 

streamlining the rulemaking process, beginning with this rulemaking, we proposed that 

when we adopt measures for the Hospital OQR Program beginning with a payment 

determination and subsequent years, these measures are automatically adopted for all 

subsequent year payment determinations unless we propose to remove, suspend, or 

replace the measures. We invited public comment on this proposal. 

Comment: Some commenters recognized the importance of stability and 

consistency in the Hospital OQR Program set and supported the proposed automatic 

retention of Hospital OQR Program measures adopted in a previous year for subsequent 

payment year determinations. One commenter stated that proposed rulemakings should 

be devoted to address new changes rather than repeating discussions of continuing 

measures previously adopted. However, the commenter urged CMS to publish the full 

list of measures to be continued, in the OPPS/ASC proposed rule each year. The 

commenter believed publishing the list of measures would provide the public the 

opportunity to comment and to share experience on current measures. 

Response: We appreciate the commenters’ recognition of the importance of our 

goal to streamline the administrative process in rulemaking. As suggested by the 
CMS-1589-FC 893 

commenters, we will continue to publish the full list of measures to be continued in the 

OPPS proposed rules, for the public to provide input and share experience. 

Comment: A few commenters urged that CMS continue to propose all Hospital 

OQR Program measures adopted, on an annual basis. Commenters were concerned that 

if measure retention occurs without going through the rulemaking process year by year, 

irrelevant and obsolete measures may not be removed timely, and the transparency of the 

rulemaking process will be compromised. 

Response: We do not believe the proposed measure retention policy will 

compromise the transparency in rulemaking or slow down the removal or suspension of 

problematic measures. Rather, the measure retention policy would enhance 

administrative efficiency while providing clear expectations to hospital providers. 

Should we decide there is a need to remove or suspend a measure for concerns of patient 

safety, we will act expeditiously to remove or suspend the measure between rulemaking 

cycles. We will notify the public by using memoranda, e-mail blasts distributed through 

QualityNet, and news postings on the “Splash page” on QualityNet. We will thereafter 

confirm the removal or suspension of the measure through rulemaking. 

In the FY 2010 IPPS/LTCH PPS rulemaking, we adopted a process for the 

Hospital IQR Program for immediate measure removal based on evidence that the 

continued use of the measure as specified raises patient safety concerns. In the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60634), we adopted this same policy 

to be used in the Hospital OQR Program. Furthermore, should we determine that a 

measure is problematic based upon other criteria stated in the CY 2013 OPPS/ASC 
CMS-1589-FC 894 

proposed rule (77 FR 45178), we will utilize rulemaking to propose the removal or 

suspension of the measure and obtain public comment prior to determining whether to 

remove or suspend the measure. 

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

automatic retention of Hospital OQR Program measures adopted in previous payment 

determinations for subsequent year payment determinations. 

C. Removal or Suspension of Quality Measures from the Hospital OQR Program 

Measure Set

1. Considerations in Removing Quality Measures from the Hospital OQR Program 

In the FY 2010 IPPS/LTCH PPS rulemaking, we finalized a process for 

immediate retirement of Hospital IQR Program measures based on evidence that the 

continued use of the measure as specified raises patient safety concerns (74 FR 43864 

through 43865). We adopted this same immediate measure retirement policy for the 

Hospital OQR Program in the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60634). 

In previous Hospital IQR Program rulemakings, we have referred to the removal 

of measures from the Hospital IQR Program as “retirement.” We have used this term to 

indicate that Hospital IQR Program measures are no longer included in the Hospital IQR 

Program measure set for one or more indicated reasons. However, we note that this term 

may imply that other payers/purchasers/programs should cease using these measures that 

are no longer required for the Hospital IQR Program. In order to clarify that this is not 

our intent, we stated in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28034) that 
CMS-1589-FC 895 

we will use the term “remove” rather than “retire” to refer to the action of no longer 

including a measure in the Hospital IQR Program. In the CY 2013 OPPS/ASC proposed 

rule (77 FR 45178), we proposed to adopt the same terminology of “removal” in the 

Hospital OQR Program to indicate our action of discontinuing a measure in the Hospital 

OQR Program. 

In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), we finalized a set of 

criteria to use when determining whether to remove Hospital OQR Program measures. 

These criteria are: (1) measure performance among hospitals is so high and unvarying 

that meaningful distinctions and improvements in performance can no longer be made 

(“topped out” measures); (2) performance or improvement on a measure does not result 

in better patient outcomes; (3) a measure does not align with current clinical guidelines or 

practice; (4) the availability of a more broadly applicable (across settings, populations, or 

conditions) measure for the topic; (5) the availability of a measure that is more proximal 

in time to desired patient outcomes for the particular topic; (6) the availability of a 

measure that is more strongly associated with desired patient outcomes for the particular 

topic; and (7) collection or public reporting of a measure leads to negative unintended 

consequences such as patient harm. These criteria were suggested by commenters during 

Hospital IQR Program rulemaking, and we determined that these criteria are also 

applicable in evaluating Hospital OQR Program quality measures for removal. In the 

CY 2013 OPPS/ASC proposed rule (77 FR 45178), we proposed to apply these measure 

removal criteria in the Hospital OQR Program as well, and we invited public comments 

on these proposals. 
CMS-1589-FC 896 

In addition to these criteria, we take into account the views of the Measure 

Application Partnership (MAP) in the evaluation of measure removal. The MAP is a 

public-private partnership convened by the NQF for the primary purpose of providing 

input to HHS on selecting performance measures for certain quality reporting programs 

and pay for performance programs. The MAP views patient safety as a high priority area 

and it strongly supports the use of NQF-endorsed measures. Furthermore, for efficiency 

and streamlining purposes, we strive to eliminate redundancy of similar measures. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45178), we did not propose to 

retire any measures from the Hospital OQR Program. 

Comment: A few commenters agreed with CMS that the term “removal” is 

preferable to “retirement” as the measure at issue may still be relevant in other 

payers/purchasers/programs. The commenters supported all of the proposed measure 

removal criteria. One commenter noted that CMS should not always choose the 

availability of measures applicable to a broader patient population as a measure removal 

criterion, over focused measures targeted at subsets of patient population. The 

commenter asserted that in some instances, condition-specific measures are warranted. 

Response: We thank the commenters for the support of the measure removal 

criteria. We are cognizant that some focused measures targeted at subsets of patient 

population are also relevant in the Hospital OQR Program. We want to clarify that 

before considering the removal of a measure in any given situation, we first assess 

whether the removal criteria are relevant. We would not be likely to propose the removal 

of a measure because there is a measure with broader applicability if what we seek to 
CMS-1589-FC 897 

measure requires a more targeted, condition or patient-specific assessment. We might, on 

the other hand, consider removal of a measure based on the availability of a measure that 

is more strongly associated with desired patient outcomes for a particular topic, since this 

might result in a focused measure that is targeted to subsets of patient populations. In any 

given situation, we will focus only on removal criteria that are relevant to a particular set 

of circumstances. If more than one of the measure removal criteria appears to be 

relevant, we intend to take a balanced approach in assessing the value of each of the 

different criteria in a given situation before removing any measure. 

Comment: One commenter requested that besides using CMS program data, 

CMS should also solicit input from developers and analyze data from EHRs and 

registries to identify topped-out measures. To avoid the unintended consequence of 

hospitals not spending resources on specific interventions due to measure removal, one 

commenter urged CMS to suspend the measures at issue rather than removing measures 

whenever feasible. In addition, the commenter requested that CMS solicit public input 

before suspending or removing a measure. 

Response: We expect hospitals to always follow appropriate standard of care and 

clinical guidelines in exercising positive interventions, regardless of whether a measure is 

being suspended or removed. Should we propose to remove measures using the 

rulemaking process, we seek input from the public, including measure developers and 

entities using EHRs to collect the measures. However, in the case of suspension or 

removal due to patient safety concerns, action would need to be taken quickly and may 

not coincide with rulemaking cycles. Should this occur, we would seek to suspend 
CMS-1589-FC 898 

measures in situations where we believe the measure can be re-specified in a manner that 

would not be overly prescriptive or overly burdensome to providers. 

Comment: A few commenters urged CMS to closely align its measure removal 

with the MAP recommendations. The commenters cited as examples of measures that 

should be removed 7previously adopted Hospital OQR Program measures that are not 

NQF-endorsed and not recommended by the MAP. 

Response: As we have already stated, we consider all of the MAP input we 

receive, including its recommendations for removal of measures, before making a 

decision about removing or keeping any particular measure. We did not include any 

proposals regarding the 7 measures that the commenters mentioned in the CY 2013 

OPPS/ASC proposed rule. As such, we are not making any revisions to these measures 

in this rulemaking. However, we thank the commenters for these measure removal 

suggestions and will take them into consideration for future measure removal. 

We note that section 1833(t)(17)(C)(i) of the Act requires the Secretary to develop 

measures that the Secretary determines to be appropriate for the measurement of the 

quality of care furnished by hospitals in outpatient settings and that reflect consensus 

among affected parties and, to the extent feasible and practicable to include measures set 

forth by one or more national consensus building entities. The Act does not require that 

the measures we adopt for the Hospital OQR Program be endorsed by any particular 

entity, such as the NQF. In addition, we believe that consensus among affected parties 

can be reflected by means other than endorsement by a national consensus building 

entity, including consensus achieved during the measure development process, consensus 
CMS-1589-FC 899 

shown through broad acceptance and use of measures, and consensus through public 

comment. Finally, the Act does not require us to do more than consider MAP input.

Comment: One commenter inquired about the criteria for resuming data 

collection for measures that are removed or temporarily suspended from the Hospital 

OQR Program. 

Response: Measures that are removed must be proposed through rulemaking in 

order to be added back to the program prior to collecting data. For suspended measures, 

we will strive to align with the regular quarterly collection cycle that has been established 

for chart-abstracted measures, and we will provide sufficient notice (at least 3 months) 

prior to resuming collection of suspended measures. We will notify hospitals of resumed 

collection the same way we notify them of suspension - through QualityNet memoranda 

and e-mail blasts. We also intend to issue addenda to Specifications Manual releases. 

However, should we determine that the re-specified measure is substantively changed; 

that is, changes have been made that affect the underlying quality concepts being 

measured, we would use rulemaking to formally propose to replace the suspended 

measure with the modified measure. As we have noted in an earlier response, examples 

of changes that we might generally consider to be substantive would be those in which 

the changes are so significant that the measure is no longer the same measure, or when a 

standard of performance assessed by a measure becomes more stringent. 

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

term “removal” to indicate future action of discontinuing a measure in the Hospital OQR 

Program. Also, we are finalizing the adoption of the measure removal criteria used in the 
CMS-1589-FC 900 

Hospital IQR Program for the Hospital OQR Program. We also thank the commenters 

for the suggestions to keep, remove, or change the status of some of the measures we 

previously adopted. At this time, we intend to keep the measures as adopted. 

2. Removal of One Chart-Abstracted Measure for the CY 2013 and Subsequent Years 

Payment Determinations 

In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43863), we established a 

precedent to immediately remove a measure from a measure set using a subregulatory 

notification process followed by subsequent confirmation in rulemaking in situations 

when there is a reason to believe that continued collection of the measure raises patient 

safety concerns, and the measure cannot be reasonably revised in a manner that would 

alleviate the concern without being overly complex. For CY 2013 and subsequent year 

payment determinations, we are confirming what we stated in our August 13, 2012, 

memorandum “Removal of Hospital Outpatient Quality Reporting Measure (OQR) 

OP-16: Troponin results for Emergency Department acute myocardial infarction (AMI) 

patients or chest pain patients (with Probable Cardiac Chest Pain) Received Within 60 

minutes of arrival” that we have removed measure OP-16. (To review this memorandum, 

visit http://www.qualitynet.org; from this page, choose “Hospitals-Outpatient” from the 

drop down menus across the top of the page, then click on “Email-Notifications.” 

Memoranda are listed by date of publication.) 

We adopted measure OP-16 for the Hospital OQR Program for the CY 2013 

payment determination with data collection beginning with January 1, 2012 encounters. 

However, we are removing OP-16 from the Hospital OQR measure set based on patient 
CMS-1589-FC 901 

safety concerns. On July 11, 2012 the Food and Drug Administration (FDA) issued a 

Class I recall on several point of care (POC) testing kits, including those that provide 

Troponin results. The Class I recall was due to an increased frequency of false positive 

and false negative results. FDA defines a Class I recall as: “a situation in which there is a 

reasonable probability that the use of or exposure to a violative product will cause serious 

adverse health consequences or death.” The FDA safety alert appears at the following 

Web site: 

http://www.fda.gov/Safety/MedWatch/SafetyInformation/SafetyAlertsforHumanMedical

Products/ucm311405.htm. 

While OP-16 did not specify which type of laboratory equipment should be used 

to obtain Troponin results, hospitals may be using these POC tests in order to expedite 

results. We understand that the FDA considers the size of this recent Class I recall to be 

large. Due to the magnitude of this recall, we became concerned that continued collection 

of the measure may potentially impact patient safety because of the high probability of 

false results associated with the equipment. We chose to remove the measure from the 

program rather than suspend the measure because revision of the measure to address this 

issue would result in an overly prescriptive and complex measure. On August 13, 2012, 

we released a memorandum “Removal of Hospital Outpatient Quality Reporting Measure 

(OQR) OP-16: Troponin results for Emergency Department acute myocardial infarction 

(AMI) patients or chest pain patients (with Probable Cardiac Chest Pain) Received 

Within 60 minutes of arrival.” This memorandum notified the Hospital OQR Program 

stakeholder community to cease chart abstraction for the OP-16 measure immediately, 
CMS-1589-FC 902 

and that CMS will not publically report, validate or use in the CY 2013 payment 

determination any data collected on this measure. The memorandum dated 

August 13, 2012 is available for review at the QualityNet Web site. To review this 

memorandum, access http://www.qualitynet.org; from this page, choose “HospitalsOutpatient” from the drop down menus across the top of the page, then click on “EmailNotifications.” Memoranda are listed by date of publication.) Since the memorandum 

was issued, we have received two Congressional inquiries from POC device 

manufacturers indicating that our decision to remove the measure will impact them 

negatively. One commenter also indicated that the measure has encouraged increased 

communication in the Emergency Department and expressed concern that removal of the 

measure would result in reduced communication. 

We emphasize that despite the removal of OP-16 from the Hospital OQR 

Program, we expect hospitals to continue the timely triage, diagnosis and treatment of 

cardiac and other patients in the ED according to established clinical guidelines. We also 

expect that hospitals will continue their efforts to improve communication and 

throughput in the ED. 

Although we have requested immediate discontinuation of chart abstraction for 

OP-16, CMS is unable to cease data collection in the system until January 1, 2013, when 

we have made certain system changes. In order to overcome CMS’s system limitation, 

hospitals can choose to submit a meaningless value for this measure through December 

31, 2012. We ask hospitals not to submit a blank value for OP-16, as a lack of a 

populated value for OP-16 will cause a case to be rejected. If a case is rejected due to 
CMS-1589-FC 903 

lack of data, this could impact a hospital’s ability to meet the Hospital OQR 

requirements. Some vendors may have the capability to provide a default value for 

OP-16. Hospitals are encouraged to work with their vendors to determine options to 

populate the OP-16 data field at submission. 

Comment: A few commenters supported the removal of OP-16 and believed that 

there was insufficient evidence to link this process measure to patient outcomes. 

However, some commenters were concerned that the removal of OP-16 may undermine 

the importance of Troponin testing or the need to receive the results of Troponin testing 

in a timely manner. Commenters asserted that clinical guidelines for the diagnostic 

evaluation of patients with AMI or presumed cardiac chest pain still recommend 

receiving results from cardiac marker testing, including Troponin, within 60 minutes. 

The commenters urged that CMS either reconsider the removal of OP-16 or provide 

guidance on when the measure will be reinstated. Commenters added that currently, 

there are new and improved Troponin testing technologies available that would meet the 

intent of OP-16. 

Response: We thank the commenter for the support of the removal of this 

measure. We also clarify that hospitals should not cease testing Troponin and other 

cardiac markers, nor should they cease following clinical guidelines for diagnosis and 

treatment of cardiac patients based on our decision to remove OP-16 from the Hospital 

OQR Program. We are considering initiating a call for measures for this program, and 

will consider suggestions for measures on this and other topics that are submitted through 

such a process for future rulemaking. 
CMS-1589-FC 904 

Comment: A few commenters perceived the CMS’ instruction to submit a blank 

value for OP-16 to be burdensome and stated that hospitals or their vendors should not 

have to bear the responsibility of submitting meaningless data. Commenters urged CMS 

to work with contractors to derive a technical solution that would not require hospitals to 

submit meaningless data. 

Response: As we stated in our memorandum, we urge hospitals to work with 

their data submission vendors on low-burden ways to populate fields for measures that 

are suspended or removed until such time as our system changes can be made. In the 

case of OP-16, this will be January 1, 2013. We have asked our systems developers to 

add functionality to remove a measure from the data collection system without any delay 

and this feature will be incorporated into a future release of our hospital reporting data 

collection system. In addition, we have added a business requirement for our contractor 

to fix this as soon as possible and it has been prioritized as high as possible given all the 

competing demands on contract programmers. 

We are confirming the removal of measure OP-16: Troponin Results for 

Emergency Department Acute Myocardial Infarction (AMI) Patients or Chest Pain 

Patients (with probable cardiac chest pain) Received Within 60 Minutes of Arrival from 

the Hospital OQR Program in this final rule with comment period. 

3. Suspension of One Chart-Abstracted Measure for the CY 2014 and Subsequent Years 

Payment Determinations 

In April of this year, we took immediate action to suspend OP-19 because of 

patient safety concerns. We chose to suspend this measure rather than to immediately 
CMS-1589-FC 905 

remove the measure from the program because the probability of harm occurring was 

relatively low, any potential harm that occurred would not be the direct result of patient 

care rendered at facilities, and the measure steward believed that the measure could be 

quickly re-specified in a manner that would mitigate the concerns raised by hospitals and 

stakeholders. 

For CY 2014 and subsequent year payment determinations, we are confirming 

that we have suspended the collection of measure OP-19: Transition Record with 

Specified Elements Received by Discharged ED Patients, which specifies patients or their 

caregivers (emphasis added) receive a transition record at the time of ED discharge. We 

adopted measure OP-19 for the Hospital OQR Program for the CY 2013 payment 

determination with data collection beginning with January 1, 2012 encounters. Since 

data collection for this measure began, concerns have been raised about the current 

measure specifications, including potential privacy concerns related to releasing certain 

elements of the transition record to a patient who is being discharged from an emergency 

department or the patient’s caregiver. Some examples provided by hospitals of this were 

the release of sensitive lab results or radiological findings to a parent, spouse, or guardian 

of a minor patient, or to the responsible party for a physically incapacitated patient. 

In regard to the issue of patient safety, there is evidence that, in some cases, 

following the measure as currently specified could lead to patient harm, especially when 

the medical results relate to pregnancy. During field testing of this measure, some 

women refused to accept transition records that documented pregnancy results. While it 

is unclear what motivated these particular women to decline to receive transition records, 
CMS-1589-FC 906 

literature supports a rationale for why pregnant women may be reluctant to receive 

documentation of pregnancy results; under certain circumstances, pregnancy is associated 

with increased risk of physical violence from a current or former male partner 

(Richardson, J. et al., 2002. Identifying domestic violence: cross sectional study in 

primary care, British Medical Journal). 

After consideration of these issues and internal review of the measure 

specifications, we decided to suspend data collection for OP-19 effective with 

January 1, 2012 encounters until further notice. On April 2, 2012 we released a 

memorandum “Temporary Suspension of Hospital Outpatient Quality Reporting Measure 

OP-19: Transition Record with Specified Elements Received by Discharged Patients.” 

This memorandum notified the Hospital OQR Program stakeholder community that we 

had suspended data collection for the OP-19 measure effective with January 1, 2012 

encounters and until further notice. 

On April 12, 2012, we released a memorandum, “Revised: Temporary Suspension 

of Hospital Outpatient Quality Reporting Measure OP-19: Transition Record with 

Specified Elements Received by Discharged Patients” to make clear our intent not to use 

any data submitted on this measure for payment determinations, public reporting, or in 

validation. The revised SDPS Memo is available for review at the QualityNet Web site 

(http://www.qualitynet.org) under the option “E-mail Notifications” within the 

“Hospitals – Outpatient” drop down menu found at the top of the page. 

When NQF completes its maintenance review on this measure, and we have 

incorporated the necessary changes to the measure specifications in our measure manual, 
CMS-1589-FC 907 

we anticipate being able to resume data collection, and will notify hospitals of changes in 

the suspension status of the measure for Hospital OQR via e-mail blast. 

Because CMS system constraints prevent immediate cessation of data collection, 

hospitals must continue to submit information for this measure during this temporary 

suspension. The data collection system currently requires a populated value for OP-19. 

During the period of time that the measure is suspended, hospitals may choose to 

populate their OP-19 submission field with a value that is not meaningful. Hospitals 

should not submit a null value because the lack of data for OP-19 will cause the 

submitted case to be rejected entirely from the data warehouse. In other words, failure to 

populate the OP-19 field could compromise reporting data for other measures for that 

same case because more than one measure can be reported within a single case. 

Some vendors may have the capability to provide a default value for this measure 

to reduce data abstraction. Hospitals are encouraged to work with their vendors to 

determine options to reduce abstraction burden. 

If a case is rejected from the data warehouse on the basis of a system error due to 

the current system’s inability to accept a case without OP-19 data populated, in the event 

that the rejected case would have also fulfilled reporting requirements for one or more 

other measures, this rejection would could affect a hospital’s ability to meet Hospital 

OQR Program requirements. 

Therefore, we recommend continuing to submit a value for OP-19, although we 

will not use data submitted on OP-19 for payment determinations, will not publicly report 
CMS-1589-FC 908 

these data, and will not validate these data until all concerns are resolved and measure 

specifications are refined as necessary. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45178), because the developer 

is working to revise the measure specifications to address the concerns raised by affected 

parties, and the measure is undergoing NQF maintenance review this year, we did not 

propose to remove the measure from the program at this time. After completion of the 

NQF maintenance process, we anticipate that normal program operations for this measure 

could resume once we have updated the Hospital OQR Specifications Manual and made 

any necessary changes to our data collection infrastructure. However, should we 

determine that these concerns cannot be addressed, we would propose to remove this 

measure in a future OPPS/ASC rule. We invited public comment on the suspension of 

OP-19 until further notice. We also invited public comment on whether the measure 

should be removed from the program at this time. 

Comment: A few commenters strongly urged CMS to retain the OP-19 measure, 

with the ongoing revision of the measure specifications to address privacy concerns. 

Some commenters advocated the removal of this measure on grounds that are 

completely different from CMS’s rationale for removing this measure. Some 

commenters were concerned that many patients may not be able to comprehend most of 

the data elements (for example, lab tests and results, and procedures performed in the 

ED) required by the measure, which would be in the transition record. Many commenters 

believed that the provision of transition records by EDs would not enhance coordination 

between sites of care. Rather, the commenters stated it will increase the likelihood of 
CMS-1589-FC 909 

confusion for the patients. Commenters were concerned that: (1) the transition records 

including instructions issued upon ED discharge are not final and may be changed 

subsequently by the observation unit staff, should the patient be put in the observation 

unit; and (2) the ED transition records may conflict with the subsequent transition record 

provided by the receiving provider, such as the home health care agency. In the 

commenters’ view, the Emergency Medical Treatment and Labor Act (EMTALA) 

regulation already provides for the transfer of records that include communication 

between nurses and physicians. Some commenters suggested the provision of a 

simplified, user-friendly ED visit summary to patients would be a better alternative. 

A few commenters requested clarification of the data elements specified in the 

Specifications Manual: major procedures and tests; patient instructions; follow up care; 

ED patient population; and medication types. Commenters stated that the data elements 

specified in the Specifications Manual are too vague and leave room for different 

interpretation. One commenter recommended creating individual measures to address 

each of the items that need to be included in the ED visit summary. 

One commenter requested limiting the transition record information to include 

only diagnostic test procedures performed in the ED. One commenter did not view 

patients put on observation as ED patients and requested they be treated as exclusions in 

the measure specification. These commenters did not discuss their reasons for requesting 

these changes. 

One commenter stated that currently, since hospitals are at different stages of 

implementing electronic health records technology, the time taken to generate electronic 
CMS-1589-FC 910 

transition records will vary greatly. For some hospitals, this may potentially delay the 

discharge of patients from the ED. 

Response: We appreciate the support and the recommendations from the 

commenters. As for the comments on clarification of data elements in the Specifications 

Manual, we note that there are no specific requirements related to what constitutes 

appropriate documentation that must be transferred to the next site of care. 

We are aware of the concerns expressed by the commenters. Since the suspension 

of OP-19 on April 2, 2012, we have been actively working with the American Medical 

Association Physician Consortium for Performance Improvement (AMA-PCPI) (the 

measure stewards) to clarify the specifications of this measure. The intent of OP-19 is to 

require a transition record to patients discharged directly to home or home health, not 

those patients who would otherwise be transferred to an acute care facility, regardless of 

EMTALA status. It is our hope that the revised specifications will address the 

commenters’ concerns prior to reinstatement of the measure in the Hospital OQR 

Program. 

Comment: Many commenters perceived the submission of a blank value for 

OP-19, as requested by CMS, to be burdensome and stated that hospitals or their vendors 

should not have to bear the responsibility of submitting meaningless data. Commenters 

requested that CMS refine specifications so that hospitals do not have to submit 

meaningless data. 

Response: As we stated in our April 12, 2012 revised memorandum, we urge 

hospitals to work with their data submission vendors on low-burden ways to populate 
CMS-1589-FC 911 

fields for measures that are suspended or removed until such time as our system changes 

can be made. 

We are confirming the suspension until further notice of measure OP-19: 

Transition Record with Specified Elements Received by Discharged ED Patients, 

effective with January 1, 2012 encounters. We are working with the measure steward, the 

AMA, to enhance OP-19 for future use. When the measure specifications have been 

updated and reviewed by the NQF, we will consider implementation of the revised 

measure. 

4. Deferred Data Collection of OP-24: Cardiac Rehabilitation Measure: Patient Referral 

from an Outpatient Setting for the CY 2014 Payment Determination 

In the CY 2012 OPPS/ASC final rule with comment period, we finalized OP-24: 

Cardiac Rehabilitation Measure: Patient Referral From an Outpatient Setting for the 

CY 2014 payment determination and indicated that the applicable quarters for data 

collection for this measure would be 1st quarter CY 2013 and 2nd quarter CY 2013 

(76 FR 74464, 74481). In order for us to adhere to this data collection schedule, we 

would have needed to have published the measure specifications in the July 2012 release 

of the Hospital OQR Specifications Manual. While there are NQF-endorsed 

specifications for this measure, in order to implement standardized data collection on a 

national scale, we must include detailed abstraction instructions for chart-based measures 

in our Specifications Manual. These instructions were not completed and tested in time 

to include in the July 2012 release of the Specifications Manual, which includes 

collection instructions for measures beginning January 1, 2013. This was an 
CMS-1589-FC 912 

unanticipated delay in implementation that we do not expect to be a regularly occurring 

issue for the Hospital OQR Program. 

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45179), we proposed 

to defer the data collection for this measure to January 1, 2014 encounters. We also 

proposed that the measure would no longer be used for the CY 2014 payment 

determination, and that its first application would be for the CY 2015 payment 

determination. The data collection deferral for this measure is detailed in the “Form, 

Manner, and Timing” section of this final rule with comment period. We invited public 

comments on these proposals. 

Comment: Many commenters supported the proposed deferred data collection of 

this measure until detailed instructions for data collection are completed. Commenters 

believed the measure is beneficial for patients with cardiovascular diseases and they were 

hopeful that the measure could be included into the Hospital OQR program for 

implementation beginning with January 1, 2014 encounters. 

Response: With the inclusion of the abstraction instructions for this 

chart-abstracted measure in our July 2013 release of the Specifications Manual, we 

anticipate that data collection can begin with January 1, 2014 encounters. 

Comment: One commenter asked if the data for this measure could be collected 

through claims instead of chart-abstraction. Also, the commenter viewed this measure as 

merely documentation of a referral being offered as the patient could have refused the 

referral to enroll in a cardiac rehabilitation program. 
CMS-1589-FC 913 

Response: This measure cannot be collected via claims because patient referral is 

not captured in claims data. We recognize that this measure does not focus on whether 

the patient actually enrolls in a cardiac rehabilitation program. Rather, the measure 

focuses on the process of referring a patient to a cardiac rehabilitation or secondary 

prevention program. 

Comment: One commenter requested clarification on: (1) what setting will be 

included in the denominator for the measure population; (2) definition of an outpatient 

practice; and (3) definition of an outpatient clinic practice. The commenter interpreted 

the measure specification developed by the American Association of Cardiovascular and 

Pulmonary Rehabilitation, American College of Cardiology Foundation, and the 

American Heart Association (AACVPR/AACF/AHA) Task Force to mean that the 

measure is intended for physicians providing follow-up care to patients after an acute 

event, and not for hospital outpatient department care. The commenter, therefore, 

suggested the removal of the current OP-24 measure and adoption of the measure 

“Cardiac Rehabilitation Patient Referral from an Inpatient Setting” for the Hospital OQR 

Program. 

Response: We intend to operationalize the measure for patients seen for ongoing 

care at outpatient clinics affiliated with hospitals. The measure is designed for the 

outpatient setting and the denominator is intended to be the percentage of patients who 

had a qualifying event/diagnosis during the previous 12 months and have not participated 

in an outpatient cardiac rehabilitation program. Given the measure focus on the process 

of referring a hospital outpatient clinic patient to a cardiac rehabilitation program, we 
CMS-1589-FC 914 

expect it will incentivize Hospital Outpatient Departments (HOPDs) to better coordinate 

the care that their patients receive. We agree that the measure could also be appropriate 

as a measurement for physicians’ follow-up care. We are currently working on the 

definitions the commenter has requested, outpatient practices and outpatient clinic 

practices, in the context of the HOPD. 

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

deferred data collection for OP-24 from January 1, 2013 to January 1, 2014 encounters 

for the CY 2015 payment determination. 

D. Quality Measures for the CY 2015 Payment Determination

We previously finalized 26 measures for the CY 2015 Hospital OQR Program 

measure set in the 2012 OPPS/ASC rulemaking (76 FR 74472 through 74474). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45179), taking into 

consideration the time and effort for CMS to develop, align, and implement the 

infrastructure necessary to collect data on the Hospital OQR Program measures and make 

payment determinations, as well as the time and effort on the part of hospital outpatient 

departments to plan and prepare for reporting additional measures, we did not propose 

any additional quality measures for CY 2015 and subsequent years payment 

determinations in this rulemaking. 

As discussed above, we have removed OP-16 as of August 2012, we suspended 

measure OP-19 and deferred data collection for OP-24 until the measure specifications 

can be further refined. 
CMS-1589-FC 915 

In summary, in this final rule with comment period, we are not adopting 

additional measures for the CY 2015 payment determination, and we are retaining 25 of 

the 26 measures previously adopted for the CY 2014 payment determination for CY 2015 

and subsequent year payment determinations. 

Set out below are the previously adopted measures which we are retaining for the 

CY 2014, CY 2015, and subsequent years payment determinations under the Hospital 

OQR Program. 

Hospital OQR Program Measures for the CY 2014, CY 2015 and Subsequent Year 

Payment Determinations 

OP-1: Median Time to Fibrinolysis 

OP-2: Fibrinolytic Therapy Received Within 30 Minutes 

OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 

OP-4: Aspirin at Arrival 

OP-5: Median Time to ECG 

OP-6: Timing of Antibiotic Prophylaxis 

OP-7: Prophylactic Antibiotic Selection for Surgical Patients 

OP-8: MRI Lumbar Spine for Low Back Pain 

OP-9: Mammography Follow-up Rates 

OP-10: Abdomen CT – Use of Contrast Material 

OP-11: Thorax CT – Use of Contrast Material 

OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly 

into their Qualified/Certified EHR System as Discrete Searchable Data 

OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery 

OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed 

Tomography (CT) 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic 

Headache* 

OP-17: Tracking Clinical Results between Visits 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients 

OP-19: Transition Record with Specified Elements Received by Discharged ED Patients** 

OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional 

OP-21: ED- Median Time to Pain Management for Long Bone Fracture 
CMS-1589-FC 916 

Hospital OQR Program Measures for the CY 2014, CY 2015 and Subsequent Year 

Payment Determinations 

OP-22: ED Patient Left Without Being Seen 

OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who 

Received Head CT Scan Interpretation Within 45 minutes of Arrival 

OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting *** 

OP-25: Safe Surgery Checklist Use 

OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures

Procedure Category Corresponding HCPCS Codes

Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, C9724, 

C9725, 0170T 

Eye 65000 through 68999, 0186, 0124T, 0099T, 0017T, 0016T, 

0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 0192T, 

76510, 0099T 

Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 

0216T, 0217T, 0218T, 0062T 

Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T 

Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, 

C9727 

Genitourinary 50000 through 58999, 0193T, 58805 

Cardiovascular 33000 through 37999 

Respiratory 30000 through 32999 

*Information for OP-15 will not be reported in Hospital Compare in 2012. Public reporting for this 

measure would occur in July 2013 at the earliest. 

**Data collection for OP-19 was suspended effective with January 1, 2012 encounters until further notice. 

***Data collection for OP-24 would begin on January 1, 2014, and its first application toward a payment 

determination will be for CY 2015 rather than CY 2014. 

Comment: Many commenters commended CMS’ pausing in the expansion of the 

Hospital OQR Program by not proposing any new measures for the CY 2014 and 

CY 2015 payment determinations. Commenters appreciated CMS’ recognition of burden 

from quality reporting on providers. 

Response: We thank the commenters for supporting our decision not to add any 

new measures. We plan to continue to find ways to strike a balance between quality 

reporting and burden reduction for providers. 
CMS-1589-FC 917 

We received comments on some of the previously finalized measures that we have 

proposed to continue using under the Hospital OQR Program. 

Comment: Commenters expressed support and opposition to the adopted 

measures from previous rulemakings. Commenters also provided suggestions on these 

measures, regarding measure implementation, adding exceptions, and revising measure 

specifications. 

Response: We thank the commenters for their comments; those supporting our 

previously finalized proposals as well as those in opposition. We will consider all of 

these views for future rulemaking and Hospital OQR Program development. 

E. Possible Quality Measures under Consideration for Future Inclusion in the Hospital 

OQR Program

The current measure set for the Hospital OQR Program includes measures that 

assess process of care, imaging efficiency patterns, care transitions, ED throughput 

efficiency, the use of HIT care coordination, patient safety, and volume. We anticipate 

that as EHR technology evolves and more infrastructure is put into place, we will have 

the capacity to accept electronic reporting of many clinical chart-abstracted measures that 

are currently part of the Hospital OQR Program using certified EHR technology. We 

work diligently toward this goal. We believe that this future progress at a future date, 

such as FY 2015, would significantly reduce the administrative 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 developers to make this 

possible with respect to the clinical quality measures targeted for e-specifications. This 
CMS-1589-FC 918 

includes completing electronic specifications for measures, pilot testing, reliability and 

validity testing, and implementing such specifications into certified EHR technology to 

capture and calculate the results, and implementing the systems. 

We seek to develop a comprehensive set of quality measures to be available for 

widespread use for informed decision-making and quality improvement in the hospital 

outpatient setting. Therefore, through future rulemaking, we intend to propose new 

measures that help us further our goal of achieving better health care and improved health 

for Medicare beneficiaries who receive health care in hospital outpatient settings. In 

addition, we are considering initiating a call for input to assess the following measure 

domains: clinical quality of care; care coordination; patient safety; patient and caregiver 

experience of care; population/community health; and efficiency. We believe this 

approach will promote better care while bringing the Hospital OQR Program in line with 

other established quality reporting and pay for performance programs such as the 

Hospital IQR Program. 

We invited public comment on this approach and on our suggestions and rationale 

for possible quality measures for future inclusion in the Hospital OQR Program. 

Comment: One commenter noted that it is important to address the priority areas 

in the National Quality Strategy; however, the commenter also suggested that measure 

selection should not be limited to only those that fall inside the six domains, as this would 

hinder improvement in other areas in HOPDs. 

Response: We note that the six domains of measurement that arise from the six 

priorities of the National Quality Strategy are some of our considerations in measure 
CMS-1589-FC 919 

selection. We also weigh other aspects of measures as delineated in our measure 

selection criteria. 

Comment: A few commenters strongly supported CMS in considering whether to 

initiate a call to get input to assess the measure domains. One commenter requested that 

CMS use the same process used in past rulemakings by providing a list of measures 

under consideration for future years for public input. 

Response: In the past, we have solicited comments on a list of measures in the 

rule that are under consideration for future years of the program. Although we did not 

provide a list in this year’s rulemaking, we will take this comment under consideration in 

future years. 

In addition, we will consider hosting a call for measures for the Hospital OQR 

Program in the future. 

Comment: Commenters suggested that CMS add the following measures to the 

Hospital OQR Program: a comprehensive “medication management” measure set; a 

system of care metric that looks at the overall median time to PCI in transferred patients 

to capture the entire process of care; a stroke measure set for outpatients; measures for 

diabetes care, congestive heart failure, heart attack, breast cancer detection rate, centralline associated blood stream infection, chronic obstructive pulmonary disease, coronary 

artery disease, and depression screening. 

Response: We thank the commenters for the input on future measures and will 

take them into consideration in future measure selections. 
CMS-1589-FC 920 

Comment: One commenter strongly encouraged CMS to adopt registry-based 

measures for which providers submit quality data directly to a registry instead of to CMS. 

Response: We thank the commenter for the recommendation for registry 

reporting. We intend to continue considering how registry reporting may be leveraged as 

a reporting mechanism for this and other quality programs. 

Comment: A few commenters recommended that for burden reduction, CMS 

should harmonize measures in the Medicare and Medicaid EHR Incentive Programs and 

the Hospital OQR Program as well as limiting adopting future measures to e-specified 

measures only. 

Response: As we stated previously, coordinated efforts to align measures in the 

Medicare and Medicaid public reporting programs and incentive payment systems have 

been ongoing, and we are working toward the eventual adoption of 

electronically-specified measures so that data can be calculated and submitted via 

certified EHR technology with minimal burden. 

Comment: One commenter recommended that CMS refrain from adopting 

claims-based measures which the commenter believed are purely administrative in nature 

and yield little value in measuring quality of care. 

Response: While we recognize the merits of chart-abstracted measures, we also 

believe that claims may still be needed to identify prior events and diagnosis for measures 

that require look-back periods, involving the matching of data for a single patient over a 

long period of time (for example, 1 year of prior history) across multiple settings. 
CMS-1589-FC 921 

Claims-based measurement facilitates the use of historical and longitudinal information 

on Medicare beneficiaries across providers. 

Comment: Commenters also expressed views and provided suggestions regarding 

additional topics and previously finalized proposals including: 

● Topped-out measures; 

● ED measures; 

● Outpatient imaging efficiency measures; and 

● Removal of additional adopted measures. 

Response: We appreciate the commenters’ views on these additional topics or our 

previously finalized measures. However, these additional topics were not the subject of 

our proposed rule. It is our policy to retain previously adopted measures unless we 

specifically propose to remove or suspend measures, or take action outside of rulemaking 

to do so for patient safety reasons. We will consider these suggestions in future Hospital 

OQR Program development. 

F. Payment Reduction for Hospitals That Fail to Meet the Hospital OQR Program 

Requirements for the CY 2013 Payment Update

1. Background 

Section 1833(t)(17) of the Act, which applies to subsection (d) hospitals (as 

defined under section 1886(d)(1)(B) of the Act), states that hospitals that fail to report 

data required to be submitted on the measures selected by the Secretary, in the form and 

manner, and at a time, required by the Secretary will incur a 2.0 percentage point 

reduction to their Outpatient Department (OPD) fee schedule increase factor, that is, the 
CMS-1589-FC 922 

annual payment update factor. Section 1833(t)(17)(A)(ii) of the Act specifies that any 

reduction applies only to the payment year involved and will not be taken into account in 

computing the applicable OPD fee schedule increase factor for a subsequent payment 

year. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769 through 

68772), we discussed how the payment reduction for failure to meet the administrative, 

data collection, and data submission requirements of the Hospital OQR Program affected 

the CY 2009 payment update applicable to OPPS payments for HOPD services furnished 

by the hospitals defined under section 1886(d)(1)(B) of the Act to which the program 

applies. The application of a reduced OPD fee schedule increase factor results in reduced 

national unadjusted payment rates that apply to certain outpatient items and services 

provided by hospitals that are required to report outpatient quality data and that fail to 

meet the Hospital OQR Program requirements. All other hospitals paid under the OPPS 

that meet the reporting requirement receive the full OPPS payment update without the 

reduction. 

The national unadjusted payment rates for many services paid under the OPPS 

equal the product of the OPPS conversion factor and the scaled relative weight for the 

APC to which the service is assigned. The OPPS conversion factor, which is updated 

annually by the OPD fee schedule increase factor, is used to calculate the OPPS payment 

rate for services with the following status indicators (listed in Addendum B to this final 

rule with comment period, which is available via the Internet on the CMS Web site): 

“P,” “Q1,” “Q2,” “Q3,” “R,” “S,” “T,” “V,” “U,” or “X.” In the CY 2009 OPPS/ASC 
CMS-1589-FC 923 

final rule with comment period (73 FR 68770), we adopted a policy that payment for all 

services assigned these status indicators would be subject to the reduction of the national 

unadjusted payment rates for applicable hospitals, with the exception of services assigned 

to New Technology APCs with assigned status indicator “S” or “T,” and brachytherapy 

sources with assigned status indicator “U,” which were paid at charges adjusted to cost in 

CY 2009. We excluded services assigned to New Technology APCs from the list of 

services subject to the reduced national unadjusted payment rates because the OPD fee 

schedule increase factor is not used to update the payment rates for these APCs. 

In addition, section 1833(t)(16)(C) of the Act, as amended by section 142 of the 

Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) 

(Pub. L. 110-275), specifically required that brachytherapy sources be paid during 

CY 2009 on the basis of charges adjusted to cost, rather than under the standard OPPS 

methodology. Therefore, the reduced conversion factor also was not applicable to 

CY 2009 payment for brachytherapy sources because payment would not be based on the 

OPPS conversion factor and, consequently, the payment rates for these services were not 

updated by the OPD fee schedule increase factor. However, in accordance with section 

1833(t)(16)(C) of the Act, as amended by section 142 of the MIPPA, payment for 

brachytherapy sources at charges adjusted to cost expired on January 1, 2010. Therefore, 

in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60641), we finalized 

our CY 2010 proposal, without modification, to apply the reduction to payment for 

brachytherapy sources to hospitals that fail to meet the quality data reporting 
CMS-1589-FC 924 

requirements of the Hospital OQR Program for brachytherapy services furnished on and 

after January 1, 2010. 

The OPD fee schedule increase factor is an input into the OPPS conversion factor, 

which is used to calculate OPPS payment rates. To implement the requirement to reduce 

the OPD fee schedule increase factor for hospitals that fail to meet reporting 

requirements, we calculate two conversion factors: a full market basket conversion factor 

(that is, the full conversion factor), and a reduced market basket conversion factor (that 

is, the reduced conversion factor). We then calculate a reduction ratio by dividing the 

reduced conversion factor by the full conversion factor. We refer to this reduction ratio 

as the “reporting ratio” to indicate that it applies to payment for hospitals that fail to meet 

their reporting requirements. Applying this reporting ratio to the OPPS payment amounts 

results in reduced national unadjusted payment rates that are mathematically equivalent 

to the reduced national unadjusted payment rates that would result if we multiplied the 

scaled OPPS relative weights by the reduced conversion factor. To determine the 

reduced national unadjusted payment rates that applied to hospitals that failed to meet 

their quality reporting requirements for the CY 2010 OPPS, we multiply the final full 

national unadjusted payment rate found in Addendum B of the CY 2010 OPPS/ASC final 

rule with comment period by the CY 2010 OPPS final reporting ratio of 0.980 

(74 FR 60642). 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 through 

68772), we established a policy that the Medicare beneficiary’s minimum unadjusted 

copayment and national unadjusted copayment for a service to which a reduced national 
CMS-1589-FC 925 

unadjusted payment rate applies would each equal the product of the reporting ratio and 

the national unadjusted copayment or the minimum unadjusted copayment, as applicable, 

for the service. Under this policy, we apply the reporting ratio to both the minimum 

unadjusted copayment and national unadjusted copayment for those hospitals that receive 

the payment reduction for failure to meet the Hospital OQR Program reporting 

requirements. This application of the reporting ratio to the national unadjusted and 

minimum unadjusted copayments is calculated according to § 419.41 of our regulations, 

prior to any adjustment for a hospital’s failure to meet the quality reporting standards 

according to § 419.43(h). Beneficiaries and secondary payers thereby share in the 

reduction of payments to these hospitals. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68772), we 

established the policy that all other applicable adjustments to the OPPS national 

unadjusted payment rates apply in those cases when the OPD fee schedule increase factor 

is reduced for hospitals that fail to meet the requirements of the Hospital OQR Program. 

For example, the following standard adjustments apply to the reduced national unadjusted 

payment rates: the wage index adjustment; the multiple procedure adjustment; the 

interrupted procedure adjustment; the rural sole community hospital adjustment; and the 

adjustment for devices furnished with full or partial credit or without cost. We believe 

that these adjustments continue to be equally applicable to payments for hospitals that do 

not meet the Hospital OQR Program requirements. Similarly, OPPS outlier payments 

made for high cost and complex procedures will continue to be made when the criteria 

are met. For hospitals that fail to meet the quality data reporting requirements, the 
CMS-1589-FC 926 

hospitals' costs are compared to the reduced payments for purposes of outlier eligibility 

and payment calculation. This policy conforms to current practice under the IPPS. We 

continued this policy in the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60642), in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72099), and in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74478). For a complete discussion of the OPPS outlier calculation and eligibility 

criteria, we refer readers to section II.G. of this final rule with comment period. 

2. Reporting Ratio Application and Associated Adjustment Policy for CY 2013 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45182), we proposed to 

continue our established policy of applying 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 2013 annual payment update factor. 

For the CY 2013 OPPS, the reporting ratio is 0.980, calculated by dividing the reduced 

conversion factor of $69.887 by the full conversion factor of $71.313. We proposed to 

continue to apply the reporting ratio to all services calculated using the OPPS conversion 

factor. For the CY 2013 OPPS, we proposed to apply the reporting ratio, when 

applicable, to all HCPCS codes to which we have assigned status indicators “P,” “Q1,” 

“Q2,” “Q3,” “R,” “S,” “T,” “V,” “U,” and “X” (other than new technology APCs to 

which we have assigned status indicators “S” and “T”). We proposed to continue to 

exclude services paid under New Technology APCs. We proposed to continue to apply 

the reporting ratio to the national unadjusted payment rates and the minimum unadjusted 

and national unadjusted copayment rates of all applicable services for those hospitals that 
CMS-1589-FC 927 

fail to meet the Hospital OQR Program reporting requirements. We also proposed to 

continue to apply all other applicable standard adjustments to the OPPS national 

unadjusted payment rates for hospitals that fail to meet the requirements of the Hospital 

OQR Program. Similarly, we proposed to continue to calculate OPPS outlier eligibility 

and outlier payment based on the reduced payment rates for those hospitals that fail to 

meet the reporting requirements. 

We invited public comments on these proposals. We did not receive any public 

comments on our CY 2013 proposal to apply the Hospital OQR Program reduction in the 

manner described above and, therefore, are finalizing our proposal, without modification. 

Therefore, for the CY 2013 OPPS, we are applying a reporting ratio of 0.980 to 

the national unadjusted payments, minimum unadjusted copayments, and national 

unadjusted copayments for all applicable services for those hospitals failing to meet the 

Hospital OQR Program reporting requirements. This reporting ratio applies to HCPCS 

codes assigned status indicators ‘‘P,’’ ‘‘Q1,’’ ‘‘Q2,’’ ‘‘Q3,’’ ‘‘R,’’ ‘‘S,’’ ‘‘T,’’ ‘‘U,’’ 

‘‘V,’’ or ‘‘X,’’ excluding services paid under New Technology APCs. All other 

applicable standard adjustments to the OPPS national unadjusted payment rates for 

hospitals that fail to meet the requirements of the Hospital OQR Program will continue to 

apply. We continue to calculate OPPS outlier eligibility and outlier payment based on 

the reduced rates for those hospitals that fail to meet the reporting requirements. 
CMS-1589-FC 928 

G. Requirements for Reporting of Hospital OQR Data for the CY 2014 Payment 

Determination and Subsequent Years

1. Administrative Requirements for the CY 2014 Payment Determination and 

Subsequent Years 

In order to participate in the Hospital OQR Program, hospitals must meet 

administrative, data collection and submission, and data validation requirements (if 

applicable). Hospitals that do not meet Hospital OQR Program requirements, as well as 

hospitals not participating in the program and hospitals that withdraw from the program, 

will not receive the full OPPS payment rate update. Instead, in accordance with section 

1833(t)(17)(A) of the Act, those hospitals will receive a reduction of 2.0 percentage 

points to their OPD fee schedule increase factor for the applicable payment year. 

We established administrative requirements for the payment determination 

requirements for the CY 2013 and subsequent years’ payment updates in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74479 through 74487). 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45182), with respect to the 

payment determinations for CY 2014 and subsequent years, we proposed one 

modification to these requirements. Under current requirements, CMS deadlines for 

hospitals to submit notice of participation forms are based on the date identified as a 

hospital’s Medicare acceptance date on the CMS Certification and Survey Provider 

Enhanced Reporting (CASPER) system. Deadlines are based on whether a hospital’s 

Medicare acceptance date falls before January 1 of the year prior to the annual payment 

update, or on or after January 1 of the year prior to the annual payment update (for 
CMS-1589-FC 929 

example, 2013 would be the year prior to the affected CY 2014 annual payment update). 

Currently, for a hospital whose Medicare acceptance date is before January 1 of the year 

prior to the affected payment update affected, the notice of participation form is due by 

March 31 of the year prior to the affected annual payment update (76 FR 74479 through 

74480). We proposed to extend this deadline for hospitals, as described below. 

Hospitals with Medicare acceptance dates before January 1 of the year prior to the 

affected annual payment update: For the CY 2014 and subsequent years payment update, 

we proposed that any hospital that has a Medicare acceptance date before January 1 of 

the year prior to the affected annual payment update (for example, 2013 would be the 

year prior to the affected CY 2014 annual payment update) that is not currently 

participating in Hospital OQR and wishes to participate in the Hospital OQR Program 

must submit a participation form by July 31, rather than March 31, of the year prior to the 

affected annual payment update. We proposed a deadline of July 31 to give hospitals the 

maximum amount of time to decide whether they wish to participate in the Hospital OQR 

Program, as well as put into place the necessary staff and resources to timely report chartabstracted data for the first quarter of the year’s services which are due August 1. 

We invited public comment on this proposed modification to Hospital OQR 

Program administrative requirements for the CY 2014 and subsequent years’ payment 

determinations. 

Comment: Several commenters supported the proposal to extend the deadline to 

submit a participation form for a hospital that is not currently participating in Hospital 
CMS-1589-FC 930 

OQR and wishes to participate in OQR to July 31, rather than March 31, of the year prior 

to the affected annual payment update. 

Response: We thank these commenters for supporting our proposal to extend the 

deadline for submitting a participation form for a hospital that is not currently 

participating in Hospital OQR and wishes to participate. 

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

proposal to extend the deadline for a hospital that is not currently participating in the 

Hospital OQR Program and wishes to participate in the Program to submit a participation 

form by July 31, rather than March 31, of the year prior to the affected annual payment 

update. 

2. Form, Manner, and Timing of Data Submitted for the Hospital OQR Program for the 

CY 2014 Payment Determination and Subsequent Years 

a. Background 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45182), we did not propose 

any additional measures for the CY 2014 payment determination year. We refer readers 

to the following OPPS/ASC final rules with comment periods for a history of measures 

adopted for the Hospital OQR Program, including lists of: 11 measures finalized for the 

CY 2011 payment determination (74 FR 60637); 15 measures finalized for the CY 2012 

payment determination (75 FR 72083 through 72084); 23 measures finalized for the 

CY 2013 payment determination (75 FR 72090); and 26 measures finalized for the 

CY 2014 and CY 2015 payment determinations (76 FR 74469 and 74473). 
CMS-1589-FC 931 

Because of the clarification in the measure table in section XV.D above that 

public reporting for OP-15: Use of Brain Computed Tomography (CT) in the 

Emergency Department for Atraumatic Headache is not planned until July 2013 at the 

earliest, we confirm this measure will not be used in the CY 2014 payment 

determination. We will confirm our intent to include or exclude this measure in the 

CY 2015 payment determination in future rulemaking. 

We refer readers to section XV.C.2 of this final rule with comment period for a 

discussion of measure OP-16: Troponin Results for Emergency Department acute 

myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac Chest 

pain) Received Within 60 minutes of Arrival. Due to a patient safety concern, this 

measure has been removed from the OQR Program measure set. 

We refer readers to section XV.C.3. of this final rule with comment period for a 

discussion of measure OP-19: Transition Record with Specified Elements Received by 

Discharged ED Patients. Because the data collection for this measure is currently 

suspended, this measure will not be used in the CY 2014 payment determination. We 

will indicate whether data collection for this measure will resume in time for the 

CY 2015 payment determination in future rulemaking. 

We refer readers to section XV.C.4. of this final rule with comment period for a 

discussion of measure OP-24: Cardiac Rehabilitation Patient Referral From an 

Outpatient Setting. We proposed not to use this measure in the CY 2014 payment 

determination and deferred data collection for this measure until the CY 2015 payment 

determination. 
CMS-1589-FC 932 

b. General Requirements 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45183), we proposed to 

continue the policy that, to be eligible to receive the full OPD fee schedule increase factor 

for any payment determination, hospitals must comply with our submission requirements 

for chart-abstracted data, population and sampling data, claims-based measure data, and 

structural quality measure data, including all-patient volume data. We refer readers to the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74480 through 74482) for a 

discussion of these requirements. 

c. Chart-Abstracted Measure Requirements for CY 2014 and Subsequent Payment 

Determination Years 

The table in section XV.D. of this final rule with comment period includes 

measures that are collected by abstracting the information from patient charts. In this 

final rule with comment period, we are confirming removal of one chart-abstracted 

measure from the program, OP-16: Troponin Results for Emergency Department acute 

myocardial infarction (AMI) patients or chest pain patients (with Probable Cardiac Chest 

Pain) Received Within 30 minutes of Arrival. For a full discussion of this removal, 

please refer to section XV.C.2. of this final rule with comment period. 

Comment: Several commenters supported the proposal not to collect data for 

measures that CMS proposed to exclude from the CY 2014 payment determination. 

Response: We thank the commenters for supporting our proposal regarding 

collection of data for measures which are to be excluded from the CY 2014 payment 
CMS-1589-FC 933 

determination. A discussion of measures that are under review or have been removed 

from the program is found in section XV.C. above. 

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

proposal to exclude chart abstracted measures OP-19 and OP-24, from the CY 2014 

payment determination. In addition, in this final rule with comment period, we are 

confirming the removal of chart-abstracted measure OP-16. Thus, the following 

chart-abstracted measures remain in the Hospital OQR Program and data for these 

measures is required for the CY 2014 payment determination: 

● OP-1: Median Time to Fibrinolysis 

● OP-2: Fibrinolytic Therapy Received Within 30 Minutes 

● OP-3: Median Time to Transfer to Another Facility for Acute Coronary 

Intervention 

● OP-4: Aspirin at Arrival 

● OP-5: Median Time to ECG 

● OP-6: Timing of Antibiotic Prophylaxis 

● OP-7: Prophylactic Antibiotic Selection for Surgical Patients 

● OP-18: Median Time from ED Arrival to ED Departure for Discharged ED 

Patients 

● OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional 

● OP-21: ED – Median Time to Pain Management for Long Bone Fracture 

● OP-22: ED Patient Left Without Being Seen 
CMS-1589-FC 934 

● OP-23: ED – Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic 

Stroke who Received Head CT Scan Interpretation Within 45 Minutes of Arrival 

Of those measures for which we proposed to collect data for in CY 2014, the form 

and manner for submission of one of these measures, OP-22: ED Patient Left Without 

Being Seen, is unique, and the form and manner for this measure is detailed in section 

XV.G.2.f. of this final rule with comment period. 

For the chart-abstracted measures for which we have finalized that we will collect 

data for the CY 2014 payment determination, we proposed that the applicable quarters for 

data collection would be as follows: 3rd quarter CY 2012, 4th quarter CY 2012, 1st quarter 

CY 2013, and 2nd quarter CY 2013 for hospitals that are continuing participants; newly 

participating hospitals would follow reporting requirements as outlined in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74480) and in section XV.G.1. of this 

final rule with comment period. 

In general, submission deadlines would be approximately 4 months after the last 

day of each calendar quarter. Thus, for example, the submission deadline for data for 

services furnished during the first quarter of CY 2013 (January - March 2013) would be 

on or around August 1, 2013. We proposed to post actual submission deadlines on the 

http://www.QualityNet.org Web site. 

Hospitals that did not participate in the CY 2013 Hospital OQR Program, but 

would like to participate in the CY 2014 Hospital OQR Program, and that have a 

Medicare acceptance date on the CASPER system before January 1, 2013, would begin 

data submission with respect to 1st quarter CY 2013 encounters using the previously 
CMS-1589-FC 935 

adopted measures which we are retaining for the CY 2014 payment determination, found 

in the table in section XV.D above. For those hospitals with Medicare acceptance dates 

on or after January 1, 2013, data submission must begin with the first full quarter 

following the submission of a completed online participation form. 

For the CY 2015 payment determination, we proposed that the applicable quarters 

for previously finalized chart-abstracted measures would be as follows: 3rd quarter 

CY 2013, 4th quarter CY 2013, 1st quarter CY 2014, and 2nd quarter CY 2014. 

Hospitals that did not participate in the CY 2014 Hospital OQR Program, but 

would like to participate in the CY 2015 Hospital OQR Program, and that have a 

Medicare acceptance date on the CASPER system before January 1, 2014, would begin 

data submission with respect to 1st quarter CY 2014 encounters using the previously 

adopted measures which we are retaining for the CY 2015 payment determination, found 

in the table in section XV.D above. For those hospitals with Medicare acceptance dates 

on or after January 1, 2014, data submission must begin with the first full quarter 

following the submission of a completed online participation form. We invited public 

comments on these proposals. 

Comment: Some commenters encouraged CMS to improve alignment among 

CMS quality reporting programs; specifically, they would like to see alignment of data 

submission deadlines and encounter/discharge periods. These commenters urged CMS to 

review its programs for opportunities to harmonize program design. These commenters 

stated their belief that aligning program design and measures supports stakeholders in 
CMS-1589-FC 936 

fulfilling CMS’ requirements, whereas lack of alignment results in stakeholders 

competing for resources to fulfill requirements. 

Response: We thank these commenters for their suggestions. We agree that end 

users and stakeholders, especially those that fulfill reporting requirements for multiple 

programs, would benefit from standardized program requirements. 

Besides the Hospital OQR Program, we have a significant number of quality data 

reporting or incentive programs. Currently, we are working on integrating the Hospital 

OQR, Hospital Inpatient Quality Reporting (IQR) Program, and the Hospital 

Value-Based Purchasing (VBP) Program more fully to meet the requirements of the 

Health Information Technology for Economic and Clinical Health Act. This statute 

promotes driving transformation through the adoption and use of health information 

technology (HIT), electronic health records (EHR) and health information organizations 

(HIOs) 

We agree with commenters that alignment is important to reduce stakeholder 

burden, and we will also continue to consider opportunities to align program 

requirements for programs outside of the Hospital OQR, IQR, and VBP Programs. 

Comment: Many commenters supported the proposed data submission deadlines 

for chart-abstracted measures. 

Response: We thank these commenters for supporting the proposed deadlines. 

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

proposals for the applicable quarters for chart abstracted measures for the CY 2014 and 

CY 2015 payment determinations and for subsequent years. We are finalizing our 
CMS-1589-FC 937 

proposals for submission deadlines for chart abstracted data for the CY 2014 payment 

determination and for subsequent years, and for posting these deadlines on the 

QualityNet Web site. We are finalizing our proposals for hospitals who are newly 

participating or who are resuming participation in the OQR program to submit a notice of 

participation and begin submitting data to the OQR Program. 

d. Claims-Based Measure Data Requirements for the CY 2014 and CY 2015 Payment 

Determinations 

The table in section XV.D. of this final rule with comment period includes 

measures that the Hospital OQR Program collects by accessing electronic claims data 

submitted by hospitals for reimbursement. 

OP-15 is a claims-based measure that has not been implemented for public 

reporting through rulemaking (76 FR 74456), and it is not required for the CY 2014 

payment determination. 

Therefore, the 6 remaining claims-based measures set out below will be included 

for the CY 2014 payment determination: 

● OP-8: MRI Lumbar Spine for Low Back Pain 

● OP-9: Mammography Follow-up Rates 

● OP-10: Abdomen CT – Use of Contrast Material 

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

● OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac 

Low Risk Surgery 
CMS-1589-FC 938 

● OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus 

Computed Tomography (CT) 

We will continue our policy of calculating the measures using the hospital’s 

Medicare claims data as specified in the Hospital OQR Specifications Manual; therefore, 

no additional data submission is required for hospitals. In the CY 2012 OPPS/ASC final 

rule with comment period (76 FR 74483), we stated that for the CY 2013 and CY 2014 

payment updates, we will use paid Medicare FFS claims for services furnished from 

January 1, 2010 to December 31, 2010 and January 1, 2011 to December 31, 2011, 

respectively. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45184), for the CY 2015 

Hospital OQR payment determination, we proposed to use paid Medicare FFS claims for 

services from a 12 month period from July 1, 2012 through June 30, 2013 for the 

calculation of the claims-based measures. While this would be a departure from the 

traditional 12 month calendar year period we have used for these measures, we proposed 

this period in order to align the data period for inpatient and outpatient claims based 

measures reported on the Hospital Compare Web site, and also to be able to post more 

recent data for the outpatient imaging efficiency on the Web site. We invited public 

comment on this proposal. 

Comment: Some commenters supported the proposal to move away from the 

traditional 12 month data period to align the data period for inpatient and outpatient 

claims based measures reported on the Hospital Compare Web site, and also to be able to 

post more recent data for the outpatient imaging efficiency on the Web Site. 
CMS-1589-FC 939 

Response: We thank these commenters for supporting our efforts to align the data 

collection period for the Hospital OQR Program with that of the Hospital IQR Program. 

Comment: One commenter questioned why CMS needs such a long delay in 

claims utilization. This commenter believed that CY 2011 claims are not appropriate to 

use in the CY 2014 payment determination. 

Response: We have proposed to adjust the time period of when services are 

furnished; doing so moves the period away from the traditional January – December time 

period to make it six months more current. Regarding the data lag for claims based data, 

for the CY 2015 payment determination year, we proposed using paid, FFS claims for 

services during the time period from July 1, 2012 through June 30, 2013. Calculations 

based on this time period would be publicly reported on Hospital Compare in July 2014, 

and we would make actual payment determinations for the CY 2015 payment year on or 

around December 1, 2014. 

For claims from the period July 1, 2012 through June 30, 2013, the data lag, or 

time elapsed until payment determination is made, is approximately 17 months at the 

longest (for data from July 1, 2012) to 5 months at shortest (for data from June 30, 2013). 

This is due to several factors. First, we allow three months after the last date of service to 

pass before pulling the data extract for claims based measures in order to ensure that we 

are capturing most of the final paid claims through the last date of service (in this 

example, the last date of service is June 30, 2012). Second, it takes three to six months to 

build our analytic files for the measures, generate calculations, and ensure their accuracy. 

For some claims-based measures, we generate and deliver detailed confidential reports 
CMS-1589-FC 940 

for hospitals. About two months prior to public reporting, we allow 30 days for hospitals 

to preview their data, after which we deliver final public reporting files for the Hospital 

Compare Web site. 

With our proposal, we believe we have adequately balanced the need for current 

data with the need to have a stable set of FFS claims data for a payment determination 

and a preview process that takes into account the needs of hospital stakeholders. 

Comment: One commenter believed that there is an inconsistency in the use of 

Medicare claims versus data from all patients. According to the commenter, CMS stated 

that it will use only Medicare FFS claims for structural measures, but proposes to use 

data from all patients (for example, including non-Medicare patients) for other measures. 

Response: We do not use Medicare FFS claims for structural measures. For 

structural measures, hospitals currently review the time period covered in the reporting 

period to answer questions about registry use, safe surgery checklist use, etc. The 

structural measures in the Hospital OQR Program apply to the hospital outpatient 

department setting. 

For clarification, the Hospital OQR chart-abstracted measures apply to all patients 

meeting the inclusion criteria for the measure regardless of payer, while the claims-based 

measures are calculated using only Medicare FFS claims. The structural measures apply 

to the hospital outpatient department. 

We require hospitals to complete and submit a registration form (‘‘participation 

form’’) in order to participate in the Hospital OQR Program. With submission of this 

participation form, participating hospitals agree that they will allow us to publicly report 
CMS-1589-FC 941 

the quality measure data submitted under the Hospital OQR Program, including measures 

that we calculate using Medicare claims and all other submitted data, including 

non-Medicare data. 

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

proposals for the data periods we will use for claims-based measures for the CY 2014 and 

CY 2015 payment determinations. 

e. Structural Measure Data Requirements for the CY 2014 Payment Determination and 

Subsequent Years 

A summary of the previously finalized structural measures that we require for the 

CY 2014 and subsequent years payment determinations is set out below: 

● OP-12: The Ability for Providers with HIT to Receive Laboratory Data 

Electronically Directly into their Qualified/Certified EHR System as Discrete Searchable 

Data 

● OP-17: Tracking Clinical Results Between Visits 

● OP 25: Safe Surgery Check List Use 

● OP 26: Hospital Outpatient Volume on Selected Outpatient Surgical 

Procedures 

We previously finalized that for the CY 2014 payment determination, hospitals 

will be required to submit data on all structural measures between July 1, 2013 and 

August 15, 2013 with respect to the time period from January 1, 2012 to 

December 31, 2012. In the CY 2013 OPPS/ASC proposed rule (77 FR 45184), we 

proposed to extend this submission deadline. Under this proposed change, for the 
CMS-1589-FC 942 

CY 2014 payment determination, hospitals would be required to submit data on all 

structural measures between July 1, 2013 and November 1, 2013 with respect to the time 

period from January 1, 2012 to December 31, 2012. In section XV.G.2.f. of this final 

rule with comment period, we describe how this proposal would likewise extend the 

deadline to submit data for OP-22: ED Patient Left Without Being Seen. We proposed 

to continue this schedule so that, for the CY 2015 payment determination, hospitals 

would be required to submit data on all structural measures between July 1, 2014 and 

November 1, 2014 with respect to the time period from January 1, 2013 to 

December 31, 2013. We invited public comments on these proposals. 

Comment: Two commenters supported the change in the 12 month period 

because it better aligns the reporting period with that of other claims based measures 

displayed on Hospital Compare. 

Response: We agree that this alignment is beneficial and we seek to align 

programs to the extent possible. We are finalizing this policy as proposed. 

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

proposal that, for the CY 2014 payment determination, hospitals would be required to 

submit data on all structural measures between July 1, 2013 and November 1, 2013 with 

respect to the time period from January 1, 2012 to December 31, 2012, and for the 

CY 2015 payment determination, hospitals would be required to submit data on all 

structural measures between July 1, 2014 and November 1, 2014 with respect to the time 

period from January 1, 2013 to December 31, 2013. 
CMS-1589-FC 943 

f. Data Submission Requirements for OP-22: ED Patient Left Without Being Seen for 

the CY 2015 Payment Determination 

OP-22: ED Patient Left Without Being Seen is a chart-abstracted measure for 

which aggregate data is collected via a Web-based tool, as previously finalized. In other 

words, for purposes of data collection, this measure is treated like a structural measure. 

For this reason, it is collected on the same schedule as the structural measures described 

above, and, in the CY 2013 OPPS/ASC proposed rule (77 FR 45184) we proposed to 

extend the submission window for all structural measures, including OP-22. In the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74485), with respect to 

OP-22, we stated that hospitals would be required to submit data once for the CY 2014 

payment determination via a Web-based tool located on the QualityNet Web site. For the 

CY 2014 payment determination, we proposed that hospitals would be required to submit 

data, including numerator and denominator counts, between July 1, 2013 and November 

1, 2013 (comparable to the submission window that we proposed for the structural 

measures data collection in the section above) with respect to the time period of 

January 1, 2012 to December 31, 2012. 

For the CY 2015 payment determination, we proposed to continue this policy. 

Hospitals would be required to submit data between July 1, 2014 and November 1, 2014 

with respect to the time period of January 1, 2013 to December 31, 2013. We invited 

public comment on these proposals. 

Comment: Some commenters opposed data collection for OP-22: ED Patient 

Left Without Being Seen. These commenters noted that OP-22 is not NQF-endorsed and 
CMS-1589-FC 944 

believed it is not a clear measure of quality of care for a variety of reasons: because there 

are credible reasons why a patient might choose to leave an ER prior to treatment; the 

measure disadvantages ED’s in areas where an ED is used as a primary care facility; and 

there are no underlying patient records to validate this data. 

Response: We thank the commenters for their feedback. Please refer to section 

XV.C.1 of this final rule with comment period for a discussion of measure OP-22. 

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

proposal to extend the data submission window for OP-22. 

g. Population and Sampling Data Requirements for the CY 2014 Payment Determination 

and Subsequent Years 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45184), for the CY 2014 

payment determination and subsequent years, we proposed to continue our policy that 

hospitals may submit voluntarily on a quarterly basis, aggregate population and sample 

size counts for Medicare and non-Medicare encounters for the measure populations for 

which chart-abstracted data must be submitted, but they will not be required to do so. 

Where hospitals do choose to submit this data, the deadlines for submission are the same 

as those for reporting data for chart-abstracted measures, and hospitals may also choose 

to submit data prior to these deadlines. The deadline schedule is available on the 

QualityNet Web site. We refer readers to the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 72101 through 72103) and the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74482 through 74483) for discussions of these policies. We 

invited public comments on these proposals. 
CMS-1589-FC 945 

Comment: One commenter appreciated the policy that program participants can 

continue to submit population and sampling data voluntarily. 

Response: We believe there is no need to require the submission of population 

and sampling data due to the high level of voluntary submission of these data. 

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

policies for population and sampling data requirements for the CY 2014 payment 

determination and subsequent years. 

3. Hospital OQR Program Validation Requirements for Chart-Abstracted Measure Data 

Submitted Directly to CMS for the CY 2014 Payment Determination and Subsequent 

Years 

a. Random Selection of Hospitals for Data Validation of Chart-Abstracted Measures for 

the CY 2014 Payment Determination and Subsequent Years 

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74484 through 

74485), similar to our approach for the CY 2012 payment determination (75 FR 72103 

through 72106), we adopted a policy to validate chart-abstracted patient-level data 

submitted directly to CMS from randomly selected hospitals for the CY 2013 payment 

determination. 

For the CY 2013 payment determination, we reduced the number of randomly 

selected hospitals from 800 to 450. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45184), we proposed to 

continue this policy for the CY 2014 payment determination and for subsequent years. 

We refer readers to the CY 2012 OPPS/ASC final rule with comment period 
CMS-1589-FC 946 

(76 FR 74484) for a discussion of sample size, eligibility for validation selection, and 

encounter minimums for chart abstracted data submitted directly to CMS from randomly 

selected hospitals. We invited public comment on this proposal. 

Comment: One commenter was pleased that the number of hospitals selected 

dropped from 800 to 450 for the CY 2013 payment determination. 

Response: We thank this commenter for supporting our proposal to maintain the 

sample size for hospitals selected for validation. We note that in the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53552) the total base sample size of hospitals included 

in the annual validation random sample has recently been reduced from 800 to 400, to 

reduce overall burden. For both the Hospital IQR and Hospital OQR Programs, we 

believe we can reduce the annual random sample size without adversely affecting our 

ability to infer reliability of the chart-abstracted clinical data submitted to the programs. 

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

proposal to retain our sample size for hospitals randomly selected for data validation of 

chart-abstracted measures for the CY 2014 payment determination and subsequent years. 

b. Targeting and Targeting Criteria for Data Validation Selection for the CY 2014 

Payment Determination and Subsequent Years 

In the CY 2011 OPPS/ASC proposed rule (75 FR 46380) we discussed applying, 

to CY 2013 and subsequent years’ data submission, criteria to determine whether a 

hospital would be included in our validation selection based on abnormal data patterns or 

a specific situation. At that time we provided, for public comment, specific examples of 

what we thought could be appropriate criteria. 
CMS-1589-FC 947 

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72106) we 

stated our belief that the targeting criteria we shared for comment were reasonable. We 

considered one commenter’s concern that we should use targeting criteria to ensure we 

do not over-select a hospital for validation. We reiterated our intent to propose the 

specific targeting criteria in the upcoming CY 2012 OPPS/ASC proposed rule 

(76 FR 42332), in order to finalize and apply it to 2012 encounter data collected for the 

CY 2013 validation process year. We did so, and finalized our proposal without 

modification in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74485). 

In summary, we finalized our intent to select a random sample of hospitals for 

validation purposes, and to select an additional 50 hospitals based on specific criteria 

designed to measure whether the data these hospitals have reported raises a concern 

regarding data accuracy. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45185), for the CY 2014 

payment determination and subsequent years, we proposed to continue these policies and 

to continue to use the targeting criteria finalized previously. Specifically, a hospital will 

be preliminarily selected for validation based on targeting criteria if it: 

● Fails the validation requirement that applies to the previous year’s payment 

determination. For example, if a hospital was selected for validation for the CY 2013 

payment determination year, either on a random or targeted basis, and the hospital did not 

meet the 75 percent validation score for the designated time period, based upon our 

validation process, for the designated time period, the hospital would be included in the 

targeted sample pool for the CY 2014 payment determination); or 
CMS-1589-FC 948 

● Has an outlier value for a measure based on the data it submitted, based on 

finalized criteria from the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74485). 

In the CY 2012 OPPS/ASC proposed rule (76 FR 42333) and CY 2012 

OPPS/ASC final rule with comment period (76 FR 74486) we describe additional data 

validation conditions under consideration for the CY 2014 payment determination and 

subsequent years. We thank those who commented on the CY 2012 proposed additional 

data validation targeting conditions and will take their views under consideration as we 

develop any future proposals on these issues. In the CY 2013 OPPS/ASC proposed rule 

(77 FR 45185), we did not propose any additional targeting criteria to use in selecting the 

additional 50 hospitals we include in the validation process for CY 2014 payment 

determination or in subsequent years. We invited public comment on this proposal. 

Comment: One commenter believed that CMS quality measures should be based 

strictly on data derived either through claims or data abstracting on the Medicare 

population, not on all patients who are treated in the outpatient setting. 

Response: Data submitted to the Hospital OQR Program are intended to provide 

the public with information on as many patients treated in the outpatient hospital setting 

as possible, including both Medicare and non-Medicare patients. As noted above, 

however, claims-based data collection is limited to Medicare FFS patients. 

The Hospital OQR Program requires this data to be submitted under 

section 1833(t)(17)(A) of the Act, which applies to hospitals as defined under 

section 1886(d)(1)(B) of the Act. That provision states that subsection (d) hospitals that 
CMS-1589-FC 949 

do not report data required for the quality measures selected by the Secretary in the form 

and manner required by the Secretary will not receive the full payment rate update. We 

modeled the Hospital OQR Program after the Hospital IQR Program. 

In order for us to evaluate the care of the Medicare population which is a subset of 

the entire population, we look at data of the whole population, to ensure Medicare 

beneficiaries are receiving the same level of care as non-Medicare beneficiaries receive. 

Because we collect chart-abstracted quality measure data on both Medicare and 

non-Medicare patients, we believe it is appropriate to establish sampling criteria that 

apply to the same populations, which include both Medicare and non-Medicare patients. 

Comment: One commenter advocated selecting a valid sample based on local 

practice patterns, desiring inter-rater reliability. This commenter suggested that CMS 

select all 450 hospitals using criteria that measure whether the data hospitals have 

reported raises a concern regarding accuracy. 

Response: We interpret the commenter to be suggesting that sampling criteria 

should be refined in order to reflect local practice patterns. Because we use quality 

measures reflecting national consensus, we do not believe that such further refinement is 

necessary. Regarding inter-rater reliability, this should not be affected by the criteria 

used for sample selection. 

Comment: One commenter believed that our sample sizes would be acceptable if 

they were the only Federal data submission requirement. This commenter believed that 

the records requested by the Hospital OQR Program are in addition to those that are 

already established as part of the Federal integrity audit processes (for example, RAC, 
CMS-1589-FC 950 

Medicaid Integrity, ZPIC, and MAC). The commenter encourages CMS to review the 

validation process with respect to other CMS data requirements. 

Response: We understand the commenter’s concern regarding multiple Federal 

medical record requests. For Hospital OQR Program validation, we have worked to limit 

overall burden by reducing the number of hospitals participating annually in validation 

through our random sampling of hospitals. In addition, hospitals are reimbursed for 

photocopying and mailing costs. We agree that efforts should be made to keep record 

requests for validation purposes at the minimum necessary to ensure accuracy of 

submitted data. 

We refer readers to section XV.J. Electronic Health Records (EHRs), below, for a 

discussion of how Hospital IQR and Hospital OQR Programs are transitioning to the use 

of certified EHR technology, for measures that otherwise require information from the 

clinical record. We look forward to the adoption of EHR technology as a means to 

reduce burden, allowing us to collect data for measures without the need for manual chart 

abstraction, and we will explore validating these data in ways that likewise reduce burden 

to providers. 

Comment: One commenter would like CMS to clearly identify whether a record 

has been requested as a result of random selection or targeted selection. 

Response: We interpret this commenter’s suggestion to mean that we should 

indicate whether we selected a hospital for validation as a result of random or targeted 

selection. 
CMS-1589-FC 951 

For example, because all hospitals are eligible for random selection, a hospital 

that failed validation in one payment determination year would not know whether it was 

selected for validation in the subsequent payment determination year based on random or 

targeted selection. The hospital might have been selected in either of these categories. 

We have refrained from noting on what basis a hospital is selected on public Web 

sites, since our targeting criteria are based on possible data quality issues. 

However, we do have that information available. If a hospital would like to 

understand why it was selected for validation, the hospital may call the support contractor 

and request that information. Contact information for the Hospital OQR support 

contractor is available at https://qualitynet.org. 

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

proposal not to include any additional targeting criteria to use in selecting the additional 

50 hospitals we include in the validation process for the CY 2014 payment determination 

or in subsequent years. 

c. Methodology for Encounter Selection for the CY 2014 Payment Determination and 

Subsequent Years 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45185), for each selected 

hospital (random or targeted), we proposed to continue the approach we adopted in the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74485 through 74486) for 

the CY 2014 payment determination and subsequent years. For the CY 2014 payment 

determination, for each selected hospital (random or targeted), we would continue to 

validate up to 48 randomly selected patient encounters (12 per quarter; 48 per year) from 
CMS-1589-FC 952 

the total number of encounters that the hospital successfully submitted to the OPPS 

Clinical Warehouse. If a selected hospital has submitted less than 12 encounters in one 

or more quarters, only those encounters available would be validated. For each selected 

encounter, a designated CMS contractor would request that the hospital submit the 

complete supporting medical record documentation that corresponds to the encounter. 

We refer readers to 42 CFR 482.24(c)(2) for a definition of what is expected in a medical 

record submitted for validation. The validation process requires full supporting medical 

documentation, including ECG tapes and/or other pieces of a medical record that may not 

be stored in a single location. The hospital must ensure a full medical record goes to the 

contractor for accurate validation. 

We continue to believe that validating a larger number of encounters per hospital 

for fewer hospitals at the measure level has several benefits. We believe that this 

approach is suitable for the Hospital OQR Program because it will: (1) produce a more 

reliable estimate of whether a hospital’s submitted data have been abstracted accurately; 

(2) provide more statistically reliable estimates of the quality of care delivered in each 

measured hospital as well as at a national level; and (3) reduce overall burden, for 

example, in submitting validation documentation, because hospitals most likely will not 

be selected to undergo validation each year, and a smaller number of hospitals per year 

will be selected. 

For all selected hospitals, we would not be selecting cases stratified by measure or 

topic; our interest is whether the data submitted by hospitals accurately reflects the care 

delivered and documented in the medical record, not what the accuracy is by measure or 
CMS-1589-FC 953 

whether there are differences by measure or topic. We would be validating data from 

April 1 to March 31 of the year preceding the payment determination year. This provides 

validation results data in time to use to make the payment determination. For example, 

encounter data from April 1, 2012 to March 31, 2013 provides a full year of the most 

recent data possible to validate in time to make the CY 2014 payment determination. We 

invited public comment on our proposal to continue to use our established methodology 

for encounter selection and to continue to use our annual schedule for encounters to be 

validated and used in payment determinations. 

We did not receive any public comments regarding our proposal to continue to 

use our established methodology for encounter selection and our annual schedule for 

encounters to be validated and used in payment determinations. As a result, we are 

finalizing our proposal to continue to use our established methodology for encounter 

selection and our annual schedule for encounters to be validated and used in payment 

determinations. 

d. Validation Score Calculation for the CY 2014 Payment Determination and Subsequent 

Years 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45185) we proposed to retain 

the medical record return policy that we finalized in the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 72104) for the CY 2014 payment determination and 

subsequent years. For the CY 2014 payment determination, we proposed to continue the 

validation score policies we adopted in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74486), for the CY 2013 payment determination. We proposed to use the 
CMS-1589-FC 954 

validation calculation approach finalized for the CY 2012 and CY 2013 payment 

determinations with validation being done for each selected hospital. Specifically, we 

proposed to conduct a measures level validation by calculating each measure within a 

submitted record using the independently abstracted data and then comparing this to the 

measure reported by the hospital; a percent agreement would then be calculated. We 

would also compare the measure category for quality measures with continuous units of 

measurement, such as time, so that for these measures, both the category and the measure 

would need to match. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45185), for the CY 2014 

payment determination and subsequent years, we proposed to use the medical record 

validation procedure we finalized in the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 72105). A designated CMS contractor would, for each quarter that applies 

to the validation, ask each of the selected hospitals to submit medical documentation for 

up to 12 randomly selected cases submitted to and accepted by the OPPS Clinical 

Warehouse. The CMS contractor would request paper copies of medical documentation 

corresponding to selected cases from each hospital via certified mail or another trackable 

method that requires a hospital representative to sign for the request letter. A trackable 

method would be used so that we would be assured that the hospital received the request. 

The hospital would have 45 calendar days from the date of the request as documented in 

the request letter to submit the requested documentation and have the documentation 

received by the CMS contractor. If the hospital does not comply within 30 calendar days 

of receipt of the initial medical documentation request, the CMS contractor would send a 
CMS-1589-FC 955 

second letter by certified mail or other trackable method to the hospital, reminding the 

hospital that paper copies of the requested documentation must be submitted and received 

within 45 calendar days following the date of the initial CMS contractor request. If the 

hospital does not submit the requested documentation and the documentation is not 

received by the CMS contractor within the 45 calendar days, then the CMS contractor 

would assign a “zero” score to each data element for each selected case and the case 

would fail for all measures in the same topic (for example, OP–6 and OP–7 measures for 

a Surgical Care case). 

We proposed that the letter from the designated CMS contractor would be 

addressed to the hospital’s medical record staff identified by the hospital for the 

submission of records under the Hospital IQR Program (that is, the hospital’s medical 

records staff identified by the hospital to its State QIO). If CMS has evidence that the 

hospital received both letters requesting medical records, the hospital would be deemed 

responsible for not returning the requested medical record documentation and the hospital 

would not be allowed to submit such medical documentation as part of its reconsideration 

request so that information not utilized in making a payment determination is not 

included in any reconsideration request. 

Once the CMS contractor receives the requested medical documentation, the 

contractor would independently reabstract the same quality measure data elements that 

the hospital previously abstracted and submitted, and the CMS contractor would then 

compare the two sets of data to determine whether the two sets of data match. 

Specifically, the CMS contractor would conduct a measures level validation by 
CMS-1589-FC 956 

calculating each measure within a submitted case using the independently reabstracted 

data and then comparing this to the measure reported by the hospital; a percent agreement 

would then be calculated. The validation score for a hospital would equal the total 

number of measure matches divided by the total number of measures multiplied by 

100 percent. 

We invited public comment on our proposals regarding the medical record request 

policy for the CY 2014 payment determination and subsequent payment determination 

years. 

Comment: Many commenters supported our proposal to continue the 45 day time 

period for medical record submission. These commenters noted that they appreciated the 

Hospital OQR Program’s consistency with the RAC auditing. 

Response: We thank these commenters for their support. We agree that the 

45 day time period to submit medical record documentation for validation is reasonable 

and has the additional benefit of being consistent with RAC medical documentation 

requests. 

To receive the full OPPS OPD fee schedule increase factor for CY 2014, we 

proposed that hospitals must attain at least a 75 percent reliability score, based upon the 

proposed validation process. We proposed to use the upper bound of a two-tailed 

95 percent confidence interval to estimate the validation score. If the calculated upper 

limit is above the required 75 percent reliability threshold, we would consider a hospital’s 

data to be “validated” for payment purposes. Because we are more interested in whether 

the measure has been accurately reported, we would continue to focus on whether the 
CMS-1589-FC 957 

measure data reported by the hospital matches the data documented in the medical record 

as determined by our reabstraction. 

We proposed to calculate the validation score using the same methodology we 

finalized for the CY 2012 and CY 2013 payment determinations (75 FR 72105 and 

76 FR 74486). We also proposed to use the same medical record documentation 

submission procedures that we also finalized for the CY 2012 and CY 2013 payment 

determinations (75 FR 72104 and 76 FR 74486). We invited public comments on these 

proposals. 

Comment: One commenter expressed concerns regarding the strict validation of 

ED throughput measures, and recommended that CMS adopt the 5 minute allowance for 

the Hospital OQR Program, which was previously adopted for the Hospital IQR Program. 

Response: We thank this commenter for expressing this concern. We believe the 

commenter is referring to our policy requiring validation of measures requiring time 

values. The commenter is referring to the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53549). 

We agree with the commenter that requiring time values to match exactly is not 

realistic based on our historical experience with clinical data abstraction, the recognition 

that hospital clocks may vary from system to system such that the same time may be 

recorded differently depending on the source, and the limited clinical significance of 

small deviations in time. We note that this particular concern affects the validation score 

for the CY 2014 payment determination as well as for future years. 
CMS-1589-FC 958 

Accordingly, we are finalizing that, for the CY 2014 payment determination and 

for subsequent years, we will not require, when scoring the following chart-abstracted 

measures, that these measures have matching numerator and denominator states: 

● OP-18: Median Time from ED Arrival to ED Departure for Discharged ED 

Patients 

● OP-19: Transition Record with Specified Elements Received by Discharged 

ED Patients (this measure is currently suspended and will not be used in the CY 2014 

payment determination. We intend to confirm whether this measure will be included in 

future payment determinations in future rulemaking). 

● OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional 

● OP-21: ED – Median Time to Pain Management for Long Bone Fracture 

● OP-22: ED Patient Left Without Being Seen 

● OP-23: ED – Head CT Scan Results for Acute Ischemic Stroke 

Instead, for scoring of these measures, we will allow a 5 minute variance between 

the time abstracted by the hospital and that abstracted by the Clinical Data Abstraction 

Center (CDAC). 

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

proposals as modified regarding the validation score calculation methodology and 

timeframe for submission of medical record documentation requested for validation. 
CMS-1589-FC 959 

H. Hospital OQR Reconsideration and Appeals Procedures for the CY 2014 Payment 

Determination and Subsequent Years

When the Hospital IQR Program was initially implemented, it did not include a 

reconsideration process for hospitals. Subsequently, we received many requests for 

reconsideration of those payment decisions and, as a result, established a process by 

which participating hospitals could submit requests for reconsideration. We anticipated 

similar concerns with the Hospital OQR Program and, therefore, in the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66875), we stated our intent to 

implement for the Hospital OQR Program a reconsideration process modeled after the 

reconsideration process we implemented for the Hospital IQR Program. In the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68779), we adopted a reconsideration 

process that applied to the CY 2010 payment decisions. In the CY 2010 OPPS/ASC final 

rule with comment period (74 FR 60654 through 60655), we continued this process for 

the CY 2011 payment update. This process required that a hospital’s CEO sign any 

request for a reconsideration. 

In the CY 2011 and CY 2012 OPPS/ASC final rules with comment periods 

(75 FR 72106 through 72108 and 76 FR 74486 through 75587), we continued this 

process for the CY 2012 and CY 2013 payment updates with some modification. In the 

CY 2011 OPPS/ASC final rule with comment period(75 FR 72107), we finalized that the 

CEO was not required to sign the reconsideration request form. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45186), we proposed to 

continue this process, with additional modifications, for the CY 2014 payment 
CMS-1589-FC 960 

determination and subsequent years’ payment determinations. We have now realized 

that, in eliminating the requirement that a CEO sign a request form, we did not include 

any requirement for a signature on the reconsideration request form. To increase 

accountability, we proposed for the CY 2014 payment determination and subsequent 

years’ payment determinations, that the hospital designate a contact on its reconsideration 

request form, who may or may not be the CEO. We would communicate with this 

designee. We also proposed that the hospital’s designee must sign its reconsideration 

request form. This process is consistent with our recently adopted proposals for 

reconsideration requests under the ASCQR Program (77 FR 53643 through 53644). 

Under this process, a hospital seeking reconsideration must-- 

● Submit to CMS, via QualityNet, a Reconsideration Request form that will be 

made available on the QualityNet Web site; this form must be submitted by February 3 of 

the affected payment year (for example, for the CY 2014 payment determination, the 

request must be submitted by February 3, 2014) and must contain the following 

information: 

○ Hospital CCN. 

○ Hospital Name. 

○ CMS-identified reason for not meeting the requirements of the affected 

payment year’s Hospital OQR Program as provided in any CMS notification to the 

hospital. 
CMS-1589-FC 961 

○ Hospital basis for requesting reconsideration. This must identify the hospital’s 

specific reason(s) for believing it met the affected year’s Hospital OQR Program 

requirements and should receive the full OPD fee schedule increase factor. 

○ Designated hospital personnel contact information, including name, e-mail 

address, telephone number, and mailing address (must include physical address, not just a 

post office box). We proposed that the designee, who may or may not be the hospital’s 

CEO, must sign the form submitted to request reconsideration. 

○ A copy of all materials that the hospital submitted to comply with the 

requirements of the affected year’s Hospital OQR Program. Such material might include, 

but does not need to be limited to, the applicable Notice of Participation form or 

completed online registration form, and measure data that the hospital submitted via 

QualityNet. 

● Paper copies of all the medical record documentation that it submitted for the 

initial validation (if applicable). Hospitals submit this documentation to a designated 

CMS contractor which has authority to review patient level information. We post the 

address where hospitals are to send this documentation on the QualityNet Web site. 

● To the extent that the hospital is requesting reconsideration on the basis that 

CMS has determined it did not meet an affected year’s validation requirement, the 

hospital must provide a written justification for each appealed data element classified 

during the validation process as a mismatch. Only data elements that affect a hospital’s 

validation score would be eligible to be reconsidered. We review the data elements that 
CMS-1589-FC 962 

were labeled as mismatched as well as the written justifications provided by the hospital, 

and make a decision on the reconsideration request. 

We proposed these requirements for the CY 2014 payment determination year 

program and for subsequent years. We invited public comment on these proposed 

changes. 

Comment: Many commenters supported the proposal that the CEO or designee 

be able to sign the reconsideration request form. 

Response: We thank these commenters for their support. 

Following receipt of a request for reconsideration, CMS -- 

● Provides an e-mail acknowledgement, using the contact information provided 

in the reconsideration request, to the designated hospital personnel notifying them that 

the hospital’s request has been received. 

● Provides a formal response to the hospital-designated personnel, using the 

contact information provided in the reconsideration request, notifying the hospital of the 

outcome of the reconsideration process. 

● Applies policies that we finalized for the CY 2012 and CY 2013 payment 

determinations regarding the scope of our review when a hospital requests 

reconsideration because it failed our validation requirement. 

These policies are as follows: 

● If a hospital requests reconsideration on the basis that it disagrees with a 

determination that one or more data elements were classified as mismatches, we only 
CMS-1589-FC 963 

consider the hospital’s request if the hospital timely submitted all requested medical 

record documentation to the CMS contractor each quarter under the validation process. 

● If a hospital requests reconsideration on the basis that it disagrees with a 

determination that one or more of the complete medical records it submitted during the 

quarterly validation process was classified as an invalid record selection (that is, the CMS 

contractor determined that one or more of the complete medical records submitted by the 

hospital did not match what was requested), thus resulting in a zero validation score for 

the encounter(s), our review is initially limited. We would review only to determine 

whether the medical documentation submitted in response to the designated CMS 

contractor’s request was the correct and complete documentation. If we determine that 

the hospital did submit the correct and complete medical documentation, we abstract the 

data elements and compute a new validation score for the encounter. If we conclude that 

the hospital did not submit the correct and complete medical record documentation, we 

do not further consider the hospital’s request. 

● If a hospital requests reconsideration on the basis that it disagrees with a 

determination that it did not submit the requested medical record documentation to the 

CMS contractor within the proposed 45 calendar day timeframe (which we are finalizing 

in this final rule with comment period), our review is initially limited to determining 

whether the CMS contractor received the requested medical record documentation within 

45 calendar days, and whether the hospital received the initial medical record request and 

reminder notice. If we determine that the CMS contractor timely received paper copies 

of the requested medical record documentation, we abstract data elements from the 
CMS-1589-FC 964 

medical record documentation submitted by the hospital and compute a validation score 

for the hospital. If we determine that the hospital received two letters requesting medical 

documentation but did not submit the requested documentation within the 45 calendar 

day period, we do not further consider the hospital’s request. 

If a hospital is dissatisfied with the result of a Hospital OQR reconsideration 

decision, the hospital is able to file an appeal under 42 CFR Part 405, Subpart R (PRRB 

appeal). 

We invited public comment on the modifications we proposed to the Hospital 

OQR Program reconsideration and appeals procedures. 

Comment: One commenter thanked CMS for fully describing the process for 

making a reconsideration request. 

Response: We thank the commenter and appreciate the support. We agree that 

the program process for reconsiderations should be clear and fully described. 

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

proposals to the Hospital OQR Program reconsideration and appeals procedures. 

I. Extraordinary Circumstances Extension or Waiver for the CY 2013 Payment 

Determination and Subsequent Years

In our experience, there have been times when hospitals have been unable to 

submit required quality data due to extraordinary circumstances that are not within their 

control. It is our goal to not penalize hospitals for such circumstances and we do not 

want to unduly increase their burden during these times. Therefore, in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60046 through 600647), we adopted a 
CMS-1589-FC 965 

process for hospitals to request and for CMS to grant extensions or waivers with respect 

to the reporting of required quality data when there are extraordinary circumstances 

beyond the control of the hospital. In the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 72103), we retained these procedures with a modification to eliminate 

redundancy in the information a hospital must provide in the request. In the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74478 through 74479), for CY 2012 

and subsequent years, we retained these procedures with one modification. The CY 2012 

modification allowed that the original procedures for requesting an extension or waiver of 

quality data submission would thereafter also extend to include medical record 

documentation submission for purposes of complying with our validation requirement for 

the Hospital OQR Program. In the CY 2013 OPPS/ASC proposed rule (77 FR 45187), 

we proposed to retain these procedures with a modification for CY 2013 and subsequent 

years. 

We proposed to modify one element of the information required on the CMS 

request form. Under the procedures set out in the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74479), hospitals were required to submit “CEO and any other 

designated personnel contact information” (emphasis added), the CEO was required to 

sign the form, and CMS was required to respond to the CEO and additional designated 

hospital personnel. The information required in CY 2013 and subsequent years would 

include “CEO or other hospital-designated personnel contact information” (emphasis 

added). This proposed change would allow the hospital to designate an appropriate, nonCEO, contact at its discretion. This individual would be responsible for the submission, 
CMS-1589-FC 966 

and would be the one signing the form. Therefore, the hospital’s designated-contact may 

or may not hold the title of CEO. We invited public comment on this proposed 

modification to the process for granting extraordinary circumstances extensions or 

waivers for the Hospital OQR Program. 

Comment: Many commenters supported the proposal that the hospital should 

designate its own most appropriate contact for the signing and submission of the 

extraordinary circumstance extension and waiver form. 

Response: We appreciate these commenters’ support. 

Thus, we proposed that, in the event of extraordinary circumstances, such as a 

natural disaster, not within the control of the hospital, for the hospital to receive 

consideration for an extension or waiver of the requirement to submit quality data or 

medical record documentation for one or more quarters, a hospital would submit to CMS 

a request form that would be made available on the QualityNet Web site. The following 

information should be noted on the form: 

● Hospital CCN; 

● Hospital Name; 

● CEO or other hospital-designated personnel contact information, including 

name, e-mail address, telephone number, and mailing address (must include a physical 

address, a post office box address is not acceptable); 

● Hospital’s reason for requesting an extension or waiver; 

● Evidence of the impact of the extraordinary circumstances, including but not 

limited to photographs, newspaper and other media articles; and 
CMS-1589-FC 967 

● A date when the hospital would again be able to submit Hospital OQR data 

and/or medical record documentation, and a justification for the proposed date. 

The request form would be signed by the hospital’s designated contact, whether 

or not that individual is the CEO. A request form would be required to be submitted 

within 45 days of the date that the extraordinary circumstance occurred. 

Following receipt of such a request, CMS would— 

(1) Provide an e-mail acknowledgement using the contact information provided 

in the request notifying the designated contact that the hospital’s request has been 

received; 

(2) Provide a formal response to the hospital’s designated contact using the 

contact information provided in the request notifying them of our decision; and 

(3) Complete our review of any CY 2013 request and communicate our response 

within 90 days following our receipt of such a request. 

We note that we might also decide to grant waivers or extensions to hospitals that 

have not requested them when we determine that an extraordinary circumstance, such as 

an act of nature (for example, hurricane) affects an entire region or locale. If we make 

the determination to grant a waiver or extension to hospitals in a region or locale, we 

would communicate this decision to hospitals and vendors through routine 

communication channels, including but not limited to e-mails and notices on the 

QualityNet Web site. We invited public comments on these proposals. 

Comment: One commenter thanked CMS for fully describing the process for 

making a request for an extension or waiver of program requirements. 
CMS-1589-FC 968 

Response: We thank this commenter for supporting our efforts. 

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

proposed modifications to the procedures for requesting an extension or waiver of 

Hospital OQR Program requirements. 

J. Electronic Health Records (EHRs)

Starting with the FY 2006 IPPS final rule, we have encouraged hospitals to take 

steps toward the adoption of EHRs (also referred to in previous rulemaking documents as 

electronic medical records) that will allow for reporting of clinical quality data from 

EHRs to a CMS data repository (70 FR 47420 through 47421). We sought to prepare for 

future EHR submission of electronic clinical quality measures (eCQMs), as they are 

referred to in the EHR Incentive Program), by sponsoring the creation of electronic 

specifications for eCQMs under consideration for the Hospital IQR Program. Through 

the Medicare and Medicaid EHR Incentive Programs, we expect that the submission of 

quality data through EHRs will provide a foundation for establishing the capacity of 

hospitals to send, and for CMS, in the future, to receive, eCQMs via hospital EHRs for 

Hospital IQR Program and Hospital OQR Program measures. We expect the Hospital 

IQR and Hospital OQR Programs to transition to the use of electronic specifications for 

eCQMs that otherwise require information from the clinical record. This would allow us 

to collect data for eCQMs without the need for manual chart abstraction. 

In the FY 2012 IPPS/LTCH PPS proposed rule (75 FR 25894), we identified 

FY 2015 as a potential transition date to move to EHR-based submission and phase out 

manual chart abstraction for the Hospital IQR Program. We also anticipate such a 
CMS-1589-FC 969 

transition for hospital outpatient measures, although likely somewhat after the transition 

for hospital inpatient measures. This is because we hope to first align the eCQMs in the 

Medicare EHR Incentive Program with the Hospital IQR Program measures. Our goals 

are to align the hospital quality reporting programs, to seek to avoid redundant and 

duplicative reporting of quality measures for hospitals, and to rely largely on EHR 

submission for many eCQMs based on clinical record data. 

As noted below, the Medicare and Medicaid EHR Incentive Programs – Stage 2 

final rule (77 FR 54088) requires electronic reporting of eCQMs beginning in 2014 for 

eligible hospitals and CAHs that are beyond the first year of Stage 1 of meaningful use. 

Under our timeline for EHR-based submission under the Hospital OQR Program, some 

eligible hospitals would be in their second year of Stage 2 reporting and these eligible 

hospitals could be using two methods to report similar information for the Medicare and 

Medicaid EHR Incentive Programs and the Hospital OQR Program. In the CY 2013 

OPPS/ASC proposed rule (77 FR 45188), we stated that we had considered allowing, but 

not requiring, EHR-based submission at the earliest possible date, so as to reduce the 

burden of hospitals. We did not propose this approach because we believe that it would 

not be consistent with our goal that measure results that must be publicly reported should 

be based on consistent, comparable results among reporting hospitals and because our 

first priority is the align EHR-based submissions under the Hospital IQR Program. We 

invited public comment on this issue. 

Comment: A few commenters pointed out that the transition from manual to 

electronic submission is a huge task and could be very labor intensive. Another 
CMS-1589-FC 970 

commenter stated that the timeline to transition to electronic reporting is too aggressive. 

Some commenters urged CMS to immediately allow data submission via chart 

abstraction or electronically to ease the burden of quality reporting. Another commenter 

agreed with CMS’s consideration for a full migration to electronic quality measurement 

and reporting. The commenter stated it is inappropriate to report data using chartabstraction and electronic submission concurrently in the interim. 

Response: We understand the transition to electronic submission is an immense 

undertaking that requires intense collaboration among stakeholders. As stated earlier, we 

still believe that public reporting should be consistent and comparable among reporting 

hospitals. We intend to move toward a full migration to electronic quality measurement 

and reporting. In addition, the EHR Incentive Program has incorporated eCQMs that are 

part of various hospital reporting programs, including the Hospital IQR and Hospital 

OQR Programs, in order to maximize financial incentives to help with this transition. 

Comment: One commenter urged CMS to lay out its vision for electronic 

reporting, stating that it is overly burdensome for hospitals to collect and report data via 

chart abstraction and electronically. 

Response: We have previously stated our vision, including in the Medicare and 

Medicaid EHR Incentive Programs – Stage 2 final rule (77 FR 54053). We noted that 

our alignment efforts focus on several fronts including using the same eCQMs for 

different programs, standardizing the measure development and electronic specification 

processes across our programs, coordinating quality measurement stakeholder 

involvement efforts, and identifying ways to minimize multiple submission requirements 
CMS-1589-FC 971 

and mechanisms. We gave the example that we are working toward allowing eCQM data 

submitted via certified EHR technology (CEHRT) by eligible professionals (EPs), 

eligible hospitals and CAHs to apply to other CMS quality reporting programs. A 

longer-term vision would be hospitals and clinicians reporting through a single, aligned 

mechanism for multiple CMS programs. For EPs, we have finalized such an alignment 

between the PQRS and the EHR Incentive Program, and we expect hospital reporting 

programs such as Hospital IQR and Hospital OQR Programs to follow. 

In order to properly transition to electronic reporting, it is imperative that we take 

a staggered approach to electronic reporting in order to allow for careful review of the 

infrastructure and data integrity during the process. We have and will continue to look 

for ways to reduce reporting burden. We note that providers could collect data in EHRs 

even if the submission of the data is not done electronically for all quality reporting 

programs. 

Comment: One commenter strongly recommended that all eCQMs should be 

field-tested and validated prior to implementation. 

Response: We agree with the commenter that eCQMs should be tested and 

validated prior to implementation. We are collaborating with the NQF, measure 

stewards, and the ONC to develop accurate, and medical-record compatible electronic 

specifications while maintaining the integrity of the measures as endorsed. 

We thank the commenters for submitting comments on the use of EHRs in the 

Hospital OQR Program and will take these comments into consideration as we develop 

future policies on this issue. 
CMS-1589-FC 972 

K. 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible 

Hospitals and CAHs

In the CY 2012 OPPS/ASC final rule with comment period, we finalized the 

voluntary 2012 Electronic Reporting Pilot for eligible hospitals and CAHs participating 

in the Medicare EHR Incentive Program for FY 2012 and also revised our regulations at 

§ 495.8(b)(2) accordingly. We refer readers to the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74489 through 74492) for detailed discussion of the 2012 

Electronic Reporting Pilot. 

We proposed to continue the Electronic Reporting Pilot for FY 2013 as finalized 

for FY 2012. We proposed to revise our regulations at § 495.8(b)(2)(vi) to reflect the 

continuation of the Electronic Reporting Pilot for FY 2013, and also to remove the 

reference to § 495.6(f)(9) in order to conform with the proposed changes to § 495.6(f) 

that were included in the Medicare and Medicaid EHR Incentive Programs - Stage 2 

proposed rule (77 FR 13817). (We note we recently published the Medicare and 

Medicaid EHR Incentive Programs - Stage 2 final rule (77 FR 53968).)We invited public 

comments on these proposals. 

We noted in the proposed rule that we finalized reporting clinical quality 

measures for the Medicare EHR Incentive Program by attestation of clinical quality 

measure results in the CY 2012 OPPS/ASC final rule with comment period for FY 2012 

and subsequent years, such as FY 2013 (76 FR 74489). Thus, eligible hospitals and 

CAHs may continue to report clinical quality measure results as calculated by CEHRT by 

attestation for FY 2013, as they did for FYs 2011 and 2012. We also noted the intent of 
CMS-1589-FC 973 

CMS to move to electronic reporting. In the Medicare and Medicaid EHR Incentive 

Programs – Stage 2 final rule, we finalized that the Medicare EHR Incentive Program 

would require electronic reporting of clinical quality measures beginning in FY 2014 for 

eligible hospitals and CAHs that are beyond the first year of Stage 1 of meaningful use 

(77 FR 54088). 

Comment: A few commenters stated that some eCQMs have not been sufficiently 

validated. One commenter also stated that not enough clinical quality measures in the 

Hospital IQR and Hospital OQR Programs are electronically specified, noting that some 

data elements are not always captured in CEHRT and still require manual review and 

input. A few commenters stated that electronic specifications have not undergone field 

testing. 

Response: The clinical quality measures finalized in the Medicare and Medicaid 

EHR Incentive Programs – Stage 2 final rule (77 FR 53968) for reporting beginning with 

FY 2014 have either undergone feasibility testing in EHR systems and clinical settings or 

were finalized in the Stage 1 final rule for reporting in FYs 2011 and 2012, and 

specifications have been and will continue to be updated based on experiences with 

reporting those clinical quality measures in the EHR Incentive Program. 

In addition, the Office of the National Coordinator for Health Information 

Technology’s (ONC) 2014 Edition EHR certification criteria explicitly requires that EHR 

technology presented for certification must be able to capture the requisite data for each 

and every clinical quality measure to which the EHR technology is requested to be 

certified (see 45 CFR 170.314(c)(1) and 77 FR 54226 through 54232). Therefore EHR 
CMS-1589-FC 974 

technology that is certified to the 2014 Edition EHR certification criteria should include 

all of the data elements needed for each and every clinical quality measure to which an 

EHR technology is certified for the purposes of the EHR Incentive Program (for a list of 

these measures, including other quality measure programs that use the same measure, 

please refer to Table 10 of the Medicare and Medicaid EHR Incentive Programs-Stage 2 

final rule at 77 FR 54083 through 54087). Finally, we do not believe that many of the 

issues experienced by providers with eCQMs in 2011 and 2012 of the EHR Incentive 

Program would continue. 

We expect that eCQMs that will be electronically reported in hospital reporting 

programs such as the Hospital OQR Program would have undergone the same or similar 

processes as the eCQMs in the EHR Incentive Program (for more information, please 

refer to the Medicare and Medicaid EHR Incentive Programs – Stage 2 final rule 

77 FR 54053 through 54056, section B.3. Criteria for Selecting CQMs and section B.4. 

CQM Specification). As the transition to electronic reporting becomes more ubiquitous 

in the hospital reporting programs, we expect that more eCQMs would be created de 

novo based on data that is readily available in EHR systems rather than retooled from 

paper-based specifications. 

Comment: Several commenters stated that CMS should establish a process for 

updating specifications for eCQMs. These commenters also suggested that we establish a 

mechanism through which vendors and providers can offer feedback on problematic or 

unclear measures. 
CMS-1589-FC 975 

Response: The Electronic Reporting Pilot, which began in FY 2012 and is being 

finalized to continue in FY 2013, is used in part as a mechanism for testing the entire 

infrastructure for reporting eCQMs, including the ability to accurately abstract clinical 

quality data from EHRs, transmit them to CMS, and for CMS to receive the data. The 

EHR Incentive Program is currently the only CMS quality reporting program using 

electronic clinical quality measures for hospitals. The process of updating specifications 

regularly is expected to continue in order to maintain alignment with current clinical 

guidelines and ensure that the measure remains relevant and actionable within the clinical 

care setting. 

In addition, we expect to make updates based on experiences of vendors, 

providers, and CMS during the process of reporting clinical quality data. We currently 

have various forums in which vendors and providers can provide feedback, such as the 

joint CMS and the Joint Commission ePilot vendor conference call, national partners’ 

calls and open door forums. We continue to engage with the vendor and provider 

communities to keep an open dialogue for feedback and continuous improvement in 

electronic quality measurement. 

Comment: One commenter did not support CMS having direct access to a 

facility’s EHR for data abstraction. 

Response: We have not proposed nor do we intend to directly access a facility’s 

EHR for data abstraction. The Electronic Reporting Pilot for the Medicare EHR 

Incentive Program (established in the CY 2012 OPPS/ASC final rule with comment 

period and being finalized to continue in FY 2013 in this final rule with comment period) 
CMS-1589-FC 976 

is expected to be the basis for electronic reporting of clinical quality data in Hospital IQR 

and Hospital OQR Programs, as well as potentially in other hospital reporting programs. 

Comment: Several commenters were concerned about participation levels in the 

Electronic Reporting Pilot and suggested flexibility with data transmission standards, 

such as using standards that EHR vendors already use. One commenter urged CMS to 

perform a comprehensive assessment of the pilot. 

Response: The submission period for the first Electronic Reporting Pilot (that is, 

the pilot established for FY 2012) is October 1, 2012 through November 30, 2012. 

Therefore, when this final rule with comment period is published, the submission period 

for the first Electronic Reporting Pilot for hospitals would not yet be completed and a 

comprehensive assessment would not yet be possible. The data transmission standard 

used in the Electronic Reporting Pilot (Quality Reporting Data Architecture category I, or 

QRDA-I) has also been finalized in the Medicare and Medicaid EHR Incentive Programs 

– Stage 2 final rule as a standard that we will accept beginning with FY 2014 

(77 FR 54088). ONC has also included QRDA-I in its 2014 Edition EHR certification 

criteria, which means that CEHRT should be capable of transmitting data using this 

standard if certified to the 2014 Edition EHR certification criteria. Therefore, it is a 

standard that we believe will continue to be used more widely for electronic reporting of 

clinical quality measures. As stated previously, we have and will continue to engage with 

the vendor community in order to continue to improve the ease and accuracy of electronic 

transmission of clinical quality data. 
CMS-1589-FC 977 

Comment: One commenter provided suggestions on development and selection 

of future electronic clinical quality measures, including considerations such as measure 

validity, quality improvement potential, reporting burden, and the National Quality 

Strategy described in the Medicare and Medicaid EHR Incentive Programs – Stage 2 

final rule (77 FR 54054). 

Response: We appreciate the suggestions on development and selection of future 

electronic clinical quality measures; however, this is outside the scope of this rulemaking. 

We will consider these suggestions when developing new electronic clinical quality 

measures and in future rulemaking when selecting new measures in our quality reporting 

programs. 

Comment: One commenter stated that it is inconsistent for the Electronic 

Reporting Pilot to collect only Medicare data when reporting of all payer data is 

instrumental to meeting the goals of national initiatives as well as needed for Hospital 

Compare. This commenter was concerned that submission of patient-level data is 

inconsistent with the requirement in the EHR Incentive Program to report summary-level 

data and could have adverse consequences for patient privacy. 

Response: In order to work towards the goal of transitioning our quality reporting 

programs to electronic reporting, we are piloting the electronic submission of 

patient-level data, which is the data level required in the hospital reporting programs, 

such as the Hospital IQR and Hospital OQR Programs. Whether the data are submitted 

to us through a manual process or electronically, all parties are expected to comply with 

HIPAA as applicable in order to maintain patient confidentiality and secure data 
CMS-1589-FC 978 

transmission. Since this is a pilot, we limited the data submission to Medicare patients 

only in order to limit the reporting burden on participating hospitals during the pilot 

phase. 

Comment: One commenter suggested piloting both the QRDA-I (patient-level) 

and QRDA-III (aggregate-level) transmission formats in 2013. 

Response: We proposed to continue the Electronic Reporting Pilot for FY 2013 

exactly as adopted for FY 2012, which only included the QRDA-I transmission format. 

The QRDA-III format is currently being finalized and is not ready for full 

implementation in FY 2013. 

Comment: Several commenters supported continuing the Electronic Reporting 

Pilot through the EHR Incentive Program. One of these commenters specifically 

supported the electronic reporting of clinical quality measures under the terms in the 

EHR Incentive Program. 

Response: We thank the commenters for the support to continue the Electronic 

Reporting Pilot and for electronically-reported clinical quality measures. 

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

proposal to continue the Electronic Reporting Pilot for FY 2013, as finalized for 

FY 2012. We are revising our regulations as proposed at § 495.8(b)(2)(vi) to reflect the 

continuation of the Electronic Reporting Pilot for FY 2013 and to remove the reference to 

§ 495.6(f)(9). 
CMS-1589-FC 979 

XVI. Requirements for the Ambulatory Surgical Center Quality Reporting 

(ASCQR) Program 

A. Background

1. Overview 

We refer readers to section XV.A.1. of this final rule with comment period for a 

general overview of our quality reporting programs. 

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

We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final rule with 

comment period (76 FR 74492 through 74493) for a detailed discussion of the statutory 

history of the ASCQR Program. 

3. History of the ASCQR Program 

In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66875), the 

CY 2009 OPPS/ASC final rule with comment period (73 FR 68780), the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60656), and the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 72109), we did not implement a quality data 

reporting program for ASCs. We determined that it would be more appropriate to allow 

ASCs to acquire some experience with the revised ASC payment system, which was 

implemented for CY 2008, before implementing new quality reporting requirements. 

However, in these rules, we indicated that we intended to implement a quality reporting 

program for ASCs in the future. 

In preparation for proposing a quality reporting program for ASCs, in the 

CY 2011 OPPS/ASC proposed rule (75 FR 46383), we solicited public comments on 
CMS-1589-FC 980 

10 measures. In addition to preparing to propose implementation of a quality reporting 

program for ASCs, HHS developed a plan to implement a value-based purchasing (VBP) 

program for payments under title XVIII of the Act for ASCs as required by section 

3006(f) of the Affordable Care Act, as added by section 10301(a) of the Affordable Care 

Act. We also submitted a report to Congress, as required by section 3006(f)(4) of the 

Affordable Care Act, entitled “Medicare Ambulatory Surgical Center Value-Based 

Purchasing Implementation Plan” that details this plan. This report is found on the CMS 

Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/Downloads/C_ASC_RTC-2011.pdf. Currently, we do not have 

express statutory authority to implement an ASC VBP program. If and when legislation 

is enacted that authorizes CMS to implement an ASC VBP program, we will develop the 

program and propose its implementation through notice-and-comment 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. We adopted quality measures for the CY 2014, 

CY 2015, and CY 2016 payment determination years and finalized some data collection 

and reporting timeframes for these measures. We also adopted policies with respect to 

the maintenance of technical specifications and updating of measures, publication of 

ASCQR Program data, and, for the CY 2014 payment determination, data collection and 

submission requirements for the claims-based measures. For a discussion of these final 

policies, we refer readers to the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74492 through 74517). 
CMS-1589-FC 981 

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74515), we 

indicated our intent to issue proposals for administrative requirements, data validation 

and completeness requirements, and reconsideration and appeals processes in the 

FY 2013 IPPS/LTCH PPS proposed rule, rather than in the CY 2013 OPPS/ASC 

proposed rule, because the FY 2013 IPPS/LTCH PPS proposed rule was scheduled to be 

finalized earlier and prior to data collection for the CY 2014 payment determination, 

which is to begin with services furnished on October 1, 2012. In the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53636 through 53644), we issued final policies for 

administrative requirements, data completeness requirements, extraordinary 

circumstances waiver or extension requests, and a reconsideration process. For a 

complete discussion of these policies, we refer readers to the FY 2013 IPPS/LTCH PPS 

final rule. 

Because we included proposals for the ASCQR Program in the FY 2013 

IPPS/LTCH PPS proposed rule, we limited the number of proposals in the CY 2013 

OPPS/ASC proposed rule. In addition, in an effort to prevent confusion regarding what 

we proposed in the CY 2013 OPPS/ASC proposed rule and what we proposed in the 

FY 2013 IPPS/LTCH PPS proposed rule, in the CY 2013 OPPS/ASC proposed rule, we 

limited our discussion of the proposals contained in the FY 2013 IPPS/LTCH PPS 

proposed rule primarily to background related to the proposals in the CY 2013 

OPPS/ASC proposed rule. 

Comment: Two commenters supported the implementation of a pay-forperformance program (that is, an ASC Value-Based Purchasing (VBP) Program) by 
CMS-1589-FC 982 

CY 2016 to reward high performing facilities and penalize low performing facilities. The 

commenters also recommended that the measure set for such a program focus not only on 

clinical outcomes and include clinical process, structural, and patient experience of care 

measures, but also minimize burden. 

Response: Currently, we do not have the statutory authority to implement an 

ASC VBP Program. If legislation is enacted that authorizes CMS to implement such a 

program for ASCs, we will consider these recommendations. 

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures 

Section 1833(i)(7)(B) of the Act states that section 1833(t)(17)(C) of the Act shall 

apply with respect to ASC services in a similar manner in which they apply to hospitals 

for the Hospital OQR Program, “except as the Secretary may otherwise provide.” The 

requirements under section 1833(t)(17)(C)(i) of the Act state that measures developed 

shall “be appropriate for the measurement of quality of care (including medication errors) 

furnished by hospitals in outpatient settings and that reflect consensus among affected 

parties and, to the extent feasible and practicable, shall include measures set forth by one 

or more national consensus building entities.” 

In addition to following the statutory requirements, in selecting measures for the 

ASCQR Program and other quality reporting programs, we have focused on measures 

that have a high impact on and support HHS’ and CMS’ priorities for improved health 

care outcomes, quality, safety, efficiency, and satisfaction for patients. Our goal for the 

future is to expand any measure set adopted for the ASCQR Program to address these 
CMS-1589-FC 983 

priorities more fully and to align ASC quality measure requirements with those of other 

reporting programs as appropriate, including the Hospital OQR Program, so that the 

burden for reporting will be reduced. 

In general, we prefer to adopt measures that have been endorsed by the NQF 

because it is a national multi-stakeholder organization with a well-documented and 

rigorous approach to consensus development. However, as discussed above, the Hospital 

OQR Program statute only requires that we adopt measures that are appropriate for the 

measurement of the quality of care furnished by hospitals in outpatient settings, reflect 

consensus among affected parties, and, to the extent feasible and practicable, include 

measures set forth by one or more national consensus building entities. Therefore, 

measures are not required to be endorsed by the NQF or any other national consensus 

building entity and, as we have noted in a previous rulemaking for the Hospital OQR 

Program (75 FR 72065), the requirement that measures reflect consensus among affected 

parties can be achieved in other ways, including through the measure development 

process, through broad acceptance and use of the measure(s), and through public 

comment. Further, the Secretary has broader authority under the ASCQR Program 

statute, as discussed above, to adopt non-endorsed measures or measures that do not 

reflect consensus for the ASCQR Program because, under the ASCQR Program statute, 

these Hospital OQR Program provisions apply “except as the Secretary may otherwise 

provide.” 

In developing the ASCQR Program, we applied the principles set forth in the 

CY 2011 OPPS/ASC proposed rule and final rule with comment period (76 FR 42337 
CMS-1589-FC 984 

through 42338 and 74494 through 74495, respectively). Although we did not propose 

any new measures for the ASCQR Program in the CY 2013 OPPS/ASC proposed rule as 

discussed below, we stated that we plan to apply the following principles in future 

measure selection and development for the ASCQR Program. These principles were 

applied in developing other quality reporting programs and many are the same principles 

applied in developing the ASCQR Program last year. 

● Our overarching goal is to support the National Quality Strategy’s goal of 

better health care for individuals, better health for populations, and lower costs for health 

care. The ASCQR Program will help achieve these goals by creating transparency 

around the quality of care provided by ASCs to support patient decision-making and 

quality improvement. More information regarding the National Quality Strategy can be 

found at: http://www.healthcare.gov/law/resources/reports/quality03212011a.html. HHS 

engaged a wide range of stakeholders to develop the National Quality Strategy, as 

required by the Affordable Care Act. 

● Pay-for-reporting and public reporting programs should rely on a mix of 

standards, process, outcomes, and patient experience of care measures. Across all 

programs, we seek to move as quickly as possible to the use of primarily outcome and 

patient experience measures. To the extent practicable and appropriate, outcome and 

patient experience measures should be adjusted for risk or other appropriate patient 

population or provider/supplier characteristics. 

● To the extent possible and recognizing the differences in payment system 

maturity and statutory authorities, measures should be aligned across public reporting and 
CMS-1589-FC 985 

payment systems under Medicare and Medicaid. The measure sets should evolve so that 

they include a focused core set of measures appropriate to the specific provider/supplier 

category that reflects the level of care and the most important areas of service and 

measures for that provider/supplier. 

● We weigh the relevance and the utility of measures compared to the burden on 

ASCs for submitting data under the ASCQR Program. The collection of information 

burden on providers and suppliers should be minimized to the extent possible. To this 

end, we continuously seek to adopt electronic-specified measures so that data can be 

calculated and submitted via certified EHR technology with minimal burden. We also 

seek to use measures based on alternative sources of data that do not require chart 

abstraction or that use data already being reported by ASCs. 

● We take into account the views of the Measure Application Partnership (MAP). 

The MAP is a public-private partnership convened by the NQF for the primary purpose 

of providing input to HHS on selecting performance measures for quality reporting 

programs and pay-for-reporting programs. The MAP views patient safety as a high 

priority area and it strongly supports the use of NQF-endorsed safety measures. 

Accordingly, we consider the MAP’s recommendations in selecting quality and 

efficiency measures (we refer readers to the Web sites at: 

http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partn

ership.aspx, and 

http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=69885). 
CMS-1589-FC 986 

● Measures should be developed with the input of providers/suppliers, 

purchasers/payers and other stakeholders. Measures should be aligned with best practices 

among other payers and the needs of the end users of the measures. We take into account 

widely accepted criteria established in medical literature. 

● HHS’ Strategic Plan and Initiatives. HHS is the U.S. Government’s principal 

agency for protecting the health of all Americans. HHS accomplishes its mission through 

programs and initiatives. Every 4 years, HHS updates its Strategic Plan and measures its 

progress in addressing specific national problems, needs, or mission-related challenges. 

The current goals of the HHS Strategic Plan can be located on the Web site at: 

http://www.hhs.gov/secretary/about/priorities/strategicplan2010-2015.pdf. 

● CMS Strategic Plan. We strive to ensure that measures for different Medicare 

and Medicaid programs are aligned with priority quality goals, that measure 

specifications are aligned across settings, that outcome measures are used whenever 

possible, and that quality measures are collected from EHRs as appropriate. 

We believe that ASCs are similar to HOPDs, insofar as the delivery of surgical 

and related nonsurgical services. Similar standards and guidelines can be applied 

between HOPDs and ASCs with respect to surgical care improvement because many of 

the same surgical procedures are provided in both settings. Measure harmonization 

assures that comparable care in these settings can be evaluated in similar ways, which 

further assures that quality measurement can focus more on the needs of a patient with a 

particular condition rather than on the specific program or policy attributes of the setting 

in which the care is provided. 
CMS-1589-FC 987 

We invited public comment on this approach for future measure selection and 

development for the ASCQR Program. 

Comment: Some commenters supported CMS’ efforts to establish the ASCQR 

Program. One commenter emphasized that ASCQR Program measures should reflect 

ASC facility-level accountability rather than physician-level accountability. 

Response: We appreciate the commenters’ support for the implementation 

of the ASCQR Program. The measures we adopted for the ASCQR Program are 

directly attributable to ASCs. The quality data are submitted by ASCs and are 

reported at a facility-level and not at a physician-level. We finalized a policy to 

publish ASC quality data by CMS Certification Number (CCN) in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74514 through 74515), which 

is a facility-level identifier. 

Comment: A few commenters asserted that ASCs are small entities and the 

utilization of EHR technology in the ASC industry is limited. Nonetheless, commenters 

requested that CMS consider electronic submission as an option for ASCs that have 

implemented EHR technology. 

Response: We recognize that many ASCs are small entities and some may have 

limited EHR technology. We are still in the beginning stages of implementing the 

ASCQR Program, and we will need to assess the readiness of ASCs prior to considering 

an option of allowing electronic submission of measures for the ASCQR Program. 

Comment: One commenter encouraged the adoption of NQF-endorsed measures 

to ensure that field testing and the consensus process are rigorous. Another commenter 
CMS-1589-FC 988 

urged CMS to facilitate direct representation from the ASC industry on either the 

National Priorities Partnership (NPP) or the MAP to formulate priorities for outpatient 

settings and coordinate efforts across inpatient and outpatient settings. 

Response: In general, we prefer to adopt measures that have been endorsed by 

the NQF because it is a national multi-stakeholder organization with a well-documented 

and rigorous approach to consensus development. However, sections 1833(i)(7)(B) and 

1833(t)(17)(C)(i) of the Act, read together, require that the Secretary develop measures 

that the Secretary determines to be appropriate for the measurement of quality of care 

(including medication errors) furnished by ASCs and that reflect consensus among 

affected parties and, to the extent feasible and practicable, shall include measures set 

forth by one or more national consensus building entities. Therefore, measures are not 

required to be endorsed by the NQF or any other national consensus building entity and, 

as we have noted in a previous rulemaking (75 FR 72065), the requirement that measures 

reflect consensus among affected parties can be achieved in other ways, including 

through the measure development process, through broad acceptance and use of the 

measure(s), and through public comment. Further, section 1833(i)(7)(B) of the Act states 

that these provisions shall apply to the ASCQR Program “except as the Secretary may 

otherwise provide.” Thus, the Secretary has broad authority under the ASCQR Program 

statute to adopt non-endorsed measures or measures that do not reflect consensus. 

As required by section 1890A of the Act, as added by section 3014 of the 

Affordable Care Act, we submit measures under consideration for this Program (and 

other programs utilizing quality measures) to the MAP by December 1 of each year, at 
CMS-1589-FC 989 

the same time that we make the list of measures available to the public. We consider the 

recommendations issued by the MAP prior to proposing measures for the ASCQR 

Program. 

We encourage stakeholders interested in direct representation on either the NPP 

or the MAP to submit nominations to the NQF for consideration. The NQF holds open 

calls for membership nominations annually for both the NPP and the MAP, followed by a 

public comment period for vetting of balanced stakeholder groups.

Comment: A few commenters strongly supported CMS’ measure selection 

criteria for ASCs. Commenters also commended CMS’ effort to align some of the 

measures for the ASCQR Program with the Hospital OQR Program measures, and 

encouraged greater alignment of the measures so that Medicare beneficiaries can 

compare ASC and HOPD quality data. 

Response: We appreciate the commenters’ support for CMS’ measure 

selection criteria. We believe that ASCs are similar to HOPDs, insofar as they 

deliver similar surgical and related nonsurgical services. Therefore, many of the 

measures may be applicable across these two settings. We agree with the 

commenters that greater harmonization of measures across these programs would 

allow beneficiaries to compare quality of care for similar services across these 

settings, and we will seek greater alignment in future program years. 

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

our approach for future measure selection and development for the ASCQR 

Program. 
CMS-1589-FC 990 

2. ASCQR Program Quality Measures 

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 through 

74517), we finalized our proposal to implement the ASCQR Program beginning with the 

CY 2014 payment determination and adopted measures for the CY 2014, CY 2015, and 

CY 2016 payment determinations. We also finalized our policy to retain measures from 

one calendar year payment determination to the next so that measures adopted for a 

previous payment determination year would be retained for subsequent payment 

determination years (76 FR 74504, 74509, and 74510). 

We adopted the following five claims-based measures for the CY 2014 payment 

determination for services furnished between October 1, 2012 and December 31, 2012: 

(1) Patient Burns (NQF #0263); (2) Patient Fall (NQF #0266); (3) Wrong Site, Wrong 

Side, Wrong Patient, Wrong Procedure, Wrong Implant (NQF #0267); (4) Hospital 

Transfer/Admission (NQF #0265); and (5) Prophylactic Intravenous (IV) Antibiotic 

Timing (NQF #0264). 

For the CY 2015 payment determination, we retained the five claims-based 

measures we adopted for the CY 2014 payment determination and adopted the following 

two structural measures: (1) Safe Surgery Checklist Use; and (2) ASC Facility Volume 

Data on Selected ASC Surgical Procedures. We specified that reporting for the structural 

measures would be between July 1, 2013 and August 15, 2013 for services furnished 

between January 1, 2012 and December 31, 2012, using an online measure submission 

Web page available at: https://www.QualityNet.org. We did not specify the data 
CMS-1589-FC 991 

collection period for the five claims-based measures for the CY 2015 payment 

determination. 

For the CY 2016 payment determination, we finalized the retention of the seven 

measures from the CY 2015 payment determination (five claims-based measures and two 

structural measures) and adopted Influenza Vaccination Coverage Among Healthcare 

Personnel (NQF #0431), a process of care, healthcare-associated infection measure 

(HAI). We specified that data collection for the influenza vaccination measure would be 

via the National Healthcare Safety Network (NHSN) from October 1, 2014 through 

March 31, 2015. We did not specify the data collection period for the claims-based or 

structural measures. 

We stated that, to the extent we finalize some or all of the measures for future 

payment determination years, we would not be precluded from adopting additional 

measures or changing the list of measures for future payment determination years through 

annual rulemaking cycles so that we may address changes in program needs arising from 

new legislation or from changes in HHS’ and CMS’ priorities. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45191), considering the time 

and effort required for us to develop, align, and implement the infrastructure necessary to 

collect data on the ASCQR Program quality measures and make payment determinations, 

and likewise the time and effort required on the part of ASCs to plan and prepare for 

quality reporting, we did not propose to delete or add any quality measures for the 

ASCQR Program for the CY 2014, CY 2015, and CY 2016 payment determination years, 

or to adopt quality measures for subsequent payment determination years. For readers’ 
CMS-1589-FC 992 

reference, the following table lists the ASCQR Program quality measures that were 

previously finalized in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74504 through 74511). 

ASC Program Measurement Set Adopted in Previous Rulemaking 

ASC-1: Patient Burn* 

ASC-2: Patient Fall* 

ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong 

Implant* 

ASC-4: Hospital Transfer/Admission* 

ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing* 

ASC-6: Safe Surgery Checklist Use** 

ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures** 

Procedure Category Corresponding HCPCS Codes 

Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, 

C9724, C9725, and 0170T 

Eye 65000 through 68999, G0186, 0124T, 0099T, 0017T, 

0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 

0191T, 0192T, 76510, and 0099T 

Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 

0215T, 0216T, 0217T, 0218T, and 0062T 

Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, and 

0201T 

Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, 

C9726, and C9727 

Genitourinary 50000 through 58999, 0193T, and 58805 

ASC- 8: Influenza Vaccination Coverage among Healthcare Personnel *** 

*New measure for the CY 2014 payment determination. 

** New measure for the CY 2015 payment determination. 

***New measure for the CY 2016 payment determination. 

Comment: Many commenters applauded CMS’ plan of not adding new measures 

to the ASCQR Program at this time because it would allow ASCs adequate time to adapt 
CMS-1589-FC 993 

to reporting requirements for the initial measure set for the CY 2014 payment 

determination. 

Response: We appreciate the commenters’ support. 

3. ASC Measure Topics for Future Consideration 

We seek to develop a comprehensive set of quality measures to be available for 

widespread use for informed decision-making and quality improvement in the ASC 

setting. Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45191), we stated 

that, through future rulemaking, we intend to propose new measures consistent with the 

principles discussed in section XVI.B.1. of the proposed rule, in order to select quality 

measures that address clinical quality of care, patient safety, and patient and caregiver 

experience of care. We invited public comment specifically on the inclusion of 

procedure-specific measures for cataract surgery, colonoscopy, endoscopy, and for 

anesthesia-related complications in the ASCQR Program measure set. 

Comment: Commenters either supported or suggested the inclusion of the 

following measure topics under the ASCQR Program: 

● Patient Experience of Care 

● Surgical Site Infection 

● Surgical Complications 

● Anesthesia-Related Complications 

● Otolaryngology 

● Gastroenterology 

● Equipment Reprocessing 
CMS-1589-FC 994 

● Adverse Events after Discharge

Response: We appreciate the commenters’ suggestions for future measure topics 

for the ASCQR Program. 

4. Clarification Regarding the Process for Updating ASCQR Program Quality Measures 

In the CY 2012 OPPS/ASC final rule with comment period, we finalized our 

proposal to follow the same process for updating the ASCQR Program measures that we 

adopted for the Hospital OQR Program’s measures (76 FR 74513 through 74514). This 

process includes the same subregulatory process for the ASCQR Program as used for the 

Hospital OQR Program for updating measures, including issuing regular manual releases 

at 6-month intervals, providing addenda as necessary, and providing at least 3 months of 

advance notice for nonsubstantive changes such as changes to ICD-9-CM, CPT, NUBC, 

and HCPCS codes, and at least 6 months’ notice for substantive changes to data elements 

that would require significant systems changes. We provided a citation to the CY 2009 

OPPS/ASC final rule with comment period where the final Hospital OQR Program 

policies are discussed (73 FR 68766 through 68767). 

In examining last year’s finalized policy for the ASCQR Program, we recognize 

that we may need to provide additional clarification of the ASCQR Program policy in the 

context of the previously finalized Hospital OQR Program policy in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68766 through 68767). Therefore, in 

the CY 2013 OPPS/ASC proposed rule (77 FR 45191), we sought to more clearly 

articulate the policy that we adopted for the ASCQR Program, which is the same policy 

that has been adopted for the Hospital OQR Program. 
CMS-1589-FC 995 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 through 

68767), we established a subregulatory process for making updates to the measures we 

have adopted for the Hospital OQR Program. This process is necessary so that the 

Hospital OQR measures are calculated based on the most up-to-date scientific evidence 

and consensus standards. Under this process, when a national consensus building entity 

updates the specifications for a measure that we have adopted for the Hospital OQR 

Program, we update our specifications for that measure accordingly and provide notice as 

described above and in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74514). An example of such an entity is the NQF. For measures that are not 

endorsed by a national consensus building entity, the subregulatory process is based on 

scientific advances as determined necessary by CMS, in part, through our measure 

maintenance process involving Technical Expert Panels (73 FR 68767). We invited 

public comment on this clarification of the finalized ASCQR Program policy of using a 

subregulatory process to update measures. 

Comment: A few commenters requested that CMS consider the measure changes 

made by measure developers and stewards of measures, as these can occur at any time 

based on a change in evidence, consensus standards, or other factors that merit an update. 

With respect to measures that are not endorsed by a national entity, the commenters 

recommended that CMS consult with ASC clinical and operational experts. Further, the 

commenters suggested that the Technical Expert Panels (TEPs), which are charged with 

maintenance of the ASCQR Program measures, include substantial representation from 

the ASC community and relevant surgical specialty societies. 
CMS-1589-FC 996 

Response: We regularly monitor changes to measures adopted for the ASCQR 

Program and other quality programs that are made by measure stewards, as well as the 

evidence upon which the measures are based. The current ASCQR Program measure set 

has been implemented with input by ASC stakeholders, including the measure stewards, 

as well as other affected parties. 

For NQF-endorsed measures, measure developers and stewards are expected to 

present these changes to the NQF for review annually. We would incorporate these 

changes based upon the NQF’s acceptance. For non-NQF-endorsed measures, we 

evaluate changes to measures recommended by our contractors’ surgical TEP, which 

includes outpatient ASC surgical representatives. 

In summary, we clarified that we adopted the Hospital OQR Program’s process 

for updating the ASCQR Program measures that was finalized in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68766 through 68767), which is 

explained above. 

C. Requirements for Reporting of ASC Quality Data

1. Form, Manner, and Timing for Claims-Based Measures for the CY 2014 Payment 

Determination and Subsequent Payment Determination Years 

a. Background 

In the CY 2012 OPPS/ASC final rule with comment period, we adopted 

claims-based measures for the CY 2014, CY 2015, and CY 2016 payment determination 

years (76 FR 74504 through 74511). We also finalized that, to be eligible for the full 

CY 2014 ASC annual payment update, an ASC must submit complete data on individual 
CMS-1589-FC 997 

quality measures through a claims-based reporting mechanism by submitting the 

appropriate QDCs on the ASC’s Medicare claims (76 FR 74515 through 74516). As 

stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), ASCs 

will add the appropriate QDCs on their Medicare Part B claims forms, the Form 

CMS-1500s submitted for payment, to submit the applicable quality data. A listing of the 

QDCs with long and short descriptors is available in Transmittal 2425, Change Request 

7754 released March 16, 2012 (http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/ASC-Transmittals-Items/ASC-CR7754-R2425CP.html). Details 

on how to use these codes for submitting numerator and denominator information are 

available in the ASCQR Program Specifications Manual located on the QualityNet Web 

site (https://www.QualityNet.org). We also finalized the data collection period for the 

CY 2014 payment determination, as the Medicare fee-for-service ASC claims submitted 

for services furnished between October 1, 2012 and December 31, 2012. In the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53640), we adopted a policy that claims for services 

furnished between October 1, 2012 and December 31, 2012, would have to be paid by the 

Medicare administrative contractor (MAC) by April 30, 2013, to be included in the data 

used for the CY 2014 payment determination. We believe that this claim paid date will 

allow ASCs sufficient time to submit claims while allowing CMS sufficient time to 

complete required data analysis and processing to make payment determinations and to 

supply this information to administrative contractors. 

b. Form, Manner, and Timing for Claims-Based Measures for the CY 2015 Payment 

Determination and Subsequent Payment Determination Years 
CMS-1589-FC 998 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45192) we proposed that, for 

the CY 2015 payment determination and subsequent payment determination years, an 

ASC must submit complete data on individual claims-based quality measures through a 

claims-based reporting mechanism by submitting the appropriate QDCs on the ASC’s 

Medicare claims. We proposed that the data collection period for the claims-based 

quality measures would be for the calendar year 2 years prior to a payment determination. 

We also proposed that the claims for services furnished in each calendar year would have 

to be paid by the MAC by April 30 of the following year of the ending data collection 

time period to be included in the data used for the payment determination. Thus, for 

example, for the CY 2015 payment determination, we proposed the data collection period 

to be claims for services furnished in CY 2013 (January 1, 2013 through 

December 31, 2013) which are paid by the MAC by April 30, 2014. We believe that this 

claim paid date would allow ASCs sufficient time to submit claims while allowing CMS 

sufficient time to complete required data analysis and processing to make payment 

determinations and to supply this information to administrative contractors. We invited 

public comment on these proposals. 

Comment: Some commenters agreed with CMS’ proposals to begin the data 

collection period for claims-based measures in the calendar year 2 years prior to a 

payment determination, and to establish the policy that the claims for services furnished 

in each calendar year would have to be paid by the MAC by April 30 of the following 

year of the ending data collection time period to be included in the data used for the 
CMS-1589-FC 999 

payment determination. The commenters stated that they believed the April 30 deadline 

would allow sufficient time for claims processing. 

However, other commenters believed the proposed period for the collection of 

claims data may be too abbreviated to capture all pertinent data. Because ASCs have up 

to 1 year to submit claims for services furnished, some commenters suggested that the 

period for the collection of claims data be as close to 1 year from the date the service was 

furnished to be included in a payment determination. Some commenters suggested that 

CMS establish a longer time period for the claims payment deadline in order to include 

all available claims data in the data used for payment determinations; one commenter 

suggested a June 30 deadline rather than April 30 deadline. 

Response: We appreciate the commenters’ support of our proposals regarding the 

period for the collection of claims data and the time allowed for data processing to be 

included in payment determinations. We agree that sufficient time should be allowed for 

claims processing to obtain complete data. We have conducted an internal analysis of 

claims submission by ASCs and have found that over 90 percent of the ASC claims are 

submitted and paid within the proposed timeframe. Therefore, we believe at this time 

that the proposed April 30 claims paid date is the latest date that would allow CMS to 

acquire and analyze the claims data, make payment determinations, and importantly, 

provide sufficient time for the MACs to program their systems. However, as we gain 

more experience and our systems become established, we will explore whether allowing 

more time for claims processing may be possible; if so, we will propose such changes 

through notice-and-comment rulemaking. 
CMS-1589-FC 1000 

Comment: One commenter expressed concern with the lag between the quality 

data reporting period and the payment reductions under the ASCQR Program by basing 

payment adjustments on participation a full 2 years before the results of a payment 

determination take effect. 

Response: We understand the commenter’s concern with the lag between when 

data are reported and when payment is affected, and we will strive to reduce this lag 

without significant adverse effects on data completeness and quality. However, we note 

that with the data collection period ending December 31 for the payment determinations 

becoming effective beginning January 1, the lag basically is 1 year past the end of the 

data collection period. Based upon our current experience, we believe the timeline we 

are finalizing provides a balance between data completeness and expediency. 

Comment: One commenter stated that the ASCQR Program’s use of the term 

“claims-based” is not consistent with the Hospital IQR Program’s use and does generate 

additional costs to the organization. The commenter stated that claims-based measures 

under the Hospital IQR Program truly means that CMS can obtain the data solely based 

on coding data without the organization taking additional steps of manually applying 

quality coding and having a clinician review the record for inclusion/exclusion criteria. 

The commenter further stated that for process measures, it is not accurate to label them as 

“claims-based” and state that this process is not time consuming and costly. 

Response: We understand the commenter’s concerns. However, we are 

clarifying that we have used the term “claims-based” to indicate the data source and 

mechanism for data submission as well as to differentiate claims-based measures from 
CMS-1589-FC 1001 

measures based on manual chart-abstracted data. We believe that a claims-based 

mechanism for data collection is less time consuming and less costly than such 

chart-abstracted quality measures. In addition, the use of the term “claims-based” for the 

claims-based ASCQR Program quality measures is consistent with the Physician Quality 

Reporting Program (PQRS), which also uses QDCs for the reporting of quality data via 

claims. 

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

proposals without modification that, for the CY 2015 payment determination and 

subsequent payment determination years, an ASC must submit complete data on 

individual claims-based quality measures through a claims-based reporting mechanism 

by submitting the appropriate QDCs on the ASC’s Medicare claims. We also are 

finalizing that the data collection period for such claims-based quality measures will be 

for the calendar year 2 years prior to a payment determination and that the claims for 

services furnished in each calendar year will have to be paid by the MAC by April 30 of 

the following year of the ending data collection time period to be included in the data 

used for the payment determination. 

2. Data Completeness and Minimum Threshold for Claims-Based Measures Using QDCs 

a. Background 

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), we 

finalized our proposal that data completeness for claims-based measures for the CY 2014 

payment determination be determined by comparing the number of claims meeting 

measure specifications that contain the appropriate QDCs with the number of claims that 
CMS-1589-FC 1002 

would meet measure specifications, but did not have the appropriate QDCs on the 

submitted claims. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641), we 

finalized our policy for the CY 2014 and CY 2015 payment determination years that the 

minimum threshold for successful reporting be that at least 50 percent of claims meeting 

measure specifications contain QDCs. We believe that 50 percent is a reasonable 

minimum threshold based upon the considerations discussed above for the initial 

implementation years of the ASCQR Program. We stated in that final rule that we intend 

to propose to increase this percentage for subsequent payment determination years as 

ASCs become more familiar with reporting requirements for the ASCQR Program. 

Comment: One commenter asked what method CMS would use to assess when to 

raise the required threshold for the level of completeness. 

Response: We plan to monitor the level of completeness for submitting QDCs 

and to monitor the ASCQR Program for issues as they arise. Based upon program 

experience, we will assess what level of completeness should be required. Any changes 

in the threshold level for completeness of reporting for ASCQR Program claims-based 

measures will be proposed through notice-and-comment rulemaking. 

b. Data Completeness Requirements for the CY 2015 Payment Determination and 

Subsequent Payment Determination Years 

After publication of the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28101 

through 28105), we realized that we did not propose a methodology for determining data 

completeness for the CY 2015 payment determination and subsequent payment 

determination years. Therefore, in the CY 2013 OPPS/ASC proposed rule 
CMS-1589-FC 1003 

(77 FR 45192), we proposed that data completeness for claims-based measures for the 

CY 2015 payment determination and subsequent payment determination years be 

determined by comparing the number of Medicare claims (where Medicare is the primary 

or secondary payer) meeting measure specifications that contain the appropriate QDCs 

with the number of Medicare claims (where Medicare is the primary or secondary payer) 

that would meet measure specifications, but did not have the appropriate QDCs on the 

submitted claims for the CY 2015 payment determination and subsequent payment 

determination years. We stated that this method is the same method for determining data 

completeness for claims-based measures that was finalized in the CY 2012 OPPS/ASC 

final rule with comment period for the CY 2014 payment determination (76 FR 74516). 

However, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641), we stated 

that, because private payers would not have QDCs in their required HCPCS data files 

until January 1, 2013, claims with QDCs received prior to January 1, 2013 could be 

rejected for invalid codes. Because it is not possible for ASCs to submit differing codes 

on primary versus secondary payer claims for at least some payers, we specified that only 

claims where Medicare is the primary payer--not the secondary payer--will be used in the 

calculation of data completeness for the CY 2014 payment determination. 

We invited public comment on this proposal. 

Comment: One commenter asked how ASCs would be notified of their claim 

completeness percentages and encouraged CMS to post claim completeness percentages 

on the QualityNet Web site (http://www.QualityNet.org). 
CMS-1589-FC 1004 

Response: We appreciate the commenter’s suggestion. We intend to supply 

preliminary completeness percentages and other data submission information to ASCs 

prior to the closing of the data submission deadline in April 2013 either electronically or 

by the mailing of a facility-specific report so ASCs can assess their data completeness 

levels. In addition, ASCs can use their remittance information to assess if QDCs have 

been successfully processed by MACs. 

We did not receive any public comments regarding our proposal that data 

completeness for claims-based quality measures for the CY 2015 payment determination 

and subsequent payment determination years be determined by comparing the number of 

Medicare claims (where Medicare is the primary or secondary payer) meeting measure 

specifications that contain the appropriate QDCs with the number of Medicare claims 

(where Medicare is the primary or secondary payer) that would meet measure 

specifications, but did not have the appropriate QDCs on the submitted claims for the 

CY 2015 payment determination and subsequent payment determination years. 

Therefore, we are finalizing this proposal without modification. 

3. Other Comments on the ASCQR Program 

Comment: Commenters expressed views and provided suggestions regarding 

additional topics and previously finalized policies for which we did not make proposals 

in the CY 2013 OPPS/ASC proposed rule, including comments and suggestions on the 

following: 

● The NHSN infrastructure; 

● Retention of quality measures from one calendar year to the next; 
CMS-1589-FC 1005 

● Case thresholds for determining completeness of reporting; 

● Alternative methods of data collection for certain finalized measures; 

● The utility of certain finalized measures; 

● Public reporting of data, including previewing data prior to public display; 

● Patient exclusions for specific measures; 

● Data collection and submission time periods for finalized measures; 

● Validation; 

● Mechanisms for opting out of reporting due to lack of cases meeting measure 

specifications; 

● The use of alternatives to claims-based reporting such as registries and EHRs; 

● The use of administrative claims data for the identification of HAIs; 

● ASCQR Program implementation date; and 

● Educational outreach to ASCs regarding the ASCQR Program. 

Response: We greatly appreciate the commenters’ views on these new topics and 

our previously finalized policies. Although we did not make proposals in the CY 2013 

OPPS/ASC proposed rule on these topics or finalized policies, we will consider all of 

these views for future rulemaking and program development. For information on the 

ASCQR program, we refer readers to the information posted on the QualityNet Web site 

(http://www.QualityNet.org) and the CMS Web site (http://www.cms.hhs.gov) under the 

Quality Initiatives and ASC sections. 

D. Payment Reduction for ASCs That Fail to Meet the ASCQR Program Requirements

1. Statutory Background 
CMS-1589-FC 1006 

Section 1833(i)(2)(D)(iv) of the Act states that the Secretary may implement the 

revised ASC payment system “in a manner so as to provide for a reduction in any annual 

update for failure to report on quality measures in accordance with paragraph (7).” 

Paragraph (7) contains subparagraphs (A) and (B). Subparagraph (A) of paragraph (7) 

states the Secretary may provide that an ASC that does not submit “data required to be 

submitted on measures selected under this paragraph with respect to a year” to the 

Secretary in accordance with this paragraph will incur a 2.0 percentage point reduction to 

any annual increase provided under the revised ASC payment system for such year. It 

also specifies that this reduction applies only with respect to the year involved and will 

not be taken into account in computing any annual increase factor for a subsequent year. 

Subparagraph (B) of paragraph (7) makes many of the provisions of the Hospital OQR 

Program applicable to the ASCQR Program “[e]xcept as the Secretary may otherwise 

provide.” Finally, section 1833(i)(2)(D)(v) of the Act states that, in implementing the 

revised ASC payment system for 2011 and each subsequent year, “any annual update 

under such system for the year, after application of clause (iv) [regarding the reduction in 

the annual update for failure to report on quality measures] shall be reduced by the 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II).” Section 

1833(i)(2)(D)(v) of the Act also states that the “application of the preceding sentence 

may result in such update being less than 0.0 for a year, and may result in payment rates 

under the [revised ASC payment system] for a year being less than such payment rates 

for the preceding year.” 
CMS-1589-FC 1007 

2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet the ASCQR 

Program Requirements for the CY 2014 Payment Determination and Subsequent 

Payment Determination Years 

The national unadjusted payment rates for many services paid under the ASC 

payment system equal the product of the ASC conversion factor and the scaled relative 

payment weight for the APC to which the service is assigned. Currently, the ASC 

conversion factor is equal to the conversion factor calculated for the previous year 

updated by the MFP-adjusted CPI-U update factor, which is the adjustment set forth in 

section 1833(i)(2)(D)(v) of the Act. The MFP-adjusted CPI-U update factor is the 

Consumer Price Index for all urban consumers (CPI-U), which currently is the annual 

update for the ASC payment system, minus the MFP adjustment. As discussed in the 

CY 2011 MPFS final rule with comment period (75 FR 73397), if the CPI-U is a negative 

number, the CPI-U would be held to zero. Under the ASCQR Program, any annual 

update would be reduced by 2.0 percentage points for ASCs that fail to meet the reporting 

requirements of the ASCQR Program. This reduction would apply beginning with the 

CY 2014 payment rates. For a complete discussion of the calculation of the ASC 

conversion factor, we refer readers to section XIV.H. of this final rule with comment 

period. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45193), in order to implement 

the requirement to reduce the annual update for ASCs that fail to meet the ASCQR 

Program requirements, we proposed that we would calculate two conversion factors: a 

full update conversion factor and an ASCQR Program reduced update conversion factor. 
CMS-1589-FC 1008 

We proposed 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 proposed that application of the 2.0 percentage point reduction to the annual update 

may result in the update to the ASC payment system being less than zero prior to the 

application of the MFP adjustment. 

The ASC conversion factor is used to calculate the ASC payment rate for services 

with the following payment indicators (listed in Addenda AA and BB to this final rule 

with comment period, which are available via the Internet on the CMS Web site): “A2,” 

“G2,” “P2,” “R2,” “Z2,” as well as the service portion of device- intensive procedures 

identified by “J8.” We proposed that payment for all services assigned the payment 

indicators listed above would be subject to the reduction of the national unadjusted 

payment rates for applicable ASCs using the ASCQR Program reduced update 

conversion factor. 

The conversion factor is not used to calculate the ASC payment rates for 

separately payable services that are assigned status indicators other than payment 

indicators “A2,” “G2,” “J8,” “P2,” “R2,” and “Z2.” These services include separately 

payable drugs and biologicals, pass-through devices that are contractor-priced, 

brachytherapy sources that are paid based on the OPPS payment rates, and certain officebased procedures and radiology services where payment is based on the MPFS PE RVU 

amount and a few other specific services that receive cost-based payment. As a result, 

we also proposed that the ASC payment rates for these services would not be reduced for 
CMS-1589-FC 1009 

failure to meet the ASCQR Program requirements because the payment rates for these 

services are not calculated using the ASC conversion factor and, therefore, not affected 

by reductions to the annual update. 

Office-based surgical procedures (performed more than 50 percent of the time in 

physicians’ offices) and separately paid radiology services (excluding covered ancillary 

radiology services involving certain nuclear medicine procedures or involving the use of 

contrast agents, as discussed in section XIV.D.2.b. of this final rule with comment 

period) are paid at the lesser of the MPFS non-facility PE RVU-based amounts and the 

standard ASC ratesetting methodology. We proposed that the standard ASC ratesetting 

methodology for this comparison would use the ASC conversion factor that has been 

calculated using the full ASC update adjusted for productivity. This is necessary so that 

the resulting ASC payment indicator, based on the comparison, assigned to an 

office-based or radiology procedure is consistent for each HCPCS code regardless of 

whether payment is based on the full update conversion factor or the reduced update 

conversion factor. 

For ASCs that receive the reduced ASC payment for failure to meet the ASCQR 

Program requirements, we believe that it is both equitable and appropriate that a 

reduction in the payment for a service should result in proportionately reduced 

copayment liability for beneficiaries. Therefore, we proposed that the Medicare 

beneficiary’s national unadjusted copayment for a service to which a reduced national 

unadjusted payment rate applies would be based on the reduced national unadjusted 

payment rate. 
CMS-1589-FC 1010 

We proposed that all other applicable adjustments to the ASC national unadjusted 

payment rates would apply in those cases when the annual update is reduced for ASCs 

that fail to meet the requirements of the ASCQR Program. For example, the following 

standard adjustments would apply to the reduced national unadjusted payment rates: the 

wage index adjustment, the multiple procedure adjustment, the interrupted procedure 

adjustment, and the adjustment for devices furnished with full or partial credit or without 

cost. We believe that these adjustments continue to be equally applicable to payment for 

ASCs that do not meet the ASCQR Program requirements. 

We invited public comment on these proposals but did not receive any 

public comments. Therefore, we are finalizing our proposals without 

modification regarding the process for reducing ASC payment rates for ASCs that 

fail to meet the ASCQR Program requirements for the CY 2014 payment 

determination and subsequent payment determination years. 
CMS-1589-FC 1011 

XVII. Inpatient Rehabilitation Facility (IRF) Quality Reporting Program Updates 

A. Overview

In accordance with section 1886(j)(7) of the Act, as added by section 3004 of the 

Affordable Care Act, the Secretary established a quality reporting program (QRP) for 

Inpatient Rehabilitation Facilities (IRFs). The IRF Quality Reporting Program 

(IRF QRP) was implemented in the FY 2012 IRF PPS final rule (76 FR 47836). We refer 

readers to the FY 2012 IRF PPS final rule (76 FR 47873 through 47883) for a detailed 

discussion on the background and statutory authority for the IRF QRP. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45193 through 45196), we 

proposed to: (1) adopt updates to a previously adopted measure for the IRF QRP that 

will affect the annual prospective payment amounts in FY 2014; (2) adopt a policy that 

would provide that any measure that has been adopted for use in the IRF QRP will 

remain in effect until the measure is actively removed, suspended, or replaced; and 

(3) adopt policies regarding when rulemaking will be used to update existing IRF QRP 

measures. 

While we generally would expect to publish IRF QRP proposals in the annual IRF 

PPS rule, there are no proposals for substantive changes to the IRF PPS this year; 

therefore, we published only an IRF PPS payment update notice for FY 2013.2

 Because 

full notice-and-comment rulemaking is required for the proposals mentioned above in 

regard to the IRF QRP, we needed to identify an appropriate rulemaking vehicle in which 

 

2

 The FY 2013 IRF PPS Payment Update Notice was published in the Federal Register on July 30, 2012 

(77 FR 44618). We refer readers to: http://www.gpo.gov/fdsys/pkg/FR-2012-07-30/pdf/2012-18433.pdf
CMS-1589-FC 1012 

we could insert our IRF QRP proposals. Because the CY 2013 OPPS/ASC proposed rule 

was already scheduled to include additional pay-for-reporting proposals for the Hospital 

OQR Program and quality reporting requirements for the ASCQR Program, it offered an 

opportunity to allow the public to review all three quality programs’ proposals in concert 

with one another in a timeframe that would be appropriate for implementing the IRF QRP 

proposals in time for the FY 2014 IRF PPS payment cycle. Therefore, we elected to 

include the IRF QRP proposals in the CY 2013 OPPS/ASC proposed rule. 

B. Updates to IRF QRP Measures Which Are Made as a Result of Review by the 

National Quality Forum (NQF) Process

Section 1886(j)(7) of the Act generally requires the Secretary to adopt measures 

that have been endorsed by the entity with a contract under section 1890(a) of the Act. 

This contract is currently held by the National Quality Forum (NQF). The NQF is a 

voluntary consensus standard-setting organization with a diverse representation of 

consumer, purchaser, provider, academic, clinical, and other health care stakeholder 

organizations. The NQF was established to standardize health care quality measurement 

and reporting through its consensus development process.3

The NQF’s responsibilities include: (1) reviewing new quality measures and 

national consensus standards for measuring and publicly reporting on performance; (2) 

providing annual measure maintenance updates to be submitted by the measure steward 

for endorsed quality measures; (3) providing measure maintenance endorsement on a 3-

year cycle; (4) conducting required follow-up reviews of measures with time-limited 

 

3

For more information about the NQF Consensus Development Process, we refer readers to the Web site at: 

http://www.qualityforum.org/Measuring_Performance/Maintenance_of_NQFEndorsed%C2%AE_Performance_Measures.aspx). 
CMS-1589-FC 1013 

endorsement for consideration of full endorsement; and (5) conducting ad hoc reviews of 

endorsed quality measures, practices, consensus standards, or events when there is 

adequate justification for a review.4 In the normal course of measure maintenance, the 

NQF solicits information from measure stewards for annual reviews and in order to 

review measures for continued endorsement in a specific 3-year cycle. In this measure 

maintenance process, the measure steward is responsible for updating and maintaining 

the currency and relevance of the measure and for confirming existing specifications to 

the NQF on an annual basis.5

 As part of the ad hoc review process, the ad hoc review 

requester and the measure steward are responsible for submitting evidence to be reviewed 

by a NQF technical expert panel (TEP) which, in turn, provides input to the Consensus 

Standards Approval Committee (CSAC). This committee then makes a recommendation 

to the NQF Board on endorsement status and/or specification changes for the measure, 

practice, or event. 

Through the NQF’s measure maintenance process, the NQF-endorsed measures 

are sometimes updated to incorporate changes that we believe do not substantially change 

the nature of the measure. Examples of such changes that we gave in the CY 2013 

OPPS/ASC proposed rule (77 FR 45194) included updated diagnosis or procedure codes, 

changes to exclusions to the patient population, definitions, or extension of the measure’s 

endorsement to apply to other settings. We stated in the proposed rule that we believed 

 

4

 For more information about the NFQ Ad Hoc Review process, we refer readers to the Web site at: 

http://www.qualityforum.org/Projects/ab/Ad_Hoc_Reviews/CMS/Ad_Hoc_Reviews-CMS.aspx). 5

For more information about the NQF Measure Maintenance process, we refer readers to the NQF Web site 

at: 

http://www.qualityforum.org/Measuring_Performance/Improving_NQF_Process/Process_Assessment__M

easure_Maintenance.aspx. 
CMS-1589-FC 1014 

these types of maintenance changes are distinct from more substantive changes to 

measures that result in what can be considered new or different measures, and that they 

do not trigger the same agency obligations under the Administrative Procedure Act. 

In the CY 2013 OPPS/ASC proposed rule, we proposed that if the NQF updates 

an endorsed measure that we have adopted for the IRF QRP in a manner that we consider 

to not substantially change the nature of the measure, we would use a subregulatory 

process to incorporate those updates to the measure specifications that apply to the 

program. Specifically, we would revise the information that is posted on the CMS IRF 

QRP Web site at: http://www.cms.gov/IRF-Quality-Reporting/ so that it clearly 

identifies the updates and provides links to where additional information on the updates 

can be found. In addition, we would refer IRFs to the NQF Web site for the most up-todate information about the quality measures (http://www.qualityforum.org/). We would 

provide sufficient lead time for IRFs to implement the changes where changes to the data 

collection systems would be necessary. 

We proposed to continue to use the rulemaking process to adopt changes to 

measures that we consider to substantially change the nature of the measure. We believe 

that our proposal adequately balances our need to incorporate NQF updates to NQFendorsed IRF QRP measures in the most expeditious manner possible, while preserving 

the public's ability to comment on updates to measures that so fundamentally change an 

endorsed measure that it is no longer the same measure that we originally adopted. We 

noted that, in the FY 2013 IPPS/LTCH PPS proposed rule, we proposed a similar policy 

for the Long-Term Care Hospital Quality Reporting (LTCHQR) Program (77 FR 53652 
CMS-1589-FC 1015 

through 53653). CMS finalized a modified version of this policy for the LTCHQR 

Program, as discussed below. 

Comment: Many of the commenters supported the use of the subregulatory 

process to incorporate NQF updates to measures that do not substantially change the 

nature of the measure. One commenter believed that this approach would be reasonable, 

as long as the use of the subregulatory process does not create any additional burden for 

IRFs. Another commenter stated that not all NQF updates need to be subject to a formal 

rulemaking process before the update can be implemented. 

Response: We appreciate the commenters’ support of our proposal. However, in 

response to some of the concerns expressed by other commenters below, and to be 

consistent with the policy that we have adopted for other quality reporting programs, we 

are finalizing this proposal with the modifications discussed below. 

Comment: Several commenters supported the proposal to use the subregulatory 

process to incorporate non-substantial NQF updates to quality measures that are made 

between rulemaking cycles. However, the commenters expressed concern regarding how 

CMS would define substantial and non-substantial changes. The commenters were 

concerned that even slight changes to a measure’s specifications will cause them to incur 

significant burden. The commenters urged CMS to use great caution in making decisions 

about what should be classified as a substantial change and a non-substantial change. 

One commenter expressed concern regarding the lack of specificity in the definition of a 

substantial change to a measure. One commenter suggested that the decision on whether 

a change to a measure rises to the level of substantial should be made by giving 
CMS-1589-FC 1016 

consideration not only to the measure itself, but also to what data the provider is required 

to report on the changed measure and how it would impact providers. Another 

commenter expressed concern that there was a lack of specificity by both CMS and the 

NQF regarding the definition of a substantive change in a measure. Several commenters 

disagreed with the examples of substantial and non-substantial changes to a measure that 

were presented in the CY 2013 OPPS/ASC proposed rule. Another commenter urged 

CMS to consider any update to a measure that requires any additional data collection as a 

substantial change and thus subject to the more formal rulemaking process. 

Response: The NQF regularly maintains its endorsed measures through annual 

and triennial reviews, which may result in the NQF making updates to the NQF-endorsed 

measures. We believe that it is important to have a subregulatory process in place, which 

we can use to incorporate non-substantive changes made by the NQF to measures we 

have adopted for use in the IRF QRP. Such a policy would allow for IRF QRP measures 

to be updated quickly and with a minimum amount of burden to IRF providers. 

However, we do recognize that some changes the NQF might make to its endorsed 

measures are substantive in nature and, therefore, it might not be appropriate for CMS to 

adopt these changes to the measures used in the IRF QRP using a subregulatory process. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45194), we proposed a policy to 

use a subregulatory process to adopt changes made to quality measures by the NQF that 

we consider to be non-substantial in nature. We further proposed to continue using the 

rulemaking process to adopt changes made by the NQF if we consider them to 

substantially change the nature of a measure. We have recently reconsidered these 
CMS-1589-FC 1017 

proposals in light of modified policies that were finalized in other quality reporting 

programs, such as the LTCHQR Program and the Hospital IQR Program. We have also 

reconsidered our proposals regarding this policy in light of the public comments we 

received. We believe that consistency and harmonization among the Medicare quality 

reporting programs is vitally important and helps to reduce provider burden. 

In the FY 2013 IPPS/LTCH final rule (77 FR 53504) we indicated examples of 

what we might generally regard as non-substantive changes to measures might include, 

but are not limited to, updated diagnosis or procedure codes, medication updates for 

categories of medications, or a broadening of age ranges. We believe that nonsubstantive changes may also include updates to NQF-endorsed measures based upon 

changes to guidelines upon which the measures are based. We noted that the NQF 

process has already incorporated an opportunity for public comment and engagement in 

the measure maintenance process.

We stated that we will continue to use rulemaking to adopt substantive updates 

made by the NQF to the endorsed measures we have adopted for the IRF Quality 

Reporting Program. Examples of changes that we might generally consider to be 

substantive would include, but are not limited to, those circumstances in which the 

changes are so significant that the measure is no longer the same measure, or when a 

standard of performance assessed by a measure becomes more stringent (for example, 

changes in acceptable timing of medication, NQF expansion of endorsement of a 

previously endorsed measure to a new setting, procedure/process, or test administration). 

However, these and other changes would need to be evaluated on a case-by-case basis to 
CMS-1589-FC 1018 

determine whether or not a change to a measure is in fact substantive. We intend to 

follow this modified policy when making changes to all IRF QRP measures. 

Comment: One commenter recommended that CMS clearly identify 

subregulatory updates, provide links to where additional information about the updates 

can be found, and provide sufficient lead time for IRFs to implement any changes related 

to the NQF’s updates. Another commenter recommended that CMS confer with a 

sufficient number of stakeholders in the rehabilitation hospital community to apprise 

them of the impending change and to seek informal feedback and input prior to adopting 

the measure’s change. Further, the commenter recommended that CMS conduct testing 

of the change to determine its effectiveness before implementation. 

Response: In the event that any measure that has been previously adopted for use 

in the IRF QRP is updated in a manner that we deem to be non-substantive in nature, we 

will use the subregulatory process to incorporate those changes. We will ensure that 

stakeholders are fully informed about these changes and that they have been afforded 

adequate lead time to make any necessary changes. Some of the methods that we will 

use to keep our stakeholders informed include: posting of information on the IRF QRP 

Web page6

; holding special open door forums, posting information in the CMS weekly ENews publication, and responding to provider questions that we receive through the IRF 

QRP helpdesk7. While we expect to provide notice to stakeholders when we intend to 

 

6 http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-QualityReporting/index.html?redirect=/IRF-Quality-Reporting/

7 IRF.questions@cms.hhs.gov
CMS-1589-FC 1019 

seek NQF’s review of measures, the NQF process incorporates an opportunity for public 

comment and engagement in the measure maintenance process.8

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

a policy to: (a) utilize a subregulatory process to incorporate updates to the IRF QRP 

quality measures that are not substantive in nature; and (b) continue use of the 

rulemaking process to adopt changes to measures that we consider to be substantive in 

nature. 

C. Process for Retention of IRF Quality Measures Adopted in Previous Fiscal Year 

Rulemaking Cycles

We expect that the measures that we adopt for purposes of the IRF QRP will 

remain current and useful for a number of years after their initial adoption. While we 

could elect to adopt measures for each fiscal year’s payment determinations, we believe 

that it would be easier for all parties concerned if we adopt the measures in perpetuity 

with an expectation that we will propose to remove, suspend or replace measures through 

future rulemaking, if necessary. Therefore, for the purpose of streamlining the 

rulemaking process, in the CY 2013 OPPS/ASC proposed rule (77 FR 45194), we 

proposed that when we initially adopt a measure for the IRF QRP for a payment 

determination, that measure will be automatically adopted for all subsequent fiscal year’s 

payment determinations or until such time as we might propose and finalize the 

measure’s removal, suspension, or replacement. 

 

8

 For information about the NQF consensus development process, we refer readers to the NQF Web site at: 

http://www.qualityforum.org/Measuring_Performance/Consensus_Development_Process%e2%80%99s_Pr

inciple/Public_and_Member_Comment.aspx
CMS-1589-FC 1020 

Quality measures may be considered for removal by CMS if: (1) measure 

performance among IRFs is so high and unvarying that meaningful distinctions in 

improvements in performance can no longer be made; (2) performance or improvement 

on a measure does not result in better patient outcomes; (3) a measure does not align with 

current clinical guidelines or practice; (4) a more broadly applicable measure (across 

settings, populations, or conditions) for the particular topic is available; (5) a measure 

that is more proximal in time to desired patient outcomes for the particular topic is 

available; (6) a measure that is more strongly associated with desired patient outcomes 

for the particular topic becomes available; or (7) collection or public reporting of a 

measure leads to negative unintended consequences. 

For any such removal, the public will be given an opportunity to comment 

through the next annual rulemaking process. However, if there is reason to believe that 

continued data collection of a measure raises potential safety concerns, we will take 

immediate action to remove the measure from the IRF QRP and not wait for the annual 

rulemaking cycle. Such measures will be promptly removed with IRFs and the public 

being immediately notified of such a decision through the usual IRF QRP communication 

channels, including listening sessions, memos, email notifications, and Web site postings. 

In such instances, the immediate removal of a measure will also be formally confirmed in 

the next annual rulemaking cycle. We invited public comment on our proposal that once 

a quality measure is adopted, it is retained for use in the subsequent fiscal year’s payment 

determinations unless otherwise stated. 
CMS-1589-FC 1021 

Comment: One commenter suggested that CMS should be required to re-propose 

quality measures each year so that stakeholders have the opportunity to submit comments 

before measures are finalized for use. The commenter stated that there needs to be a 

continuing opportunity for the public to comment each year on not only measures that are 

being proposed, but also on measures that were previously adopted. Further, the 

commenter expressed concern that this policy would result in a scenario in which 

stakeholder comments about previously adopted measures would not be given proper 

consideration. 

Response: Our proposal to retain previously finalized IRF QRP measures for 

future years aligns with our policy to retain measures for future years in other Medicare 

quality reporting programs such as the LTCHQR Program and the Hospital IQR 

Program. We plan to review quality measures that have been adopted for use in the IRF 

QRP on at least an annual basis to make sure that each measure remains relevant, valid 

and reliable. The optimum time to perform this review would be at the time when we 

review and analyze the quality measure data received from IRFs for any given reporting 

period or data reporting cycle. Some of the IRF QRP measures may be reviewed more 

often, depending upon the frequency with which we receive data for these measures or 

whether other circumstances prompt review. We will perform ad hoc reviews of IRF 

QRP quality measures if we find any indication that a measure is no longer valid, reliable 

or that continued collection of data for this measure leads to negative unintended 

consequences. Regardless of the type of review performed, if our analysis of these data 

reveals that a quality measure meets any of the above-stated enumerated criteria for 
CMS-1589-FC 1022 

removal (for reasons other than patient safety) we will propose to remove that measure in 

the next rulemaking cycle. If, at any time, we discover that an IRF quality measure poses 

a potential safety concern, we will take immediate action to remove that measure from 

the IRF QRP. 

We have provided IRFs with a mechanism by which to submit comments 

regarding quality measures that have previously been adopted for use in the IRF QRP. 

IRFs may submit comments regarding quality measures that are already being used in the 

IRF QRP through the IRF QRP helpdesk email box.9

 We will give full consideration to 

any comments that we receive. 

Finally, we also plan to solicit input in regard to the quality measures that are 

already being used in the IRF QRP from technical experts, as well as the public, through 

venues such as listening sessions, special open door forums, and national provider calls. 

These venues will provide IRFs with several ways to provide us with input on quality 

measures that are currently in use under the IRF QRP. We will give equal consideration 

to comments that we receive in regard to measures, whether they are being proposed or 

have previously been finalized for use under the IRF QRP. This will help to ensure that 

each of the adopted measures remains appropriate for continued inclusion in the IRF 

QRP. 

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

proposal to retain adopted quality measures for subsequent reporting periods (and the 

associated annual payment determinations) unless we propose to remove, suspend, or 

replace these measures. 

 

9 IRF.questions@cms.hhs.gov
CMS-1589-FC 1023 

We proposed to apply this principle to the two measures that were selected for use 

in the IRF QRP beginning on October 1, 2012. These adopted measures are: (1) ) An 

application of the NHSN Catheter-Associated Urinary Tract Infection (CAUTI) Outcome 

measure (NQF #0138)10, and (2) An application of the Percent of Residents with Pressure 

Ulcers that Are New or Worsened measure (NQF #0678). We also invited public 

comment on our proposal to apply the principle of retention to the two above-stated 

quality measures that were adopted for use under the IRF QRP in the FY 2012 IRF PPS 

final rule (76 FR 47874 through 47878) for the second and all subsequent reporting 

periods (and associated payment determinations). 

Likewise, we invited public comment on our proposed use of the process, as 

stated above, for retention of any additional future quality measures that may be adopted 

for use in the IRF QRP. 

Comment: Two commenters supported CMS’ proposal for retention of the two 

quality measures that were previously finalized for use under the IRF QRP. 

Response: We appreciate the commenters’ support of our proposed approach for 

retention of the two quality measures adopted for use under the IRF QRP. 

After consideration of the public comments we received, for the reasons set forth 

above, we are finalizing our proposal to apply this policy of retention of IRF QRP quality 

 

10 The CAUTI measure that was adopted in the FY 2012 IRF PPS final rule (76 FR 47836 through 47915) 

was titled “Urinary Catheter-Associated Urinary Tract Infection [CAUTI] Rate Per 1,000 Urinary Catheter 

Days for ICU patients.” However, this measure was submitted by the CDC (measure steward) to the NQF 

for a measure maintenance review. As part of their NQF submission, the CDC asked for changes to the 

measure, including expansion of the scope of the measure to non-ICU settings, including IRFs. The NQF 

approved the CDC’s request on January 12, 2012. Due to the changes that were made to the measure, the 

CDC believed that it was appropriate that the measure title be changed. This measure is now titled 

“National Health Safety Network (NHSN) Catheter Associated Urinary Tract Infection (CAUTI) Outcome 

Measure.” 
CMS-1589-FC 1024 

measures to the two measures that were finalized in the FY 2012 IRF PPS final rule. 

These measures are (1) An application of the NHSN Catheter-Associated Urinary Tract 

Infection (CAUTI) Outcome Measure (NQF #0138) (previously titled “CAUTI rate per 

1,000 urinary catheter days, for Intensive Care Unit Patients”); and (2) An application of 

the Percent of Residents with Pressure Ulcers that Are New or Worsened measure (NQF 

#0678).11 Although we are retaining these measures for the IRF QRP, we discuss below 

certain updates that we are making with respect to each of them. 

D. Measures for the FY 2014 Payment Determination

We have previously identified the measurement of pressure ulcers and the 

prevalence of urinary tract infections (UTI) as two critical areas for quality measurement 

under the IRF QRP. While section 1886(j)(7) of the Act generally requires the adoption 

of endorsed measures, there were no NQF-endorsed measures for the two desired areas in 

the IRF context at the time CMS was conducting its rulemaking. As 

section 1886(j)(7)(D)(ii) of the Act authorizes the use of measures that are not endorsed 

when there are no feasible and practicable endorsed options, in the FY 2012 IRF PPS 

final rule (76 FR 47874 through 47878), we adopted applications of an NQF-endorsed 

pressure ulcer measure that had been endorsed for use in skilled nursing facilities 

(NQF #0678) and a CDC measure, the CDC’s Urinary Catheter Associated Urinary Tract 

Infection [CAUTI] rate per 1, 000 urinary catheter days, for Intensive Care Unit [ICU] 

 

11 This measure was recently reviewed by the NQF and the scope of the measure was expanded to include 

post-acute care settings such as IRFs. Patients in post-acute care settings are referred to as “patients” as 

opposed to “residents”, which is a term used in the nursing home setting. To reflect the expansion in the 

scope of this measure, the title was changed to “Percent of Patients/Residents with Pressure Ulcers that Are 

New or Worsened (NQF #0678)” (emphasis added). 
CMS-1589-FC 1025 

Patients (NQF #0138), that had NQF endorsement for use in intensive care settings of 

hospitals. 

1. Clarification Regarding Existing IRF Quality Measures That Have Undergone 

Changes During NQF Measure Maintenance Processes 

In the FY 2012 IRF PPS final rule (76 FR 47874 through 47876), we used the 

endorsement exception authority under section 1886(j)(7)(D)(ii) of the Act. This 

authority permitted us to adopt the Urinary Catheter-Associated Urinary Tract Infection 

[CAUTI] rate per 1,000 urinary catheter days, for Intensive Care Unit [ICU] Patients 

measure (NQF #0138). We chose to adopt this measure because there was no 

NQF-endorsed CAUTI measure available to assess the prevalence of urinary CAUTI 

rates in the IRF setting. 

As stated in section XVII.C. of this final rule with comment period, the CAUTI 

measure steward, the CDC, submitted the CAUTI measure to the NQF for a scheduled 

measure maintenance review in late 2011. At that time, the CDC also filed a request to 

expand the CAUTI measure to non-ICU settings, including IRFs. The NQF granted the 

CDC’s request for an expansion of the scope of endorsement of the CAUTI measure to 

additional non-ICU care settings, including “rehabilitation hospitals.” The NQF defined 

the term “rehabilitation hospitals” as including both freestanding IRFs, as well as IRF 

units that are located within an acute care facility. Despite the expansion in the scope of 

endorsement of the CAUTI measure, the original NQF endorsement number (NQF 

#0138) was retained. However, the measure was re-titled “National Health Safety 
CMS-1589-FC 1026 

Network (NHSN) Catheter Associated Urinary Tract Infection (CAUTI) Outcome 

Measure.”12

As amended, the expanded CAUTI measure includes a different data calculation 

method, which is referred to as the standardized infection ratio (SIR).13 The change in the 

data calculation method does not, however, change the way in which IRFs will submit 

CAUTI data to the CDC. IRFs will still be required to submit their CAUTI data to the 

CDC via the National Healthcare Safety Network (NHSN) online system. 

Under the originally endorsed version of the CAUTI measure, the CDC calculated 

an infection rate per 1,000 urinary catheter days. Under the new method, CDC will use a 

SIR calculation method, which is comprised of the observed number of infections over 

the expected number of infections.14 The SIR calculation consists of an “observed” rate 

of CAUTI infections over the “expected rate” of CAUTI infections for that particular 

healthcare location. The CDC calculates the “expected rate” of CAUTI infections from 

CAUTI data that is reported to them by healthcare facilities. According to the 

epidemiologists at the CDC, they will need to analyze approximately 12 months of 

CAUTI data in order to calculate the “expected rate” of CAUTI infections for any given 

healthcare facility. 

We believe that the SIR calculation method is a more accurate way to calculate 

the CAUTI measure results for comparative purposes because it takes into account an 

IRF’s case mix. In addition, use of the SIR calculation does not require any change to the 

 

12http://www.qualityforum.org/MeasureDetails.aspx?actid=0&SubmissionId=1121#k=0138&e=0&st=&sd

=&s=n&so=a&p=1&mt=&cs=&ss=

13 Centers for Disease Control and Prevention (2012, January), Catheter Associated Urinary Tract Infection 

Event. Retrieved from: http://www.cdc.gov/nhsn/PDFs/pscManual/7pscCAUTIcurrent.pdf. 14 http://www.cdc.gov/nhsn/pdfs/pscmanual/7psccauticurrent.pdf. 
CMS-1589-FC 1027 

type of data required to be submitted by IRFs or the method of data submission that IRFs 

must use in order to comply with the CAUTI measure reporting requirements. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45196), we made the following 

proposals in regards to the CAUTI measure: (1) we proposed to adopt the changes made 

to the NQF #0138 CAUTI measure, which will apply to the FY 2014 annual payment 

update determination; (2) we proposed to adopt the CAUTI measure, as revised by the 

NQF on January 12, 2012, for the FY 2015 payment determination and all subsequent 

fiscal year’s payment determinations; and (3) we proposed to incorporate, for use under 

the IRF QRP, any future changes to the CAUTI measure to the extent these changes are 

consistent with our proposal in section XVII.B. of the CY 2013 OPPS/ASC proposed rule 

to update measures. 

Comment: Several commenters supported our proposal to adopt the changes 

made by the NQF to the CAUTI measure. Several commenters also supported use of the 

SIR calculation. The commenters also supported the delay in the implementation of the 

SIR calculation by the CDC. One commenter agreed that CMS should delay public 

reporting of the CAUTI measure data until after the CDC has collected enough data to 

calculate the expected CAUTI infection rate that will be used in the SIR calculations. 

Response: We agree that use of the SIR calculation will be a more accurate 

method for risk stratified calculation of the CAUTI measure data. We also agree that 

public reporting of the CAUTI measure data should not take place until sufficient 

baseline data has been collected by the CDC. 
CMS-1589-FC 1028 

Comment: One commenter expressed concern regarding CMS being able to 

properly risk adjust the CAUTI data results using the SIR calculation. The commenter 

was concerned that IRFs caring for more complicated patients will appear to have worse 

quality outcomes than other IRFs that care for less specialized patients, unless CMS can 

make the proper type of risk adjustments. The commenter further expressed concern that 

the SIR calculation method will be unable to provide adequate risk adjustment when 

comparing IRFs that have a specialized patient population to other IRFs that tend to have 

a more general patient population. 

Response: After the IRF QRP begins, the CDC will take time to collect and 

analyze the CAUTI measure data in an amount that is sufficient to calculate an “expected 

rate” of CAUTI infection for IRF locations/units. The CDC needs up to 12 months of 

CAUTI data from various IRF’s in order to calculate the “expected” CAUTI rates for the 

IRFs locations and units. These expected CAUTI infection rates can then be used to 

calculate a SIR for each IRF that includes adjustment for the patient population mix. The 

CDC and their subject matter experts, will make a determination with regard to how the 

patient population mix will be used in the risk adjustment for the SIR. 

Comment: One commenter expressed concern regarding IRFs being held 

accountable for CAUTI infections that a patient acquired prior to an admission or transfer 

into that IRF. 

Response: To help determine where the CAUTI infection may have developed, 

the CAUTI measure specifications incorporate a “transfer rule.” The “transfer rule” 

provides that if a patient develops a CAUTI within 48 hours of transfer from another 
CMS-1589-FC 1029 

location, the CAUTI is attributed back to the transferring location 

(http://www.cdc.gov/nhsn/pdfs/pscmanual/7psccauticurrent.pdf). We believe that the use 

of the transfer rule to the CAUTI measure calculations will help ensure that CAUTI 

infections are properly attributed to the facility where they originated. 

Comment: One commenter suggested that pediatric patients should be excluded 

from the CAUTI measure because it has not been NQF-endorsed for the pediatric 

population due to low frequency of catheter use and difficulty in attributing UTIs. 

Response: We disagree with the commenter’s suggestion that pediatric patients 

should be excluded from this measure for the reasons stated below. The measure 

specifications for the NQF #0138 CAUTI measure exclude patients in a neonatal ICU, 

but otherwise have no other age based exclusions. The target population age range for 

the NQF #0138 CAUTI measure is described in the measure specifications as follows: 

“Patients of all ages are eligible except patients in Levels I, II, II/III and III nurseries, 

and in locations where patients do not reside overnight.” (Emphasis added) 

Second, we believe that it is important to gather and analyze CAUTI measure data 

from patients of all age groups so that we can study the rate of CAUTI infections in not 

only adults and the elderly, but also in children. There are several IRFs that specialize in 

the rehabilitation of pediatric patients. Many other IRFs also treat pediatric patients. We 

would be remiss in our duty to measure the quality of care in the IRF setting if we did not 

gather CAUTI measure data from these IRFs on their pediatric patients. 

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

proposals to: (1) adopt the changes made to the NHSN Catheter-Associated Urinary Tract 
CMS-1589-FC 1030 

Infection (CAUTI) Outcome Measure (NQF #0138) as applicable to the FY 2014 annual 

payment update determination; and (2) adopt the NHSN Catheter-Associated Urinary 

Tract Infection (CAUTI) Outcome Measure (NQF #0138) measure for the FY 2015 

payment determination and all subsequent fiscal year payment determinations thereafter. 

2. Updates to the “Percent of Residents Who Have Pressure Ulcers That Are New or 

Worsened” Measure 

In the FY 2012 IRF PPS final rule (76 FR 47876 through 47878), we again used 

the endorsement exception authority under section 1886(j)(7)(D)(ii) of the Act to adopt 

an application of the “Percent of Residents with Pressure Ulcers that Are New or 

Worsened” measure (NQF #0678). We selected this measure because there was no other 

NQF-endorsed measure available to assess the percentage of patients with pressure ulcers 

that are new or worsened in the IRF setting at that time. We recognized that the NQF 

endorsement of this measure was, at that time, limited to short-stay nursing home 

patients, but we noted our belief that this measure was highly relevant to patients in any 

setting who are at risk of pressure ulcer development and a high priority quality issue in 

the care of IRF patients. Therefore, in the FY 2012 IRF PPS final rule, we finalized the 

adoption of an application of the NQF-endorsed #0678 pressure ulcer measure. We also 

stated that we would request that the NQF extend its endorsement of this short-stay 

nursing home pressure ulcer measure to the IRF setting (76 FR 47876 through 47878). 

In April 2012, CMS filed an ad hoc request for review of the NQF #0678 

short-stay pressure ulcer measure with the NQF. As part of that request, we asked the 

NQF to expand its endorsement of the measure to several other care settings, including 
CMS-1589-FC 1031 

IRFs. As we noted in the FY 2012 IRF PPS final rule, we believe this measure is highly 

applicable to all post acute care settings, including IRFs (76 FR 47876). We stated in the 

proposed rule that if the pressure ulcer measure was revised by the NQF, we anticipated 

that it would be re-titled “Percent of Patients or Residents with Pressure Ulcers That Are 

New or Worsened” (NQF #0678) (emphasis added) so as to reflect the expansion in the 

scope of the applicable patient population. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45196), we noted that, as of the 

publication of that proposed rule, the NQF review process for the NQF #0678 pressure 

ulcer measure expansion request was still in progress. We proposed that if the NQF 

expands the scope of endorsement for this measure to the IRF setting, without any 

substantive changes, we would adopt and use the NQF-endorsed pressure ulcer measure 

in the IRF QRP, in accordance with the policy set forth above in section XVII.B. of that 

proposed rule. We believed that, in this anticipated scenario, the pressure ulcer measure, 

as revised, would be substantively the same measure, although broader in scope, than the 

current NQF-endorsed #0678 pressure ulcer measure. We invited public comments on 

our proposed use of this policy. For the reasons stated below, we have decided not to 

finalize this proposal. 

In the meantime, in the CY 2013 OPPS/ASC proposed rule (77 FR 45196), we 

proposed to proceed with our plan, as finalized in the FY 2012 IRF PPS final rule, to use 

an application of the Percent of Residents With Pressure Ulcers that Are New or 

Worsened (NQF #0678) measure for the FY 2014 payment determination and all 

subsequent fiscal year payment determinations. For the reasons stated below, we will 
CMS-1589-FC 1032 

collect only part of the pressure ulcer measure data as part of the pressure ulcer measure 

that we adopted last year. We have decided to adopt a non-risk-adjusted version of the 

NQF #0678 short-stay pressure ulcer measure, and will not publicly report the measure 

data until such time that we are able to collect data on the IRF-PAI necessary to calculate 

risk-adjusted measure rates. 

Comment: Many commenters supported the use of the “Percent of Residents with 

Pressure Ulcers That Are New or Worsened” (NQF #0678) measure in the IRF QRP. 

The commenters also supported CMS’ request to expand this measure to the IRF setting. 

One commenter expressed support for the use of the updated pressure ulcer measure, but 

recommended adding the term “patients” to the title of this measure. 

Response: We appreciate the commenters’ support and agree that adding the 

word “patients” to the title of the revised pressure ulcer measure will help to distinguish 

the IRF population from patients in nursing homes who are typically referred to as 

“residents.” However, for the reasons discussed below, at this time, we are adopting a 

non-risk-adjusted version of the NQF-endorsed pressure ulcer measure (NQF #0678). 

Comment: One commenter expressed doubt regarding the applicability of the 

pressure ulcer measure to the IRF setting. 

Response: We believe that pressure ulcer development and worsening is an issue 

that is highly relevant to the IRF setting. Pressure ulcers are high-volume and high-cost 

adverse events across the spectrum of health care settings from acute hospitals to home 

health. Patients in the IRF setting may have medically complex conditions and severe 

functional limitations, and are, therefore, at high risk for the development, or worsening, 
CMS-1589-FC 1033 

of pressure ulcers. Pressure ulcers are serious medical conditions and an important 

measure of quality. Pressure ulcers can lead to serious, life threatening infections, which 

substantially increase the total cost of care. Even if the proportion of patients in IRFs 

with new or worsening pressure ulcers is small, any such cases are particularly troubling. 

Comment: One commenter urged CMS to remove this measure from the IRF 

QRP until such time as the issues that have been raised in stakeholder calls regarding the 

measure specifications and definitions can be resolved. The commenter stated that CMS 

has given conflicting guidance on how to stage pressure ulcers and document pressure 

ulcer data on the Inpatient Rehabilitation Facility – Patient Assessment Instrument 

(IRF-PAI) during several different provider outreach activities. The commenter opposed 

“back-staging” of pressure ulcers, and suggested that the IRF-PAI does not allow for the 

documentation of unstageable pressure ulcers that develop after the patient is admitted. 

Another commenter expressed concern that the modifications to the “Quality Indicator” 

section of the IRF-PAI are confusing. The commenter stated that the pressure ulcer 

questions that were added to the IRF-PAI do not account for all categories of pressure 

ulcers, such as unstageable pressure ulcers and suspected deep tissue injuries. Two 

commenters suggested that CMS delay implementation of the pressure ulcer measure and 

take time to work with IRFs and the National Pressure Ulcer Advisory Panel (NPUAP) to 

develop a standardized approach to reporting pressure ulcers. 

Response: We have made several different types of training opportunities 

available to the IRF provider community. We held special open door forums on 

November, 29, 2011, and April 19, 2012. We also provided a full day in-person provider 
CMS-1589-FC 1034 

training on May 2, 2012. Most recently, we initiated a four-part series of special open 

door forums held on July 26, 2012; August 16, 2012; September 20, 2012; and 

October 18, 2012. PowerPoint slides used at the IRF Open Door Forums are available on 

the IRF QRP Web page. (http://www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/IRF-Quality-Reporting/index.html?redirect=/IRF-QualityReporting/). Documentation of the collection of pressure ulcer data is contained in 

Section 4 of the IRF-PAI training manual. This manual is available on the CMS Web site 

(https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Downloads/IRFPAI-manual-2012.pdf).

During each of these training/outreach activities, we provided individuals with 

information regarding the IRF quality reporting program, including information about 

CAUTI and pressure ulcer data reporting. The information that we have offered to 

providers at each of the outreach activities noted above has been consistent. 

We have also engaged the help of two widely known experts in the area of skin 

conditions and wound care. These experts have served as consultants to CMS and have 

taught our outreach activities. These experts have given presentations on how to stage 

and report pressure ulcer data. One of these experts was a guest lecturer at our provider 

training, which took place on May 2, 2012. Our pressure ulcer experts also attended the 

open door forums held on July 26, 2011, August 16, 2012, and October 18, 2012. At 

three of the open door forums held, these experts were available to answer questions from 

providers. 
CMS-1589-FC 1035 

In addition, we held an open door forum on September 20, 2012, that dealt 

exclusively with the issue of pressure ulcer staging and documentation on the IRF-PAI. 

We also presented answers to questions that had been previously raised as well as a copy 

of a properly completed “Quality Indicator” section (questions 48A to 50C) of the IRFPAI, which corresponded to the scenarios presented in each question. We believed that 

showing examples of a properly completed IRF-PAI for each question would help to 

reduce the confusion that IRFs were experiencing regarding the coding of pressure ulcer 

data on the IRF-PAI. We also discussed during this open door forum the issue of “backstaging” pressure ulcers, and explained that we do not, nor have we ever recommended, 

“back-staging” pressure ulcers in the IRF QRP.

We have provided IRFs with written guidance related to the staging of pressure 

ulcers, collection of pressure ulcer data, and documentation of pressure ulcer data in the 

“Quality Indicator” section of the IRF-PAI. This written guidance is contained in Section 

4 of the IRF-PAI training manual. This manual is available on the CMS Web site 

(https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Downloads/IRFPAI-manual-2012.pdf). 

We recognize that the format and structure of the pressure ulcer questions, which 

are located in the “Quality Indicator” section of the revised IRF-PAI has resulted in some 

unintended limitations in the type and amount of pressure ulcer data that can be collected. 

We will continue to work with stakeholders to address their concerns and make the 

appropriate modifications to the data collection instrument over time. In the meantime, 
CMS-1589-FC 1036 

we will continue with the collection of the pressure ulcer measure data using the 

questions contained in the “Quality Indicator” section of the IRF-PAI. 

We do not believe that it would be in the best interest of many of the IRF 

providers if we were to delay the use of the pressure ulcer measure in the IRF QRP until 

such time as the IRF-PAI is modified. . We recognize that IRFs have incurred a 

significant financial burden preparing their EHR systems and staff to report pressure 

ulcer measure data beginning on October 1, 2012.15. 

Comment: One commenter expressed concern that revisions to the IRF-PAI do 

not allow IRFs to adequately document suspected deep tissue injury (DTI) that is present 

when the patient is admitted to the IRF. The commenter stated that DTIs are “wounds” 

that are evolving or in the process of “declaring” their final stage. The commenter stated 

that if the suspected DTI cannot be adequately recorded upon admission, and the wound 

later progresses to its final stage (stage 3 or 4), it will appear that the IRF was responsible 

for the pressure ulcer, instead of the location where the DTI occurred. 

Response: We believe that it is important to do a thorough admission assessment 

on each patient who is admitted to an IRF at the soonest possible time after admission. 

This admission assessment should include a through skin assessment and should include 

the documentation of the presence of any pressure ulcers as well as any unstageable 

pressure ulcers, including suspected deep tissue injury. The IRF-PAI admission 

 

15 For quality reporting purposes, only those patients that are admitted on after 10/01/2012 will be included in the 

measure. Data obtained from partient that are admitted before 10/01/2012 but discharged after 10/01/2012 will not be 

used in the measure calculations.. For more information about this policy, we refer readers to the IRF-PAI training 

manual.
CMS-1589-FC 1037 

assessments must be performed within 3 days after admission. However, the IRF staff 

would also document the admission assessment findings in their medical records as well. 

We also agree with the commenter that it is not possible to directly document 

suspected DTIs on the revised IRF-PAI (which became effective on October 1, 2012) 

immediately when doing the IRF-PAI admission assessment. However, an IRF provider 

can and certainly should, as part of its normal patient assessment and good care, perform 

the skin assessment and note any finding of suspected DTI or pressure ulcers at any stage 

in the patient’s medical record. Documentation of pressure ulcer data on the IRF-PAI is 

not a replacement for proper clinical documentation in a patient’s medical record. 

A suspected DTI is one of three types of unstageable pressure ulcers, which can 

be documented on the IRF-PAI after it becomes stageable and “declares” its final stage. 

We believe that we have given IRF providers instructions about how to document 

unstageable pressure ulcers on the IRF-PAI on several different occasions. This issue 

was discussed during a question and answer session that took place during the IRF QRP 

special open door forum held on July 26, 2012, and at another IRF QRP special open 

door forum held on August 16, 2012. In addition, this issue was discussed again at 

another IRF QRP special open door forum held on September 20, 2012. The 

September 20, 2012 open door forum was devoted solely to the discussion of staging and 

documentation of pressure ulcers on the IRF-PAI. PowerPoint slides used during the 

September 20, 2012 special open door forum included scenarios in the form of questions 

and answers, as well as examples of the IRF-PAI with the correct coding to correspond to 

the scenario presented in each question. As noted above, the PowerPoint slides used at 
CMS-1589-FC 1038 

any of the IRF QRP open door forums are available to IRFs on the IRF QRP Web page 

(http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRFQuality-Reporting/index.html?redirect=/IRF-Quality-Reporting/). 

Also, we have provided written guidance on how to document unstageable 

pressure ulcers that have become stageable on the IRF-PAI in Section 4 of the IRF-PAI 

training manual. On page IV-3 of Section 4 of the IRF-PAI training manual, suspected 

deep tissue injury is defined as one of the three types of unstageable pressure ulcers. 

Section 4 of the IRF-PAI training manual further states that unstageable pressure ulcers 

that are present at the time of admission are not documented on the IRF-PAI. 

As documented in Section 4 of the IRF-PAI training manual , if a pressure ulcer is 

unstageable upon admission, but becomes stageable later during the patient’s IRF stay, 

this pressure ulcer should be considered as present on admission, at the stage at which it 

first becomes stageable. The admission assessment should be modified to reflect this. 

For example, if the IRF had documented on the patient’s admission assessment that there 

were no pressure ulcers on admission, and then a suspected DTI progressed to a Stage 2 

or higher pressure ulcer, the IRF would change the admission assessment to document the 

final stage of that pressure ulcer. Doing so will help to ensure that the IRF-PAI reflects 

that this pressure ulcer was present on admission, and what stage the ulcer was when it 

first became stageable. We believe that this effectively prevents the finding that an 

unstageable pressure ulcer that became stageable during the IRF stay developed during 

the patient’s IRF stay and/or is attributed to the IRF. 
CMS-1589-FC 1039 

Comment: One commenter expressed concern about making comparisons in 

pressure ulcer rates between IRFs because of the differences in patient populations that 

are served by each IRF. The commenter suggested that CMS develop a mechanism 

whereby these IRFs are not unfairly compared against peers that do not care for like 

populations of patients in any public reporting of the pressure ulcer measure data or other 

quality measures. 

Response: The specifications for both the application of the pressure ulcer 

measure that we adopted in the FY 2012 IRF PPS final rule, as well as the specifications 

for the updated NQF-endorsed version of the measure (NQF #0678), include data 

elements that allow the measure to be risk adjusted when calculated in the IRF setting. 

These risk adjustment specifications take into consideration items such as the patient’s 

height, weight, and co-morbid conditions. When we were revising the “Quality 

Indicator” section of the IRF-PAI by replacing the old voluntary quality items with the 

mandatory pressure ulcer questions, we worked within the existing format and framework 

of the IRF-PAI. We recognize that placement of quality measurement data items within 

the format of the IRF-PAI has resulted in some unintended limitations in the type and 

amount of pressure ulcer data that can be collected. 

We will continue to work with stakeholders to address their concerns and make 

the appropriate modifications to the “Quality Indicator” section of the IRF-PAI. 

However, we do not believe that it would benefit IRFs to delay the start of the pressure 

ulcer measure data reporting during the time that we are working to make the necessary 

revision to the IRF-PAI. We say this for several reasons. First, evaluating the pressure 
CMS-1589-FC 1040 

ulcer data that is reported to us during the first several reporting periods is one of the best 

ways for us to see what changes and modifications are needed to the IRF-PAI to ensure 

that it properly collects all of the data elements needed to calculate risk-adjusted rates. 

Second, many IRFs have incurred a significant amount of time and money to prepare 

themselves to report pressure ulcer data. Also, use of a non-risk adjusted version of the 

NQF-endorsed pressure ulcer measure will not cause IRF providers any increased burden 

because it will not require any change in the way that IRFs are required to collect and 

report pressure ulcer data.

After giving full consideration to the public comments we have received, we have 

decided to: (1) adopt a non-risk-adjusted version (numerator and denominator data only) 

of the NQF #0678 pressure ulcer measure; (2) collect the pressure ulcer measure data 

using the current version of the IRF-PAI; and (3) not begin public reporting of pressure 

ulcer measure data until we have: (a) thoroughly reviewed and researched this matter and 

consulted technical experts; (b) made appropriate modifications to the “Quality Indicator” 

section of the IRF-PAI to add the risk adjustment items; and (c) adopted the 

NQF-endorsed pressure ulcer measure (#0678) and notified stakeholders of our intentions 

through the rulemaking process. 

Comment: MedPAC made suggestions related to additional quality measures that 

it believed CMS should add to the IRF QRP. MedPAC suggested that CMS develop a 

risk-adjusted readmission measure. Further, MedPAC requested that CMS comment, in 

this final rule with comment period, on the progress of the development of this type of 

readmission measure. MedPAC also urged CMS to consider adding a measure of 
CMS-1589-FC 1041 

functional improvement. MedPAC pointed out that regaining functional status represents 

a central goal of IRF care. 

Response: We appreciate MedPAC’s input. We agree that both a risk-adjusted 

readmission measure and a measure of functional improvement would be extremely 

valuable measures of quality in the IRF setting. We are working to develop and 

implement these measures in the IRF QRP at the soonest possible time. We invite 

MedPAC to meet with the CMS IRF QRP team for further discussion of these quality 

measures. 

Comment: One commenter made reference to the IRF quality measures that CMS 

included on a list made publicly available in late 2012 in accordance with section 

1890A(a)(2) of the Act. The commenter noted that none of these measures were 

proposed for adoption into the IRF QRP in the proposed rule. This commenter offered 

their opinion and rationale as to whether some of measures should, or should not be 

added to the IRF QRP. The measures are as follows: 

● Incidence of potentially preventable venous thromboembolism (VTE) -

The commenter stated that this measure requires considerable clarification because, 

many, if not most, rehabilitation patients are at very high risk for VTE. The commenter 

further pointed out that many IRF patients are on VTE prophylaxis, yet, some of the IRF 

patients still get VTEs.. 

● Health care worker influenza immunization – This commenter supported 

adoption of this measure as long as data is reported by IRFs to NHSN; 
CMS-1589-FC 1042 

● The percent of patients/residents on a scheduled pain medication regimen 

on admission who self-report – The commenter stated that in intensive rehabilitation, 

providers need to strike a balance between relieving pain completely, and avoiding 

overmedication so that the patient can safely participate in an intensive rehabilitation 

program; 

● Percent of nursing home residents who were assessed and appropriately 

given the seasonal influenza vaccine - Because most patients that enter IRFs were 

previously hospitalized, it is likely that their influenza vaccination status already was 

established in the hospital during the flu season. The commenter further stated that, in 

some cases, with repeat questioning, some patients may elect vaccination after they have 

left the acute care facility or had a change of mind within the facility; 

● Percent of nursing home residents who were assessed and appropriately 

given the pneumococcal vaccine. - This commenter stated that the same problems that 

may occur with the patient influenza vaccination measure may also occur with this 

measure; 

● Functional improvement measure - Of particular note is that the commenter 

expressed opposition to the use of a functional measure that is based upon the FIMTM 

scale. The commenter stated that data related to FIMTM change are impacted 

dramatically by high rates of discharges back to acute care hospitals from rehabilitation 

facilities caring for the most complex and unstable rehabilitation patients. The 

commenter further stated that if quality measures for rehabilitation emphasize FIMTM 

change during rehabilitation, it is quite possible that IRFs will be incentivized to deny 
CMS-1589-FC 1043 

admission to the most complex patients who, in fact, have the greatest need for 

rehabilitation. 

Response: We appreciate the commenter’s thoughts and suggestions offered 

regarding the above-stated quality measures. All of these measures remain under active 

consideration for future adoption into the IRF QRP, and we will consider this information 

during future rulemaking cycles when we are selecting quality measures for inclusion 

under the IRF QRP. 
CMS-1589-FC 1044 

XVIII. Revisions to the Quality Improvement Organization (QIO) Regulations 

(42 CFR Parts 476, 478, and 480) 

A. Summary of Changes

The Utilization and Quality Control Peer Review Program was originally 

established by sections 142 and 143 of the Tax Equity and Fiscal Responsibility Act 

(TEFRA) of 1982 (Pub. L. 97-248). The name of the individual organizations covered 

under the program was previously changed from “Peer Review Organizations” to 

“Quality Improvement Organizations” through rulemaking (67 FR 36539). In the 

CY 2013 OPPS/ASC proposed rule (77 FR 45196 through 45205), we identified several 

changes that we proposed because they are essential to remedying longstanding 

problematic aspects of the QIOs’ review activities. These proposed changes would 

enable us to improve the QIO program by ensuring that QIOs are better able to meet the 

needs of Medicare beneficiaries. 

Several of the proposed changes are specific to the QIOs’ processing of quality of 

care reviews, which includes beneficiary complaint reviews. Although references are 

made to QIO sanction activities, the proposed changes did not impact QIO sanction 

activities or the regulations located in 42 CFR Part 1004. 

In addition, as part of our review of our regulations in light of the President’s 

Executive Order on Regulatory Reform, Executive Order 13563 (January 18, 2011), we 

have identified several technical corrections that would improve the readability and use 

of the QIO regulations. 
CMS-1589-FC 1045 

B. Quality of Care Reviews

Section 9353(c) of Pub. L. 99-509 amended section 1154(a) of the Act (adding a 

new paragraph (14)) to require that QIOs (then PROs), effective August 1, 1987, conduct 

an appropriate review of all written complaints from beneficiaries or their representatives 

about the quality of services (for which payment may otherwise be made under 

Medicare) not meeting professionally recognized standards of health care. This authority 

was in addition to the QIOs’ already existing authority under section 1154(a)(1)(B) of the 

Act to perform quality of care reviews. In order to provide more clarity regarding the 

QIOs’ roles, in the CY 2013 OPPS/ASC proposed rule (77 FR 45196), we proposed to 

add a definition of “quality of care review” under § 476.1 to make clear that this review 

type refers to both beneficiary complaint reviews (written or oral) and general quality of 

care reviews. We also proposed to add under § 476.1 definitions for “beneficiary 

complaint” to mean a complaint by a beneficiary or a beneficiary’s representative 

alleging that the quality of services received by the beneficiary did not meet 

professionally recognized standards of care and may consist of one or more quality of 

care concerns; “beneficiary complaint review” to mean a review conducted by a QIO in 

response to the receipt of a written beneficiary complaint to determine whether the 

quality of Medicare covered services provided to beneficiaries was consistent with 

professionally recognized standards of health care; and “general quality of care review” 

to mean a review conducted by a QIO to determine whether the quality of services 

provided to a beneficiary(s) was consistent with professionally recognized standards of 

health care. We proposed that a general quality of care review may be carried out as a 
CMS-1589-FC 1046 

result of a referral to the QIO or a QIO’s identification of a potential concern during the 

course of another review activity or through the analysis of data. In addition, we 

proposed to revise the language under § 476.71(a)(2) to make clear that the scope of a 

QIO’s review includes the right to conduct quality of care reviews, including beneficiary 

complaint reviews and general quality of care reviews, as well as a new review process 

that QIOs can offer Medicare beneficiaries called “immediate advocacy,” which is 

described more fully in section XVIII.B.1. of this final rule with comment period. 

We proposed additional changes to the QIO regulations related to the following 

issues: 

1. Beneficiary Complaint Reviews 

At the time QIOs assumed the authority under section 9353(c) of Pub. L. 99-509 

to conduct reviews of written beneficiary complaints, we made a decision to rely upon 

the existing regulations for certain requirements (for example, the timeframes for 

requesting medical records and the practitioner’s right to consent to the release of specific 

findings to beneficiaries), and to subsequently establish other remaining procedural 

requirements through manual instructions. While this approach has provided QIOs with 

a basic framework for completing the reviews, we have become aware of other issues that 

need to be addressed through the promulgation of new regulations as well as revisions to 

existing regulations. 

In 2003, the United States Court of Appeals for the District of Columbia Circuit 

issued a decision in the case of Public Citizen, Inc. v. U.S. Department of Health and 

Human Services (332 F.3d 654, June 20, 2003) (referred to below as Public Citizen) in 
CMS-1589-FC 1047 

which the court determined that QIOs must, at a minimum, notify a complainant of the 

results of its review. We recently completed a comprehensive revision to the manual 

instructions governing both beneficiary complaints and quality of care reviews, which, in 

part, was designed to ensure compliance with this court decision (Transmittal 17, 

April 6, 2012, CMS Manual System, Pub. 100-10 Medicare Quality Improvement 

Organizations, Chapter 5, Quality of Care Review) (available at 

http://www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/Downloads/R17QIO.pdf). These new instructions were 

effective May 7, 2012. While these manual revisions were necessary, we believe that 

additional regulatory changes are needed in order to improve QIO operations. In order to 

subject these additional changes to the processing of beneficiary complaint reviews and 

general quality of care reviews to notice-and-comment rulemaking, in the proposed rule, 

we proposed to add new §§ 476.110, 476.120, 476.130, 476.140, 476.150, 476.160, and 

476.170 as described below in this section. We also proposed to add new definitions of 

“authorized representative”, “appointed representative; “beneficiary representative” and 

“quality improvement initiative,” and revise the definition of “preadmission certification” 

in § 476.1. In addition, to ensure consistency with the proposed revisions to or additional 

sections under Part 476, we proposed to revise §§ 480.107, 480.132, and 480.133, as 

discussed more fully below. 

The proposed revisions to the regulations under Part 476 include several changes 

that would improve the beneficiary’s experience when contacting a QIO about the quality 

of health care he or she has received and also shorten key timeframes so that beneficiaries 
CMS-1589-FC 1048 

can achieve resolution of their health care concerns in less time. We proposed 

regulations under new proposed § 476.110 regarding a new alternative dispute resolution 

process called “immediate advocacy.” We proposed to add a definition of “immediate 

advocacy” under § 476.1, and to make clear that this process is specific to oral 

complaints. We proposed to define “immediate advocacy” as an informal alternative 

dispute resolution process used to quickly resolve an oral complaint that a beneficiary or 

his or her representative has regarding the quality of health care received, and that this 

process involves a QIO representative’s direct contact with the provider and/or 

practitioner. 

Comment: Several commenters expressed support for the proposed definitions 

and stated that the availability of clear definitions would help ensure consistent 

interpretation and application of rules and processes, as well as prevent confusion and 

dissatisfaction for beneficiaries, providers, practitioners, and QIOs. Other commenters, 

although supportive of the definitions, raised concerns with specific definitions such as 

the inclusion of “oral beneficiary complaints” in the definition of quality of care reviews, 

because, in the opinion of the commenters, beneficiary complaints must be written. In 

addition, other commenters suggested that the wording of a beneficiary complaint should 

be modified to denote that a complaint must contain at least one quality of care concern 

because nonmedical, ancillary issues, including perceptions that staff are impolite, it is 

too hot or cold in the facility, or complaints about the reception process in the waiting 

room, are not considered to be quality of care issues. Moreover, some commenters 

suggested that the definition of beneficiary complaint should be modified so that the 
CMS-1589-FC 1049 

focus is not on whether the care met professionally recognized standards because care, 

even when meeting professionally recognized standards of care, could raise quality issues 

that a QIO should address. 

One commenter believed that a definition of professionally recognized standards 

of health care should be included because it is not clear what this entails. Another 

commenter requested further clarification regarding what is considered as an episode of 

care and asked if it relates to one setting, one continuous course of treatment across 

multiple settings, or something else. 

Response: We appreciate the commenters’ support of our proposed definitions. 

With regard to the inclusion of oral beneficiary complaints in the definition of quality of 

care reviews, we recognize that, under section 1154(a)(14) of the Act, QIOs are required 

to review written complaints submitted by Medicare beneficiaries. However, section 

1154(a)(1)(B) of the Act also gives QIOs general authority to conduct quality of care 

reviews based on concerns conveyed from a variety of different sources, regardless of the 

manner in which these concerns have been conveyed. Therefore, a QIO can review 

concerns that have been expressed orally by any parties, including beneficiaries. 

Moreover, with regard to the comment that all beneficiary complaints include at least one 

quality of care concern and that nonmedical, ancillary issues should be excluded, we do 

not believe that the statute limits the concept of a beneficiary complaint in this way. 

Beneficiaries have the right to lodge complaints under section 1154 (a)(14) of the Act 

based on their perception that the quality of services they received did not meet 

recognized standards of care. This concept of a complaint does not require that the 
CMS-1589-FC 1050 

complaint allege a concern that the QIO believes could actually relate to a violation of a 

standard of care, only that the complaint be about the quality of services not meeting the 

standard. Many beneficiaries are not in the position of being able to determine whether 

or not some aspect of their care actually violated a medical standard—nor should 

beneficiaries be discouraged from filing complaints because they must first make a 

judgment about standards of care. Additionally, we believe that the examples provided, 

such as impolite staff, the facility being too hot or too cold, or the reception process in the 

waiting room, can potentially contribute to the QIO’s overall assessment of whether 

particular services met standards of care. The specific facets that impact the quality of 

care are not always readily quantifiable, and the QIO must consider various factors before 

determining whether an issue does or does not relate to the standard of care received. As 

such, we are not making any change to the definition at this time. 

While we considered the concern that quality of care issues could be evident even 

where professionally recognized standards of care are met, we believe that QIOs must 

fulfill their statutory obligation to focus their efforts on determining, in any given 

situation, whether professionally recognized standards of care have been met. At this 

time, we also have determined that a definition of professionally recognized standards of 

care is not something we can define for all QIOs in all States. Section 1154(a)(6) of the 

Act specifically requires that each QIO apply professionally developed norms of care 

based upon typical patterns of practice within the QIO’s own geographic area as principal 

points of evaluation and review, taking into consideration national norms where 

appropriate. The norms of care must be based on a list of specific elements that each 
CMS-1589-FC 1051 

QIO must consider. The intricacies on what must go into a standard of care are further 

discussed in the QIO regulations at 42 CFR 476.1 (definitions of norms; standards; and 

regional norms, criteria, and standards), and 42 CFR 476.100, which includes details on 

establishing these elements of review for a QIO’s particular locale. Moreover, the QIOs 

have extensive experience in identifying and implementing their own standards of care. 

Regarding the questions about an “episode of care,” this term is designed to incorporate 

flexibility so that QIOs can identify the best approach to assessing complaints. As such, 

we believe that defining the term could unintentionally restrict QIOs’ flexibility to link 

different settings and/or services when the QIO believes that a particular complaint spans 

a beneficiary’s experience with medical care across different settings and/or services. An 

“episode” in one case might therefore be different for different beneficiaries. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45197 through 45199), we 

proposed an informal review process for beneficiary complaints. Historically, the only 

option available to beneficiaries, regardless of the severity or type of issue, has been the 

right to file a written complaint. Once a written complaint is received, the QIO is then 

obligated to conduct a formal peer review of the complaint, which includes a review of 

the beneficiary’s medical information. Although this peer review process is effective, it 

can be quite lengthy and burdensome on providers and practitioners, given the various 

steps that must be completed by the QIO prior to the QIO rendering its final decision, 

with providers and practitioners cooperating with the QIO throughout this process. These 

steps include the time needed by the QIO to follow up with beneficiaries to ensure receipt 

of the complaint in writing, request and receive the medical information from the 
CMS-1589-FC 1052 

provider and/or practitioner, discuss the QIO’s interim decision with the practitioner 

and/or provider, respond to a practitioner’s and/or provider’s request that a QIO conduct 

a re-review of the initial peer reviewer’s decision, and obtain the practitioner’s consent to 

the release of specific findings in the final letter to the beneficiary. By regulation, QIOs 

must disclose to patients or their representatives information they have requested within 

30 calendar days (42 CFR 480.132); it is possible that obtaining a practitioner’s consent 

alone could take 30 calendar days. Even if there are no delays at any point in the current 

peer review process, it can take over 150 calendar days for a QIO to complete its review 

of a beneficiary’s written complaint. 

At times, the length of the current peer review process can render the 

beneficiary’s original concern moot, particularly where the beneficiary’s concern relates 

to a communication issue between his or her providers and/or practitioners, the 

prescribing of medications, or the failure to receive a necessary medical item, such as a 

wheelchair. For these types of concerns, we believe that requiring a beneficiary to submit 

the complaint in writing and waiting more than 150 calendar days so that the QIO can 

complete its review does not provide prompt and customer friendly service to Medicare 

beneficiaries. Moreover, at times, certain issues raised by a Medicare beneficiary in a 

complaint may not even be documented in the beneficiary’s medical information. This is 

particularly true for complaints related to communication or coordination issues 

surrounding the beneficiary’s care. Thus, a QIO may actually know at the outset of a 

review that the peer review process will not divulge any information related to the 

beneficiary’s complaint. 
CMS-1589-FC 1053 

We believe that, under an informal process such as “immediate advocacy,” the 

QIO would be able to offer an alternative to a Medicare beneficiary in those situations 

where a resolution is needed more quickly than the current traditional peer review 

process. We believe that the proposed new informal process would also be beneficial in 

those instances where information relevant to a complaint would most likely not be 

contained in the medical information or where the Medicare beneficiary may simply be 

put off by the formality of the traditional peer review process. We specified in proposed 

§ 476.110(a) that this new informal process would be available for oral complaints so that 

there is a clear distinction from the process requiring a written complaint under section 

1154(a)(14) of the Act. Again, the proposed definition of “immediate advocacy” under 

§ 476.1 also would make this clear. 

We also proposed that the use of “immediate advocacy” would not be available if 

the QIO makes a preliminary determination that the complaint includes concerns that 

could be deemed significant, substantial, or gross and flagrant violations of the standard 

of care to which a beneficiary is entitled (proposed § 476.110(a)(2)(ii)). In addition, we 

proposed to add definitions of “quality of care concern” and “significant quality of care 

concern” under § 476.1, and to incorporate the definitions of “gross and flagrant 

violation” and “substantial violation in a substantial number of cases” as these two terms 

are used in 42 CFR 1004.1. Section 1004.1 covers definitions that apply to a QIO’s 

sanction authority under 42 CFR Part 1004. We proposed to define “quality of care 

concern” to mean a concern that care provided did not meet a professionally recognized 

standard of health care, and that a general quality of care review or a beneficiary 
CMS-1589-FC 1054 

complaint review may cover a single concern or multiple concerns. “Significant quality 

of care concern” would mean a determination by the QIO that the quality of care 

provided to a beneficiary(s) did not meet the standard of care and while not a gross and 

flagrant or substantial violation of the standard, represents a noticeable departure from 

the standard that could reasonably be expected to have a negative impact on the health of 

a beneficiary. “Gross and flagrant violation” would mean that a violation of an 

obligation specified in section 1156(a) of the Act has occurred in one or more instances 

which presents an imminent danger to the health, safety, or well-being of a program 

patient or places the program patient unnecessarily in high-risk situations (as specified in 

42 CFR 1004.1). “Substantial violation in a substantial number of cases” would mean a 

pattern of providing care that is inappropriate, unnecessary, or does not meet recognized 

professional standards of care, or is not supported by the necessary documentation of care 

as required by the QIO (as specified in 42 CFR 1004.1). 

We stated that we believe that the proposed definitions would give improved 

clarity to the distinctions made among concerns that do not meet the standard of care and 

demonstrate that QIOs are responsible for reviewing all quality-related cases to determine 

whether care provided to a beneficiary could have violated a standard, and to address any 

violation, not just the most significant or flagrant failures to meet a standard of care. 

With regard to “immediate advocacy,” we believe that this informal process is not 

appropriate for those situations where a QIO preliminarily determines that a complaint 

could involve a “gross and flagrant” or “substantial” concern. In these circumstances, the 

QIO would not offer the immediate advocacy process, but instead would inform the 
CMS-1589-FC 1055 

beneficiary of the right to file a written complaint. Moreover, while we proposed to 

exclude the use of the immediate advocacy process for those instances where “significant 

quality of care concerns” might be present, we requested public comments regarding 

whether the immediate advocacy process should be made available for these concerns as 

well. In addition, while we proposed to restrict the use of the immediate advocacy 

process to a period of 6 months after a beneficiary has received the care at issue 

(proposed § 476.110(a)(1)), we also requested public comments on whether this time 

period should be extended beyond 6 months, whether based on the proposed structure or 

in order to accommodate the potential broadening of its use for “significant quality of 

care concerns.” The public comments that we received are discussed later in this section. 

We proposed, under proposed § 476.110(a)(2), to specify that the immediate 

advocacy process can be used for issues that are not directly related to the clinical quality 

of health care itself or that accompany or are incidental to the medical care received, but 

might, as a general matter, contribute to a standard of care not being met. This includes, 

but is not limited to, issues such as delays in obtaining much needed medical items (for 

example, wheelchairs). In addition, under § 476.110(a)(3), we proposed that the 

Medicare beneficiary must agree to the disclosure of his or her name in order for the 

immediate advocacy process to be used. We believe that it is important for the Medicare 

beneficiary to disclose his or her name because the immediate advocacy process is based 

on the need for open discussions to quickly resolve a beneficiary’s concerns. Moreover, 

we also proposed that all parties orally consent to the use of immediate advocacy 

(proposed § 476.110(a)(4)). Because our goal is to work with the providers and 
CMS-1589-FC 1056 

practitioners to resolve a beneficiary’s concerns, we believe that consent is necessary. 

The use of oral consent, and not written consent, is in keeping with the cost-saving 

attributes of alternative dispute resolution processes. 

Although we believe that the immediate advocacy process will be of great value 

to Medicare beneficiaries, providers, practitioners, and the QIOs, we recognize that, for 

some, the process may not provide the desired resolution. In addition, there could be 

situations where a QIO determines, after the immediate advocacy process has begun, that 

more serious concerns are evident. Therefore, we proposed under § 476.110(b) that the 

QIO and either party can discontinue participation in immediate advocacy at any time 

and the steps a QIO will take when this occurs. This includes informing the beneficiary 

of his or her right to submit a written complaint. 

Under proposed § 476.110(c), we proposed to convey the need to maintain the 

confidentiality of the immediate advocacy proceedings by specifically referencing the 

redisclosure restrictions under § 480.107. We proposed to make a corresponding change 

to § 480.107 by adding new paragraph (l), to specify that the redisclosure of confidential 

information related to immediate advocacy proceedings can occur when there is consent 

by all parties. Under proposed § 476.110(d), we proposed to include procedures that 

QIOs would follow in those instances where a party fails to participate or otherwise 

comply with the immediate advocacy procedures. This includes making a beneficiary 

aware of his or her right to submit a written complaint. 

We believe that the use of the immediate advocacy process will greatly reduce the 

burden on practitioners and providers by avoiding the formality of the traditional peer 
CMS-1589-FC 1057 

review process in appropriate situations and quickly identifying resolutions and 

improvements in the provision of health care. In fact, the immediate advocacy process 

has already been introduced through the recently completed manual instructions, and 

preliminary feedback indicates that it is being received positively by providers, 

practitioners, and Medicare beneficiaries. Medicare beneficiaries have indicated their 

appreciation of the quicker and more appropriate resolution of their concerns. Many 

times, Medicare beneficiaries would wait months for the resolution of a formal written 

complaint, only to be disappointed in what the QIO actually found or frustrated that the 

concern initially raised was rendered obsolete by more recent events. Under the 

immediate advocacy process, the QIO has a mechanism to resolve beneficiaries’ 

concerns, sometimes the same day the beneficiary calls. Moreover, providers and 

practitioners have responded positively to being given the opportunity to immediately 

address beneficiary’s concerns and improve care, particularly where communication is 

one of the beneficiary’s primary concerns. In addition, the provider’s or practitioner’s 

ability to avoid receiving and processing a formal complaint letter from the QIO and the 

related time and costs related to forwarding medical records and engaging in the lengthy 

review process also have been positively received. The decreased burden on Medicare 

beneficiaries, providers, and practitioners and the time and cost savings are cornerstones 

of alternative dispute resolution processes. We are confident the positive responses to 

this new option will continue. 

Comment: Commenters supported the establishment of the immediate advocacy 

process. The commenters noted the efficiencies of immediate advocacy and the ability to 
CMS-1589-FC 1058 

identify and achieve quality improvements much more quickly in a less formal 

environment. Many commenters noted that immediate advocacy will enable providers 

and practitioners to avoid the costly and time-consuming written beneficiary complaint 

process and, thus, dedicate already scarce resources to delivering high-quality care. 

Some commenters noted that swift and effective resolutions should be the goal, whether 

the complaint is oral or written, and that immediate advocacy is best for nonsignificant 

concerns related to the experience of care or issues that stem from a breakdown in 

communication that likely would not be documented in a medical record. One 

commenter suggested that CMS ensure the general public is aware of the availability of 

immediate advocacy. 

Some commenters suggested that immediate advocacy be used for all complaints 

unrelated to quality of care or patient safety issues, and that the formal beneficiary 

complaint process be restricted to complaints involving patient safety issues or quality of 

care issues. One commenter asked whether immediate advocacy could tie up hospital 

and QIO resources in the long run, leading to slower response times and more 

administrative burden and whether it could increase “busy work” for providers. The 

same commenter then suggested that immediate advocacy be used only on a trial basis 

until the benefits are clear. Another commenter was similarly concerned that the 

immediate advocacy process would place a greater burden on the providers and 

practitioners because the QIOs would be contacting them directly. 

Other commenters indicated that CMS should consider not implementing 

immediate advocacy because other avenues already exist for addressing complaints about 
CMS-1589-FC 1059 

the quality of care, such as reporting the concerns directly to the provider or to Statebased agencies, and that having multiple complaint processes impacts the resources of 

providers because they are sometimes forced to respond multiple times to the same 

issues. One commenter suggested that, because the QIOs would be documenting the 

complaint in its own words and it does not require a proper investigation of the patient’s 

experience and the staff’s actions, the QIO will lose neutrality and thus become an agent 

of the patient. 

Response: We appreciate the commenters’ support of the use of immediate 

advocacy, and we have already taken steps to ensure that beneficiaries, providers, and 

practitioners are aware that this new alternative dispute resolution process is available. 

We acknowledge the commenters’ suggestion that the division of precise categories or 

types of concerns for which immediate advocacy should be used be distinct from those 

covered by the formal beneficiary complaint process. However, we believe that the 

proposed structure, which considers the severity of the concern and not the type of 

concern, represents the best approach to the design of both the immediate advocacy 

process and the beneficiary complaint review process. This approach gives beneficiaries 

as well as providers and practitioners options in achieving resolutions of complaints. 

Moreover, the immediate advocacy process is designed using the principles of the 

well-established alternative dispute resolution process, which focuses on achieving 

results in less time with lower costs. This is certainly true when compared to the 

traditional beneficiary complaint review process, which can take months and necessitates 

multiple reviews by physician reviewers, along with ongoing repetitive involvement of 
CMS-1589-FC 1060 

the pertinent practitioners and/or providers. While we appreciate the suggestion that 

immediate advocacy only be used on a trial basis, we indicated in the proposed rule that 

immediate advocacy is already being used and that initial results are positive in that there 

is improved satisfaction with results, with less time and resources being expended to 

achieve the results. This initial feedback from practitioners and providers indicates that 

the process is, in fact, less burdensome and directly attributable to the complaint being 

resolved within hours or a couple of days versus several months, the avoidance of 

responding to a request for medical records, and a provider’s and/or practitioner’s limited 

involvement in the immediate advocacy process compared to the repeated back and forth 

communication necessitated throughout the lengthy formal beneficiary complaint review 

process. However, if any provider or practitioner believes that immediate advocacy is 

more burdensome and costly in any given situation, the provider or practitioner has the 

option to decline to participate in the immediate advocacy process. Although reference 

was made to the impact on providers and practitioners resulting from the availability of 

multiple options for filing a complaint, Federal law has specifically provided Medicare 

beneficiaries with the right to file written complaints with the QIOs. Thus, QIOs are 

obligated to appropriately review these complaints. We believe that the QIOs’ 

substantial experience in resolving beneficiary complaints will enable them to determine 

what is necessary to conduct an appropriate review of a patient’s experiences and staff 

reactions. Moreover, because immediate advocacy will only be used for less severe 

quality of care concerns, we believe the QIOs are well equipped to determine the 

appropriate and necessary level of their review efforts. We also believe the QIOs’ 
CMS-1589-FC 1061 

substantial experience in resolving complaints will enable them to effectively fulfill their 

roles in immediate advocacy without becoming agents of the beneficiaries, providers, or 

practitioners. 

Comment: Numerous commenters opposed the expansion of immediate advocacy 

for use with significant quality of care concerns. Many commenters indicated that the 

immediate advocacy approach is not appropriate for these significant concerns because 

the roots of these concerns do not lend themselves to rapid resolution, and there is a risk 

that the cursory analysis may not sufficiently address the concerns in light of the short 

timeframe (8 hours to 2 days) within which immediate advocacy is intended to be 

completed. These commenters believed that this could ultimately be a disservice to 

beneficiaries and that, for these significant concerns, the medical record should be 

reviewed. Some commenters suggested that the review of medical records offers the best 

protection for providers, practitioners, and beneficiaries. Others commenters stated that 

the use of oral consent is not sufficient if significant quality of care concerns are present. 

Response: We appreciate the commenters’ responses on this issue. In light of 

these comments, we are not expanding the use of immediate advocacy for significant 

quality of care concerns at this time. As the QIOs continue to use immediate advocacy, 

we will continue to evaluate its use to determine if the future expansion to include 

significant quality of care concerns is warranted. 

Comment: Several commenters agreed with the proposed 6 month timeframe 

regarding complaints that are eligible for immediate advocacy because they believed that 

this time seemed reasonable. Others commenters stated that, while the 6 month 
CMS-1589-FC 1062 

timeframe is reasonable, exceptions should be granted for extenuating circumstances. 

However, other commenters believed that 6 months is too long because frequently these 

cases involve issues happening at the time of the call and, as such, 3 months is more 

appropriate. They believed that the shorter timeframe also would facilitate using these 

issues as “teaching tools” for practitioners and providers. 

Commenters noted that the longer window could result in staff involved in the 

complaint no longer being with the provider, which is significant because the medical 

record is not being reviewed. Other commenters believed that immediate advocacy could 

be effective for complaints received up to a year after the date of care. 

Response: In considering the exact period of time applicable to the use of 

immediate advocacy, we believe we must balance the cost-saving aspects, the desire to 

timely resolve the complaints, and the level of involvement required by practitioner and 

provider staff. We continue to believe that 6 months represents the best balance of these 

factors. We appreciate the comments provided and will consider making additional 

adjustments as the QIOs gain experience in using immediate advocacy. 

While we believe that the immediate advocacy process represents a significant 

step forward in ensuring the timely, appropriate, and cost-efficient resolution of Medicare 

beneficiaries’ concerns, we recognize that additional changes are needed to improve the 

QIOs’ review process in general. Therefore, in the CY 2013 OPPS/ASC proposed rule 

(77 FR 45198 through 45202), we proposed regulations governing written beneficiary 

complaint reviews as well as general quality of care reviews. We proposed to add a new 

§ 476.120 that would govern a Medicare beneficiary’s submission of a written complaint 
CMS-1589-FC 1063 

and proposed, under proposed § 476.120(a), language limiting the time period for 

submitting a written complaint to 3 years from the date on which the care giving rise to 

the complaint occurred. We believe this is necessary because the ability of a QIO to 

thoroughly review a complaint becomes more problematic the longer the period of time is 

between the circumstances giving rise to a complaint and the actual filing of the 

complaint. An individual’s memory can fade, and we are aware of some instances where 

Medicare beneficiaries have submitted complaints about issues that have occurred 

decades ago. In these situations, the QIOs’ ability to obtain the necessary information, let 

alone render a valid decision, has been severely compromised. As such, we believe that a 

3-year look back period should be sufficient to ensure that a QIO can effectively 

complete its review. 

Under proposed § 476.120(a)(1), we proposed that a complaint submitted 

electronically to the QIO would meet the requirement for the submission of a written 

complaint. We proposed, under proposed § 476.120(a)(2), that if a beneficiary contacts a 

QIO about a potential complaint but decides not to submit it in writing (and the QIO did 

not believe it was appropriate to offer immediate advocacy), the QIO may use its 

authority under section 1154(a)(1)(B) of the Act to complete a general quality of care 

review in accordance with new proposed procedures at proposed § 476.160. We noted 

that, in these situations, the beneficiary would not receive any results of the QIO’s 

review. We also proposed to limit the QIO’s authority to conduct a general quality of 

care review in response to an oral complaint to those situations where the QIO makes a 
CMS-1589-FC 1064 

preliminary determination that the complaint contains a potential gross and flagrant, 

substantial, or significant quality of care concern. 

Under proposed § 476.120(b), we proposed instructions for QIOs when a 

beneficiary submits additional concerns after the initial submission of a written 

complaint. We believe that the focus on an episode of care, which we proposed in 

§ 476.130(a)(1), gives the QIO adequate flexibility to consider all related concerns 

surrounding a complaint, but for those rare instances where a beneficiary does convey a 

new concern, the QIO would now have specific instructions regarding the right to 

consider the additional concerns either during the same complaint review or as a separate 

complaint. 

Under proposed § 476.130(a), we proposed to convey the QIO’s obligation to 

consider any information submitted by the beneficiary or his/her representative and by 

the provider and/or practitioner, along with the QIO’s obligation to maintain the 

information received as confidential information, if that information falls within the 

definition of “confidential information” under existing § 480.101. Moreover, proposed 

§ 476.130(a)(1) also would convey that the focus of the QIO’s review will be on the 

episode of care from which the complaint arose and that in completing its review, the 

QIO will respond to the specific concerns raised by the beneficiary along with any 

additional concerns the QIO identifies while processing the complaint. We believe that 

the focus on the episode of care could potentially reduce the burden on providers and 

practitioners and reduce timeframes for completing individual reviews. Historically, 

QIOs would closely track the complaint as originally conveyed by a Medicare 
CMS-1589-FC 1065 

beneficiary. However, often Medicare beneficiaries would become dissatisfied with the 

focus and/or results of the QIO’s review, and the QIO would be forced to reexamine the 

same complaint in light of these entirely new issues, either in addition to or replacing the 

original issues. On occasion, this could result in the beneficiary raising concerns that 

should have been filed as an entirely new complaint, based on issues that might be related 

to, but were not reviewed as part of, the original complaint. This situation could slow the 

progress of the complaint indefinitely because there were no limits on what beneficiaries 

could add to existing complaints and the time span in which they could do this. These 

situations also could add to the burden on providers and practitioners because they would 

be required to participate in the review of the additional concerns and even provide 

additional medical documentation related to a complaint that might have changed course 

multiple times. 

In conjunction with limiting complaints to an episode of care, we proposed, under 

proposed § 476.130(a)(1),to specify the details of the QIO’s authority to separate a 

beneficiary’s concerns into separate complaints if the QIO determines that the concerns 

relate to different episodes of care. We believe that focusing on the episode of care will 

put QIOs in a better position to identify all potential concerns at the onset and help 

alleviate any potential back and forth based on the specter of new or different concerns 

arising after the review has begun. 

Under proposed § 476.130(a)(2), we proposed to set forth the QIO’s use of 

evidence-based standards of care to the maximum extent practicable, and specify the 

method that the QIO must use to establish standards if no standard exists. Moreover, this 
CMS-1589-FC 1066 

paragraph (a)(2) also conveys the finality of a QIO’s determination regarding the 

standard to be used for a particular concern, in that the QIO’s determination regarding the 

standard used is not subject to appeal. We believe that the focus on evidence-based 

standards of care is vital to the improvement of health care nationally. 

Under proposed § 476.130(b), we proposed to specify the timeframes that 

practitioners and providers must follow when a QIO requests medical information in 

response to a written beneficiary complaint. We proposed a 10 calendar day timeframe 

for responding to these requests and believed providers and practitioners would also 

benefit from the faster resolution of complaints. We also noted that QIOs have 

historically employed a different, shorter timeframe for reviews where a Medicare 

beneficiary is still receiving care (concurrent review), compared to those situations where 

a Medicare beneficiary has already been discharged (retrospective review). For 

concurrent reviews, QIOs request that medical information be received within 1 calendar 

day, and typically this timeframe has been adhered to by providers and practitioners. 

Although we did not propose the continued use of the concurrent and retrospective 

review framework for responding to written complaints, we recognize that there could be 

circumstances in which an even shorter timeframe for receiving medical information is 

warranted, and we proposed to include language detailing a QIO’s right to earlier receipt 

of medical information. We proposed that this right to earlier receipt of medical 

information be related to potential gross and flagrant or substantial quality of care 

concerns. However, we requested public comments on whether there are other 
CMS-1589-FC 1067 

circumstances, involving less serious kinds of concerns, for which this authority to 

employ a shorter timeframe should be used. 

In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53664 through 53665), we 

finalized proposed changes to § 476.78 to add references to “practitioners” in parts of this 

section, which referred only to “providers,” in order to equalize the 30-day and 21-day 

timeframes for submitting records. In that final rule, we also made changes to § 476.90 

to equalize the ramifications for not submitting records on time, including denying 

payment, because we saw no reason to differentiate between a provider’s and a 

practitioner’s records. We note that these changes had not been finalized when we issued 

the CY 2013 OPPS/ASC proposed rule, and in anticipation of the changes proposed in 

the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28119 through 28120), we requested 

public comment in the CY 2013 OPPS/ASC proposed rule on whether changes similar to 

those we proposed for beneficiary complaints, including shortening of the 30-day and 

21-day timeframes, should be incorporated into § 476.78(b) for requests for medical 

information in general, for any kind of QIO reviews, including nonquality related 

reviews. In the CY 2013 OPPS/ASC proposed rule, we also proposed to apply a shorter 

timeframe for all of a QIO’s requests for records, without limiting this application to 

quality reviews in just one instance: where secure transmissions of electronic versions of 

medical information are available, we proposed a shorter timeframe. Our proposal 

regarding secure transmissions of electronic versions of medical information is discussed 

more fully later in this section. 
CMS-1589-FC 1068 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45200), under proposed 

§ 476.130(c), we proposed to include a requirement for beneficiary complaints that the 

QIO issue its interim initial determination within 7 calendar days after receiving all 

medical information. We stated that we believe that this timeframe is sufficient to 

evaluate a complaint and identify the key aspects of the care provided. Under proposed 

§ 476.130(c)(1), we proposed to specify the provider’s and/or practitioner’s right to 

discuss the QIO’s determination before it is finalized, and to specify that the QIO’s initial 

notification will be made by telephone. We proposed a 7-calendar day timeframe for 

completion of the discussion. In addition, we proposed that the QIO’s interim initial 

determination would become the QIO’s final determination if the discussion is not 

completed timely because the provider and/or practitioner has failed to respond (proposed 

§ 476.130(c)(2)). Again, our focus is on obtaining resolutions to complaints within 

reasonable timeframes, and the completion of the discussion is an area where improved 

instructions may benefit the timeliness of complaint processing because we have 

experienced significant delays in completing this particular step. The term “final initial 

determination” should not be confused with the term used in 42 CFR Part 405, because 

Part 405 relates to whether a beneficiary is entitled to services or the amount of those 

services, while this regulation covers only the quality of services as specified in the QIO 

statute. At the same time, we proposed, under proposed § 476.130(c)(3), the provider’s 

or practitioner’s right to submit a written statement in lieu of a discussion, with the 

requirement that the written statement be received within the same 7-calendar day 

timeframe from the date of the initial offer. We believed that allowing the submission of 
CMS-1589-FC 1069 

a written statement would benefit practitioners or providers that may have trouble being 

available at a specific time within the 7-calendar day timeframe. Moreover, under 

proposed § 476.130(c)(4), we proposed to include the QIO’s right to extend the 

timeframe for holding the discussion or submission of a written statement in lieu of a 

discussion in those rare instances where a practitioner or provider is unavailable, whether 

because of military tours of duty, travel or other unforeseen circumstances. 

In addition, we noted in the CY 2013 OPPS/ASC proposed rule that we were 

considering restricting a provider’s or practitioner’s right to submit new or additional 

medical evidence in the form of test results, X-rays, and other evidence, as part of this 

discussion. We stated that we believe that doing so would emphasize the need for 

providers and practitioners to supply all relevant evidence when first requested by the 

QIO and also would maintain the focus on the discussion a physician or provider is due in 

accordance with section 1154(a)(14) of the Act. Allowing the submission of additional 

or new evidence could also substantially raise the possibility that the discussion will 

become, in effect, an entirely new review by the QIO. Moreover, providers and 

practitioners will still be able to submit information as part of a request for a 

reconsideration review. We requested public comments on whether providers and/or 

practitioners should be prohibited from submitting new or additional medical evidence in 

response to the offer of a discussion. 

Under proposed § 476.130(d), we proposed to specify the QIO’s obligation to 

issue a written final initial determination, regardless of whether care did or did not meet 

standards for all concerns, and that this determination must be issued within 72 hours 
CMS-1589-FC 1070 

after completion of the QIO’s review or, in cases where the standard was not met, the 

QIO’s discussion or receipt of the provider’s and/or practitioner’s written statement. In 

addition, we proposed, under proposed § 476.130(d)(1), to specify that the notice of the 

final initial determination will be forwarded to all parties, and paragraph (d)(2) lists the 

actual content of the notice. We also proposed to specify that the QIO would not forward 

the notice if either party requests a reconsideration of the final initial determination. 

These proposed changes represent significant departures from the process QIOs 

have historically used when resolving beneficiary complaints and are necessary to 

improve the fairness of the review process and increase the transparency of the QIO 

review process. When the process was originally established, CMS determined that 

physicians, providers, or Medicare beneficiaries would not be afforded the right to 

request a reconsideration of these determinations under section 1155 of the Act. 

However, providers and practitioners were afforded an administratively created option, 

referred to as a “re-review,” if the provider or practitioner disagreed with the QIO’s 

initial decision. Medicare beneficiaries were not provided this re-review opportunity and, 

in fact, were not given any response until after completion of the re-review. Moreover, 

the actual information a beneficiary received in response to the submission of a complaint 

was further limited by certain provisions in the existing regulations. Section 480.132 

covers the general requirements that a QIO must meet in disclosing information to a 

beneficiary when that beneficiary has requested information about him or herself. 

Section 480.132(a)(1)(iii) states that this information cannot include any 

practitioner-specific information. We have read this provision in conjunction with 
CMS-1589-FC 1071 

§ 480.133(a)(2)(iii), which authorizes a QIO to disclose practitioner-specific information 

when the practitioner has consented to the disclosure. In the past, we have interpreted 

these provisions as applying in the context of beneficiary complaints. This limitation 

greatly reduced a beneficiary’s access to information related to the QIO’s specific 

findings. In fact, § 480.132 also gave attending practitioners the authority to direct that a 

QIO not provide results directly to a Medicare beneficiary should that practitioner 

determine that the released information could “harm the patient.” This same provision 

gave QIOs a full 30 calendar days before they had to respond to a beneficiary’s request 

for information, which would apply even in the context of a complaint. Thus, the QIO 

was required to obtain a practitioner’s consent to disclose information within this 

30-calendar day timeframe before the QIO could disclose the specific results of its 

complaint review to the beneficiary. 

As a result of the provisions in the existing regulation, the QIO was often delayed 

in its ability to respond to the beneficiary, and was sometimes forced to identify a 

representative and then give the results to the representative even if the Medicare 

beneficiary believed he or she was able to represent himself or herself and legally had not 

been deemed otherwise. This scenario has frustrated Medicare beneficiaries over time 

and placed QIOs in difficult situations. Furthermore, if a practitioner did not consent to 

any disclosures or to limited disclosures of information that would identify the 

practitioner, a QIO’s decision typically contained a conclusory statement about the results 

of the QIO’s review but no information about the standards of care the QIO used, the 

evidence the QIO considered, or the rationale for how the QIO arrived at its conclusion. 
CMS-1589-FC 1072 

The limitations on what information Medicare beneficiaries received and broad authority 

given to attending practitioners have been particularly troubling in those instances in 

which the beneficiary’s complaint relates to care that the attending physician provided. 

In fact, the lack of information given to Medicare beneficiaries in response to a complaint 

was the precise issue addressed in the Public Citizen decision. 

We stated in the proposed rule that we believe that the proposed changes to 

§ 476.130(d), including paragraphs (d)(1) and (d)(2), are necessary to ensure 

beneficiaries are given the same information and rights as practitioners and providers. 

The proposed changes make clear that the timeframe given to QIOs for issuing the final 

initial determination in response to a complaint is separate and distinct from the 

timeframe given to QIOs when responding to a beneficiary’s request for information. 

Any requests for information, including requests for information pertaining to beneficiary 

complaint reviews that are unrelated to a QIO’s issuance of its final initial determination, 

would continue to be governed by § 480.132. Moreover, while the proposed 72-hour 

timeframe in § 476.130 appears short in comparison to the 30-calendar day timeframe in 

§ 480.132 that has historically been used, we believe that the 72-hour timeframe 

represents a more appropriate and reasonable period of time in which to issue these 

decisions. In most cases, the QIO’s final initial determination may not change 

significantly from the interim initial determination. Thus, QIOs would be able to rely 

heavily upon the interim initial determination in most instances, with only minor 

adjustments being made in light of information received in response to the opportunity 

for discussion. In addition, in paragraph (d)(2), we proposed the content of the written 
CMS-1589-FC 1073 

decision to be given to the beneficiary, provider, and/or practitioner. We proposed that 

the content include a statement for each concern that the care did or did not meet the 

standard of care, the standard identified by the QIO for each of the concerns, and a 

summary of the specific facts that the QIO determines are pertinent to its findings. This 

list makes clear that § 480.132 will no longer govern what information a QIO may 

provide to a beneficiary in resolving a complaint. We believe this approach more fully 

supports the court’s decision in the Public Citizen case. 

In addition, we believe that the language under section 1155 of the Act supports 

the decision to give all parties the right to request that the QIO reconsider its initial 

decision, and we proposed to offer providers, practitioners, and beneficiaries the right to 

request a reconsideration in proposed § 476.140(a) for complaints filed after 

July 31, 2014. This includes proposed specific requirements regarding the manner in 

which these requests are to be submitted and the obligations of beneficiaries, providers, 

and practitioners to participate in the reconsideration process in proposed § 476.140(a)(1) 

through (a)(3). We proposed to delay implementation of this new proposed right to 

ensure all processing requirements are fully developed for QIOs to follow in reviewing 

these reconsideration requests. 

In addition to the proposed specific content of the notice at proposed 

§ 476.130(d)(2) when a final initial determination is issued and under proposed 

§ 476.140(b) when a reconsideration final decision is issued, we proposed to make 

corresponding changes to existing §§ 480.132(a) and (b) and 480.133(a) (proposed new 

paragraph (a)(2)(iv)). In order to make clear that § 480.132 relates solely to a 
CMS-1589-FC 1074 

beneficiary’s request for information, but not to a beneficiary’s receipt of information 

from a QIO in resolution of a complaint review, we proposed the inclusion of a 

cross-reference to §§ 476.130(d) and 476.140(b) in paragraph (a). Similarly, we 

proposed to include language in § 480.132 (a)(1)(iii) to denote that the removal of all 

other patient and practitioner identifiers does not apply to disclosures described in 

§ 480.132(b). We also proposed clarifications to § 480.132(b) to improve the link 

between paragraph (b) and the provisions of § 478.24 regarding requests for information 

relied upon in rendering initial denial determinations, which are cross-referenced in 

paragraph (b). We note that § 478.24 does not require seeking the advice or consent of 

the practitioner that treated the patient, nor does it prohibit the QIO from disclosing 

practitioner identifiers. We have made this clear by the proposed deletion of paragraph 

(b)(1)(i) and added language to the end of current paragraph (b)(1)(ii) to indicate that the 

information provided under § 478.24 includes relevant practitioner identifiers. With the 

deletion of paragraph (b)(1)(i), there is no longer a need for multiple paragraphs in (b)(1). 

Therefore, we proposed to eliminate the current designation for paragraph (b)(1)(ii), with 

the provision being included as part of paragraph (b)(1). We also proposed a 

corresponding change to § 480.133(a)(2)(iv) that makes clear a practitioner’s or 

provider’s consent is not required prior to releasing information to a beneficiary in 

connection with an initial denial determination or in providing a beneficiary with the 

results of the QIO’s findings related to a beneficiary complaint review as described in 

§§ 476.130(d) and 476.140(b). 
CMS-1589-FC 1075 

We also proposed to remove from existing § 480.132(a)(2) and (c)(1) the right of 

an attending practitioner to direct a QIO to withhold information based on a “harm” 

determination. This included the proposed removal of the requirement from existing 

§ 480.132(c)(2) that a QIO release results to a beneficiary’s representative if a “harm” 

determination has been made by the attending practitioner. This also included our 

proposed decrease in the timeframe that QIOs must follow in responding to a 

beneficiary’s request for information (in any situation, as well as in the context of a 

beneficiary complaint) in § 480.132(a)(2) from 30 calendar days to 14 calendar days. 

This timeframe is strictly related to those situations where a beneficiary is making a 

request for information and will no longer be associated with obtaining responses to 

beneficiary complaints in the form of the QIO’s final initial determination and the QIO’s 

issuance of a final decision after a reconsideration, which are detailed in proposed 

§§ 476.130(d) and 476.140(b). We believe the decrease from 30 calendar days to 14 

calendar days is warranted in light of the improved ability to maintain data, including in 

electronic formats, so that less time is needed when responding to requests. The 

proposed changes would ensure that Medicare beneficiaries have more control over the 

designation of their representatives and also give a QIO more appropriate steps to follow 

in identifying a representative when one is actually needed. As an example, the existing 

regulations at § 480.132(c)(3) direct a QIO to “first” look to the medical record to 

identify a representative but then direct the QIO to “rely on the attending practitioner” if 

no information is contained in the medical record. The changes we proposed to 

§ 480.132(c) place more emphasis on the obligation of the QIO to follow the 
CMS-1589-FC 1076 

requirements under State law regarding the designation of health care representatives or 

agents, rather than focusing on “where” the information might be contained. 

Lastly, under proposed § 476.140(b), we proposed to specify that the QIO must 

notify the beneficiary and the practitioner and/or provider of its final, reconsidered, 

decision within 72 hours after receipt of the request for a reconsideration or, if later, 72 

hours after receipt of any medical or other records needed for such a reconsideration. 

The QIO may do so orally, by telephone, in order to meet this timeframe. Proposed 

§ 476.140(b)(1) also would specify that a written notice must be mailed by noon of the 

next calendar day and specifies the content of the notice. In addition, under proposed 

§ 476.140(b)(2), we proposed to describe the QIO’s authority to provide information in 

its final decision to beneficiaries, providers and/or practitioners regarding improvement 

opportunities. The information QIOs provide regarding potential improvements could 

include specific opportunities related to the practitioner’s or the provider’s delivery of 

care and/or even broader improvements focusing on the community served by the 

practitioners and/or the providers. Some QIOs have, in fact, been providing this 

information to beneficiaries since it can offer the beneficiaries assurance that their 

complaints and any underlying problems are being addressed. 

We proposed to include, under proposed new § 476.150, specific requirements for 

QIOs to follow in response to abandoned complaints. We believe that these instructions 

are necessary in light of a QIO’s experience when handling complaints where a Medicare 

beneficiary initially submits a complaint but then all attempts by the QIO to contact the 

beneficiary are unsuccessful. Historically, QIOs have been responsible for continual 
CMS-1589-FC 1077 

follow-up with beneficiaries, even if months later the beneficiary still had not responded. 

We believe that giving QIOs the discretion to close these cases will eliminate this 

unnecessary follow-up and reduce costs. Moreover, it will alleviate provider’s and/or 

practitioner’s concerns in those situations where the QIO may have already reached out 

to them about a potential complaint. We also proposed to add, under proposed 

§ 476.150(b), instructions for QIOs to follow in those situations, which we believe will 

be rare, where a QIO must reopen a beneficiary complaint review. We would have QIOs 

apply the same procedures that appear in the already existing regulations at § 476.96 for 

the reopening of cases involving initial denial determinations and changes as a result of 

DRG validation, simply using those same procedures for a different purpose. We 

proposed to do this by placing a reference in § 476.150(b) to the procedures in § 476.96. 

Comment: Numerous commenters supported the establishment of regulatory 

provisions addressing beneficiary complaint reviews, including the streamlining of the 

overall process. Several commenters supported a beneficiary’s right to submit additional 

concerns after the initial submission of a written complaint, a QIO’s right to determine 

whether concerns should be processed as a single complaint or separated into multiple 

complaints, as well as the procedures for handling abandoned complaints. In addition, 

one commenter supported the provision allowing payment denials for practitioners and 

providers. 

However, several commenters noted that a strong operational infrastructure must 

be developed to ensure the stricter timeframes in the beneficiary complaint review 

process can be effectively implemented, particularly in light of the QIO’s budget limits 
CMS-1589-FC 1078 

and the aggressive system-wide changes being attempted. Other commenters supported 

the provision allowing the submission of complaints electronically, although one 

commenter stated that CMS does not allow QIOs to accept electronic beneficiary 

complaints. One commenter also suggested that QIOs should not be communicating 

directly with physicians in resolving beneficiary complaints since this undercuts quality 

management of physician practices and instead the QIOs should communicate directly 

with the quality offices of the practices’ system so that more orderly systematic approach 

to quality control can be maintained. Another commenter recommended that all 

communications exchanged between QIOs and beneficiaries be written at a 6th grade 

level and that, due to disabilities, visual impairments and non-English speaking Medicare 

beneficiaries, communications must be available in alternative formats. 

Response: We appreciate the support for these regulatory provisions. With 

regard to the need for a strong operational infrastructure, the QIOs have been performing 

beneficiary complaint reviews for over 25 years and already have a strong operational 

infrastructure in place. While some adjustments could be necessary to the content of 

letters, any changes to the infrastructure will most likely be related to the new 

reconsideration right to be given to beneficiaries. In recognition of this, we proposed 

delaying the implementation of this new right until August 2014. In addition, we 

appreciate the commenters’ support for the submission of complaints electronically. 

However, we are concerned by the comment that QIOs have been advised by CMS that 

complaints cannot be accepted electronically. This is incorrect, and we have 

communicated this to QIOs on several occasions. As these regulations will make clear, 
CMS-1589-FC 1079 

beneficiaries have the right to submit complaints electronically, including by email, if 

they desire. Although we appreciate the concern that QIOs communicate with the 

provider’s system quality office in resolving beneficiary complaints, we believe that 

communication must ensure the involved practitioner is also involved and nothing in 

these regulations limit the QIOs’ ability to communicate directly with the provider’s 

quality improvement staff. We appreciate the recommendations regarding the QIOs 

communications and availability of alternative formats and have already taken steps to 

ensure that communications are written in plain language and offered in other languages 

so that the needs of Medicare beneficiaries are met. 

Comment: Some commenters suggested that CMS also require that, when QIOs 

investigate a complaint, all parties are informed as to who else has received the 

complaint, such as State survey agencies and the Joint Commission. Commenters 

suggested that this level of coordination is necessary because resources are being 

expended by all of the various entities, including the involved providers and/or 

practitioners, and coordinating the initial investigation or interview would be a 

cost-effective method that could also lead to an earlier resolution of the complaint. 

Moreover, the commenters believed that this would also ensure that information is better 

shared between oversight entities. They believed that doing so could alleviate duplicative 

efforts. 

Response: While we recognize that, at times, several agencies could be 

investigating the same or similar concerns, our concern at this time is ensuring that 

beneficiaries, providers, practitioners, and QIOs have clear instructions regarding the 
CMS-1589-FC 1080 

processing of beneficiary complaints. As such, we are not recommending specific 

changes designed to improve the coordination among various entities as a direct result of 

these regulations. 

Comment: Several commenters expressed concern regarding the impact of the 

proposed regulations on the recently effectuated manual instructions included in 

Transmittal 17 (issued on April 6, 2012, CMS Manual System, Pub. 100-10 Medicare 

Quality Improvement Organizations, Chapter 5, Quality of Care Review). Specifically, 

commenters raised concerns regarding the extent to which beneficiaries can rely on the 

additional protections included in Transmittal 17 because the notice-and-comment 

rulemaking process may take a different and conflicting turn, leaving the beneficiary who 

relied on the transmittal in an insecure and vulnerable position. 

Response: While we recognize that the timing of Transmittal 17 could cause 

confusion in light of the proposed regulations, this rule does not remove any of the 

additional protections conveyed through Transmittal 17. Rather, the regulatory 

provisions are designed to bring about additional changes that will improve the 

processing of beneficiary complaint reviews for all parties and provide beneficiaries with 

even more access to information. We anticipate making additional changes to the manual 

instructions to comply with the new regulatory provisions once the regulations are in 

effect. 

Comment: Many commenters supported the 3-year period for submitting 

beneficiary complaints, while other commenters believed that 3 years is too long. Many 

commenters urged CMS to consider a 1- or 2-year timeframe, with the potential to allow 
CMS-1589-FC 1081 

for additional time in rare circumstances. Many of the commenters’ concerns about the 

3-year time period were based on the ability of providers to reasonably defend against 

allegations of inappropriate care after three years, since memories fade. Moreover, the 

commenters believed that the time lapse could result in the standards of care being 

different in light of clinical advances that have occurred. Other commenters believed that 

the timeframe should be shortened because the proposed time practitioners and/or 

providers are being given to provide medical evidence is much shorter. 

Response: While we recognize that a variety of factors could impact the success 

of the QIO’s review process, we believe that because these reviews are primarily 

conducted by reviewing medical information supplied by the practitioner and/or provider, 

the longer time period is appropriate. Moreover, QIOs are experienced at identifying the 

appropriate standard of care, including any changes or updates to the standard of care 

since the time the actual care was provided. Therefore, we believe that 3 years represents 

a reasonable period of time for submitting complaints. 

Comment: Numerous commenters opposed giving QIOs the authority to identify 

the standard of care, including the right to determine a standard of care where a clear 

standard does not exist. Commenters noted that standards of care are complex and can be 

reliably developed only with clinical experts assessing the available medical information, 

and there is no reason to believe that QIOs will have more relevant medical expertise 

available to make such determinations for all medical care issues. Some commenters also 

noted that there are numerous areas of medical practice for which insufficient evidence 

exists to guide the conclusion of what should be the standard of practice and that the 
CMS-1589-FC 1082 

QIOs should not be expected to make up a standard where evidence to support it does not 

exist. One commenter noted that allowing QIOs to determine the standards of care will 

actually create more variation in the standards. In addition, some commenters believed 

that it was cause for concern that the QIO would make a determination as to whether the 

care provided met professionally recognized standards of care but the 

provider’s/practitioner’s perspective, including the provider’s/practitioner’s intimate 

knowledge of the patient’s care, was secondary. Many commenters were troubled that a 

QIO’s decision regarding the standard of care is not subject to appeal and believed that an 

independent third party entity should be established to review QIOs’ decisions regarding 

the standard of care. One commenter also suggested that giving beneficiaries results of 

reviews could be more problematic in light of these concerns over the standards of care. 

Response: QIOs were specifically established to make available a cadre of peer 

reviewers, including both physician and nonphysician practitioners, with expertise who 

could review complaints and other quality of care concerns in order to make 

determinations as to whether the care provided met professionally recognized standards 

of care. As part of this process, QIOs take care in matching the clinical background of 

their peer reviewers with the specific care at issue in the complaint and ensure that the 

peer reviewer’s knowledge of existing practices in the relevant health care setting and the 

particular geographic area is current. Moreover, the identification of the standard of care 

is based on a robust review of current literature and available evidence pertaining to the 

standard in addition to the peer reviewer’s own clinical judgment. QIOs have been 

reviewing quality of care concerns and making decisions regarding the standards of care 
CMS-1589-FC 1083 

to be used when conducting these reviews for over 30 years. The regulations merely 

continue a process that has been in place since the program was initially established, and 

we see no reason to change the process at this time. In particular, we believe the 

suggestion that a third party be created to review the QIOs’ decisions is unnecessarily 

duplicative because this is the precise reason QIOs were created, and a QIO is 

specifically tasked with applying the standards of care as described in section 

1154(a)(6)(A) of the Act based on its evaluation of the typical patterns of practice within 

the geographic area it serves. This responsibility is also detailed in 42 CFR 476.100. 

Comment: Numerous commenters supported the regulatory changes giving 

beneficiaries more detailed results of review findings, the removal of a physician’s right 

to consent to the release of specific findings, and the provision of information to 

beneficiaries regarding quality improvement activities in the final decision letters. Many 

commenters believed that it is imperative that beneficiaries have the same access to 

information about complaints as practitioners and providers and that this right should not 

be defeated by the objection of a practitioner or provider. Many commenters also agreed 

that the elimination of the consent requirement would improve beneficiary satisfaction 

and that it aligns with the value of patient centered care in addition to reducing the 

processing timeframe by 30 days. 

Other commenters supported the providing of information regarding quality 

improvement activities, but believed that the QIOs will need to take care that the 

information is presented in an easily understandable manner because it can be difficult at 

times for a beneficiary to discern how particular quality improvement activities relate to 
CMS-1589-FC 1084 

the quality of care the beneficiary received. One commenter supported the proposal to 

reduce the time that a QIO is given in responding to requests for information from 

beneficiaries from 30 to 14 calendar days. However, another commenter noted that 

giving beneficiaries more information could be contrary to State law, and provided an 

example that, under Florida law, psychiatrists may redact notes or provide a summary 

statement to patients in lieu of providing them clinical notes, which may be harmful to 

the patient. Another commenter suggested that the failure to obtain a practitioner’s 

consent could expose the QIO to legal activity, which would result in the need for 

increased liability insurance, additional costs for the QIO and for CMS and potentially 

peer reviewers refusing to participate in the process because of concerns over potential 

litigation. 

Response: We regard the provision of more detailed information to beneficiaries 

to be a direct, logical, and reasonable outgrowth of the Public Citizen decision and 

recognize the benefits of providing this more detailed information to beneficiaries. We 

appreciate the support for providing this information and agree that quality improvement 

activities must be conveyed in an easy and understandable way to beneficiaries. We 

believe that the QIOs are already well-equipped to effectively communicate this 

information. With regard to the provision being contrary to State law, we do not agree 

that this provision will place a QIO in jeopardy of violating State law requirements. 

QIOs would be effectuating the procedures of a Federal program that is mandated by a 

Federal statute and interpreted under Federal regulations. As such, a QIO’s obligations to 

provide information under a Federal statute and regulations would preempt any State law 
CMS-1589-FC 1085 

requirements that conflict with the QIO’s obligations. The information conveyed by the 

QIO will be limited because it will be specific to the care a beneficiary has received, and 

relate only to the facts that are essential to determining whether a provider or practitioner 

met professionally recognized standards of care. Lastly, with regard to a QIO or a peer 

reviewer being exposed to legal action, the liability protections afforded under section 

1157 of the Act would apply to the QIO and its staff. Section 1157(b) of the Act states 

that any QIO or person employed by or who provides professional services to the QIO, or 

who has a fiduciary relationship with a QIO, cannot be held to have violated any criminal 

law or to be civilly liable under any Federal or State law as a result of his or her 

performance of any duties, functions, or activities required under or authorized by the 

QIO statute or under the QIO’s contract with CMS. 

Comment: Several commenters supported the reduction in timeframes related to 

requests for medical information. One commenter noted that, because providers have 

already demonstrated the ability to respond to requests for medical information related to 

expedited appeals within 4 hours, 10 days should be ample time. One commenter also 

supported the removal of the retrospective and concurrent distinction in processing 

complaints, as well as the authority to request medical information in less time when 

circumstances warranted. Other commenters believed that the shorter timeframes were 

necessary in order to give beneficiaries results in a reasonable period of time in response 

to a complaint. 

Some commenters supported the efforts to shorten the timeframes associated with 

completing quality of care reviews, but believed that the 10-day timeframe was 
CMS-1589-FC 1086 

insufficient because navigating a hospital’s complex medical records system is 

time-consuming. Moreover, some commenters expressed concerns that the shorter 

timeframes would disrupt the providers’ and practitioners’ daily work in order to comply 

with the decreased timeframe and will ultimately lead to additional costs, including for 

providers and/or practitioners using vendors. Other commenters noted that a 10-day 

timeframe could not be met until providers and practitioners have established electronic 

health record systems that would easily facilitate the collection of medical information 

and that the current 21-day and 30-day timeframes should be maintained. Many of these 

commenters noted that a significant number of providers and practitioners either still rely 

entirely on paper records or are in a hybrid state with some paper records and some 

electronic records. Several commenters suggested that the 3-year “look back” period for 

complaints affected the ability to comply with this requirement because the providers and 

practitioners may have to retrieve medical information from offsite facilities. Other 

commenters noted that providers and practitioners receive numerous requests for medical 

information from various entities and that frequently the timeframes for responding are 

different for each entity, and these issues impact the ability of providers and practitioners 

to respond in a timely fashion. Several commenters also questioned whether the shorter 

timeframes will have any material benefit for beneficiaries that have submitted 

complaints. One commenter noted that, for one QIO, approximately 75 percent of 

providers are already complying with the 10-day timeframe, and that the other 25 percent 

are taking up to 25 days to respond, with the non-hospital providers and practitioners 

taking the longest to respond. 
CMS-1589-FC 1087 

In addition, many commenters supported a similar shortening of the timeframes 

for replying to requests for medical information in response to other review activities. 

However, several commenters believed that the 21-day and 30-day timeframes should be 

maintained for other review activities for the same reasons they supported maintaining 

the current timeframes associated with completing quality of care reviews. 

Response: In determining the precise number of days for responding to requests 

for medical information, we must consider the impact on the QIOs’ ability to make 

timely decisions, the beneficiaries’ right to have complaints or other review activities 

decided in a timely fashion, as well as the burden on practitioners and providers in 

responding to medical record requests. While we recognize that the shorter timeframes 

could cause concerns for some practitioners and providers, particularly nonhospital 

providers, we also considered the additional flexibilities we have proposed regarding the 

ability to securely transmit electronic versions of medical information. 

In light of the concerns raised, we are modifying the proposed regulations to 

require that medical information be obtained within 14 calendar days when requested in 

response to a quality of care review. In addition, we are adopting this same 14 calendar 

day timeframe for all QIO review activities. We believe that having a single timeframe 

will facilitate provider’s and practitioner’s response times. This same timeframe will be 

applicable whether the provider or practitioner is forwarding paper copies of medical 

records or electronic versions. We believe that the ability to timely comply with these 

requests will be further enhanced by additional infrastructure changes we are working 

towards implementing in the near future, including electronic facsimile capabilities and 
CMS-1589-FC 1088 

secure file-sharing capabilities. We will continue evaluating additional changes to this 

timeframe as providers and practitioners increasingly move towards electronic health 

records. However, we are finalizing the proposed regulatory language that gives QIOs 

authority to request medical information in less time if circumstances warrant the earlier 

receipt. 

Comment: Several commenters supported the proposed decrease in timeframes 

for completing various steps of the review process, and several commenters commended 

CMS for streamlining the process. Some commenters noted that the prior lengthy 

timeframes were not patient-centered and have historically been a point of beneficiary 

dissatisfaction. Other commenters believed that the reduced timeframes were necessary 

so that providers and practitioners obtain results more quickly, and this is particularly 

helpful where the concerns are unfounded. 

However, numerous commenters expressed concerns regarding the decreased 

timeframes. In particular, commenters raised concerns regarding the ability to meet the 

7-day timeframe for completing the interim initial determinations and that, in order to do 

so, the more aggressive process improvements for expedited appeals would need to be 

adopted. Some commenters alleged that CMS is attempting to make the beneficiary 

complaint process similar to the expedited appeals process, and that this is not 

appropriate because these are not payment determinations in need of rapid resolution. 

Some commenters mentioned that the need of a QIO to complete a Quality Review 

Decision form for each concern and need to identify evidence-based standards of care 
CMS-1589-FC 1089 

will impact the ability of QIOs to meet the reduced timeframes for making the interim 

initial determination. 

Some commenters also noted that the 72-hour timeframe for rendering the final 

initial determination and the 72-hour timeframe for rendering the reconsideration 

decision are too short in consideration of the scope of the review necessary and need to 

thoroughly evaluate the medical information. Other commenters also believed that the 

requirement that reconsideration requests be submitted by noon the day after the 

notification of the final initial determination is too short because the beneficiary and the 

providers and/or practitioners need adequate time to consider the essence of the QIO’s 

decision. Moreover, the commenters stated that the fact that the interim and final initial 

determinations are conveyed orally could impact the ability to fully evaluate whether a 

reconsideration request should be filed and may even violate confidentiality and privacy 

rights of the individual. Some commenters alleged that the provider, practitioner, or 

beneficiary could question the identity of the caller. Still other commenters noted that it 

is critical not to rush the QIOs’ investigations of these issues, particularly because, when 

final, the determinations could be used by plaintiffs’ attorneys to pursue additional 

actions against providers and practitioners. Another commenter noted that shortening the 

timeframes too extensively could have unintentional negative consequences resulting in 

the value of the review process being compromised for the beneficiaries who would 

prefer that their concerns are properly addressed. One commenter noted that there are 

already shorter processing timeframes currently in place through the concurrent review 

process and, thus, it is not clear why there is a need for decreased timeframes when 
CMS-1589-FC 1090 

responding to retrospective reviews. Another commenter expressed concern regarding 

the sequence of the reconsideration right, for example, should the review of a 

beneficiary’s reconsideration request occur before or after the practitioner’s or provider’s 

request, and believed that a beneficiary could be upset should a concern be confirmed at 

the conclusion of the final initial determination only to have it overturned as a result of a 

practitioner’s or provider’s reconsideration request. Other commenters believed that the 

shorter timeframes would increase costs, including the compensation costs for physician 

reviewers. Several commenters noted that the new Chapter 5 instructions already include 

shorter timeframes for completing various steps of the review process and that these 

timeframes should be maintained until medical information can be received electronically 

from providers and practitioners and also conveyed electronically to peer reviewers. 

Some commenters questioned why a beneficiary’s right to request a reconsideration 

cannot be implemented sooner than August 2014. 

Response: In considering the reduced timeframes for various steps, we attempted 

to identify timeframes that would balance the interests of beneficiaries, providers, and 

practitioners in obtaining timely resolution of complaints with the time necessary for the 

QIOs to effectively and thoroughly complete the various tasks involved in the review 

process. We have routinely heard from beneficiaries that the time necessary to complete 

reviews is a point of dissatisfaction, and clearly a process that requires more than 150 

days to complete a review can be frustrating to all involved. Moreover, we disagree with 

the suggestion that our goal is to make the beneficiary complaint review process similar 

to the expedited appeals process. Because the expedited appeal decisions are typically 
CMS-1589-FC 1091 

made within 24 to 48 hours of the filing of the appeal, the expedited appeal process is 

quite different from the proposed complaint process, which allows 7 days to make the 

interim initial determination, offers providers and practitioners the opportunity to discuss 

the results, and then permits several more days before the final initial determination is 

made. 

We are concerned by the statement of the commenter who noted the need to 

create a Quality Review Decision form for each concern identified during the review. 

That is inaccurate. Only one Quality Review Decision form needs to be created to track 

the QIO’s review of a beneficiary complaint or completion of a general quality of care 

review. Moreover, with regard to the comment that these shorter timeframes appear 

unnecessary in light of the already existing authority to conduct concurrent beneficiary 

complaint reviews, we advised in the proposed rule that the retrospective and concurrent 

distinction in reviews would no longer be used. Our goal is to move away from having a 

distinction in processing requirements that is determined by the beneficiary’s inpatient 

(concurrent) or discharge (retrospective) status and instead consider the severity of the 

issues in order to determine how quickly to process the complaints. We have already 

addressed that QIOs have the authority to request medical information within shorter 

periods of time if circumstances warranted. Moreover, the timeframes for completing the 

interim initial determination and final initial determination convey that the QIO must 

complete its review “within” the prescribed period of time. We believe that our 

timeframe should be sufficient, even for complaints that are unexpectedly complex, and 

that QIOs have the flexibility to use the full time allotted for the interim and final initial 
CMS-1589-FC 1092 

determinations or to complete these steps in less time if circumstances warrant it, such as 

when circumstances surrounding the complaint have a severe impact on the quality of 

care received. 

With regard to the sequence, all parties will be offered the right to request a 

reconsideration at the same time, and each party must understand that the review will be 

an independent review that could result in the final initial determination being 

overturned. In addition, while it is accurate that the new Chapter 5 manual instructions 

contain processing timeframes that are shorter than those historically used, we undertook 

the task of writing these new regulatory provisions because we believed that additional 

improvements, including the potential incorporation of even shorter timeframes, could be 

made and that any additional and more comprehensive timeframes should be 

accomplished through notice-and-comment rulemaking. 

However, we recognize that some of the timeframes are considerably more 

aggressive than those followed by the QIOs as recently as 6 months ago. After 

considering the public comments we received, we have decided to extend the timeframe 

for the QIO to make the interim initial determination from 7 calendar days to 10 calendar 

days. Although we do not agree that QIOs will be unable to meet the proposed 7-day 

timeframe based on the need to identify evidence-based standards of care because QIOs 

have always been responsible for identifying standards of care and will have a readily 

available repository of up-to-date standards of care for most concerns, we nonetheless 

choose to extend the timeframe to 10 days based on the concerns that peer reviewers be 
CMS-1589-FC 1093 

given adequate time to review the medical information, particularly if the medical 

information is somewhat voluminous. 

In addition, in this final rule with comment period, we have modified the 

timeframe for making the final initial determination from 72 hours to 3 business days. 

We also have extended the timeframe for filing reconsideration requests from noon the 

calendar day following the initial notification to 3 calendar days. In addition, to ensure 

that all parties can properly evaluate the need to file a reconsideration request, we have 

modified the regulatory requirements to require that QIOs issue the final initial 

determination in writing. Lastly, we have extended the timeframe for QIOs to render the 

reconsideration decision from 72 hours to 5 calendar days. Although it was suggested 

that the right to request reconsiderations could be implemented sooner than August 2014, 

we continue to believe that this period of time is necessary to ensure all process and 

system requirements can be effectively implemented. This includes ensuring that 

beneficiaries, providers, and practitioners are aware of this new right. 

Comment: Several commenters believed that the reduction of time for 

completing the opportunity for discussion could impact the accuracy and thoroughness of 

the review process and that because the results of the interim initial determination and 

right to an opportunity for discussion are initially conveyed orally, this will require a 

physician with quality improvement experience to ensure that the issues are accurately 

conveyed to the practitioner or provider and to ensure that any response from the 

practitioner is correctly transcribed. Several commenters believed that it would be better 

for the response to be in writing in all circumstances. Other commenters believed that the 
CMS-1589-FC 1094 

timeframe for completing the opportunity should be extended to 10 days with exceptions 

built in for certain events. One commenter noted that more time was necessary because it 

is hard to reach practitioners and/or providers and leaving messages is not appropriate. 

The commenter believed that this timeframe is even more problematic where multiple 

practitioners and/or providers are involved in a single complaint and that should the 

practitioners and providers be reached on different days, the QIOs would be forced to 

separately track the response time period applicable to each practitioner and/or provider. 

Several commenters suggested that practitioners and providers be allowed to 

submit new or additional medical information during the opportunity for discussion. 

Some commenters suggested that refusing to allow the submission of additional medical 

information is grossly unfair if the amount of time provided for submitting medical 

information is reduced. Moreover, commenters noted that providers and practitioners 

could find additional medical documentation in researching the results of the interim 

initial determination. Other commenters believed that not allowing the submission of 

additional evidence during the opportunity for discussion would result in the unnecessary 

filing of additional reconsideration requests. In addition, commenters noted that, 

frequently, when a physician or provider receives a call regarding the opportunity to 

discuss the QIOs findings, this is the first time the provider and/or practitioner learns that 

a complaint has been filed. Thus, the commenters added, the discussion can be helpful to 

explain the content of the discussion, particularly because the content of the medical 

information may not be readily available. 
CMS-1589-FC 1095 

Response: While we recognize that any shortening of timeframes creates 

concerns, our objective is to identify a period of time that ensures beneficiaries obtain 

resolution of complaints in a timely fashion, while also giving a practitioner or provider 

an adequate period of time to discuss the QIO’s initial findings. In considering the 

comments, we noted that, while some concerns were related to the ability to reach the 

physician and/or provider, the primary concerns related to the impact on the QIO’s initial 

decision and request for medical information and not the discussion itself. In fact, QIOs 

have noted that, rather than focus being given to the discussion of a QIO’s findings, the 

“discussion” instead frequently becomes an additional period of time during which the 

provider or practitioner attempts to convey additional medical information that was not 

provided when the request was first made. In shortening the timeframe and restricting 

the submission of additional medical information, we intend that more focus be given to 

the discussion with emphasis on improving the quality of care provided. Moreover, 

many QIOs already conduct the opportunity for discussion based solely on oral 

communications with the providers and/or practitioners, and we see no need to restrict the 

process to written exchanges of information in light of the QIOs’ historical experience in 

effectively completing the discussions orally. At the time of the discussion, the QIO has 

made its interim initial determination, with the specific problematic care and pertinent 

standard of care being identified. Thus, the discussions can be narrowly focused to the 

QIO’s findings. As such, in considering the public comments provided regarding the 

opportunity for discussion, we have determined that the 7-day time period is an 

appropriate period of time to complete this step. However, we recognized that the offer 
CMS-1589-FC 1096 

of the opportunity to discuss the QIO’s interim initial determination findings can be the 

first time the provider and/or practitioner is made aware that a complaint has been filed. 

Therefore, we have modified the regulations at § 476.130(b) to add new language at 

paragraph (2) that when requesting medical information in response to a complaint, the 

QIO must advise that the information is being requested as the result of a complaint and 

convey to the provider and/or practitioner that they will be given the right to discuss the 

QIO’s interim initial determination. The QIO also must request, at that time, a contact 

name to ensure the opportunity for discussion can be completed in a timely fashion. 

We are not persuaded that an opportunity to submit additional medical 

information is necessary as part of the opportunity for a discussion. While we appreciate 

the fact that the ability to submit additional medical information could facilitate the 

resolution of concerns and avoid the submission of reconsideration requests, we believe 

that there is sufficient time to ensure QIOs receive the correct medical information to 

resolve the complaint correctly the first time such that the discussion does not routinely 

result in the QIO learning that its review was completed without all the medical 

information. Making providers and practitioners aware that the initial request for medical 

information is the result of a beneficiary complaint will facilitate the QIOs’ receipt of 

thorough and complete medical information. This will also ensure that the discussions 

are focused more on ways to improve the quality of care rather than the continued pursuit 

of obtaining all pertinent medical records. 

After consideration of the public comments we received, we are adopting our 

proposals regarding the beneficiary complaint review process, except for those 
CMS-1589-FC 1097 

modifications to the proposed timeframes related to the issuance of the interim initial 

determination, the issuance of the final initial determination, the time period provided for 

requesting a reconsideration, the time given to QIOs for issuing the reconsideration 

decision, the new notification requirement for medical information requests in response 

to beneficiary complaints, and the change requiring that written notice of the final initial 

determination be forwarded in all situations. 

2. Completion of General Quality of Care Reviews 

As we noted in the proposed rule, although the QIO’s responsibility for 

completing quality of care reviews is already set forth in the QIO program regulations at 

existing § 476.71(a)(2), the procedures that QIOs use in completing these reviews are not. 

As we previously noted, many process improvements were incorporated into the new 

manual instructions mentioned previously (Transmittal 17, April 6, 2012, CMS Manual 

System, Pub. 100-10 Medicare Quality Improvement Organizations, Chapter 5, Quality 

of Care Review) (available at http://www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/Downloads/R17QIO.pdf). These new instructions were 

effective May 7, 2012. However, we believe that it was also necessary to propose these 

regulations to attain additional improvements and to ensure transparency of the QIO 

program operations. 

First, in the CY 2013 OPPS/ASC proposed rule (77 FR 45202), under new 

§ 476.160(a)(1), we proposed to specify those circumstances in which a QIO may 

conduct a general quality of care review. These circumstances would include those 

situations where a potential quality of care issue is referred to the QIO by another source, 
CMS-1589-FC 1098 

such as by another CMS contractor, an individual submitting a request anonymously, or 

another Federal or State entity. In addition, we recognize that more frequently the QIOs 

are working to use the substantial data available to them to identify potential areas where 

improvements in the quality of health care could be attained, and we believe these 

instances should be accounted for as we move forward. We also are aware that QIOs 

frequently identify potential quality of care issues when conducting other case review 

activities, including medical necessity reviews, expedited discharge appeals, among 

others; therefore, we have included this as an instance where a general quality of care 

review can be initiated.

Under proposed new § 476.160(a)(2), we proposed to specify that the QIO’s 

review will focus on all concerns raised by the source of a referral or report and/or 

identified by the QIO. While the episode of care should still be considered, it may be less 

significant for these reviews than those in response to a complaint submitted by a 

beneficiary, because the main goal of complaint reviews is to address a beneficiary’s 

particular experiences with receiving certain services at a particular time. However, we 

again proposed under proposed § 476.160(a)(3) that the QIO will use evidence-based 

standards of care to the maximum extent practicable in completing these reviews, and 

that the QIO’s determination regarding the standard used in completing the review is not 

subject to appeal. 

Under proposed new § 476.160(b), we proposed to specify the responsibility of 

providers and practitioners to supply requested medical information. This language is 

identical to the language in proposed new § 476.130(b) applicable to written beneficiary 
CMS-1589-FC 1099 

complaints, including the proposed 10-calendar day timeframe for practitioners and 

providers to respond to requests for medical information and the QIO’s right to request 

even earlier receipt when the QIO preliminarily determines that a concern may be serious 

enough to qualify as a gross and flagrant or substantial quality of care concern. Although 

the decreased timeframe is not related to the goal of providing beneficiaries with more 

timely resolution of their complaints (because beneficiaries will not be getting results of 

these reviews), we still believe there is ample justification to warrant the reduced 

timeframe. Providers and practitioners will benefit from the faster resolution of these 

reviews and the increased focus on identifying and resolving impediments to improved 

health care (particularly in cases involving potential serious concerns). These 

improvements will ultimately benefit patients. Additionally, as with written beneficiary 

complaints, the timeframes are comparable to models typically used by vendors. We also 

considered that, as with written beneficiary complaints, the QIOs currently use shorter 

timeframes where the beneficiaries impacted by the general quality of care review are 

still receiving care (concurrent review), compared to those situations where a beneficiary 

has already been discharged (retrospective review). Again, while we did not propose the 

continued use of the concurrent and retrospective designations, we recognize that there 

are circumstances, even with general quality of care reviews, where even shorter 

timeframes may be warranted. 

As mentioned previously, in the FY 2013 IPPS/LTCH PPS final rule 

(77 FR 53664 through 53665), we finalized proposed changes to § 476.78 to add 

references to “practitioners” in parts of this section, which previously referred only to 
CMS-1589-FC 1100 

“providers,” in order to equalize the 30-day and 21-day timeframes for submitting 

records. We also made changes to § 476.90 to equalize the ramifications for not 

submitting records on time because we see no reason to differentiate between a 

provider’s and a practitioner’s records. While these changes in the FY 2013 IPPS/LTCH 

PPS final rule had not been finalized when we issued the CY 2013 OPPS/ASC proposed 

rule, in the CY 2013 OPPS/ASC proposed rule, we proposed to modify the current 

general 30-day and 21-day timeframes in § 476.78(b) to reflect the new timeframes in 

§§ 476.130(b) and 476.160(b), which apply only to records submitted for purposes of 

beneficiary complaint and general quality reviews. We also requested public comment 

on whether changes similar to those we proposed for beneficiary complaints and general 

quality of care reviews, including shortening of the 30-day and 21-day timeframes, 

should be incorporated more broadly into § 476.78(b) for requests for medical 

information in general, for any kind of QIO reviews, including nonquality-related 

reviews. We proposed to apply a shorter timeframe for all of a QIO’s requests for 

records, without limiting this application to beneficiary complaints or general quality 

reviews in just one instance; where secure transmissions of electronic versions of medical 

information are available, we proposed a shorter timeframe. Our proposal regarding 

secure transmissions of electronic versions of medical information is discussed more 

fully later in this section. 

We also proposed new § 476.160(c), which would specify that the QIO peer 

reviewer will render the initial determination within 7 calendar days of the receipt of all 

medical information; this paragraph is substantially different from the proposed 
CMS-1589-FC 1101 

beneficiary complaint review procedures in proposed new § 476.130 in two areas. First, 

beneficiaries would not be provided any information regarding these reviews. Although 

we recognize that, at times, potential quality concerns a QIO identifies could impact a 

specific beneficiary, we believe that this type of review does not warrant any 

communication directly to the beneficiary. In fact, we believe that giving feedback of 

potentially poor care to an unknowing beneficiary could cause more anxiety than is 

warranted by the circumstances, and that is not our goal. We also recognize that, in many 

situations, the reviews could relate to or involve numerous beneficiaries. However, those 

beneficiaries may only be a sample of the beneficiaries potentially impacted. This is 

particularly true in those circumstances where the QIO is reviewing system-related 

aspects of care, and it will be incumbent upon the QIO to determine what medical 

information--and by extension the sample of beneficiaries receiving care--to be analyzed 

in completing these reviews. 

Second, we proposed that practitioners and providers not be given an opportunity 

to discuss the QIO’s initial determination before it becomes final. We believe that giving 

such an opportunity is not necessary, particularly because these discussions frequently 

become, in effect, an entirely new review by the QIO and not merely a discussion, and 

because we already proposed at proposed new § 476.170(a) that the practitioner and/or 

provider be given the right to request a reconsideration of the QIO’s initial determination. 

As with beneficiary complaint reviews, we proposed that this right not be available until 

after July 31, 2014, to give us time to fully establish the process requirements and ensure 
CMS-1589-FC 1102 

that this right is meaningful for providers and practitioners, although they continue to 

have the right to request a re-review. 

In addition, under proposed new § 476.170(a)(1) through (a)(3), we proposed 

requirements similar to those in § 476.140 regarding the timeframe for submitting a 

request for a reconsideration (by noon of the calendar day following initial notification), 

the obligation of a practitioner and/or provider to be available to answer questions or 

supply information, as well as the QIO’s obligation to offer the provider the opportunity 

to provide information as part of the reconsideration request. We also proposed 

provisions under proposed new § 476.170(b) concerning the QIO’s issuance of its final 

decision. This includes the requirement that the QIO’s decision be issued within 72 

hours after receipt of the request for a reconsideration, or, if later, 72 hours after receiving 

any medical information or other records needed for such a reconsideration, the specific 

content of the final decision, and the right of the QIO to provide information to the 

provider or practitioner regarding opportunities for improving care given to beneficiaries 

based on the specific findings of its review. The information QIOs provide regarding 

potential improvements could include specific opportunities related to the practitioner’s 

or provider’s delivery of care and/or even broader improvements focusing on the 

community served by the practitioners and/or providers. 

Comment: Commenters conveyed the same concerns regarding several aspects of 

general quality of care reviews as were raised with beneficiary complaint reviews, 

including the authority to establish the standards of care and lack of an appeal mechanism 

for these standards, shorter timeframes for medical information requests, decreased 
CMS-1589-FC 1103 

timeframes for various steps, including the timeframe for rendering the initial 

determination, the time given to submit reconsideration requests, and the timeframe given 

to QIOs to render reconsideration decisions. 

Response: For the same reasons we discussed regarding beneficiary complaint 

reviews, we are not making any changes to the proposed regulations regarding the QIOs’ 

authority to establish standards of care, but we are modifying several key timeframes as 

discussed below. As previously mentioned, we are extending the time period for 

responding to medical record requests from 10 calendar days to 14 calendar days for all 

review types, including general quality of care reviews. We are extending the period of 

time given to the QIO peer reviewer in rendering the initial determination from 7 

calendar days to 10 calendar days, and we believe this additional time is warranted to 

ensure the peer reviewer has adequate time to render a thorough decision. In addition, as 

with reconsideration requests submitted in response to beneficiary complaints, we are 

increasing the time to file a reconsideration request from noon of the calendar day 

following the initial notification to 3 calendar days. We also are increasing the time 

given to a QIO to complete the reconsideration decision from 72 hours to 5 calendar 

days. Moreover, we are modifying § 476.160(c) to make clear that the initial 

determination must be issued in writing and also are adding a corresponding change to 

§ 476.170(a) denoting that a reconsideration request be received within 3 calendar days 

of the receipt of the written determination. 

Comment: Some commenters expressed support for the QIOs’ authority to 

pursue quality of care concerns when a beneficiary decides not to file a complaint. 
CMS-1589-FC 1104 

However, some commenters noted that using the “imminent danger” criterion embedded 

within the definition of “gross and flagrant” violations was too limiting and QIOs should 

have more authority to pursue these issues. One commenter questioned why CMS was 

creating this “new authority” – and a second oversight body - when States already have 

oversight over hospital quality. This commenter also suggested that the QIOs’ efforts are 

duplicative and thus the overlap of State efforts is problematic. 

Response: We appreciate the commenters’ support and agree that having QIOs 

pursue certain quality of care issues, even when a beneficiary chooses not to file a 

complaint, can be helpful in identifying improvements to the quality of care. However, 

we believe that some limits should be placed on the type or severity of concerns that 

QIOs should pursue in order to maximize the use of QIO resources. Thus, we are 

maintaining the limit on the QIOs’ authority to pursue these as conveyed in the proposed 

regulation. 

With regard to the concern that we are creating a “new authority,” this is 

inaccurate. QIOs have actually had and used this authority for more than 30 years, 

although this is the first time the process requirements have been detailed in regulations. 

We are obligated to ensure the effective implementation of the QIO program in light of 

the statutory authority granted the QIOs, regardless of whether certain State programs 

have been established to address similar issues. 

Comment: Several commenters expressed concern regarding the proposed 

removal of the right to request an opportunity for discussion. The commenters expressed 

concern that the QIO could make decisions on these concerns without an opportunity for 
CMS-1589-FC 1105 

a counter argument from the involved practitioner and/or provider. Several commenters 

suggested that the change would merely result in the receipt of more reconsideration 

requests being filed based on initial determinations being made without input from the 

involved practitioner and/or provider or the ability to obtain additional medical 

information. Other commenters suggested that providers and practitioners should have 

the same rights to due process here as with beneficiary complaint reviews and that the 

discussion can often clarify the concerns so that the provider or practitioner is better able 

to respond. Some commenters suggested that the opportunity for discussion was 

necessary because, in comparison to beneficiary complaints, these concerns are often the 

most serious cases because they include issues identified by the QIO through evaluation 

of other QIO review activities or from referrals from other agencies. 

Response: Although we appreciate the concerns raised regarding the removal of 

this step, we believe that it is not necessary for purposes of general quality of care 

reviews because, as many commenters acknowledged, the discussion has become little 

more than an opportunity to convey additional medical information to the QIO with no 

actual discussion occurring about ways to improve the quality of care. We believe that 

there are modifications that can be made to the manner in which medical information is 

initially requested by the QIO to ensure that all medical information is obtained prior to 

the QIO’s review, and we will work to ensure that these modifications are incorporated 

into the QIO’s processing requirements. This will then eliminate what many commenters 

suggested was the primary purpose of the opportunity for discussion. 
CMS-1589-FC 1106 

Moreover, there is a statutory distinction between situations in which discussions 

have been specifically required and those in which they are not. In those circumstances 

where Congress believed that such an opportunity to discuss a particular type of issue 

was warranted, the right was specifically added to the statute, as in section 

1154(a)(3)(B)(ii) of the Act regarding those situations where an item or service furnished 

or to be furnished is disapproved and section 1154(a)(14) of the Act regarding written 

beneficiary complaints. 

In terms of the commenters’ other concerns—that providers and practitioners will 

not have an opportunity to make counter arguments, that decisions would be made 

without input from the involved practitioners or providers, that providers and 

practitioners will not have the same rights to due process as in beneficiary complaint 

reviews, and that providers’ and practitioners’ concerns in general quality reviews often 

involve the most serious cases--we would note that these parties continue to have the 

opportunity to make counter arguments and give input on the QIO’s decisions by 

requesting a re-review until the reconsideration right becomes available. A provider’s or 

practitioner’s right to request a re-review is, in fact, a due process right that beneficiaries 

are not given. Providers and practitioners also will have an opportunity to present their 

point of view in the context of a reconsideration when that right is implemented, and 

beneficiaries will be afforded the same right. 

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

our proposals regarding general quality of care reviews, except that we have extended the 

timeframes for submitting medical records to 14 calendar days, rendering the initial 
CMS-1589-FC 1107 

determination to 10 calendar days, filing a reconsideration request to 3 calendar days, and 

issuing the reconsideration decision to 5 calendar days. 

C. Use of Confidential Information That Explicitly or Implicitly Identifies Patients

The QIO regulations at § 480.101(b) define any information that explicitly or 

implicitly identifies an individual patient as confidential information. Although 

provisions are included in 42 CFR Part 480 governing a practitioner’s and/or provider’s 

right to allow a QIO to use or disclose confidential information about the named 

practitioner or provider (§§ 480.105(b), 480.133(a)(2)(iii), and 480.140(d)), a similar 

right is not conveyed for beneficiaries. Thus, QIOs are prohibited from obtaining a 

beneficiary’s authorization to use or disclose the beneficiary’s confidential information, 

even in situations where a use or disclosure could be helpful to the beneficiary and his or 

her health care or even where the beneficiary specifically asks the QIO to disclose the 

information. 

One of the key challenges for the QIOs is identifying improvements in health care 

delivery systems. In fact, the “patient-centeredness” aim of the QIO’s current scope of 

work requires more patient involvement, and the goal of many patient and family 

engagement efforts is to incorporate a “real-world person’s” experiences to demonstrate 

the compelling and urgent need for healthcare delivery reform. Additionally, 

beneficiaries have asked to participate in the QIO’s work in a meaningful way. 

Unfortunately, we are often unable to accommodate these requests in light of the current 

regulatory restriction. We believe that this restriction, which was developed may years 
CMS-1589-FC 1108 

ago, is outdated, and that beneficiaries should be given the right to make choices 

regarding the use and disclosure of their confidential information. 

Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45204), we proposed 

new § 480.145 that will govern a beneficiary’s right to authorize a QIO’s use or 

disclosure of the beneficiary’s confidential information. Under proposed § 480.145(a), 

we proposed that, except as otherwise authorized by the QIO confidentiality regulations, 

a QIO may not use or disclose a beneficiary’s confidential information without an 

authorization from the beneficiary and that the QIO’s use or disclosure must be consistent 

with the authorization. Under proposed § 480.145(b)(1) through (b)(6), we listed those 

aspects of an authorization necessary to make the authorization valid. This includes the 

requirements that a specific and meaningful description of the confidential information be 

included, and that the authorization also include the name(s) of the QIO(s) and QIO 

point(s) of contact making the request to use or disclose the information, the name or 

other specific identification of the person, or class of persons to whom the QIO may 

allow the requested use or make the requested disclosure, a description of the purpose(s) 

of the use or disclosure, the date or event upon which the authorization will expire, and 

the signature and date of the beneficiary authorizing the use and/or disclosure of the 

information. We also proposed under § 480.145(c)(1) and (c)(2) that the authorization 

must contain a statement that the beneficiary maintains the right to revoke his or her 

authorization in writing and that the QIO must specify any exceptions to the right to 

revoke, as well as the process a beneficiary must use to revoke the authorization. In 

addition, under § 480.145(c)(3), we proposed the requirement that the QIO convey to the 
CMS-1589-FC 1109 

beneficiary its inability to condition the review or other activities it is responsible for 

(such as beneficiary complaint reviews, medical necessity of a beneficiary’s services, or 

discharge appeals) on whether or not the beneficiary provides authorization. We also 

proposed under § 480.145(c)(4) to make clear the consequences of authorizing the use or 

disclosure of information, and the fact that the QIO may be unable to protect the 

information from redisclosure. Under § 480.145(d), we proposed that an authorization 

must be written in plain language, and under § 480.145(e) that a QIO must provide the 

beneficiary with a copy of the signed authorization. Lastly, although we make reference 

to a beneficiary’s right to revoke authorization under proposed § 480.145(c)(1), in 

paragraph (f) we proposed a specific provision that will make clear that a beneficiary may 

revoke, in writing, an authorization at any time, except when the QIO has taken action in 

reliance upon the authorization. 

We believe that these proposed changes appropriately relax some of the historical 

restraints on the QIO’s use of a beneficiary’s confidential information, enable QIOs to 

better meet the needs of Medicare beneficiaries, and give beneficiaries the opportunity to 

participate in efforts to improve the quality of their health care. 

Comment: Several commenters supported this new authority. One commenter 

requested that the regulations should also be changed to allow for the use of video as well 

as social media, while another commenter requested that whatever authorization form 

CMS develops should be in plain, understandable language and as short as possible. 

Response: We appreciate the support for this new regulatory authority. We 

believe that the regulatory provisions as proposed already give the flexibility to use video 
CMS-1589-FC 1110 

and social media. The proposed regulations specify the beneficiary’s right to authorize 

the use of his or her confidential information and the mechanism through which QIO’s 

can obtain this authorization. However, the provisions do not, in any way, restrict the use 

of the confidential information to one specific mechanism, such as print advertisements. 

In terms of the development of an authorization form, at this time we do not intend to 

develop such a form. Each QIO will be responsible for developing an authorization form 

that meets the requirements of the new regulatory provisions. 

After consideration of the public comments we received, we are adopting, without 

modification, our proposals regarding the use of confidential information that implicitly 

or explicitly identifies patients. 

D. Secure Transmissions of Electronic Versions of Medical Information

When the QIO program regulations were first written in 1985, computers, along 

with digitally or electronically stored information, were still in their infancy. Thus, the 

QIO program regulations were written based on the perspective that most information 

sharing would be through the exchange of paper copies of medical records and other 

information. Since that time, we have seen great advances in the ability to electronically 

share data, whether through the use of mass storage devices (flash drives), the sending 

and receipt of electronic facsimiles, and even the use of e-mail. At the same time, several 

laws, including HIPAA and the Federal Information Security and Management Act 

(FISMA), have been established to protect sensitive information. However, because the 

QIO program regulations have not undergone significant modification since they were 

originally adopted, the regulations do not account for electronic sharing of information 
CMS-1589-FC 1111 

and the QIOs’ work is carried out within the context of exchanging paper copies of 

documents and information. At times, this creates additional work and costs because 

those providers and practitioners who have the ability to securely share electronic 

versions of medical records must actually print out the records and pay to have the paper 

copies mailed to the QIOs. 

To address these issues, in the CY 2013 OPPS/ASC proposed rule (77 FR 45204) 

we proposed to revise existing § 476.78(b)(2) to add a new paragraph (iii) to make clear 

the QIOs’ right to exchange secure transmissions of electronic versions of medical 

information, subject to a QIO’s ability to support the exchange of the electronic version. 

We believe that this proposal would enable QIOs to receive and send medical 

information in a variety of formats, including through secure electronic faxes, and would 

reduce costs for providers and practitioners because they would no longer have to print 

and mail paper copies. In addition, to fully take advantage of the ability to receive and 

send electronic versions of medical information, we believe that a reduced timeframe is 

warranted for those instances where electronic versions are to be forwarded in response 

to requests from a QIO. Therefore, we proposed under proposed § 476.78 (b)(2)(iii) to 

require providers and practitioners to deliver electronic versions of medical information 

within 10 calendar days of the request from the QIO. As we noted previously, changes to 

existing § 476.78(b) have already been adopted in the FY 2013 IPPS/LTCH PPS final 

rule (77 FR 53664 through 53665). As discussed earlier in this preamble, we proposed in 

the CY 2013 OPPS/ASC proposed rule additional changes to § 476.78 to take into 

account the different, more expedited timeframes we proposed for medical records 
CMS-1589-FC 1112 

related to beneficiary complaint and general quality of care reviews. In the CY 2013 

OPPS/ASC proposed rule (77 FR 45204), we also requested public comments on whether 

additional changes should be made to § 476.78(b) to expand the different timeframes to 

cover medical records for all kinds of reviews. We also requested public comments on 

whether any modifications should be made to the reimbursement methodologies for paper 

copies described in § 476.78(c). We note that we carried forth in the proposed rule the 

proposed change to the section heading for § 476.78 that was included in the FY 2013 

IPPS/LTCH PPS proposed rule, that is, the proposed change from “Responsibilities of 

health care facilities” to “Responsibilities of providers and practitioners” (which has now 

been finalized). 

Comment: Several commenters supported the proposed regulation that would 

enable QIOs to securely transmit electronic versions of medical information. Some 

commenters noted that the ability to transmit information electronically is a long overdue 

process change and the QIOs have been “severely hampered” by not being allowed to 

incorporate more electronic exchanges of information into their activities. These 

commenters also urged CMS to consider how QIOs can more effectively accept 

electronic records. Other commenters, while supportive of the proposal to allow QIOs to 

securely transmit electronic versions of medical information, cautioned CMS that QIOs 

will need instructions, equipment and electronic exchange infrastructure to be in place 

before these changes are implemented. Some commenters noted that ensuring remote 

access to CMS information systems for QIO staff and access to medical information is 

necessary to achieve the full benefits of this proposed regulation because peer reviewers 
CMS-1589-FC 1113 

frequently are not located onsite at the QIOs’ place of business. Some commenters noted 

that the ability to securely transmit electronic versions of information is particularly 

significant in light of the proposed tighter timeframes for completing review activities, 

while other commenters expressed concerns surrounding the ability to correctly track the 

differences in timeframes for responding to different types of requests. In addition, some 

commenters suggested that the proposed provision could help reduce costs related to the 

shipping of paper copies of medical information from providers and practitioners to the 

QIO, as well as from the QIOs to their physician reviewers and then back to the QIOs. 

Response: We appreciate the commenters’ support and agree that instructions, 

equipment, and electronic exchange infrastructure must be put in place in order to take 

full advantage of this new flexibility. We are currently initiating efforts to allow QIOs to 

receive electronic versions of medical information in multiple ways, as well as exchange 

these electronic versions with staff, including peer reviewers, remotely. We agree that 

this new flexibility can only facilitate providers’ and practitioners’ ability to comply with 

requests for medical information and also anticipate that the opportunity to use electronic 

exchanges will enable QIOs to complete their activities more quickly at reduced costs 

compared to the use of paper copies of medical records. Moreover, we appreciate that 

providers and practitioners receive a variety of requests for medical records and that these 

requests are not just from QIOs. Thus, tracking the different timeframes can be 

problematic. As we previously noted, we are adopting a uniform 14 calendar day 

timeframe for responding to requests for medical information for all requests, except that 
CMS-1589-FC 1114 

QIOs will maintain the authority to request medical information more quickly if 

circumstances warrant earlier receipt. 

Comment: Some commenters stated that the amounts of reimbursement for 

photocopies do not adequately cover the cost of what it takes to generate the requested 

records and that the methodology for determining reimbursement rates needs to be 

routinely updated to keep pace with inflation. 

Response: We thank the commenters for their input. At this time we are 

continuing to examine ways to possibly accommodate changes in reimbursement rates. 

We plan to consider various factors, such as how the new flexibility to securely transmit 

electronic versions of medical information might affect the payments we will be able to 

make for the submission of paper records. We are not making specific changes at this 

time, but will consider the commenters’ input as we pursue possible changes to these 

regulations in future rulemaking. 

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

final, our proposals regarding secure transmissions of electronic versions of medical 

information, except that we are extending the timeframe for submission of medical 

information to 14 calendar days. 

E. Active Staff Privileges

In our efforts to ensure the QIO program is able to meet the needs of Medicare 

beneficiaries and improve the quality of health care moving forward, we have identified 

an aspect of the QIO program regulations that has become increasingly problematic for 

the QIOs. Under existing § 476.98(a)(1), QIOs are required to use an individual with 
CMS-1589-FC 1115 

“active staff privileges in one or more hospitals” in making initial denial determinations. 

However, there is an accelerating trend toward primary care physicians (family 

physicians/internists) who provide care solely in the outpatient care settings and a 

corresponding decline in the number of family practice physicians who provide any care 

in hospitals. In fact, many of these individuals do not provide any inpatient care and 

either have no hospital privileges or only “courtesy” privileges, which do not meet the 

definition in existing § 476.1 of “active staff privileges.” While we believe that the 

continued use of peer reviewers is necessary and vital to the success of the QIO program, 

the need to use physicians with “active staff privileges” is not. We believe that the 

proposed removal of this requirement would increase the number of peer reviewers 

available for use by the QIOs, which, at times, has become particularly problematic for 

the QIOs. Therefore, in the CY 2013 OPPS/ASC proposed rule (77 FR 45204 through 

45205), we proposed to remove the definition of “active staff privileges” under § 476.1 

and to remove the phrase referring to using individuals “with active staff privileges in one 

or more hospitals in the QIO area” in making initial denial determinations under 

§ 476.98(a)(1). 

Comment: Several commenters opposed the proposal to remove “active staff 

privileges” as a requirement for peer reviewers making an initial denial determination and 

indicated that having active staff privileges is necessary because there is a need to ensure 

peer reviewers are cognizant of “emerging clinical evidence and practices,” particularly 

because clinical practice can change so rapidly. Others commenters noted that CMS 

should at least require active staff privileges in the State where the care was provided, 
CMS-1589-FC 1116 

while some commenters may have misunderstood the terminology and believed that the 

change would enable QIOs to use physicians who are not actively practicing. Some 

commenters also noted that requiring QIOs to use physicians with active staff privileges 

made assessing the care provided by potential reviewers easier because it supplemented 

the information QIOs could glean from State licensure, National Practitioner Data Bank, 

and self-reported information, and that the use of physicians with active staff privileges 

added to the credibility of the QIOs’ peer review activities in the medical community. 

Several commenters supported the removal of this requirement and believed it 

would allow for the inclusion of more specialized physician reviewers, provide more 

flexibility to QIOs in hiring peer reviewers by increasing the pool of eligible reviewers, 

and more closely mirror the current practicing medical environment. In particular, one 

commenter noted that, by removing this language, QIOs would be able to rely more on 

“setting-based” expertise (such as a nursing home or clinic), than is currently allowed by 

the more narrow active staff privilege requirement. Another commenter supported the 

change but not the removal of the phrase “in the QIO area” because of a concern that it 

could be interpreted to mean that a physician from outside the QIO’s review area could 

conduct the review. 

Response: We appreciate the comments and agree that having physicians with 

current, relevant knowledge of medical care is imperative to the operations of the QIOs 

and its cadre of physician reviewers. However, it appears that some commenters 

erroneously equated the removal of the active staff privileges requirement to the QIOs’ 

use of physicians who were not actively practicing medicine. This is inaccurate and 
CMS-1589-FC 1117 

QIOs are obligated to use physicians who are actively practicing. Other commenters 

believed that physicians with active staff privileges would be those with the most current 

and relevant knowledge of medical care that is the subject of the QIO’s review. 

However, we are unaware of any studies or research supporting this claim. In identifying 

physicians for use as reviewers, the QIOs would still be able to procure the services of 

actively practicing physicians with knowledge of the most current, relevant medical care. 

We believe that the removal of the active staff privileges requirement, however, would 

enable QIOs to better match and utilize the expertise of physicians to the actual settings 

in which the care in question is provided. That is because, historically, the requirement to 

use a physician with active staff privileges could prevent the use of a physician who 

practiced in, and was more intimately familiar with, the care provided in a particular 

setting (for example, a nursing home setting) if that physician lacked active staff 

privileges in a hospital. 

While it is possible that the removal of this requirement might result in a QIO 

being obligated to take some additional steps in evaluating the performance or 

effectiveness of a potential peer reviewer, we see no reason why having QIOs assume 

these extra steps should amount to a significant addition to their workload. We regard 

these steps as an essential part of the process a QIO should follow in finding the best 

match, including by specialty and setting, for any particular review activity. Lastly, 

while we appreciate the concern that removal of the language “in the QIO area” could 

cause confusion surrounding the QIO’s obligation to use a physician within the QIO’s 

area, we note that, in fact, this obligation continues to be clearly laid out in provisions of 
CMS-1589-FC 1118 

the statute, including in section 1154(a)(7) of the Act, and in other references within the 

regulations at 42 CFR Part 476. However, in order to minimize any possible confusion, 

we are modifying the proposal to maintain the “in the QIO area” language within 

§ 476.98(a)(1). 

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

our proposal to remove the language regarding active staff privileges, except that we are 

maintaining the language “in the QIO area.” 

F. Technical Corrections

In addition to the proposed changes discussed above, in the CY 2013 OPPS/ASC 

proposed rule (77 FR 45205), we proposed to make the following technical corrections to 

the QIO regulations: 

● In 1989, several sections in 42 CFR Part 405 were redesignated to 

42 CFR Part 411 (54 FR 41746), but the cross-references to these sections in the QIO 

regulations was never made. Therefore, we proposed to make the following reference 

changes: 

+- Changing the reference “§ 405.330(b)” in existing § 476.71(b) to 

“§ 411.400(b)”; 

+- Changing the reference “§ 405.332” in § 476.74 to “§ 411.402”; 

+ Changing the references “§ 405.310(g) or § 405.310(k)” in § 476.86 to 

“§ 411.15(g) or § 411.15(k)”. 
CMS-1589-FC 1119 

● In 1999, 42 CFR Parts 466, 473, and 476 were redesignated as 42 CFR Parts 

476, 478, and 480, respectively (64 FR 66236). Therefore, we proposed to make changes 

to correct several cross-references to sections in these Parts: 

+ Changing the reference “§ 466.73(b)(3)” in § 476.73 to “§ 476.78(b)(3)”. 

+ Changing the reference “part 473” in § 476.78(f) to “part 478”. 

+ Changing the reference “part 473” in § 476.94(c)(3) to “part 478”. 

+ Changing the reference “§ 473.24” in §§ 480.132 and 480.133 to “§ 478.24”. 

+ Changing the reference “§ 466.98” in § 478.28 to “§ 476.98”. 

+ Changing the reference to “Part 478” in §§ 478.15, 478.16, 478.20, 478.38, 

478.42, and 478.48 to “Part 473”. 

+ Changing the reference “§ 473.24” in § 480.132 to “§ 478.24”. 

+ Changing the references “Part 466” and “§ 473.24” in § 480.133(b) to “Part 

476” and “§ 478.24”, respectively. 

● We proposed the deletion of several provisions in Part 476 regarding risk-basis 

contracts because risk-basis contracts previously under section 1876 of the Act no longer 

exist. As such, these provisions are obsolete and no longer used under the QIO program. 

Specifically, we are deleting the following sentence from § 476.70(a): “Section 

1154(a)(4) of the Act requires QIOs, or, in certain circumstances, non-QIO entities, to 

perform quality of care reviews of services furnished under risk-basis contracts by health 

maintenance organizations (HMOs) and competitive medical plans (CMPs) that are 

covered under subpart C of part 417 of this chapter.” We proposed to delete the 

following sentence from § 476.70(b): “Section 466.72 of this part also applies, for 
CMS-1589-FC 1120 

purposes of quality of care review under section 1154(a)(4) of the Act, to non-QIO 

entities that enter into contracts to perform reviews of services furnished under risk basis 

contracts by HMOs and CMPs under subpart C of part 417 of this chapter.” We 

proposed to delete § 476.72 - Review of the quality of care of risk-basis health 

maintenance organizations and competitive medical plans, in its entirety for the same 

reason. 

● In § 476.70(a), we proposed to change the word “basis” to “bases” to match the 

title of this section and to correctly denote that there is more than one statutory basis 

described in paragraph (a). 

● We proposed technical corrections to sections in Part 476 and 480 to accurately 

reflect the transition to Medicare administrative contractors (MACs) to process Medicare 

claims and conduct other actions. This transition is ongoing, and fiscal intermediaries 

and carriers still exist. However, we believe that the presence of MACs should be 

accounted for to accurately reflect current contractual relationships. As such, we 

proposed to incorporate references to “Medicare administrator contractors” in the 

following sections, where appropriate: 

+ § 476.1, in the definition of “Preadmission Certification”; 

+ § 476.71(c)(1); 

+ § 476.73(a); 

+ § 476.74(b) and (c)(1); 

+ § 476.80 section heading, and §§ 476.80(a), (a)(1), (a)(2), (b)(1), (c), (c)(3)(ii), 

(d)(1), (d)(2), (e) paragraph heading, (e)(1), and (e)(2); 
CMS-1589-FC 1121 

+ § 476.86(a)(2), (c) introductory text, (c)(1), and (d); 

+ § 476.94(a)(1)(iv) and (d); 

+ § 476.104(a); and 

+ § 480.105(a). 

● We proposed a technical correction to § 480.139 by adding a paragraph “(a)” in 

front of “(1)” to the beginning of the text of the section to correct a recent inadvertent 

coding error which had removed the “(a)”. 

● We proposed to correct the statutory citation in § 480.132(b) by changing 

“section 1154(a)(3)” to “section 1154(a)(2)”. 

Comment: Commenters agreed with the proposed technical changes. 

Response: We appreciate the commenters’ support. 

After consideration of the public comments we received, we are adopting, without 

modification, our proposals regarding the technical changes.
CMS-1589-FC 1122 

XIX. Files Available to the Public via the Internet 

The Addenda of the proposed rules and the final rules with comment period will 

be published and available only via the Internet on the CMS Web site. To view the 

Addenda of this final rule with comment period pertaining to the CY 2013 payments 

under the OPPS, go to the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-andNotices.html and select “1589-FC” from the list of regulations. All Addenda for this 

final rule with comment period are contained in the zipped folder entitled “2013 OPPS 

1589-FC Addenda” at the bottom of the page. 

To view the Addenda of this final rule with comment period pertaining to the 

CY 2013 payments under the ASC payment system, go to the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/ASC-Regulations-and-Notices.html and select 

“1589-FC” from the list of regulations. All Addenda for this final rule with comment 

period are contained in the zipped folder entitled “Addenda AA, BB, DD1 and DD2”, 

and “Addendum EE” at the bottom of the page. 

XX. Collection of Information Requirements 

A. Legislative Requirements for Solicitation of Comments

Under the Paperwork Reduction Act of 1995, we are required to provide 30-day 

notice in the Federal Register and to solicit public comment before a collection of 

information requirement is submitted to the Office of Management and Budget (OMB) 
CMS-1589-FC 1123 

for review and approval. In order to fairly evaluate whether an information collection 

should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 

1995 requires that we solicit comment on the following issues: 

● The need for the information collection and its usefulness in carrying out the 

proper functions of our agency. 

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

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

● Recommendations to minimize the information collection burden on the 

affected public, including automated collection techniques. 

In the CY 2013 OPPS/ASC proposed rule (77 FR 45206), we solicited public 

comments on each of the issues outlined above as discussed below that contained 

information collection requirements. 

B. Requirements in Regulation Text

1. 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals and 

CAHs (§ 495.8) 

Under the definition of “meaningful EHR user” in 42 CFR 495.4, we require 

eligible hospitals and CAHs participating in the Medicare EHR Incentive Program 

(which would include those participating in the 2013 Medicare EHR Incentive Program 

Electronic Reporting Pilot) to successfully report the hospital clinical quality measures 

(CQMs) selected by CMS to CMS in the form and manner specified by CMS. Although 

eligible hospitals and CAHs may continue to report CQM results as calculated by 

certified EHR technology by attestation for 2013, they also may choose to participate in 
CMS-1589-FC 1124 

the 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Hospitals and 

CAHs. Eligible hospitals and CAHs participating in the 2013 Medicare EHR Incentive 

Program Electronic Reporting Pilot must submit CQM data on all 15 CQMs (listed in 

Table 10 of the Stage 1 final rule (75 FR 44418 through 44420) for the Medicare and 

Medicaid EHR Incentive Program) to CMS, via a secure transmission based on data 

obtained from the eligible hospital or CAH’s certified EHR technology. 

Eligible hospitals and CAHs are required to report on core and menu set criteria 

for Stage 1 of meaningful use. We estimated that it would take an eligible hospital or 

CAH 0.5 hour to submit the required CQM information via the proposed 2013 Medicare 

EHR Incentive Program Electronic Reporting Pilot. Therefore, the estimated total burden 

for all 4,922 Medicare eligible hospitals and CAHs participating in the Pilot (3,620 acute 

care hospitals and 1,302 CAHs) is 2,461 hours. 

We believe that an eligible hospital or CAH might assign a computer and 

information systems manager to submit the CQM information on its behalf. We 

estimated the cost burden for an eligible hospital or CAH to submit the CQMs and 

hospital quality requirements is $30.21 (0.5 hour x $60.41 (mean hourly rate for a 

computer and information systems manager based on the 2011 Bureau of Labor 

Statistics)) and the total estimated annual cost burden for all eligible hospitals and CAHs 

to submit the required CQMs is $148,694 ($30.21 x 4,922 hospitals and CAHs). We 

solicited public comments on the estimated numbers of eligible hospitals and CAHs that 

may register for the Medicare EHR Incentive Program Electronic Reporting Pilot that 

would submit the CQM information via the proposed Electronic Reporting Pilot in 2013. 
CMS-1589-FC 1125 

We also invited comments on the type of personnel or staff that would mostly likely 

submit on behalf of eligible hospitals and CAHs. 

We did not receive any public comments on these information collection 

requirements. Therefore, we are finalizing the proposed burden estimates.

C. Associated Information Collections Not Specified in Regulatory Text

In the CY 2013 OPPS/ASC proposed rule, we made reference to proposed 

associated information collection requirements that are not discussed in the regulation 

text contained in the proposed rule. The following is a discussion of those requirements. 

1. Hospital OQR Program 

As previously stated in section XIV. of the CY 2012 OPPS/ASC final rule with 

comment period, the Hospital OQR Program has been generally modeled after the quality 

data reporting program for the Hospital IQR Program. We refer readers to the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72064 through 72110 and 72111 

through 72114) and the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74549 through 74554) for detailed discussions of the Hospital OQR Program 

information collection requirements we have previously finalized. 

2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014, and CY 2015 

Payment Determinations 

a. Previously Adopted Hospital OQR Program Measures for the CY 2012, CY 2013, and 

CY 2014 Payment Determinations 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766), we 

retained the 7 chart-abstracted measures we used in CY 2009 and adopted 4 new 
CMS-1589-FC 1126 

claims-based imaging measures for the CY 2010 payment determination, bringing the 

total number of quality measures for which hospitals had to submit data to 11 measures. 

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60637), we required 

hospitals to continue to submit data on the same 11 measures for the CY 2011 payment 

determination. The burden associated with the aforementioned data submission 

requirements is currently approved under OCN: 0938-1109. This approval expires on 

October 31, 2013. 

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 through 

72094), we adopted measures for the CY 2012, CY 2013, and CY 2014 payment 

determinations. 

For the CY 2012 payment determination, we retained the 7 chart-abstracted 

measures and the 4 claims-based imaging measures we used for the CY 2011 payment 

determination. We also adopted 1 structural HIT measure that tracks HOPDs’ ability to 

receive laboratory results electronically, and 3 claims-based imaging efficiency measures. 

These actions bring the total number of measures for the CY 2012 payment determination 

for which hospitals must submit data to 15 measures. In the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72112 through 72113), we discussed the burden 

associated with these information collection requirements. 

For the CY 2013 payment determination, we required that hospitals continue to 

submit data for all of the quality measures that we adopted for the CY 2012 payment 

determination. We also adopted 1 structural HIT measure assessing the ability to track 

clinical results between visits, 6 new chart-abstracted measures on the topics of HOPD 
CMS-1589-FC 1127 

care transitions and ED efficiency, as well as 1 chart-abstracted ED-AMI measure that we 

proposed for the CY 2012 payment determination but which we decided to finalize for 

the CY 2013 payment determination. These actions bring the total number of quality 

measures for the CY 2013 payment determination for which hospitals must submit data 

to 23 measures. 

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 through 

72094), for the CY 2014 payment determination, we retained the CY 2013 payment 

determination measures, but did not adopt any additional measures. In the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72112 through 72113), we discussed 

the burden associated with these information collection requirements. 

b. Hospital OQR Program Measures for the CY 2014 Payment Determination 

In the CY 2011 OPPS/ASC final rule with comment period, we did not adopt any 

new measures for the CY 2014 payment determination. In the CY 2012 OPPS/ASC final 

rule with comment period, we added, for the CY 2014 payment determination, 

1 chart-abstracted measure and 2 structural measures (including hospital outpatient 

volume data for selected outpatient surgical procedures). However, as discussed in the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74456), we did not 

implement public reporting of the claims-based OP: 15 Use of Brain Computed 

Tomography (CT) in the ED for Atraumatic Headache. Because this is a claims-based 

measure, hospitals continue to submit relevant claims to be paid, but these administrative 

data and any measure calculations from them are not being made publicly available as 
CMS-1589-FC 1128 

specified for required hospital outpatient hospital quality of care measure data under 

section 1833(t)(17)(E) of the Act. 

In addition, in section XV.C. of the proposed rule, we stated that we were 

confirming that, using a subregulatory process, we have suspended indefinitely data 

collection for one measure, OP-19: Transition Record with Specified Elements Received 

by Discharged Patients, and have deferred data collection for another measure, OP-24: 

Cardiac Rehabilitation Patient Referral From an Outpatient Setting. (We note that, in this 

final rule with comment period, we are confirming the removal of the measure, 

OP-16: Troponin results for Emergency Department acute myocardial infarction (AMI) 

patients or chest pain patients (with probable cardiac chest pain) received within 60 

minutes of arrival, and we will cease data collection in the system for this measure 

effective January 1, 2013.) Thus, for the CY 2014 and subsequent years payment 

determinations, as proposed, we are finalizing in this final rule with comment period a 

total of 25 measures (rather than 26 measures as we indicated in the proposed rule 

(77 FR 45207), with hospitals reporting data on only 22 of them (rather than 23 measures 

as we indicated in the proposed rule (77 FR 45207)). The required measure set for the 

CY 2014 and subsequent years’ payment determinations includes the measures shown 

below; all measures were previously adopted. 

Hospital OQR Program Measures for the CY 2014, CY 2015 and Subsequent Years 

Payment Determinations 

OP-1: Median Time to Fibrinolysis 

OP-2: Fibrinolytic Therapy Received Within 30 Minutes 

OP-3: Median Time to Transfer to Another Facility for Acute Coronary Intervention 

OP-4: Aspirin at Arrival 

OP-5: Median Time to ECG 
CMS-1589-FC 1129 

Hospital OQR Program Measures for the CY 2014, CY 2015 and Subsequent Years 

Payment Determinations 

OP-6: Timing of Antibiotic Prophylaxis 

OP-7: Prophylactic Antibiotic Selection for Surgical Patients 

OP-8: MRI Lumbar Spine for Low Back Pain 

OP-9: Mammography Follow-up Rates 

OP-10: Abdomen CT – Use of Contrast Material 

OP-11: Thorax CT – Use of Contrast Material 

OP-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically 

Directly into their Qualified/Certified EHR System as Discrete Searchable Data 

OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk 

Surgery 

OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed 

Tomography (CT) 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for 

Atraumatic Headache* 

OP-17: Tracking Clinical Results between Visits 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients 

OP-19: Transition Record with Specified Elements Received by discharged ED Patients** 

OP-20: Door to Diagnostic Evaluation by a Qualified Medical Professional 

OP-21: ED- Median Time to Pain Management for Long Bone Fracture 

OP-22: ED Patient Left Without Being Seen 

OP-23: ED- Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic Stroke who 

Received Head CT Scan Interpretation Within 45 minutes of Arrival 

OP-24: Cardiac Rehabilitation Patient Referral from an Outpatient Setting*** 

OP-25: Safety Surgery Checklist 

OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures 

Procedure Category Corresponding HCPCS Codes

Gastrointestinal 

40000 through 49999, G0104, G0105, G0121, C9716, 

C9724, C9725, and 0170T 

Eye 

65000 through 68999, G0186, 0124T, 0099T, 0017T, 

0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 

0191T, 0192T, 76510, and 0099T 

Nervous System 

61000 through 64999, G0260, 0027T, 0213T, 0214T, 

0215T, 0216T, 0217T, 0218T, and 0062T 

Musculoskeletal 

20000 through 29999, 0101T, 0102T, 0062T, 0200T, 

and 0201T 
CMS-1589-FC 1130 

Hospital OQR Program Measures for the CY 2014, CY 2015 and Subsequent Years 

Payment Determinations 

Skin 

10000 through 19999, G0247, 0046T, 0268T, G0127, 

C9726, and C9727 

Genitourinary 50000 through 58999, 0193T, and 58805 

Cardiovascular 33000 through 37999 

Respiratory 30000 through 32999 

*Information for OP-15 will not be reported in Hospital Compare in 2012. Public reporting for this 

measure would occur in July 2013 at the earliest. 

**Data collection for OP-19 was suspended effective with January 1, 2012 encounters until further notice. 

***Data collection for OP-24 is deferred from January 1, 2013 to January 1, 2014, and its first application 

toward a payment determination would be for CY 2015 rather than CY 2014. 

We will calculate the six claims-based measures (rather than seven claims-based 

measures as indicated in the proposed rule (77 FR 45207) using Medicare FFS claims 

data and do not require additional hospital data submissions. With the exception of 

OP-22, we are using the same data submission requirements related to the 

chart-abstracted quality measures that are submitted directly to CMS that we used for the 

CY 2011 and CY 2012 payment determinations. For the four structural measures, 

including the collection of data for all-patient volume for selected outpatient procedures, 

hospitals will enter data into a Web-based collection tool during a specified collection 

period once annually. Under the Hospital OQR Program requirements, hospitals must 

complete and submit a notice of participation form for the Hospital OQR Program if they 

have not already done so or have withdrawn from participation. By submitting this 

document, hospitals agree that they will allow CMS to publicly report the measures for 

which they have submitted data under the Hospital OQR Program. 

For the CY 2014 payment determination, the burden associated with these 

requirements is the time and effort associated with completing the notice of participation 
CMS-1589-FC 1131 

form, and collecting and submitting the data on the required measures. For the 

chart-abstracted measures (including those measures for which data are submitted 

directly to CMS, as well as the OP-22 measure for which data will be submitted via a 

Web-based tool rather than via an electronic file), we estimated that there will be 

approximately 3,200 respondents per year. For hospitals to collect and submit the 

information on the chart-abstracted measures (excluding the chart-abstracted OP-22 

measure), we estimated it will take 35 minutes per sampled case. Based upon the data 

submitted for the CY 2011 and CY 2012 payment determinations, we estimated there will 

be a total of 1,628,800 cases per year, approximately 509 cases per year per respondent. 

The estimated annual burden associated with the submission requirements for these chartabstracted measures is 949,590 hours (1,628,800 cases per year x 0.583 hours per case). 

For the chart-abstracted OP-22 measure plus the 3 structural measures (excluding 

the all-patient volume for selected surgical procedures measure), we estimated that each 

participating hospital will spend 10 minutes per year to collect and submit the required 

data, making the estimated annual burden associated with these measures 2,138 hours 

(3,200 hospitals x 0.167 hours per hospital x 4 measures per hospital). For the proposed 

rule (77 FR 45208), we inadvertently stated the burden to be 1,603 hours because we 

excluded the OP-22 measure in our burden computation. 

For the collection of all-patient volume for selected outpatient surgical procedures 

(OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures), 

because hospitals must determine their populations for data reporting purposes and most 

hospitals are voluntarily reporting population and sampling data for Hospital OQR 
CMS-1589-FC 1132 

Program purposes, we believe the only additional burden associated with this requirement 

is the reporting of the data using the Web-based tool. We estimated that each 

participating hospital will spend 10 minutes per year to collect and submit the data, 

making the estimated annual burden associated with this measure 534 hours (3,200 

hospitals x 0.167 hours per measure x 1 all-patient volume measure per hospital). We 

note that we inadvertently indicated that the total of this computation was 53 hours in the 

proposed rule (77 FR 45208). 

We did not receive any public comments on these information collection 

requirements and, therefore, are finalizing our proposed burden estimates with the 

modifications we have described above. 

c. Hospital OQR Program Measures for CY 2015 

In the CY 2012 OPPS/ASC final rule with comment period, for the CY 2015 

payment determination, we retained the requirement that hospitals must complete and 

submit a notice of participation form in order to participate in the Hospital OQR 

Program. For the CY 2015 payment determination, we also retained the measures used 

for CY 2014 payment determination (including the measures adopted in the CY 2012 

final rule with comment period) and did not add any additional measures. 

For the CY 2015 payment determination, the burden associated with these 

requirements is the time and effort associated with completing the notice of participation 

form, collecting and submitting the data on the measures, and collecting and submitting 

all-patient volume data for selected outpatient surgical procedures. For the 

chart-abstracted measures, we estimated that there will be approximately 3,200 
CMS-1589-FC 1133 

respondents per year. For hospitals to collect and submit the information on the 

chart-abstracted measures where data are submitted directly to CMS (excluding the 

chart-abstracted OP-22 measure), we estimated it will take 35 minutes per sampled case. 

Based upon the data submitted for the CY 2011 and CY 2012 payment determinations, 

we estimated there will be a total of 1,628,800 cases per year, approximately 509 cases 

per year per respondent. The estimated annual burden associated with the 

aforementioned submission requirements for the chart-abstracted data is 949,590 hours 

(1,628,800 cases per year x 0.583 hours per case). 

For the chart-abstracted OP-22 measure plus the 3 structural measures (excluding 

the all-patient volume for selected surgical procedures measure), we estimated that each 

participating hospital will spend 10 minutes per year to collect and submit the data, 

making the estimated annual burden associated with these measures 2,138 hours (3,200 

hospitals x 0.167 hours per hospital x 4 measures per hospital). In the proposed rule 

(77 FR 45208), we inadvertently excluded the OP-22 measure in our burden computation. 

For the collection of all-patient volume data for selected outpatient surgical 

procedures, because hospitals must determine their populations for data reporting 

purposes and most hospitals are voluntarily reporting population and sampling data for 

Hospital OQR purposes, we believe the only additional burden associated with this 

requirement will be the reporting of the data using the Web-based tool. We estimated 

that each participating hospital will spend 10 minutes per year to collect and submit the 

data, making the estimated annual burden associated with this measure 534 hours (3,200 
CMS-1589-FC 1134 

hospitals x 0.167 hours per hospital). We note that we inadvertently indicated that the 

total of this computation was 53 hours in the proposed rule (77 FR 45208). 

We invited public comment on the burden associated with the information 

collection requirements. 

We did not receive any public comments on these information collection 

requirements and, therefore, are finalizing our proposed burden estimates with the 

modifications we have described above. 

3. Hospital OQR Program Validation Requirements for CY 2014 

In the CY 2013 OPPS/ASC proposed rule, we proposed to retain the requirements 

related to data validation for CY 2014 that we adopted in the CY 2011 OPPS/ASC final 

rule with comment period (76 FR 74486) for CY 2013, and that we revised in the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74553). While these 

requirements are subject to the PRA, they are currently approved under OCN: 0938-1109. 

This approval expires on October 31, 2013. 

Similar to our approach for the CY 2013 Hospital OQR Program payment 

determination (76 FR 74484 through 74485), we proposed to continue to validate data 

from randomly selected hospitals for the CY 2014 payment determination, selecting 450 

hospitals. We note that, because hospitals would be selected randomly, every hospital 

participating in the Hospital OQR Program would be eligible each year for validation 

selection. 

In the CY 2011 OPPS/ASC proposed rule and final rule with comment period 

(75 FR 46381 and 75 FR 72106, respectively), we discussed additional data validation 
CMS-1589-FC 1135 

conditions under consideration for CY 2013 and subsequent years. In the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74485 and 76 FR 74553), we 

finalized a policy under which we will select for validation up to 50 additional hospitals 

based upon targeting criteria. 

For each selected hospital (random or targeted), generally we will randomly select 

up to 48 patient encounters per year (12 per quarter) for validation purposes from the 

total number of cases that the hospital successfully submitted to the OPPS Clinical 

Warehouse during the applicable time period. However, if a selected hospital submitted 

less than 12 cases in one or more quarters, only those cases available would be validated. 

The burden associated with the CY 2014 requirement is the time and effort 

necessary to submit validation data to a CMS contractor. We estimated that it would take 

each of the sampled hospitals approximately 12 hours to comply with these data 

submission requirements. To comply with the requirements, we estimated each hospital 

must submit up to 48 cases for the affected year for review. All selected hospitals must 

comply with these requirements each year, which would result in a total of up to 24,000 

charts being submitted by the sampled hospitals. The estimated annual burden associated 

with the data validation process for CY 2014 is approximately 6,000 hours. 

We proposed to maintain the deadline of 45 days for hospitals to submit requested 

medical record documentation to a CMS contractor to support our validation process. 

We invited public comment on the burden associated with these information 

collection requirements. 
CMS-1589-FC 1136 

We did not receive any public comments on these information collection 

requirements. Therefore, we are finalizing our burden estimates as proposed.

4. Hospital OQR Program Reconsideration and Appeals Procedures 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779), we 

adopted a mandatory reconsideration process that applied to the CY 2010 payment 

decisions. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60654 

through 60655), we continued this process for the CY 2011 payment update. In the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 72106 through 72108), we 

continued this process for the CY 2012 payment update with some modifications. We 

eliminated the requirement that the reconsideration request form be signed by the hospital 

CEO to facilitate electronic submission of the form and reduce hospital burden. In the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74487 and 74488 and 

76 FR 74553 and 74554), we specified that we were continuing this process for the 

CY 2013 and subsequent years’ payment determinations. 

In this CY 2013 OPPS/ASC final rule with comment period, we are making one 

change to this process--to modify a requirement that the CEO must sign the 

reconsideration request to allow the CEO or other designated personnel to sign the 

required form. 

While there is burden associated with filing a reconsideration request, 

5 CFR 1320.4 of the Paperwork Reduction Act of 1995 regulations excludes collection 

activities during the conduct of administrative actions such as redeterminations, 

reconsiderations, or appeals or all of these actions. 
CMS-1589-FC 1137 

We did not receive any public comments on our proposed burden statement and 

therefore are finalizing it with modification in this final rule with comment period. 

5. ASCQR Program Requirements 

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

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74496 through 

74504), we adopted five claims-based measures (four outcome and one process) to be 

used for the CY 2014 payment determination. We will collect quality measure data for 

the five claims-based measures by using QDCs placed on submitted claims beginning 

with services furnished from October 1, 2012 through December 31, 2012. The five 

outcome measures are: 

● Patient Burns (NQF #0263) 

● Patient Falls (NQF #0266) 

● Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant 

(NQF #0267) 

● Hospital Transfer/Admission (NQF #0265) 

● Prophylactic Intravenous (IV) Antibiotic Timing (NQF #0264) 

The first four measures listed above are outcome measures and the fifth measure 

is a process measure. 

Approximately 71 percent of ASCs participate in Medical Event Reporting, which 

includes reporting on the first four claims-based measures listed above. Between 

January 1995 and December 2007, ASCs reported 126 events, an average of 8.4 events 

per year (Florida Medical Quality Assurance, Inc. and Health Services Advisory Group: 
CMS-1589-FC 1138 

Ambulatory Surgery Center Environmental Scan (July 2008) (Contract 

No. GS-10F-0096T)). Thus, we estimated the burden to report QDCs on this number of 

claims per year for the first four claims-based measures to be nominal due to the small 

number of cases (less than 1 case per month per ASC, or about 11.8 events per year). 

For the remaining claims-based measure, Prophylactic IV Antibiotic Timing, we 

estimated the burden associated with submitting QDCs to be nominal, as few procedures 

performed by ASCs will require prophylactic antibiotic administration. 

b. Claims-Based Process, Structural, and Volume Measures for the CY 2015 and 

CY 2016 Payment Determinations 

For the CY 2015 payment determination, we finalized the retention of the five 

measures we adopted for the CY 2014 payment determination, and we added two 

structural measures: Safe Surgery Checklist Use and ASC Facility Volume Data on 

Selected ASC Surgical Procedures (76 FR 74504 through 74509). For the CY 2015 

payment determination, we proposed (and are finalizing in this final rule with comment 

period) that the data collection period for claims-based measures would be for services 

furnished from January 1, 2013, through December 31, 2013, that are paid by the 

administrative contractor by April 30, 2014. 

For the CY 2016 payment determination, we finalized the retention of the seven 

measures for the CY 2015 payment determination and added Influenza Vaccination 

Coverage among Healthcare Personnel (NQF #0431) (76 FR 74509). For the CY 2016 

payment determination, we proposed (and are finalizing in this final rule with comment 

period) that the data collection period for claims-based measures would be for services 
CMS-1589-FC 1139 

furnished from January 1, 2014, through December 31, 2014, that are paid by the 

administrative contractor by April 30, 2015. 

Based on our data for CY 2014 payment determinations above, extrapolating to 

100 percent of ASCs reporting, there would be an average of 11.8 events per year. Thus, 

we estimated the burden to report QDCs on this number of claims per year for the first 

four claims-based measures to be nominal due to the small number of cases 

(approximately one case per month per ASC) for the CYs 2015 and CY 2016 payment 

determinations. We estimated the burden associated with submitting QDCs for the fifth 

measure to be nominal as well, as discussed above. 

For the CY 2015 payment determination, for the structural measures, ASCs will 

enter required information using a Web-based collection tool between July 1, 2013 and 

August 15, 2013. For the Safe Surgery Checklist Use structural measure, we estimated 

that each participating ASC will spend 10 minutes per year to collect and submit the 

required data, making the estimated annual burden associated with this measure 864 

hours (5,175 ASCs x 1 measure x 0.167 hours per ASC). 

For the ASC Facility Volume Data on Selected ASC Surgical Procedures 

structural measure, we estimated that each participating ASC will spend 10 minutes per 

year to collect and submit the required data, making the estimated annual burden 

associated with this measure, 864 hours (5,175 ASCs x 1 measure 0.167 hours per ASC). 

We have not yet proposed reporting requirements for the Safe Surgery Checklist 

or the ASC Volume Data on Selected ASC Surgical Procedures nor have we proposed 
CMS-1589-FC 1140 

details on submission of the NHSN HAI measure: Influenza Vaccination Coverage 

Among Healthcare Personnel for the CY 2016 payment determination. 

Public comments in reference to the use of the term “claims-based” on these 

information collection requirements are discussed in section XVI.C.1.b. of this final rule 

with comment period. We did not receive any other public comments on these 

information collection requirements and, therefore, are finalizing our burden estimates as 

proposed. 

c. Program Administrative Requirements and QualityNet Accounts; Extraordinary 

Circumstance and Extension Requests; Reconsideration Requests 

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), we 

finalized our proposal to consider an ASC to be participating in the ASCQR Program for 

the CY 2014 payment determination if the ASC includes QDCs specified for the program 

on their CY 2012 claims relating to the finalized measures. 

In the FY 2013 IPPS/LTCH PPS final rule, we finalized, for the CY 2015 

payment determination and subsequent payment determination years, that once an ASC 

submits any quality measure data, it would be considered to be participating in the 

ASCQR Program. Once an ASC submits quality measure data indicating its participation 

in the ASCQR Program, in order to withdraw, an ASC must complete and submit an 

online form indicating that it is withdrawing from the program. 

For the CY 2015 payment determination and subsequent payment determination 

years, if the ASC submits quality measure data, there is no additional action required by 

the ASC to indicate participation in the program. The burden associated with the 
CMS-1589-FC 1141 

requirements to withdraw from the program is the time and effort associated with 

accessing, completing, and submitting the online form. Based on the number of hospitals 

that have withdrawn from the Hospital OQR Program over the past 4 years, we estimated 

that 2 ASCs would withdraw per year and that an ASC would expend 30 minutes to 

access and complete the form, for a total burden of 1 hour per year. 

In the FY 2013 IPPS/LTCH PPS final rule, we finalized for the CY 2015 payment 

determination the requirement that ASCs to identify and register a QualityNet 

administrator in order to set up accounts necessary to enter structural measure data. We 

estimated that, based upon previous experience with the Hospital OQR Program, it would 

take an ASC 10 hours to obtain, complete, and submit an application for a QualityNet 

administrator and then set up the necessary accounts for structural measure data entry. 

We estimated the total burden to meet these requirements to be 51,750 hours (10 hours x 

5,175 ASCs). 

In the FY 2013 IPPS/LTCH PPS final rule, we adopted a process for an extension 

or waiver for submitting information required under the program due to extraordinary 

circumstances that are not within the ASC’s control. We are requiring that an ASC 

would complete a request form that would be available on the QualityNet Web site, 

supply requested information, and submit the request. The burden associated with these 

requirements is the time and effort associated with gathering required information as well 

as accessing, completing, and submitting the form. Based on the number of hospitals that 

have submitted a request for an extension or waiver from the Hospital OQR Program 

over the past 4 years, we estimated that 1 ASC per year would request an extension or 
CMS-1589-FC 1142 

waiver and that an ASC would expend 2 hours to gather required information as well as 

access, complete, and submit the form, for a total burden of 2 hours per year. 

We also adopted a reconsideration process that would apply to the CY 2014 

payment determination and subsequent payment determination years under the ASCQR 

Program. While there is burden associated with an ASC filing a reconsideration request, 

the regulations at 5 CFR 1320.4 for the Paperwork Reduction Act of 1995 exclude data 

collection activities during the conduct of administrative actions such as 

redeterminations, reconsiderations, or appeals or all of these actions. 

We did not receive any public comments on our burden discussion in the 

proposed rule. 

6. IRF QRP 

In the FY 2012 IRF PPS final rule (76 FR 47873 through 47883), we finalized the 

initial reporting requirements of the IRF QRP, including two quality measures for 

CY 2012 reporting. These two quality measures are: (1) Percent of Residents with 

Pressure Ulcers that are New or Worsened (NQF #0678); and (2) Urinary Catheter 

Associated Urinary Tract Infection (CAUTI) rate per 1,000 urinary catheter days, for 

Intensive Care Unit (ICU) Patients (NQF #0138). 

We also established reporting mechanisms for these two measures in the FY 2012 

IRF PPS final rule. IRFs were instructed to use the Inpatient Rehabilitation FacilityPatient Assessment Instrument (IRF-PAI) (approved under OCN: 0938-0842) to collect 

pressure ulcer measure data on Medicare Part A, Part B, and Medicare Advantage 

beneficiaries, and they were to collect CAUTI measure data on all patients and report that 
CMS-1589-FC 1143 

data to CDC’s National Healthcare Safety Network (NHSN). The burden associated with 

this collection of information for IRFs was included in the FY 2012 IRF PPS final rule 

(76 FR 47884 through 47885). 

In section XVII. of the proposed rule, we proposed to adopt three proposals for 

the IRF QRP, which are: (1) a proposal to implement updates made by the NQF to the 

CAUTI measure which will affect the annual payment update in FY 2014; (2) a proposal 

that any measure selected for use in the IRF QRP would remain in effect until actively 

removed, suspended, or replaced; and (3) a proposal to implement policies regarding 

when rulemaking will be used to update existing IRF QRP measures. 

We stated that the first proposal would allow us to incorporate recent updates that 

were made to the CAUTI measure (NQF#0138) by the NQF. However, we stated that 

these changes would not affect the type or amount of data that IRFs will be required to 

collect and submit. 

The second proposal involves the implementation of a policy that IRF quality 

measures will remain in effect until a measure is actively removed, suspended, or 

replaced. We stated that this policy would not add any additional information collection 

requirements for CY 2013 and beyond as discussed below. 

The third proposal involves implementing a policy regarding when rulemaking 

would be used to update existing IRF QRP measures that have been updated by the NQF. 

We stated that this proposal would likewise not create any increased information 

collection burden on IRFs. 
CMS-1589-FC 1144 

a. Pressure Ulcer Measure 

In the CY 2013 OPPS/ASC proposed rule, we did not propose to make any 

changes in the way the pressure ulcer data are to be collected and submitted to CMS 

using the current version of the IRF-PAI. As discussed in section XVII.D.2. of this final 

rule with comment period, we have decided to adopt a nonrisk-adjusted version of the 

NQF #0678 pressure ulcer measure. We will collect pressure ulcer data using the current 

version of the IRF-PAI, which became effective on October 1, 2012. 

We have decided to use a nonrisk-adjusted application of the NQF #0678 pressure 

ulcer measure as opposed to the NQF-endorsed version of this measure. However, this 

change in the nature of the measure will not change the information collection burden 

that IRFs will incur for the reporting of pressure ulcer data. Nor will the burden differ 

from that which was stated in the FY 2012 IRF PPS final rule (76 FR 47884 through 

47885). Likewise, the information collection burden will not differ from the burden 

estimated that is currently approved for the IRF-PAI under OCN: 0938-0842. It is 

important to note that, while the FY 2012 IRF PPS final rule mainly discusses the 

reporting requirement that will be incurred by IRFs for the FY 2014 payment 

determination, we do not anticipate that the policies we are finalizing in this final rule 

with comment will create an increase in the information collection burden for subsequent 

fiscal years. 

b. CAUTI Measure 

As discussed above, the FY 2012 IRF PPS final rule adopted the “Urinary 

Catheter Associated Urinary Tract Infection (CAUTI) rate per 1,000 urinary catheter 
CMS-1589-FC 1145 

days, for Intensive Care Unit (ICU) Patients” (NQF# 0138) measure for the IRF QRP. 

However, subsequent to the publication of the FY 2012 IRF PPS final rule, this measure 

was expanded to several non-ICU settings, including IRFs. The CDC also changed the 

way the CAUTI measure is calculated from an infection rate per 1,000 days to a 

standardized infection ratio (“SIR”). The SIR calculation is comprised of the actual rate 

of infection over the expected rate of infection. 

These changes will not impact the type or amount of data that IRFs will be 

required to collect and submit. Therefore, the information collection estimates that are 

stated in the FY 2012 IRF PPS final rule (76 FR 47884 through 47885) for reporting 

CAUTI data remain unchanged for the FY 2014 payment determination as well as for 

subsequent years payment determinations. 

Summaries of the public comments we received on the proposed policies and the 

burden associated with these proposed information collection requirements and our 

responses are discussed in section XVII. of this final rule with comment period. 

If you comment on these information collection and recordkeeping requirements, 

please submit your comments to the Office of Information and Regulatory Affairs, Office 

of Management and Budget, Attention: CMS Desk Officer, CMS-1589-FC; Fax: 

(202) 395-6974; or Email: OIRAsubmittions_@omb.eop.gov

XXI. Waiver of Proposed Rulemaking and Response to Comments 

A. Waiver of Proposed Rulemaking

We ordinarily publish a notice of proposed rulemaking in the Federal Register

and invite public comment on the proposed rule. The notice of proposed rulemaking 
CMS-1589-FC 1146 

includes a reference to the legal authority under which the rule is proposed, and the terms 

and substance of the proposed rule or a description of the subjects and issues involved. 

This procedure can be waived, however, if an agency finds good cause that a 

notice-and-comment procedure is impracticable, unnecessary, or contrary to the public 

interest and incorporates a statement of the finding and its reasons in the rule issued. 

We utilize HCPCS codes for Medicare payment purposes. The HCPCS is a 

national coding system comprised of Level I codes (CPT codes) and Level II codes that 

are intended to provide uniformity to coding procedures, services, and supplies across all 

types of medical providers and suppliers. CPT codes are copyrighted by the AMA and 

consist of several categories, including Category I codes which are 5-digit numeric codes, 

and Category III codes which are temporary codes to track emerging technology, 

services, and procedures. The AMA issues an annual update of the CPT code set each 

Fall, with January 1 as the effective date for implementing the updated CPT codes. The 

HCPCS, including both CPT codes and Level II codes, is similarly updated annually on a 

calendar year basis. Annual coding changes are not available to the public until the Fall 

immediately preceding the annual January update of the OPPS and the ASC payment 

system. Because of the timing of the release of these new codes, it is impracticable for us 

to provide prior notice and solicit comment on these codes and the payments assigned to 

them in advance of publication of the final rule that implements the OPPS and the ASC 

payment system. However, it is imperative that these coding changes be accounted for 

and recognized timely under the OPPS and the ASC payment system for payment 

because services represented by these codes will be provided to Medicare beneficiaries in 
CMS-1589-FC 1147 

hospital outpatient departments and ASCs during the calendar year in which they become 

effective. Moreover, regulations implementing HIPAA (42 CFR Parts 160 and 162) 

require that the HCPCS be used to report health care services, including services paid 

under the OPPS and the ASC payment system. We assign interim payment amounts and 

status indicators to any new codes according to our assessment of the most appropriate 

APC based on clinical and resource homogeneity with other procedures and services in 

the APC. If we did not assign payment amounts to new codes on an interim basis, the 

alternative would be to not pay for these services during the initial calendar year in which 

the codes become effective. We believe it would be contrary to the public interest to 

delay establishment of payment amounts for these codes. 

Therefore, we find good cause to waive the notice of proposed rulemaking for the 

establishment of payment amounts for selected HCPCS codes identified with comment 

indicator “NI” in Addendum B and Addendum BB to this final rule with comment 

period. We are providing a 60-day public comment period. 

B. Response to Comments

Because of the large number of public comments we normally receive on Federal 

Register documents, we are not able to acknowledge or respond to them individually. 

We will consider all comments we receive by the date and time specified in the DATES

section of this final rule with comment period, and, when we proceed with a subsequent 

document(s), we will respond to those comments in the preamble to that document. 
CMS-1589-FC 1148 

XXII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We have examined the impacts of this final rule with comment period as required 

by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), 

Executive Order 13563 on Improving Regulation and Regulatory Review 

(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, 

Pub. L. 96-354), section 1102(b) of the Social Security Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), Executive 

Order 13132 on Federalism (August 4, 1999), and the Contract with America 

Advancement Act of 1996 (Pub. L. 104-121) (5 U.S.C. 804(2)). This section of the final 

rule with comment period contains the impact and other economic analyses for the 

provisions that we are finalizing. 

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits 

of available regulatory alternatives and, if regulation is necessary, to select regulatory 

approaches that maximize net benefits (including potential economic, environmental, 

public health and safety effects, distributive impacts, and equity). Executive Order 13563 

emphasizes the importance of quantifying both costs and benefits, of reducing costs, of 

harmonizing rules, and of promoting flexibility. This rule has been designated as an 

“economically” significant rule under section 3(f)(1) of Executive Order 12866 and a 

major rule under the Contract with America Advancement Act of 1996 

(Pub. L. 104-121). Accordingly, the rule has been reviewed by the Office of 
CMS-1589-FC 1149 

Management and Budget. We have prepared a regulatory impact analysis that, to the best 

of our ability, presents the costs and benefits of this final rule with comment period. In 

the proposed rule (77 FR 45210), we solicited public comments on the regulatory impact 

analysis provided. 

2. Statement of Need 

This final rule with comment period is necessary to update the Medicare hospital 

OPPS rates. It is necessary to make changes to the payment policies and rates for 

outpatient services furnished by hospitals and CMHCs in CY 2013. We are required 

under section 1833(t)(3)(C)(ii) of the Act to update annually 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 less often than annually, and revise the 

groups, the relative payment weights, and the wage and other adjustments described in 

section 1833(t)(2) of the Act. We must review the clinical integrity of payment groups 

and relative payment weights at least annually. We revised the APC relative payment 

weights using claims data for services furnished on and after January 1, 2011, through 

and including December 31, 2011, and updated cost report information. 

For CY 2013, we are continuing the current payment adjustment for rural SCHs, 

including EACHs. In addition, section 10324 of the Affordable Care Act, as amended by 

HCERA, authorizes a wage index of 1.00 for certain frontier States. Section 1833(t)(17) 

of the Act requires that subsection (d) hospitals that fail to meet quality reporting 

requirements under the Hospital OQR Program incur a reduction of 2.0 percentage points 

to their OPD fee schedule increase factor. In this final rule with comment period, we are 
CMS-1589-FC 1150 

implementing these payment provisions. Also, we list the 23 drugs and biologicals in 

Table 32 that we are removing from pass-through payment status for CY 2013. 

This final rule with comment period is also necessary to update the ASC payment 

rates for CY 2013, enabling CMS to make changes to payment policies and payment 

rates for covered surgical procedures and covered ancillary services that are performed in 

an ASC in CY 2013. Because the ASC payment rates are based on the OPPS relative 

payment weights for the majority of the procedures performed in ASCs, the ASC 

payment rates are updated annually to reflect annual changes to the OPPS relative 

payment weights. In addition, because the services provided in ASCs are identified by 

HCPCS codes that are reviewed and revised either quarterly or annually, depending on 

the type of code, it is necessary to update the ASC payment rates annually to reflect these 

changes to HCPCS codes. In addition, we are required under section 1833(i)(1) of the 

Act to review and update the list of surgical procedures that can be performed in an ASC 

not less frequently than every 2 years. Sections 1833(i)(2)(D)(iv) and 1833(i)(7) of the 

Act authorize the Secretary to implement a quality reporting system for ASCs in a 

manner so as to provide for a reduction of 2.0 percentage points in any annual update 

with respect to the year involved for ASCs that fail to meet the quality reporting 

requirements. For CY 2013, there will be no impacts associated with this payment 

reduction because it will not be applied until CY 2014. 

3. Overall Impacts for OPPS and ASC Payment Provisions 

We estimate that the effects of the OPPS payment provisions will result in 

expenditures exceeding $100 million in any 1 year. We estimate that the total increase 
CMS-1589-FC 1151 

from the changes in this final rule with comment period in expenditures under the OPPS 

for CY 2013 compared to CY 2012 will be approximately $600 million. Taking into 

account our estimated changes in enrollment, utilization, and case-mix, we estimate that 

the OPPS expenditures for CY 2013 will be approximately $4.571 billion higher, relative 

to expenditures in CY 2012. Because this final rule with comment period is 

“economically significant” as measured by the $100 million threshold, we have prepared 

this regulatory impact analysis that, to the best of our ability, presents its costs and 

benefits. Table 57 displays the redistributional impact of the CY 2013 changes in OPPS 

payment to various groups of hospitals and for CMHCs. 

We estimate that the update to the conversion factor and other adjustments (not 

including the effects of outlier payments, the pass-through estimates, and the application 

of the frontier State wage adjustment for CY 2013) will increase total OPPS payments by 

1.8 percent in CY 2013. The changes to the APC weights, the changes to the wage 

indices, the continuation of a payment adjustment for rural SCHs, including EACHs, and 

the payment adjustment for cancer hospitals will not increase OPPS payments because 

these changes to the OPPS will be budget neutral. However, these updates will change 

the distribution of payments within the budget neutral system. We estimate that the total 

change in payments between CY 2012 and CY 2013, considering all payments, including 

changes in estimated total outlier payments, pass-through payments, and the application 

of the frontier State wage adjustment outside of budget neutrality, in addition to the 

application of the OPD fee schedule increase factor after all adjustments required by 
CMS-1589-FC 1152 

sections 1833(t)(3)(F), 1833(t)(3)(G) and 1833(t)(17) of the Act, will increase total 

estimated OPPS payments by 1.9 percent. 

We estimate that the effects of the ASC provisions in this final rule with comment 

period for the ASC payment system would result in expenditures exceeding $100 million 

in any 1 year. We estimate the total increase (from changes in this final rule with 

comment period as well as enrollment, utilization, and case-mix changes) in expenditures 

under the ASC payment system for CY 2013 compared to CY 2012 to be approximately 

$189 million. Because this final rule with comment period for the ASC payment system 

is “economically significant” as measured by the $100 million threshold, we have 

prepared a regulatory impact analysis of the changes to the ASC payment system that, to 

the best of our ability, presents the costs and benefits of this final rule with comment 

period. Tables 58 and Table 59 of this final rule with comment period display the 

redistributional impact of the CY 2013 changes on ASC payment, grouped by specialty 

area and then grouped by procedures with the greatest ASC expenditures, respectively. 

4. Detailed Economic Analyses 

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

(1) Limitations of Our Analysis 

The distributional impacts presented here are the projected effects of the CY 2013 

policy changes on various hospital groups. We post on the CMS Web site our 

hospital-specific estimated payments for CY 2013 with the other supporting 

documentation for this final rule with comment period. To view the hospital-specific 

estimates, we refer readers to the CMS Web site at: 
CMS-1589-FC 1153 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. At the Web site, select “regulations and 

notices” from the left side of the page and then select “CMS-1589-FC” from the list of 

regulations and notices. The hospital-specific file layout and the hospital-specific file are 

listed with the other supporting documentation for this final rule with comment period. 

We show hospital-specific data only for hospitals whose claims were used for modeling 

the impacts shown in Table 57 below. We do not show hospital-specific impacts for 

hospitals whose claims we were unable to use. We refer readers to section II.A. for a 

discussion of the hospitals whose claims we do not use for ratesetting and impact 

purposes. 

We estimate the effects of the individual policy changes by estimating payments 

per service, while holding all other payment policies constant. We use the best data 

available, but do not attempt to predict behavioral responses to our policy changes. In 

addition, we do not make adjustments for future changes in variables such as service 

volume, service-mix, or number of encounters. In the proposed rule, we solicited public 

comment and information about the anticipated effects of our changes on providers and 

our methodology for estimating them. Any public comments that we receive are 

addressed in the applicable sections of this final rule with comment period that discuss 

the specific policies. 

(2) Estimated Effects of OPPS Changes on Hospitals 

Table 57 below shows the estimated impact of this final rule with comment period 

on hospitals. Historically, the first line of the impact table, which estimates the change in 
CMS-1589-FC 1154 

payments to all facilities, has always included cancer and children’s hospitals, which are 

held harmless to their pre-BBA amount. We also include CMHCs in the first line that 

includes all providers because we include CMHCs in our weight scalar estimate. We 

now include a second line for all hospitals, excluding permanently held harmless 

hospitals and CMHCs. 

We present separate impacts for CMHCs in Table 57 and we discuss them 

separately below, because CMHCs are paid only for partial hospitalization services under 

the OPPS and are a different provider type from hospitals. In CY 2012, we are paying 

CMHCs under APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) and 

APC 0173 (Level II Partial Hospitalization (4 or more services) for CMHCs), and we are 

paying hospitals for partial hospitalization services under APC 0175 (Level I Partial 

Hospitalization (3 services) for hospital-based PHPs) and APC 0176 (Level II Partial 

Hospitalization (4 or more services) for hospital-based PHPs). For CY 2013, we are 

finalizing our proposal to continue this APC payment structure and are basing payment 

fully on the geometric mean costs calculated using data for the type of provider for which 

rates are being set, that is, hospital or CMHC. We display separately the impact of this 

policy on CMHCs, and we discuss its impact on hospitals as part of our discussion of the 

hospital impacts. 

The estimated increase in the total payments made under the OPPS is determined 

largely by the increase to the conversion factor under the statutory methodology. The 

distributional impacts presented do not include assumptions about changes in volume and 

service-mix. The conversion factor is updated annually by the OPD fee schedule increase 
CMS-1589-FC 1155 

factor as discussed in detail in section II.B of this final rule with comment period. 

Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule increase factor is 

equal to the market basket percentage increase applicable under section 1886(b)(3)(B)(iii) 

of the Act, which we refer to as the IPPS market basket percentage increase. The IPPS 

market basket percentage increase for FY 2013 is 2.6 percent (77 FR 53258). 

Section 1833(t)(3)(F)(i) of the Act reduces that 2.6 percent by the multifactor 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act, which is 

0.7 percentage points (which is also the MFP adjustment for FY 2013 in the FY 2013 

IPPS/LTCH PPS final rule (77 FR 53258); and sections 1833(t)(3)(F)(ii) and 

1833(t)(3)(G)(ii) of the Act further reduce the market basket percentage increase by 0.1 

percentage point, resulting in the OPD fee schedule increase factor of 1.8 percent, which 

we are using in the calculation of the CY 2013 OPPS conversion factor. Section 10324 

of the Affordable Care Act, as amended by HCERA, further authorized additional 

expenditures outside budget neutrality for hospitals in certain frontier States that have a 

wage index less than 1.00. The amounts attributable to this frontier State wage index 

adjustment are incorporated in the CY 2013 estimates in Table 57. 

To illustrate the impact of the CY 2013 changes, our analysis begins with a 

baseline simulation model that uses the CY 2012 relative payment weights, the FY 2012 

final IPPS wage indices that include reclassifications, and the final CY 2012 conversion 

factor. Table 57 shows the estimated redistribution of the increase in payments for 

CY 2013 over CY 2012 payments to hospitals and CMHCs as a result of the following 

factors: APC reconfiguration and recalibration based on our historical methodology 
CMS-1589-FC 1156 

using median costs (Column 2); the marginal impact of basing the APC relative payment 

weights on geometric mean costs over basing them on median costs (Column 3); APC 

recalibration based on geometric mean costs (Column 4, the combined effect of Columns 

2 and 3); the wage indices and the rural adjustment (Column 5); the combined impact of 

APC recalibration based on geometric mean costs, the wage indices and rural adjustment, 

and the OPD fee schedule increase factor update to the conversion factor (Column 6); the 

combined impact of APC recalibration based on geometric mean costs, the wage indices 

and rural adjustment, the conversion factor update, and the CY 2013 frontier State wage 

index adjustment (Column 7); and the estimated impact taking into account all payments 

for CY 2013 relative to all payments for CY 2012 (Column 8), including the impact of 

changes in estimated outlier payments and changes to the pass-through payment estimate. 

We did not model an explicit budget neutrality adjustment for the rural adjustment 

for SCHs because we did not make any changes to the policy for CY 2013. Because the 

updates to the conversion factor (including the update of the OPD fee schedule increase 

factor), the estimated cost of the rural adjustment, and the estimated cost of projected 

pass-through payment for CY 2012 are applied uniformly across services, observed 

redistributions of payments in the impact table for hospitals largely depend on the mix of 

services furnished by a hospital (for example, how the APCs for the hospital’s most 

frequently furnished services will change), and the impact of the wage index changes on 

the hospital. However, total payments made under this system and the extent to which 

this final rule with comment period will redistribute money during implementation also 

will depend on changes in volume, practice patterns, and the mix of services billed 
CMS-1589-FC 1157 

between CY 2012 and CY 2013 by various groups of hospitals, which CMS cannot 

forecast. 

Overall, we estimate that the OPPS rates for CY 2013 will have a positive effect 

for providers paid under the OPPS, resulting in a 1.9 percent estimated increase in 

Medicare payments. Removing payments to cancer and children’s hospitals because their 

payments are held harmless to the pre-OPPS ratio between payment and cost and 

removing payments to CMHCs suggest that these changes will still result in a 1.9 percent 

estimated increase in Medicare payments to all other hospitals. Those estimated 

payments will not significantly impact other providers. 

Column 1: Total Number of Hospitals

The first line in Column 1 in Table 57 shows the total number of facilities (4,127), 

including designated cancer and children’s hospitals and CMHCs, for which we were 

able to use CY 2011 hospital outpatient and CMHC claims data to model CY 2012 and 

CY 2013 payments, by classes of hospitals, for CMHCs and for dedicated cancer 

hospitals. We excluded all hospitals and CMHCs for which we could not accurately 

estimate CY 2012 or CY 2013 payment and entities that are not paid under the OPPS. 

The latter entities include CAHs, all-inclusive hospitals, and hospitals located in Guam, 

the U.S. Virgin Islands, Northern Mariana Islands, American Samoa, and the State of 

Maryland. This process is discussed in greater detail in section II.A. of this final rule 

with comment period. At this time, we are unable to calculate a disproportionate share 

(DSH) variable for hospitals not participating in the IPPS. Hospitals for which we do not 

have a DSH variable are grouped separately and generally include freestanding 
CMS-1589-FC 1158 

psychiatric hospitals, rehabilitation hospitals, and long-term care hospitals. We show the 

total number (3,905) of OPPS hospitals, excluding the hold-harmless cancer and 

children’s hospitals and CMHCs, on the second line of the table. We excluded cancer 

and children’s hospitals because section 1833(t)(7)(D) of the Act permanently holds 

harmless cancer hospitals and children’s hospitals to their “pre-BBA amount” as 

specified under the terms of the statute, and therefore, we removed them from our impact 

analyses. We show the isolated impact on 159 CMHCs at the bottom of the impact table 

and discuss that impact separately below. 

Columns 2, 3, and 4: APC Recalibration

These columns show the combined effects of the reconfiguration, recalibration, 

and other policies (such as setting payment for separately payable drugs and biologicals 

at ASP+6 under our CY 2013 decision to apply the statutory default). Column 2 shows 

the reclassification effects if we were to base the relative payment weights on the median 

costs of services. Column 3 shows the marginal effects of using the geometric mean 

costs compared to the effects if we were to base the relative payment weights on the 

median costs of services, in other words the effects of our policy change from medians to 

geometric means. We are providing this column comparing the additional impact of 

developing the CY 2013 OPPS relative payment weights using geometric mean costs 

only in the CY 2013 OPPS/ASC proposed and final rules because the CY 2013 OPPS 

will establish geometric mean costs as a baseline configuration for the OPPS. Column 4 

shows the combined effect of Columns 2 and 3, in other words the effect of our decision 

to base the relative payment weights on geometric mean costs. It reflects the impacts of 
CMS-1589-FC 1159 

the reclassification of services among APC groups and the recalibration of APC relative 

payment weights, based on 12 months of CY 2011 OPPS hospital claims data and the 

most recent cost report data, and determining relative payment weights using the 

geometric mean costs of services. We modeled the effect of the APC recalibration 

changes by varying only the relative payment weights (the final CY 2012 relative weights 

versus the CY 2013 relative weights calculated using the service-mix and volume in the 

CY 2011 claims used for this final rule with comment period) and calculating the percent 

difference in the relative weight. Column 4 also reflects any changes in multiple 

procedure discount patterns or conditional packaging that occur as a result of the changes 

in the relative magnitude of payment weights. 

Overall, we estimate that changes in APC reassignment and recalibration across 

all services paid under the OPPS will slightly decrease payments to urban hospitals by 

0.1 percent. However, the smallest urban hospitals will receive slight payment increases 

of 0.6 percent (hospitals with 0-99 beds), attributable to increased payments for partial 

hospitalization, group psychotherapy and cardiac rehabilitation monitoring services 

furnished in the hospital. Due to recalibration, we estimate that low volume urban 

hospitals billing fewer than 21,000 lines for OPPS services will experience increases 

ranging from 1.0 percent to 4.9 percent. The increase of 4.9 percent for urban hospitals 

billing fewer than 5,000 lines per year is similarly attributable to an increase in payment 

for partial hospitalization and group psychotherapy services furnished in the hospital. 

Overall, we estimate that rural hospitals will experience a small increase of 

0.5 percent as a result of changes to the APC structure, with the largest increases going to 
CMS-1589-FC 1160 

the smallest hospitals both by number of beds (1.2 percent to those with less than 

50 beds) and volume (3.1 percent to those with fewer than 5,000 lines). As a result of the 

recalibration, we estimate that rural hospitals that report 5,000 or more lines for OPPS 

services will experience payment increases ranging from 0.3 percent to 1.5 percent. 

Classifying hospitals according to teaching status, we estimate that the APC 

recalibration will lead to small payment decreases of 0.1 to 0.2 percent for major and 

minor teaching hospitals, respectively. We estimate that nonteaching hospitals will 

experience an increase of 0.2 percent. Classifying hospitals by type of ownership 

suggests that voluntary, proprietary, and governmental hospitals will experience changes 

ranging from a decrease of 0.1 percent to an increase of 0.3 percent as a result of the APC 

recalibration. 

For most hospitals, we estimate insignificant impacts of our final policy of using 

geometric mean-based relative payment weights. Most hospitals will receive small 

increases in payments of up to 6.5 percent. We estimate that hospitals for which DSH 

payments are not available (mostly urban hospitals) will experience an increase of 

6.5 percent. Hospitals for which DSH data are not available (non-IPPS hospitals) furnish 

a large number of psychiatric services and we believe that the increase in payment is due 

to increased payment for partial hospitalization and group psychotherapy services, as well 

as for hemodialysis services furnished in the hospital. 

Column 5: New Wage Indices and the Effect of the Rural and Cancer Hospital 

Adjustments
CMS-1589-FC 1161 

Column 5 demonstrates the combined budget neutral impact of APC recalibration 

using geometric means; the wage index update; the rural adjustment; and the cancer 

hospital adjustment. We modeled the independent effect of the budget neutrality 

adjustments and the OPD fee schedule increase factor by using the relative payment 

weights and wage indices for each year, and using a CY 2012 conversion factor that 

included the OPD fee schedule increase and a budget neutrality adjustment for 

differences in wage indices. 

Column 5 reflects the independent effects of the updated wage indices, including 

the application of budget neutrality for the rural floor policy on a nationwide basis. This 

column excludes the effects of the frontier State wage index adjustment, which is not 

budget neutral and is included in Column 7. We did not model a budget neutrality 

adjustment for the rural adjustment for SCHs because we did not make any changes to 

the policy for CY 2013. Similarly, the differential impact between the CY 2012 cancer 

hospital payment adjustment and the CY 2013 cancer hospital payment adjustment had 

no effect on the budget neutral adjustment to the conversion factor. We modeled the 

independent effect of updating the wage indices by varying only the wage indices, 

holding APC relative payment weights, service-mix, and the rural adjustment constant 

and using the CY 2013 scaled weights and a CY 2012 conversion factor that included a 

budget neutrality adjustment for the effect of changing the wage indices between 

CY 2012 and CY 2013. This column estimates the impact of applying the FY 2013 IPPS 

wage indices for the CY 2013 OPPS without the influence of the frontier State wage 

index adjustment, which is not budget neutral. The frontier State wage index adjustment 
CMS-1589-FC 1162 

is reflected in the combined impact shown in Column 7. We are continuing the rural 

payment adjustment of 7.1 percent to rural SCHs for CY 2013, as described in section 

II.E.2. of this final rule with comment period. We estimate that the combination of 

updated wage data and nationwide application of rural floor budget neutrality will 

redistribute payment among regions. We also updated the list of counties qualifying for 

the section 505 out-migration adjustments. 

Overall, we estimate that as a result of the updated wage indices and the rural 

adjustment, urban hospitals will experience no change from CY 2012 to CY 2013. Rural 

sole community hospitals will not be affected, but other rural hospitals will experience 

decreases of 0.4 percent. Urban hospitals in the East South Central and Pacific regions 

will experience the most significant payment changes with a decrease of 0.7 percent in 

the East South Central region and an increase of 1.4 percent in the Pacific region. 

Overall, we estimate that rural hospitals will experience a decrease of 0.2 percent as a 

result of changes to the wage index for CY 2013. Regionally, the changes will range 

from a decrease of 0.9 percent in the rural Pacific region to an increase of 0.7 percent in 

the rural Mountain region. 

Column 6: All Budget Neutrality Changes Combined with the OPD Fee Schedule 

Increase

Column 6 demonstrates the cumulative impact of the budget neutral adjustments 

from Column 5 and the OPD fee schedule increase factor of 1.8 percent. We estimate 

that for most hospitals, the addition of the OPD fee schedule increase factor of 
CMS-1589-FC 1163 

1.8 percent will mitigate the negative impacts created by the budget neutrality 

adjustments made in Column 5. 

While most classes of hospitals will receive an increase that is more in line with 

the 1.8 percent overall increase after the update is applied to the budget neutrality 

adjustments, urban hospitals that bill fewer than 5,000 lines, rural hospitals that bill fewer 

than 5,000 lines, and hospitals for which DSH information is not available will 

experience larger increases ranging from 4.5 percent to 8.2 percent. In particular, urban 

hospitals that report fewer than 5,000 lines will experience a cumulative increase, after 

application of the OPD fee schedule increase factor and the budget neutrality 

adjustments, of 6.7 percent, largely as a result of increases in payments to partial 

hospitalization and group psychotherapy services furnished in the hospital. Similarly, 

urban hospitals for which DSH data are not available will experience an increase of 

8.0 percent, also largely as a result of increases in payment for partial hospitalization, 

group psychotherapy and hemodialysis services furnished in hospitals. 

Overall, we estimate that these changes will increase payments to urban hospitals 

by 1.8 percent. We estimate that large urban hospitals and “other” urban hospitals will 

also experience increases of 1.9 and 1.6 percent, respectively. Urban hospitals in the 

Pacific region will experience an increase of 3.3 percent, largely as a result of the change 

in wage index shown under column 3 and discussed above. We estimate that rural 

hospitals will experience a 2.1 percent increase as a result of the OPD fee schedule 

increase factor and other budget neutrality adjustments. 
CMS-1589-FC 1164 

Classifying hospitals by teaching status suggests that the OPD fee schedule 

increase factor and the budget neutrality adjustments will result in an increase of 

1.7 percent for major teaching hospitals, 1.5 percent for minor teaching hospitals and 

2.0 percent for nonteaching hospitals. 

Classifying hospitals by type of ownership suggests that proprietary hospitals will 

experience an estimated increase of 2.3 percent, while voluntary hospitals will experience 

an estimated increase of 2.0 percent and government hospitals will experience an 

estimated increase of 1.8 percent. 

Column 7: All Adjustments with the Frontier State Wage Index Adjustment 

This column shows the impact of all budget neutrality adjustments, application of 

the 1.8 percent OPD fee schedule increase factor, and the nonbudget neutral impact of 

applying the frontier State wage adjustment (that is, the frontier State wage index change 

in addition to all changes reflected in Column 6). This column differs from Column 6 

solely based on application of the non-budget neutral frontier State wage index 

adjustment. 

In general, we estimate that all facilities and all hospitals will experience a 

combined increase of 0.1 percent due to the nonbudget neutral frontier State wage index 

adjustment. The index will only affect urban hospitals in the West North Central and 

Mountain regions. Urban hospital in those regions will experience increases of 1.0 

percent (West North Central) and 0.4 percent (Mountain) that are attributable to the 

frontier State wage index, and rural hospitals will experience increases of 1.2 percent 
CMS-1589-FC 1165 

(West North Central) and 2.1 percent (Mountain) that are attributable to the frontier State 

wage index. 

Column 8: All Changes for CY 2013

Column 8 depicts the full impact of the CY 2013 policies on each hospital group 

by including the effect of all the changes for CY 2013 and comparing them to all 

estimated payments in CY 2012. Column 8 shows the combined budget neutral effects of 

Columns 2 through 5; the OPD fee schedule increase; the impact of the frontier State 

wage index adjustment; the impact of estimated OPPS outlier payments as discussed in 

section II.G. of this final rule with comment period; the change in the Hospital OQR 

Program payment reduction for the small number of hospitals in our impact model that 

failed to meet the reporting requirements (discussed in section XV. of this final rule with 

comment period); and the impact of increasing the estimate of the percentage of total 

OPPS payments dedicated to transitional pass-through payments. Of the 101 hospitals 

that failed to meet the Hospital OQR Program reporting requirements for the full 

CY 2012 update (and assumed, for modeling purposes, to be the same number for 

CY 2013), we included 30 hospitals in our model because they had both CY 2011 claims 

data and recent cost report data. We estimate that the cumulative effect of all changes for 

CY 2013 will increase payments to all providers by 1.9 percent for CY 2013. We 

modeled the independent effect of all changes in Column 8 using the final relative 

payment weights for CY 2012 and the relative payment weights for CY 2013. We used 

the final conversion factor for CY 2012 of $70.016 and the CY 2013 conversion factor of 

$71.313 discussed in section II.B. of this final rule with comment period. 
CMS-1589-FC 1166 

Column 8 contains simulated outlier payments for each year. We used the one 

year charge inflation factor used in the FY 2013 IPPS/LTCH PPS final rule of 

4.24 percent (1.0424) to increase individual costs on the CY 2011 claims, and we used 

the most recent overall CCR in the July 2012 Outpatient Provider-Specific File (OPSF) to 

estimate outlier payments for CY 2012. Using the CY 2011 claims and a 4.24 percent 

charge inflation factor, we currently estimate that outlier payments for CY 2012, using a 

multiple threshold of 1.75 and a fixed-dollar threshold of $2,025 should be approximately 

0.9 percent of total payments. The estimated current outlier payments of 0.9 percent are 

incorporated in the CY 2013 comparison in Column 8. We used the same set of claims 

and a charge inflation factor of 8.66 percent (1.0866) and the CCRs in the July 2012 

OPSF, with an adjustment of 0.9880, to reflect relative changes in cost and charge 

inflation between CY 2011 and CY 2013, to model the CY 2013 outliers at 1.0 percent of 

estimated total payments using a multiple threshold of 1.75 and a fixed-dollar threshold 

of $2,025. 

We estimate that the anticipated change in payment between CY 2012 and 

CY 2013 for the hospitals failing to meet the Hospital OQR Program requirements will 

be negligible. Overall, we estimate that facilities will experience an increase of 

1.9 percent under this final rule with comment period in CY 2013 relative to total 

spending in CY 2012. This projected increase (shown in Column 8) of Table 57 reflects 

the 1.8 percent OPD fee schedule increase factor, with 0.07 percent for the change in the 

pass-through estimate between CY 2012 and CY 2013, with an additional 0.1 percent for 

the difference in estimated outlier payments between CY 2012 (0.9 percent) and CY 2013 
CMS-1589-FC 1167 

(1.0 percent), less 0.04 percent due to the expiration of the section 508 wage adjustment, 

less 0.1 percent due to the frontier adjustment in CY 2012, plus 0.1 percent due to the 

frontier State wage index adjustment in CY 2013. When we exclude cancer and 

children’s hospitals (which are held harmless to their pre-BBA amount) and CMHCs, the 

estimated increase continues to be 1.9 percent after rounding. We estimate that the 

combined effect of all changes for CY 2013 will increase payments to urban hospitals by 

1.9 percent, with large urban hospitals experiencing an estimated 2.0 percent increase and 

“other” urban hospitals experiencing an estimated 1.7 percent increase. We estimate that 

urban hospitals that bill less than 5,000 lines of OPPS services will experience an 

increase of 6.8 percent, largely attributable to the increase in payment for partial 

hospitalization and group psychotherapy services furnished in the hospital. We estimate 

that urban hospitals that bill 11,000 or more lines of OPPS services will experience 

increases between 1.8 percent and 3.1 percent, while urban hospitals that report between 

5,000 and 10,999 lines will experience an increase of 4.4 percent. 

Overall, we estimate that rural hospitals will experience a 2.2 percent increase as 

a result of the combined effects of all changes for CY 2013. We estimate that rural 

hospitals that bill less than 5,000 lines of OPPS services will experience an increase of 

4.6 percent and that rural hospitals that bill 5,000 or more lines of OPPS services will 

experience increases ranging from 2.1 to 2.8 percent. 

Among teaching hospitals, we estimate that the impacts resulting from the 

combined effects of all changes will include an increase of 1.8 percent for major teaching 
CMS-1589-FC 1168 

hospitals and 2.1 percent for nonteaching hospitals. Minor teaching hospitals will 

experience an increase of 1.7 percent. 

In our analysis, we also have categorized hospitals by type of ownership. Based 

on this analysis, we estimate that voluntary hospitals will experience an increase of 

1.9 percent, proprietary hospitals will experience an increase of 2.2 percent, and 

governmental hospitals will experience an increase of 1.9 percent. 
CMS-1589-FC 1169 

TABLE 57.—ESTIMATED IMPACT OF THE CY 2013 CHANGES FOR THE HOSPITAL OUTPATIE

PAYMENTS SYSTEM 

 (1) (2) (3) (4) (5) (6) 

Number of Hospitals 

APC Recalibration (Median) (%) 

Impact of Basing Weights Using Geo Mean(%) 

APC Recalibration (Geo Mean) (%) 

New Wage Index and Provider Adjustments (%) 

Combination of Cols 4, 5 with Market Basket Update (%) 

ALL FACILITIES * 4,127 0.0 0.0 0.0 0.0 1.8 ALL HOSPITALS 3,905 0.0 0.0 0.0 0.0 1.8 (excludes hospitals permanently held harmless and CMHCs) URBAN HOSPITALS 2,957 -0.1 0.0 -0.1 0.0 1.8  LARGE URBAN 1,611 -0.1 0.0 -0.1 0.2 1.9  (GT 1 MILL.)  OTHER URBAN 1,346 -0.1 0.0 -0.1 -0.1 1.6  (LE 1 MILL.) RURAL HOSPITALS 948 0.3 0.1 0.5 -0.2 2.1  SOLE COMMUNITY 385 0.4 0.1 0.5 0.0 2.3  OTHER RURAL 563 0.3 0.1 0.4 -0.4 1.9 
CMS-1589-FC 1170 

 (1) (2) (3) (4) (5) (6) 

Number of Hospitals 

APC Recalibration (Median) (%) 

Impact of Basing Weights Using Geo Mean(%) 

APC Recalibration (Geo Mean) (%) 

New Wage Index and Provider Adjustments (%) 

Combination of Cols 4, 5 with Market Basket Update (%) 

BEDS (URBAN)  0 - 99 BEDS 1,047 0.4 0.2 0.6 0.0 2.5  100-199 BEDS 833 0.1 0.1 0.2 0.2 2.2  200-299 BEDS 458 -0.1 0.0 -0.1 0.1 1.7  300-499 BEDS 415 -0.2 0.0 -0.2 0.1 1.7  500 + BEDS 204 -0.2 -0.1 -0.3 -0.2 1.3 BEDS (RURAL)  0 - 49 BEDS 356 0.8 0.4 1.2 -0.3 2.8  50- 100 BEDS 352 0.5 0.1 0.7 0.0 2.4  101- 149 BEDS 137 0.2 0.1 0.2 -0.6 1.5  150- 199 BEDS 55 0.3 0.1 0.4 -0.3 1.8  200 + BEDS 48 -0.2 0.0 -0.2 0.1 1.7 VOLUME (URBAN)  LT 5,000 Lines 597 2.4 2.5 4.9 -0.1 6.7  5,000 - 10,999 Lines 126 1.3 1.3 2.6 -0.3 4.1  11,000 - 20,999 Lines 197 0.7 0.3 1.0 0.1 2.9 
CMS-1589-FC 1171 

 (1) (2) (3) (4) (5) (6) 

Number of Hospitals 

APC Recalibration (Median) (%) 

Impact of Basing Weights Using Geo Mean(%) 

APC Recalibration (Geo Mean) (%) 

New Wage Index and Provider Adjustments (%) 

Combination of Cols 4, 5 with Market Basket Update (%) 

 21,000 - 42,999 Lines 429 0.3 0.1 0.4 0.1 2.3  42,999 - 89,999 Lines 688 0.0 0.0 0.0 0.1 1.9  GT 89,999 Lines 920 -0.2 0.0 -0.2 0.0 1.6 VOLUME (RURAL)  LT 5,000 Lines 59 1.8 1.3 3.1 -0.3 4.5  5,000 - 10,999 Lines 61 0.5 0.9 1.5 -0.9 2.3  11,000 - 20,999 Lines 146 0.6 0.6 1.2 -0.3 2.7  21,000 - 42,999 Lines 282 0.7 0.2 0.9 -0.3 2.4  GT 42,999 Lines 400 0.2 0.1 0.3 -0.2 1.9 REGION (URBAN)  NEW ENGLAND 149 0.3 0.0 0.3 -0.6 1.5  MIDDLE ATLANTIC 349 -0.1 -0.1 -0.1 -0.3 1.4  SOUTH ATLANTIC 453 -0.1 -0.1 -0.2 -0.5 1.1  EAST NORTH CENT. 474 -0.2 0.0 -0.2 0.3 1.9  EAST SOUTH CENT. 179 -0.3 -0.1 -0.4 -0.7 0.7  WEST NORTH CENT. 188 0.0 0.0 0.0 0.3 2.1 
CMS-1589-FC 1172 

 (1) (2) (3) (4) (5) (6) 

Number of Hospitals 

APC Recalibration (Median) (%) 

Impact of Basing Weights Using Geo Mean(%) 

APC Recalibration (Geo Mean) (%) 

New Wage Index and Provider Adjustments (%) 

Combination of Cols 4, 5 with Market Basket Update (%) 

 WEST SOUTH CENT. 515 -0.1 0.1 -0.1 -0.4 1.4  MOUNTAIN 208 0.2 0.0 0.2 0.6 2.7  PACIFIC 395 -0.1 0.1 0.0 1.4 3.3  PUERTO RICO 47 -0.1 0.0 -0.1 0.1 1.8 REGION (RURAL)  NEW ENGLAND 25 0.7 0.0 0.7 0.4 3.0  MIDDLE ATLANTIC 67 0.4 0.0 0.4 0.0 2.2  SOUTH ATLANTIC 161 0.2 0.1 0.3 -0.4 1.6  EAST NORTH CENT. 127 0.2 0.1 0.3 0.4 2.5  EAST SOUTH CENT. 175 0.0 0.1 0.1 -0.5 1.4  WEST NORTH CENT. 98 0.5 0.1 0.7 -0.5 2.0  WEST SOUTH CENT. 201 0.5 0.4 0.9 -0.4 2.3  MOUNTAIN 65 0.6 0.0 0.6 0.7 3.1  PACIFIC 29 0.7 0.1 0.8 -0.9 1.7 TEACHING STATUS  NON-TEACHING 2,930 0.1 0.1 0.2 0.0 2.0 
CMS-1589-FC 1173 

 (1) (2) (3) (4) (5) (6) 

Number of Hospitals 

APC Recalibration (Median) (%) 

Impact of Basing Weights Using Geo Mean(%) 

APC Recalibration (Geo Mean) (%) 

New Wage Index and Provider Adjustments (%) 

Combination of Cols 4, 5 with Market Basket Update (%) 

 MINOR 687 -0.1 0.0 -0.2 -0.1 1.5  MAJOR 288 -0.1 -0.1 -0.1 0.1 1.7 DSH PATIENT PERCENT  0 14 1.4 0.0 1.4 -0.1 3.1  GT 0 - 0.10 343 0.1 -0.1 0.0 0.0 1.8  0.10 - 0.16 327 0.1 0.0 0.0 0.1 1.9  0.16 - 0.23 686 0.0 0.0 0.0 0.0 1.7  0.23 - 0.35 1,064 0.0 0.0 0.0 -0.1 1.7  GE 0.35 832 -0.2 0.0 -0.1 0.1 1.8 

DSH NOT AVAILABLE ** 639 2.1 4.3 6.5 -0.1 8.2 

URBAN TEACHING/DSH  TEACHING & DSH 885 -0.1 -0.1 -0.2 0.0 1.6  NO TEACHING/DSH 1,458 0.0 0.0 0.0 0.1 1.9  NO TEACHING/NO DSH 14 1.4 0.0 1.4 -0.1 3.1  DSH NOT AVAILABLE** 600 2.1 4.1 6.2 0.0 8.0 
CMS-1589-FC 1174 

 (1) (2) (3) (4) (5) (6) 

Number of Hospitals 

APC Recalibration (Median) (%) 

Impact of Basing Weights Using Geo Mean(%) 

APC Recalibration (Geo Mean) (%) 

New Wage Index and Provider Adjustments (%) 

Combination of Cols 4, 5 with Market Basket Update (%) 

TYPE OF OWNERSHIP  VOLUNTARY 2,053 -0.1 0.0 -0.1 0.0 1.8  PROPRIETARY 1,294 0.1 0.2 0.3 -0.1 2.0  GOVERNMENT 558 0.1 0.0 0.1 -0.1 1.8 CMHCs 159 -1.8 -3.9 -5.7 -0.6 -4.5 

Column (1) shows total hospitals and/or CMHCs. Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups, the use payment weights, and the final recalibration of APC weights based on CY 2011 hospital claims data. Column (3) shows the estimated impact of basing the CY 2013 OPPS final payments on geometric mean costs, by comparthe policy for a geometric mean cost based system to those under a median based OPPS. Column (4) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups, the use the CY 2013 final OPPS relative payment weights, and the recalibration of APC weights based on CY 2011 hospital claimColumn (5) shows the budget neutral impact of updating the wage index by applying the FY 2013 hospital inpatient wage percent in both years so its budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments f

thus results in a budget neutrality factor of 1. 
CMS-1589-FC 1175 

Column (6) shows the impact of all budget neutrality adjustments and the final addition of the 1.8 percent OPD fee scheduby 0.7 percentage points for the multifactor productivity adjustment and further reduced by 0.1 percentage point in order tin the Affordable Care Act). Column (7) shows the non-budget neutral impact of applying the frontier State wage adjustment in CY 2013, after applicaschedule increase factor. Column (8) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate This column also shows the expiration of section 508 wages on March 30, 2012, and the application of the frontier State w*These 4,127 facilities include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. ** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatr
CMS-1589-FC 1176 

(3) Estimated Effects of OPPS Changes on CMHCs 

The last line of Table 57 demonstrates the isolated impact on CMHCs, which 

furnish only partial hospitalization (PHP) services under the OPPS. In CY 2012, CMHCs 

are paid under two APCs for these services: APC 0172 (Level I Partial Hospitalization 

(3 services) for CMHCs) and APC 0173 (Level II Partial Hospitalization (4 or more 

services) for CMHCs). In contrast, hospitals are paid for partial hospitalization services 

under APC 0175 (Level I Partial Hospitalization (3 services) for hospital-based PHPs) 

and APC 0176 (Level II Partial Hospitalization (4 or more services) for hospital-based 

PHPs). We first implemented these four APCs for CY 2011 and adopted payment rates 

for each APC based on the cost data derived from claims and cost reports for the provider 

type to which the APC is specific but provided a transition to CMHC rates based solely 

on CMHC data for the two CMHC PHP per diem rates. For CY 2013, we are continuing 

the provider-specific APC structure that we adopted for CY 2011 and are basing payment 

fully on the data for the type of provider furnishing the service. We modeled the impact 

of this APC policy assuming that CMHCs will continue to provide the same number of 

days of PHP care, with each day having either 3 services or 4 or more services, as seen in 

the CY 2011 claims data used for this final rule with comment period. We excluded days 

with 1 or 2 services because our policy only pays a per diem rate for partial 

hospitalization when 3 or more qualifying services are provided to the beneficiary. 

Because the relative payment weights for APC 0173 (Level II Partial Hospitalization 

(4 or more services) for CMHCs) decline in CY 2013 using geometric mean-based 

relative payment weights as opposed to median-based relative payment weights (shown 
CMS-1589-FC 1177 

in Columns 3 and 4), we estimate that there will be an overall 4.4 percent decrease in 

payments to CMHCs (shown in Column 8). 

Column 5 shows that the estimated impact of adopting the CY 2013 wage index 

values will result in a small decrease of 0.6 percent to CMHCs. We note that all 

providers paid under the OPPS, including CMHCs, will receive a 1.8 percent OPD fee 

schedule increase factor. Column 6 shows that combining this OPD fee schedule 

increase factor, along with changes in APC policy for CY 2013 and the CY 2013 wage 

index updates, results in an estimated decrease of 4.5 percent. Column 7 shows that 

adding the frontier State wage adjustment will result in no change to the cumulative 

4.5 percent decrease. Column 8 shows that adding the changes in outlier and pass-though 

payments will result in a 0.1 percent decrease in payment for CMHCs. This reflects all 

changes to CMHCs for CY 2013. 

(4) Estimated Effect of OPPS Changes on Beneficiaries 

For services for which the beneficiary pays a copayment of 20 percent of the 

payment rate, the beneficiary share of payment will increase for services for which the 

OPPS payments will rise and will decrease for services for which the OPPS payments 

will fall. For example, for a service assigned to Level IV Needle Biopsy/Aspiration 

Except Bone Marrow (APC 0037) in the CY 2012 OPPS, the national unadjusted 

copayment is $227.35, and the minimum unadjusted copayment is $215.00, 20 percent of 

the national unadjusted payment rate of $1,074.99. For CY 2013, the national unadjusted 

copayment for APC 0037 is $227.35, the same amount as the national unadjusted 

copayment in effect for CY 2012. The minimum unadjusted copayment for APC 0037 is 
CMS-1589-FC 1178 

$223.71 or 20 percent of the CY 2013 national unadjusted payment rate for APC 0037 of 

$1,118.54. The minimum unadjusted copayment will increase for CY 2013 compared to 

CY 2012 because the payment rate for APC 0037 will increase for CY 2013. For further 

discussion on the calculation of the national unadjusted copayments and minimum 

unadjusted copayments, we refer readers to section II.H. of this final rule with comment 

period. In all cases, the statute limits beneficiary liability for copayment for a procedure 

to the hospital inpatient deductible for the applicable year. The CY 2012 hospital 

inpatient deductible is $1,156. The amount of the CY 2013 hospital inpatient deductible 

is not available at the time of publication of this final rule with comment period. 

In order to better understand the impact of changes in copayment on beneficiaries, 

we modeled the percent change in total copayment liability using CY 2011 claims. We 

estimate, using the claims of the 4,127 hospitals and CMHCs on which our modeling is 

based, that total beneficiary liability for copayments will decrease as an overall 

percentage of total payments, from 22.0 percent in CY 2012 to 21.5 percent in CY 2013 

due largely to changes in service-mix. 

(5) Estimated Effects of OPPS Changes on Other Providers 

The relative payment weights and payment amounts established under the OPPS 

affect the payments made to ASCs as discussed in section XIV. of this final rule with 

comment period. No types of providers or suppliers other than hospitals, CMHCs and 

ASCs will be affected by the changes in this final rule with comment period. 

(6) Estimated Effects of OPPS Changes on the Medicare and Medicaid Programs 
CMS-1589-FC 1179 

The effect on the Medicare program is expected to be $600 million in additional 

program payments for OPPS services furnished in CY 2013. The effect on the Medicaid 

program is expected to be limited to increased copayments that Medicaid may make on 

behalf of Medicaid recipients who are also Medicare beneficiaries. We refer readers to 

our discussion of the impact on beneficiaries in section XXII.A. of this final rule with 

comment period. 

(7) Alternative OPPS Policies Considered 

Alternatives to the OPPS changes we are making and the reasons for our selected 

alternatives are discussed throughout this final rule with comment period. In this section, 

we discuss some of the major issues and the alternatives considered. 

● Alternatives Considered for Basing the APC Relative Payment Weights on 

Geometric Mean Costs Rather than Median Costs 

As described in section II.A.2.f. of this final rule with comment period, we are 

basing the CY 2013 relative payment weights on which OPPS payments are calculated 

using geometric mean costs rather than median costs. We established this policy based 

on stakeholder public comments, the improvements we have made to the data process to 

obtain more data and additional accuracy in estimating cost, and the other reasons 

described in the geometric mean based relative payment weights section. 

In developing this policy, we considered another alternative, which was to 

continue basing the relative payment weights based on median costs. As discussed in the 

geometric mean based weights section, medians have historically served as a good 

measure of central tendency and continue to do so. In the initial establishment of the 
CMS-1589-FC 1180 

OPPS, we selected medians as the measure of central tendency on which to base the 

weights for a number of reasons. Those included statistical bases such as medians' 

resistance to outlier observations and their impact as well as reasons surrounding the 

practical implementation of the OPPS as a new payment system. While some of those 

reasons for selecting medians continue to apply, others are now less relevant because of 

changes we have made in our data process, or no longer apply because of factors such as 

actual development of a working payment system. We have made a number of changes 

to the OPPS to address some of the challenges in arriving at better estimates of service 

cost, including trims, more specific application of cost to charge ratios in estimating cost, 

modeling changes to better simulate payment mechanisms, and methods of obtaining 

additional claims data through what is already available such as the bypass list. 

We believe that those changes have helped to improve the relative costs on which 

the payment system is based. We also believe that geometric mean costs better 

incorporate the range of costs associated with providing a service, and thus will represent 

one such additional improvement. Therefore, in order to improve the accuracy at which 

we arrive at service costs used to set relative payment weights, to be responsive to 

stakeholder concerns regarding the degree to which OPPS payment appropriately reflects 

service cost, and the other reasons described in section II.A.2.f. of this final rule with 

comment period, we will establish the CY 2013 OPPS relative payment weights based on 

geometric means rather than continuing our historical practice of modeling costs using 

median costs. 
CMS-1589-FC 1181 

● Alternatives Considered for Payment of Drugs and Biologicals That Do Not 

Have Pass-Through Status 

We are paying for separately payable drugs and biologicals at ASP+6 percent, 

based on section 1833(t)(14)(A)(iii)(II) of the Act, also referred to as the statutory 

default. As detailed in greater depth in section V.B.3 of this final rule with comment 

period, this payment will represent the combined payment for both the acquisition and 

pharmacy overhead costs of separately payable drugs and biologicals. 

We considered three alternatives for payment for drugs and biologicals that do not 

have pass-through status for CY 2013 (separately payable drugs and biologicals). The 

first alternative we considered was to propose to use the standard methodology, as 

described in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68642). 

We compared the estimated aggregate cost of separately payable drugs and biologicals in 

our claims data to the estimated aggregate ASP dollars for separately payable drugs and 

biologicals, using the ASP as a proxy for average acquisition cost, to calculate the 

estimated percent of ASP that would serve as the best proxy for the combined acquisition 

and pharmacy overhead costs of separately payable drugs and biologicals, but without 

redistribution of estimated pharmacy overhead costs. Under this methodology, without a 

redistribution of overhead costs from packaged drugs to separately payable drugs, using 

April 2012 ASP information and costs derived from CY 2011 OPPS claims data, we 

estimated the combined acquisition and overhead costs of separately payable drugs and 

biologicals to be ASP+0 percent. We also determined that the combined acquisition and 

overhead costs of packaged drugs are 311 percent of ASP. 
CMS-1589-FC 1182 

We did not choose this alternative because we believe that this analysis indicates 

that hospital charging practices reflected in our standard drug payment methodology have 

the potential to “compress” the calculated costs of separately payable drugs and 

biologicals to some degree when there is no redistribution of estimated pharmacy 

overhead costs. Further, we recognize that the attribution of pharmacy overhead costs to 

packaged or separately payable drugs and biologicals through our standard drug payment 

methodology of a combined payment for acquisition and pharmacy overhead costs 

depends, in part, on the treatment of all drugs and biologicals each year under our annual 

drug packaging threshold. Changes to the packaging threshold may result in changes to 

payment for the overhead cost of drugs and biologicals that do not reflect actual changes 

in hospital pharmacy overhead cost for those products. 

The second alternative we considered was to propose to continue our overhead 

adjustment methodology for CY 2013 and redistribute $270 million in overhead costs 

from packaged coded and uncoded drugs and biologicals to separately payable drugs and 

biologicals. Using this approach, we adjusted the CY 2011 pharmacy overhead 

redistribution amount of $200 million using the PPI for Pharmaceuticals for Human Use, 

resulting in a redistribution amount of $270 million and a payment rate for separately 

payable drugs of ASP+6 percent. We did not choose this alternative because of the 

reasons discussed below and in further detail in section V.B.3 of this final rule with 

comment period. 

The third option that we considered, and the one that we are adopting for 

CY 2013, is to pay for separately payable drugs and biologicals administered in the 
CMS-1589-FC 1183 

hospital outpatient department, at ASP+6 percent based on the statutory default described 

in section 1833(t)(14)(A)(iii)(II) of the Act, which requires an alternative methodology 

for determining payment rates for SCODs wherein, if hospital acquisition cost data are 

not available, payment shall be equal (subject to any adjustment for overhead costs) to 

payment rates established under the methodology described in section 1842(o), section 

1847A, or section 1847B of the Act, as calculated and adjusted by the Secretary as 

necessary. We determined that this ASP+6 percent payment amount for separately 

payable drugs and biologicals represents the combined acquisition and pharmacy 

overhead payment for drugs and biologicals for CY 2013. 

As described in further detail in section V.B.3 of this final rule with comment 

period, we chose this alternative because we are uncertain about the full cost of pharmacy 

overhead and acquisition cost, due to the limitations of the submitted hospital charge and 

claims data for drugs. We believe that the continued use of our current drug payment 

methodologies may not appropriately account for average acquisition and pharmacy 

overhead cost and therefore could result in future payment rates that are not appropriate. 

Therefore, we finalized our proposal to pay for separately payable drugs and 

biologicals based on the statutory default at the physician’s office Part B payment rates, 

as established in sections 1842(o) and 1847A of the Act, at ASP+6 percent. We believe 

that paying for separately payable drugs and biologicals at ASP+6 percent based on the 

statutory default is appropriate at this time as it yields increased predictability in payment 

for drugs and biologicals under the OPPS while appropriately paying for drugs at a level 

consistent with payment amounts yielded by our methodology of the past 7 years. 
CMS-1589-FC 1184 

b. Estimated Effects of ASC Payment System Final Policies 

On August 2, 2007, we published in the Federal Register the final rule for the 

revised ASC payment system, effective January 1, 2008 (72 FR 42470). In that final 

rule, we adopted the methodologies to set payment rates for covered ASC services to 

implement the revised payment system so that it would be designed to result in budget 

neutrality as required by section 626 of Pub. L. 108-173; established that the OPPS 

relative payment weights would be the basis for payment and that we would update the 

system annually as part of the OPPS rulemaking cycle; and provided that the revised 

ASC payment rates would be phased in over 4 years. 

ASC payment rates are calculated by multiplying the ASC conversion factor by 

the ASC relative payment weight. As discussed fully in section XIV. of this final rule 

with comment period, we set the CY 2013 ASC relative payment weights by scaling the 

CY 2013 OPPS relative payment weights by the ASC scaler of 0.9324. The estimated 

effects of the updated relative payment weights on payment rates are varied and are 

reflected in the estimated payments displayed in Tables 58 and 59 below. 

Beginning in CY 2011, section 3401 of the Affordable Care Act requires that the 

annual update to the ASC payment system (which currently is the CPI-U) after 

application of any quality reporting reduction be reduced by a productivity adjustment. 

The Affordable Care Act defines the productivity adjustment to be equal to the 10-year 

moving average of changes in annual economy-wide private nonfarm business 

multifactor productivity (MFP) (as projected by the Secretary for the 10-year period 

ending with the applicable fiscal year, year, cost reporting period, or other annual period). 
CMS-1589-FC 1185 

Because the ASCQR Program will not affect payment rates until CY 2014, there will be 

no reduction to the CPI-U for failure to meet the requirements of the ASCQR Program 

for CY 2013. We calculated the CY 2013 ASC conversion factor by adjusting the 

CY 2012 ASC conversion factor by 1.0008 to account for changes in the pre-floor and 

pre-reclassified hospital wage indices between CY 2012 and CY 2013 and by applying 

the CY 2013 MFP-adjusted CPI-U update factor of 0.6 percent (projected CPI-U update 

of 1.4 percent minus a projected productivity adjustment of 0.8 percent). The CY 2013 

ASC conversion factor is $42.917. 

(1) Limitations of Our Analysis 

Presented here are the projected effects of the changes for CY 2013 on Medicare 

payment to ASCs. A key limitation of our analysis is our inability to predict changes in 

ASC service-mix between CY 2011 and CY 2013 with precision. We believe that the net 

effect on Medicare expenditures resulting from the CY 2013 changes would be small in 

the aggregate for all ASCs. However, such changes may have differential effects across 

surgical specialty groups as ASCs continue to adjust to the payment rates based on the 

policies of the revised ASC payment system. We are unable to accurately project such 

changes at a disaggregated level. Clearly, individual ASCs would experience changes in 

payment that differ from the aggregated estimated impacts presented below. 

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

Some ASCs are multispecialty facilities that perform the gamut of surgical 

procedures from excision of lesions to hernia repair to cataract extraction; others focus on 

a single specialty and perform only a limited range of surgical procedures, such as eye, 
CMS-1589-FC 1186 

digestive system, or orthopedic procedures. The combined effect on an individual ASC 

of the update to the CY 2013 payments would depend on a number of factors, including, 

but not limited to, the mix of services the ASC provides, the volume of specific services 

provided by the ASC, the percentage of its patients who are Medicare beneficiaries, and 

the extent to which an ASC provides different services in the coming year. The 

following discussion presents tables that display estimates of the impact of the CY 2013 

updates to the ASC payment system on Medicare payments to ASCs, assuming the same 

mix of services as reflected in our CY 2011 claims data. Table 58 depicts the estimated 

aggregate percent change in payment by surgical specialty or ancillary items and services 

group by comparing estimated CY 2012 payments to estimated CY 2013 payments, and 

Table 59 shows a comparison of estimated CY 2012 payments to estimated CY 2013 

payments for procedures that we estimate would receive the most Medicare payment in 

CY 2012. 

Table 58 shows the estimated effects on aggregate Medicare payments under the 

ASC payment system by surgical specialty or ancillary items and services group. We 

have aggregated the surgical HCPCS codes by specialty group, grouped all HCPCS codes 

for covered ancillary items and services into a single group, and then estimated the effect 

on aggregated payment for surgical specialty and ancillary items and services groups. 

The groups are sorted for display in descending order by estimated Medicare program 

payment to ASCs. The following is an explanation of the information presented in 

Table 58. 
CMS-1589-FC 1187 

● Column 1—Surgical Specialty or Ancillary Items and Services Group indicates 

the surgical specialty into which ASC procedures are grouped and the ancillary items and 

services group which includes all HCPCS codes for covered ancillary items and services. 

To group surgical procedures by surgical specialty, we used the CPT code range 

definitions and Level II HCPCS codes and Category III CPT codes as appropriate, to 

account for all surgical procedures to which the Medicare program payments are 

attributed. 

● Column 2—Estimated CY 2012 ASC Payments were calculated using 

CY 2011 ASC utilization (the most recent full year of ASC utilization) and CY 2012 

ASC payment rates. The surgical specialty and ancillary items and services groups are 

displayed in descending order based on estimated CY 2012 ASC payments. 

● Column 3—Estimated CY 2013 Percent Change is the aggregate percentage 

increase or decrease in Medicare program payment to ASCs for each surgical specialty or 

ancillary items and services group that would be attributable to updates to ASC payment 

rates for CY 2013 compared to CY 2012. 

As seen in Table 58, we estimate that the update to ASC rates for CY 2013 would 

result in a zero percent change in aggregate payment amounts for eye and ocular adnexa 

procedures, a 2-percent increase in aggregate payment amounts for digestive system 

procedures, and a 3-percent increase in aggregate payment amounts for nervous system 

procedures. 

Generally, for the surgical specialty groups that account for less ASC utilization 

and spending, we estimate that the payment effects of the CY 2013 update are variable. 
CMS-1589-FC 1188 

For instance, we estimate that, in the aggregate, payment for integumentary system 

procedures, respiratory system procedures, and cardiovascular systems procedures would 

decrease by 3 percent, whereas auditory system procedures would increase by 1 percent 

under the CY 2013 rates. 

An estimated increase in aggregate payment for the specialty group does not mean 

that all procedures in the group would experience increased payment rates. For example, 

the estimated increase for CY 2013 for nervous system procedures is likely due to an 

increase in the ASC payment weight for some of the high volume procedures, such as 

CPT code 63685 (Insrt/redo spine n generator) where estimated payment would increase 

by 8 percent for CY 2013. 

Also displayed in Table 58 is a separate estimate of Medicare ASC payments for 

the group of separately payable covered ancillary items and services. The payment 

estimates for the covered surgical procedures include the costs of packaged ancillary 

items and services. We estimate that aggregate payments for these items and services 

would remain unchanged for CY 2013. 

TABLE 58.—ESTIMATED IMPACT OF THE FINAL CY 2013 UPDATE TO THE 

ASC PAYMENT SYSTEM ON AGGREGATE CY 2013 MEDICARE PROGRAM 

PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS AND 

SERVICES GROUP 

Surgical Specialty Group 

(1) 

Estimated 

CY 2012 

ASC 

Payments 

(in Millions) 

(2) 

Estimated 

CY 2013 

Percent 

Change 

(3) 

Total $3,480 1% 

Eye and ocular adnexa $1,453 0% 
CMS-1589-FC 1189 

Surgical Specialty Group 

(1) 

Estimated 

CY 2012 

ASC 

Payments 

(in Millions) 

(2) 

Estimated 

CY 2013 

Percent 

Change 

(3) 

Digestive system $719 2% 

Nervous system $471 3% 

Musculoskeletal system $433 -2% 

Genitourinary system $160 0% 

Integumentary system $131 -3% 

Respiratory system $45 -3% 

Cardiovascular system $31 -3% 

Ancillary items and services $21 0% 

Auditory system $11 1% 

Hematologic & lymphatic systems $5 0% 

Table 59 below shows the estimated impact of the updates to the revised ASC 

payment system on aggregate ASC payments for selected surgical procedures during 

CY 2013. The table displays 30 of the procedures receiving the greatest estimated 

CY 2012 aggregate Medicare payments to ASCs. The HCPCS codes are sorted in 

descending order by estimated CY 2012 program payment. 

● Column 1–CPT/HCPCS code. 

● Column 2–Short Descriptor of the HCPCS code. 

● Column 3–Estimated CY 2012 ASC Payments were calculated using CY 2011 

ASC utilization (the most recent full year of ASC utilization) and the CY 2012 ASC 

payment rates. The estimated CY 2012 payments are expressed in millions of dollars. 

● Column 4–Estimated CY 2013 Percent Change reflects the percent differences 

between the estimated ASC payment for CY 2012 and the estimated payment for 

CY 2013 based on the update. 
CMS-1589-FC 1190 

TABLE 59.--ESTIMATED IMPACT OF THE FINAL CY 2013 UPDATE TO THE 

ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS FOR SELECTED 

PROCEDURES 

CPT/HCPCS 

Code* 

(1) 

Short Descriptor 

(2) 

Estimated 

CY 2012 

ASC 

Payments 

(in millions) 

(3) 

Estimated 

CY 2013 

Percent 

Change 

(4) 

66984 Cataract surg w/iol, 1 stage $1,079 1%

43239 Upper GI endoscopy, biopsy $157 2%

45380 Colonoscopy and biopsy $144 2%

45385 Lesion removal colonoscopy $92 2%

45378 Diagnostic colonoscopy $89 2%

66982 Cataract surgery, complex $83 1%

64483 Inj foramen epidural l/s $73 5%

62311 Inject spine l/s (cd) $68 5%

66821 After cataract laser surgery $55 5%

63650 Implant neuroelectrodes $40 -2%

15823 Revision of upper eyelid $39 -2%

G0105 Colorectal scrn; hi risk ind $38 2%

64493 Inj paravert f jnt l/s 1 lev $36 5%

29827 Arthroscop rotator cuff repr $36 -6%

64721 Carpal tunnel surgery $31 -1%

G0121 Colon ca scrn not hi rsk ind $30 2%

29881 Knee arthroscopy/surgery $30 -1%

63685 Insrt/redo spine n generator $28 8%

64590 Insrt/redo pn/gastr stimul $25 8%

29880 Knee arthroscopy/surgery $25 -1%

45384 Lesion remove colonoscopy $23 2%

43235 Uppr gi endoscopy diagnosis $23 2%

52000 Cystoscopy $20 4%

28285 Repair of hammertoe $19 -1%

62310 Inject spine c/t $18 5%

26055 Incise finger tendon sheath $17 -4%

67042 Vit for macular hole $17 -1%

29826 Shoulder arthroscopy/surgery $17 -1%

67904 Repair eyelid defect $17 -3%

50590 Fragmenting of kidney stone $17 -4%
CMS-1589-FC 1191 

*Note that HCPCS codes we are deleting for CY 2013 are not displayed in this table. 

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

We estimate that the CY 2013 update to the ASC payment system would be 

generally positive for beneficiaries with respect to the new procedures that we are adding 

to the ASC list of covered surgical procedures and for those that we are designating as 

office-based for CY 2013. First, other than certain preventive services where coinsurance 

and the Part B deductible is waived to comply with sections 1833(a)(1) and (b) of the 

Act, the ASC coinsurance rate for all procedures is 20 percent. This contrasts with 

procedures performed in HOPDs, where the beneficiary is responsible for copayments 

that range from 20 percent to 40 percent of the procedure payment. Second, in almost all 

cases, the ASC payment rates under the ASC payment system are lower than payment 

rates for the same procedures under the OPPS. Therefore, the beneficiary coinsurance 

amount under the ASC payment system will almost always be less than the OPPS 

copayment amount for the same services. (The only exceptions would be if the ASC 

coinsurance amount exceeds the inpatient deductible. The statute requires that 

copayment amounts under the OPPS not exceed the inpatient deductible.) Furthermore, 

the additions to the ASC list of covered surgical procedures will provide beneficiaries 

access to more surgical procedures in ASCs. Beneficiary coinsurance for services 

migrating from physicians' offices to ASCs may decrease or increase under the revised 

ASC payment system, depending on the particular service and the relative payment 

amounts for that service in the physician's office compared to the ASC. However, for 
CMS-1589-FC 1192 

those additional procedures that we are designating as office-based in CY 2013, the 

beneficiary coinsurance amount would be no greater than the beneficiary coinsurance in 

the physician's office because the coinsurance in both settings is 20 percent (except for 

certain preventive services where the coinsurance is waived in both settings). 
CMS-1589-FC 1193 

(4) Alternative ASC Payment Policies Considered 

Alternatives to the changes we are making to the ASC payment system and the 

reasons that we have chosen specific options are discussed throughout this final rule with 

comment period. Some of the major ASC issues discussed in this final rule with 

comment period and the options considered are discussed below. 

● Alternatives Considered for the Annual Update to ASC Payments for Inflation 

Section 1833(i)(2)(C)(i) of the Act requires that, “if the Secretary has not updated 

amounts established” under the revised ASC payment system in a calendar year, the 

payment amounts “shall be increased by the percentage increase in the Consumer Price 

Index for all urban consumers (U.S. city average) as estimated by the Secretary for the 

12-month period ending with the midpoint of the year involved.” The statute, therefore, 

does not mandate the adoption of any particular update mechanism, but it requires the 

payment amounts to be increased by the CPI-U in the absence of any update. Because 

the Secretary updates the ASC payment amounts annually under the revised payment 

system, we are not compelled to increase the ASC payment amounts by the CPI-U. 

Nonetheless, we adopted a policy, which we codified at § 416.171(a)(2)(ii), to update the 

ASC conversion factor using the CPI-U for CY 2010 and subsequent calendar years. 

While we believe the CPI-U is appropriate to apply to update the ASC payment system, 

we are aware that the CPI-U is highly weighted for housing and transportation and may 

not best reflect inflation in the cost of providing ASC services. Therefore, as alternatives 

to using the CPI-U to update ASC payment rates for inflation, in developing this final 

rule with comment period, we considered using: (1) the hospital market basket, which is 
CMS-1589-FC 1194 

used to update OPPS rates for inflation; (2) the PE component of the MEI update, which 

is used to update the MPFS payment rates for inflation; or (3) the average of the hospital 

market basket update and the PE component of the MEI update. 

However, until we have more information regarding the cost inputs of ASCs, we 

are not confident that any of the alternatives are a better proxy for ASC cost inputs than 

the CPI-U. Therefore, we proposed and are finalizing our established policy to continue 

to base the ASC update on the CPI-U. 

● Alternatives Considered for Office-Based Procedures 

According to our existing policy for the ASC payment system, we designate as 

office-based those procedures that are added to the ASC list of covered surgical 

procedures in CY 2008 or later years and that we determine are predominantly performed 

in physicians’ offices based on consideration of the most recent available volume and 

utilization data for each individual procedure HCPCS code and/or, if appropriate, the 

clinical characteristics, utilization, and volume of related HCPCS codes. We establish 

payment for procedures designated as office-based at the lesser of the MPFS nonfacility 

practice expense payment amount or the ASC rate developed according to the standard 

methodology of the ASC payment system. 

In developing this final rule with comment period, we reviewed CY 2011 

utilization data for all surgical procedures added to the ASC list of covered surgical 

procedures in CY 2008 or later years and for those procedures for which the office-based 

designation is temporary in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74406 through 74408). Based on that review and as discussed in section 
CMS-1589-FC 1195 

XIV.C.1.b. of this final rule with comment period, we are newly designating 6 surgical 

procedures as permanently office-based, are making temporary office-based designations 

for 6 procedures in CY 2013 of the 8 procedures that were designated as temporarily 

office-based for CY 2012, and are making temporary office-based designations for 2 

procedures that are new ASC covered surgical procedures for CY 2013. We considered 

two alternatives in developing this policy. 

The first alternative we considered was to make no change to the procedure 

payment designations. This would mean that we would pay for the 6 procedures we 

proposed to designate as permanently office-based and the 8 procedures we proposed to 

designate as temporarily office-based at an ASC payment rate calculated according to the 

standard ratesetting methodology of the ASC payment system. We did not select this 

alternative because our analysis of the data and our clinical review indicated that all 6 

procedures we proposed to designate as permanently office-based, as well as the 8 

procedures that we proposed to designate temporarily as office-based, are considered to 

be predominantly performed in physicians’ offices. Consistent with our final policy 

adopted in the August 2, 2007 final rule (72 FR 42509 through 42513), we were 

concerned that making payments at the standard ASC payment rate for the 6 procedures 

we proposed to designate as permanently office-based and the 8 procedures we proposed 

to designate as temporarily office-based could create financial incentives for the 

procedures to shift from physicians’ offices to ASCs for reasons unrelated to clinical 

decisions regarding the most appropriate setting for surgical care. Further, consistent 

with our policy, we believe that when adequate data become available to make permanent 
CMS-1589-FC 1196 

determinations about procedures with temporary office-based designations, maintaining 

the temporary designation is no longer appropriate. 

The second alternative we considered and the one we selected for CY 2013 is to 

designate 6 additional procedures as permanently office-based for CY 2013 and to 

designate 8 procedures as temporarily office-based in CY 2013. We chose this 

alternative because our claims data and clinical review indicate that these procedures 

would be considered to be predominantly performed in physicians’ offices. We believe 

that designating these procedures as office-based, which results in the CY 2013 ASC 

payment rate for these procedures potentially being capped at the CY 2013 physicians’ 

office rate (that is, the MPFS nonfacility practice expense payment amount), if 

applicable, is an appropriate step to ensure that Medicare payment policy does not create 

financial incentives for such procedures to shift unnecessarily from physicians’ offices to 

ASCs, consistent with our final policy adopted in the August 2, 2007 final rule. 

c. Effects of the Revisions to the QIO Regulations 

In section XVIII. of this final rule with comment period, we discuss our changes 

to the QIO program regulations, including: adding provisions for processing beneficiary 

complaints that will give beneficiaries more information about the QIO’s review process, 

which includes a new alternative dispute resolution option (immediate advocacy); giving 

QIOs the authority to send and receive secure transmissions of electronic versions of 

health information; conveying beneficiaries the right to authorize the QIOs’ use and 

disclosure of confidential information; and removing outdated regulatory provisions that 

will enable QIOs to give more information regarding the results of reviews. We believe 
CMS-1589-FC 1197 

the changes will improve the QIO program, give beneficiaries better information 

regarding review activities and reduce burden for both providers and practitioners. 

The QIO program requests approximately 62,400 medical records each year for 

the Hospital IQR and Hospital OQR Programs combined (38,400 for inpatient and 24,000 

for outpatient). For the Hospital IQR Program, the average number of pages per medical 

record is 289 pages, and for the Hospital OQR Program, the average number of pages is 

74. Reimbursement is made at a rate of $0.12 per page for PPS hospitals, which includes 

the costs of toner, paper, and labor associated with the copying of paper medical records. 

We also note that the labor associated with copying the medical records can be 

considerable. In fact, many providers and practitioners store health information 

electronically, and these same providers and practitioners are forced to print hard copies 

of the information for shipment to the QIOs. Sometimes this may entail using the “print 

screen” function to create the record to be shipped. On average, the cost of shipping the 

records is approximately $32.35 per shipment, with approximately 5,200 shipments being 

made. The shipping amount takes into consideration that, for some QIO review 

activities, multiple records are shipped at one time, which can involve the use of several 

boxes. 

Under our proposal, by example, assuming all hospitals operate under a PPS, 

should all hospitals transfer health information on a digital versatile device (DVD), the 

costs associated with the toner and paper would be replaced by the costs of a DVD. In 

fact, numerous medical records could be copied to a single DVD. Moreover, the labor in 

copying the records would be substantially reduced because, for example, rather than 
CMS-1589-FC 1198 

copying the average 289 pages related to a Hospital IQR Program review, the file could 

be electronically transferred to a DVD for shipping. We estimate that the $0.12 per page 

rate could be reduced by as much as $0.07 per page. Based on the overall average 

number of pages for the Hospital IQR Program and Hospital OQR Program, respectively, 

reducing the per page rate to $0.05 per page would save $901,152 ((11,097,600 pages x 

$0.12 = $1,331,712) + (1,776,000 pages x $0.12 = $213,120) – (11,097,600 pages x 

$0.05 = $554,880) – (1,776,000 pages x $0.05 = $88,800)). 

The changes also would reduce the costs associated with mailing the records. For 

the Hospital IQR Program, hospitals sometimes need to ship as many as four or five large 

boxes of medical records. By comparison, a single DVD can house multiple medical 

records and even if multiple DVDs were required, all the DVDs could be mailed in a 

single envelope at a significantly lower cost. Potentially, the per envelope mailing cost 

could be as low as $5 compared to the per shipment average cost of $32.35. Thus, if all 

records were shipped on DVDs, the program would save $142,220 ($168,220 – $26,000). 

The changes allowing the sending and receiving of electronic versions of health 

information also would reduce costs for other QIO review activities. QIOs request 

approximately 100,000 medical records in completing other review activities, including 

but not limited to requests related to the processing of general quality of care reviews, 

written beneficiary complaint reviews, medical necessity reviews, and expedited 

discharge appeal reviews. The average number of pages associated with each of these 

reviews varies greatly, and we have estimated an overall average of approximately 

175 pages per request. The reimbursement rate for requests associated with these 
CMS-1589-FC 1199 

activities is $0.12 per page for PPS providers and $0.15 per page for practitioners and 

non-PPS providers. Assuming an overall average number of 175 pages for each record, 

we estimate that the total number of pages requested is approximately 17,500,000. 

Assuming that approximately 75 percent (13,125,000) of the pages are from practitioners 

and non-PPS providers, with the remaining 25 percent (4,375,000) from PPS providers, 

based on the $0.12 or $0.15 per page reimbursement rate, we estimate that the total costs 

would be approximately $1,968,750 and $525,000, respectively. If all these requests 

were fulfilled using a DVD or other electronic means, we estimate that the cost per page 

could be reduced to approximately $0.05 per page for PPS providers and $0.06 per page 

for practitioners and non-PPS providers. Thus, the estimated savings related to PPS 

providers would be approximately $306,250 ($525,000 - $218,750) and the estimated 

savings related to practitioners and non-PPS providers would be approximately 

$1,181,250 ($1,968,750 – $787,500). 

With regard to mailing, we also believe the changes would significantly reduce 

the costs for other QIO review activities. Moreover, unlike the Hospital IQR and 

Hospital OQR Programs, the number of medical records requested for these other QIO 

review activities more closely mirrors the actual number of shipments made. For 

example, on average, the QIOs request 100,000 medical records related to these other 

activities, and we estimate that this equates to approximately 82,000 shipments. We 

estimate that there is a corresponding decrease in the cost per shipment ($7 per shipment 

compared to $32.35 per shipment for the Hospital IQR and OQR Programs). If DVDs 
CMS-1589-FC 1200 

were used instead of paper copies of the medical records, we estimate saving of $164,000 

(82,000 x $7 – 82,000 x $5). 

Beginning with the QIOs’ most recent scope of work, which began 

August 1, 2011, QIOs began offering immediate advocacy to Medicare beneficiaries for 

the resolution of certain types of oral complaints. We believe that cost savings will be 

realized as a result. In developing this new process, we had several goals. One of these 

goals was to create a way for Medicare beneficiaries to obtain resolutions of complaints 

much faster than the traditional peer review process, which usually take over 158 days to 

complete because, inevitably, various timeframes throughout the review process are not 

met (for example, providers and practitioners sometimes take more time that allowed to 

respond to medical record requests or the opportunity for discussion). By comparison, 

we believe that immediate advocacy normally can be completed within 2 calendar days. 

However, this process could result in reductions of more than merely a reduction in days. 

Because immediate advocacy is completed without reviewing a beneficiary’s medical 

record, QIOs would save the costs associated with requesting the records, which includes 

the labor, supplies (toner and paper), and mailing of the records. Moreover, although 

there may be some variation among QIOs, immediate advocacy would typically be 

carried out by a nurse or social worker, and, thus, the QIO can avoid the more expensive 

costs associated with the use of a physician reviewer. 

In addition, for a traditional complaint review, the QIO’s peer reviewer completes 

three separate and distinct reviews (the interim initial determination, the final initial 

determination, and the reconsideration determination), each time reviewing the medical 
CMS-1589-FC 1201 

information and providing his/her conclusion about the quality of care provided. 

Moreover, the provider and/or practitioner who is the subject of the complaint will be 

brought into the complaint process each time to respond to the conclusions. With 

immediate advocacy, the nurse or social work would be involved once, early in the 

process, with the primary role being to listen to the beneficiary’s concerns and then 

coordinate a resolution with the provider or practitioner, instead of merely reviewing 

information contained in the beneficiary’s medical information. Not only would this 

process enable beneficiaries to obtain resolution of complaints quicker, but it would 

decrease the amount of time and energy practitioners and providers would devote to 

responding to the complaints. This is especially true for certain types of complaints 

where the issues involved are not even documented in the medical information the 

physician reviewers would review in the traditional complaint process. Typically, we 

have estimated a total cost per case of $960 for each case processed using the traditional 

peer review process. We estimate that, for those instances where immediate advocacy is 

used, the average cost per case would be approximately $87. On average, QIOs complete 

approximately 3,500 complaint reviews each year, and we estimate that approximately 10 

percent of these reviews (350) would be resolved using immediate advocacy instead of 

the traditional peer review process. This would result in savings of $305,550 each year 

(($960 x 350 = $336,000) – ($87 x 350 = $30,450)). 

Comment: One commenter stated that the estimate of $87 for immediate 

advocacy “seems unreasonably low for the actual staff time involved in these cases.” 
CMS-1589-FC 1202 

Response: We appreciate the comment. However, our ability to evaluate the 

substance of the comment is limited because the commenter did not give any specific 

information regarding why the commenter believes the estimated amount is unreasonably 

low. In identifying the estimated amount, we considered the significantly reduced time 

frame within which these cases are resolved, the fact that the types of complaints are less 

severe than what can be handled through the traditional complaint process, and the fact 

that QIOs will be able to use review analysts in completing these reviews compared to 

other more costly peer reviewers used as many as three times as part of the traditional 

complaint review process. While we recognize that the time needed to achieve an actual 

resolution may be longer, we estimated that, on average, the actual amount of time spent 

working on these cases to be approximately 70 minutes, and using an hourly rate of 

approximately $43.17 and adding in other costs, such as leave and other indirect costs, 

we believe $87 is appropriate. In light of the above, we see no need to adjust the 

estimated cost. 

The technical changes to the QIO regulations under section XVIII.F. of this final 

rule with comment period that we are making to improve the regulations reflect CMS’ 

commitment to the principles of the President’s Executive Order on Regulatory Reform, 

Executive Order 13563 (January 18, 2011). 

Below is a table summarizing the savings associated with both of these 

provisions. 

Provision Savings per Year 

Authority to transmit information 

electronically 

$2,388,622 total per year 
CMS-1589-FC 1203 

Quality Reporting Information 

(Copying) 

$901,152 

Quality Reporting Information 

(Mailing) 

$142,220 

Other QIO Activities (Copying) $1,487,500 

Other QIO Activities (Mailing) $164,000 

Immediate Advocacy $305,550 total per year 

Total Savings $3,000,422 per year 

d. Accounting Statements and Tables 

As required by OMB Circular A-4 (available on the Office of Management and 

Budget Web Site at: 

http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf, 

we have prepared three accounting statements to illustrate the impacts of this final rule 

with comment period. The first accounting statement, Table 60 below, illustrates the 

classification of expenditures for the CY 2013 estimated hospital OPPS incurred benefit 

impacts associated with the CY 2013 OPD fee schedule increase, based on the FY 2013 

President’s Budget. The second accounting statement, Table 61 below, illustrates the 

classification of expenditures associated with the 0.6 percent CY 2013 update to the ASC 

payment system, based on the provisions of this final rule with comment period and the 

baseline spending estimates for ASCs in the FY 2013 President’s Budget. The third 

accounting statement, Table 62 below, illustrates the estimated impact based on the 

provisions allowing QIOs to securely send and receive electronic versions of health 

information as well as the use of alternative dispute resolution process called immediate 

advocacy. Lastly, the three tables classify most estimated impacts as transfers. 
CMS-1589-FC 1204 

TABLE 60.--ACCOUNTING STATEMENT: CY 2013 ESTIMATED HOSPITAL 

OPPS TRANSFERS FROM CY 2012 TO CY 2013 ASSOCIATED WITH THE 

CY 2013 HOSPITAL OUTPATIENT OPD FEE SCHEDULE INCREASE 

Category Transfers 

Annualized Monetized Transfers $600 million 

From Whom to Whom Federal Government to outpatient hospitals and 

other providers who received payment under 

the hospital OPPS 

Total $600 million 

TABLE 61.--ACCOUNTING STATEMENT: CLASSIFICATION OF 

ESTIMATED TRANSFERS FROM CY 2012 TO CY 2013 AS A RESULT OF THE 

FINAL CY 2013 UPDATE TO THE REVISED ASC PAYMENT SYSTEM 

Category Transfers 

Annualized Monetized Transfers $18 million 

From Whom to Whom 

Federal Government to Medicare Providers 

and Suppliers 

Total $18 million 

TABLE 62.--ACCOUNTING STATEMENT: CY 2013 ESTIMATED SAVINGS 

TO MEDICARE FROM THE REVISIONS OF THE QIO REGULATIONS 

Category Transfers 

Annualized Monetized Transfers -$3.0 million 

From whom to Whom Federal Government to Medicare Providers 

Total -$3.0 million 

e. Effects of Requirements for the Hospital OQR Program 

In section XVI. of the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68758 through 68781), section XVI. of the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60629 through 60655), section XVI. of the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 72064 through 72110), and section XVI. of the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74451 through 74492), we 
CMS-1589-FC 1205 

discussed the requirements for subsection (d) hospitals to report quality data under the 

Hospital OQR Program in order to receive the full OPD fee schedule increase factor for 

CY 2010, CY 2011, and CYs 2012 through 2014, respectively. In section XV. of this 

final rule with comment period, we adopted additional policies affecting the Hospital 

OQR Program. 

We determined that 114 hospitals did not meet the requirements to receive the full 

OPD fee schedule increase factor for CY 2012. Most of these hospitals (106 of the 114) 

received little or no OPPS payment on an annual basis and did not participate in the 

Hospital OQR Program. We estimate that 106 hospitals may not receive the full OPD fee 

schedule increase factor in CY 2014. We are unable at this time to estimate the number 

of hospitals that may not receive the full OPD fee schedule increase factor in CY 2015. 

In section XVI.E.3.a. of the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60647 through 60650), for the CY 2011 payment update, as part of the validation 

process, we required hospitals to submit paper copies of requested medical records to a 

designated contractor within the required timeframe. Failure to submit requested 

documentation could result in a 2.0 percentage point reduction to a hospital’s CY 2011 

OPD fee schedule increase factor, but the failure to attain a validation score threshold 

would not. 

In section XVI.D.3.b of the CY 2011 OPPS/ASC final rule with comment period, 

we finalized our proposal to validate data submitted by 800 hospitals of the 

approximately 3,200 participating hospitals for purposes of the CY 2012 Hospital OQR 

Program payment determination. We stated our belief that this approach was suitable for 
CMS-1589-FC 1206 

the CY 2012 Hospital OQR Program because it would: produce a more reliable estimate 

of whether a hospital’s submitted data have been abstracted accurately; provide more 

statistically reliable estimates of the quality of care delivered in each selected hospital as 

well as at the national level; and reduce overall hospital burden because most hospitals 

would not be selected to undergo validation each year. We adopted a threshold of 

75 percent as the threshold for the validation score because we believed this level was 

reasonable for hospitals to achieve while still ensuring accuracy of the data. 

Additionally, this level is consistent with what we adopted in the Hospital Inpatient 

Quality Reporting (IQR) Program (formerly referred to as the Reporting Hospital Quality 

Data for Annual Payment Update (RHQDAPU) program)) (75 FR 50225 through 50229). 

As a result, we believed that the effect of our validation process for CY 2012 would be 

minimal in terms of the number of hospitals that would not meet all program 

requirements. 

In the CY 2012 OPPS/ASC final rule with comment period, we finalized our 

proposal to validate data submitted by up to 500 of the approximately 3,200 participating 

hospitals for purposes of the CY 2013 Hospital OQR Program payment determination. 

Under our policy for CY 2011, CY 2012, and CY 2013, we stated that we would conduct 

a measure level validation by assessing whether the measure data submitted by the 

hospital matches the independently reabstracted measure data. 

In this final rule with comment period, for CY 2014 and subsequent years 

payment determinations, we are making some modifications to administrative 

requirements in extending a deadline to submit a Notice of Participation as well as to 
CMS-1589-FC 1207 

extraordinary circumstance waiver or extension and reconsideration processes to broaden 

the scope of personnel who can sign these requests. However, we are not making any 

modifications to our validation requirements. We expect these policies to have minimal 

impact on the program. 

As stated above, we are unable to estimate the number of hospitals that may not 

receive the full OPD fee schedule increase factor in CY 2015. We also are unable to 

estimate the number of hospitals that would fail the validation documentation submission 

requirement for the CY 2015 payment update. 

The validation requirements for CY 2014 would result in medical record 

documentation for approximately 6,000 cases per quarter for CY 2014, being submitted 

to a designated CMS contractor. We will pay for the cost of sending this medical record 

documentation to the designated CMS contractor at the rate of 12 cents per page for 

copying and approximately $1.00 per case for postage. We have found that an outpatient 

medical chart is generally up to 10 pages. Thus, as a result of validation requirements 

effective for CY 2014, we estimate that we will have expenditures of approximately 

$13,200 per quarter for CY 2014. Because we will pay for the data collection effort, we 

believe that a requirement for medical record documentation for 7,300 total cases for up 

to 500 hospitals for CY 2014 represents a minimal burden to Hospital OQR Program 

participating hospitals. 

We are maintaining a 45-day timeframe for hospitals to submit requested medical 

record documentation to meet our validation requirement. The total burden would be a 
CMS-1589-FC 1208 

maximum of 12 charts for each of the four quarters that must be copied and mailed within 

a 45-day period after the end of each quarter. 

f. Effects of the EHR Electronic Reporting Pilot 

Under section XV.K. of this final rule with comment period, we are allowing 

eligible hospitals and CAHs that are participating in the EHR Incentive Program to meet 

the CQM reporting requirement of the program in FY 2013 by participating in the 

Medicare EHR Incentive Program Electronic Reporting Pilot. This will facilitate the use 

of an electronic infrastructure that supports the use of EHRs by eligible hospitals and 

CAHs to meet the requirements in various CMS programs and reduce reporting burden 

simultaneously. Through this pilot, we have encouraged hospitals and CAHs to take 

steps toward the adoption of EHRs that will allow for reporting of clinical quality data 

from EHRs to a CMS data repository. We expect that the submission of quality data 

through EHRs will provide a foundation for establishing the capacity of hospitals to send, 

and for CMS, in the future, to receive, quality measures via hospital EHRs for the 

Hospital IQR Program’s measures. Hospitals that choose to participate in the EHR 

Incentive Program by means of this pilot for the purpose of meeting the CQM reporting 

requirement of meaningful use will be taking those first steps toward reporting clinical 

quality data in such a way. 

There are no changes to the costs or impact in the 2012 OPPS/ASC final rule for 

the 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible 

Hospitals and CAHs. 
CMS-1589-FC 1209 

g. Effects of Proposals for the ASCQR Program 

In section XVI. of this final rule with comment period, for the ASCQR Program, 

we discuss public comment on our approach for future measures selection and 

development as well as on certain measures for potential future inclusion in the ASCQR 

Program measure set. We are finalizing our approach to future measure selection and 

development for the ASCQR Program. For the CY 2015 payment determination and 

subsequent calendar year payment determinations, we are adopting requirements for 

claims-based measures regarding the dates for submission and payment and data 

completeness. We also are finalizing our policy regarding how the payment rates will be 

reduced in CY 2014 and in subsequent calendar years for ASCs that fail to meet program 

requirements, and we are clarifying our policy on updating measures. 

We are unable at this time to estimate the number of ASCs that may not receive 

the full ASC annual payment update in CYs 2014, 2015, and 2016. However, we do not 

expect our new policies to significantly affect the number of ASCs that do not receive a 

full annual payment update. 

h. Effects of Updates to the IRF QRP 

In section XVII. of this final rule with comment period, we discuss our policy 

that, once we initially adopt a measure for the IRF QRP for a payment determination, that 

measure will be automatically adopted for all subsequent fiscal years’ payment 

determinations or until such time as we might propose and finalize the measure’s 

removal, suspension, or replacement. 
CMS-1589-FC 1210 

We also discuss how we will use the CAUTI measure previously finalized. We 

will use the CAUTI measure that was previously finalized in the FY 2012 IRF PPS final 

rule (76 FR 24214) with revisions which were made by the NQF after publication of the 

FY 2012 IRF PPS final rule. We will apply the revised CAUTI measure for the FY 2014 

reporting period, which affects the FY 2012 APU, and each subsequent reporting period 

thereafter. We also are finalizing the use of a nonrisk-adjusted version of the 

NQF-endorsed pressure ulcer measure, which does not include public reporting of any 

nonrisk-adjusted pressure ulcer measure data. 

There are no changes to the costs or impact as stated in FY 2012 IRF PPS final 

rule (76 FR 24214). IRFs will be required to submit CAUTI data on all patients that are 

admitted to their facility and pressure ulcer data only on those patients for which they are 

required to submit the IRF-PAI. This policy has not changed. Further, we do not expect 

our new policies to significantly affect the number of IRFs that do not receive a full 

annual payment update. 

B. Regulatory Flexibility Act (RFA) Analysis

The RFA requires agencies to analyze options for regulatory relief of small 

entities, if a rule has a significant impact on a substantial number of small entities. For 

purposes of the RFA, we estimate that most hospitals, ASCs and CMHCs are small 

entities as that term is used in the RFA. For purposes of the RFA, most hospitals are 

considered small businesses according to the Small Business Administration’s size 

standards with total revenues of $34.5 million or less in any single year. Most ASCs and 

most CMHCs are considered small businesses with total revenues of $10 million or less 
CMS-1589-FC 1211 

in any single year. We estimate that this final rule with comment period may have a 

significant impact on approximately 2,053 hospitals with voluntary ownership. For 

details, see the Small Business Administration’s “Table of Small Business Size 

Standards” at http://www.sba.gov/content/table-small-business-size-standards. 

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact 

analysis if a rule may have a significant impact on the operations of a substantial number 

of small rural hospitals. This analysis must conform to the provisions of section 604 of 

the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as 

a hospital that is located outside of a metropolitan statistical area and has 100 or fewer 

beds. We estimate that this final rule with comment period may have a significant impact 

on approximately 708 small rural hospitals. 

The analysis above, together with the remainder of this preamble, provides a 

regulatory flexibility analysis and a regulatory impact analysis. 

C. Unfunded Mandates Reform Act Analysis

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 

requires that agencies assess anticipated costs and benefits before issuing any rule whose 

mandates require spending in any 1 year of $100 million in 1995 dollars, updated 

annually for inflation. That threshold level is currently approximately $139 million. This 

final rule with comment period does not mandate any requirements for State, local, or 

tribal governments, or for the private sector. 
CMS-1589-FC 1212 

D. Conclusion

The changes we are making in this final rule with comment period will affect all 

classes of hospitals paid under the OPPS and will affect both CMHCs and ASCs. We 

estimate that most classes of hospitals paid under the OPPS will experience a modest 

increase or a minimal decrease in payment for services furnished under the OPPS in 

CY 2013. Table 57 demonstrates the estimated distributional impact of the OPPS budget 

neutrality requirements that will result in a 1.9 percent increase in payments for all 

services paid under the OPPS in CY 2013, after considering all changes to APC 

reconfiguration and recalibration, as well as the OPD fee schedule increase factor, wage 

index changes, including the frontier State wage index adjustment, estimated payment for 

outliers, and changes to the pass-through payment estimate. However, some classes of 

providers that are paid under the OPPS will experience more significant gains and others 

will experience modest losses in OPPS payments in CY 2013. We estimate that hospitals 

for whom DSH data are not available (non-IPPS, largely urban hospitals) will experience 

an increase of 8.3 percent due to increased payments for partial hospitalization, group 

psychotherapy and hemodialysis services. CMHCs will see an overall decrease in 

payment of 4.4 percent as a result of a decrease in their estimated costs. 

The updates to the ASC payment system for CY 2013 will affect each of the 

approximately 5,300 ASCs currently approved for participation in the Medicare program. 

The effect on an individual ASC will depend on its mix of patients, the proportion of the 

ASC’s patients who are Medicare beneficiaries, the degree to which the payments for the 

procedures offered by the ASC are changed under the ASC payment system, and the 
CMS-1589-FC 1213 

extent to which the ASC provides a different set of procedures in the coming year. Table 

58 demonstrates the estimated distributional impact among ASC surgical specialties of 

the MFP-adjusted CPI-U update factor of 0.6 percent for CY 2013. 

XXIII. Federalism Analysis 

Executive Order 13132 establishes certain requirements that an agency must meet 

when it promulgates a proposed rule (and subsequent final rule) that imposes substantial 

direct costs on State and local governments, preempts State law, or otherwise has 

Federalism implications. We have examined the OPPS and ASC provisions included in 

this final rule with comment period in accordance with Executive Order 13132, 

Federalism, and have determined that they will not have a substantial direct effect on 

State, local or tribal governments, preempt State law, or otherwise have a Federalism 

implication. As reflected in Table 57 of this final rule with comment period, we estimate 

that OPPS payments to governmental hospitals (including State and local governmental 

hospitals) will increase by 1.9 percent under this final rule with comment period. While 

we do not know the number of ASCs or CMHCs with government ownership, we 

anticipate that it is small. The analyses we have provided in this section of this final rule 

with comment period, in conjunction with the remainder of this document, demonstrate 

that this final rule with comment period is consistent with the regulatory philosophy and 

principles identified in Executive Order 12866, the RFA, and section 1102(b) of the Act. 

This final rule with comment period will affect payments to a substantial number 

of small rural hospitals and a small number of rural ASCs, as well as other classes of 

hospitals, CMHCs, and ASCs, and some effects may be significant. 
CMS-1589-FC 1214 

List of Subjects 

42 CFR Part 416 

Health facilities, Health professions, Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 419

Hospitals, Medicare, Reporting and recordkeeping requirements. 

42 CFR Part 476 

Health care, Health professional, Health record, Peer Review Organization 

(PRO), Penalties, Privacy, Reporting and recordkeeping requirements. 

42 CFR Part 478 

Administrative practice and procedure, Health care, Health professions, Peer 

Review Organizations (PRO), Reporting and recordkeeping requirements. 

42 CFR Part 480 

Health care, Health professions, Health records, Peer Review Organizations 

(PRO), Privacy, Reporting and recordkeeping requirements. 

42 CFR Part 495 

Computer technology, Electronic health records, Electronic transactions, Health, 

Health care. Health information technology, Health insurance, Health records, Hospitals, 

Laboratories, Medicaid, Medicare, Privacy, Reporting and recordkeeping requirements, 

Public health, Security. 

For reasons stated in the preamble of this document, the Centers for Medicare & 

Medicaid Services is amending 42 CFR Chapter IV as set forth below: 
CMS-1589-FC 1215 

PART 416—AMBULATORY SURGICAL SERVICES 

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

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

and1395hh). 

2. Section 416.160 is amended by revising paragraph (a)(1) to read as follows: 

§ 416.160 Basis and scope.

(a) * * * 

(1) Section 1833(i)(2)(D) of the Act requires the Secretary to implement a 

revised payment system for payment of surgical services furnished in ASCs. The statute 

requires that, in the year such system is implemented, the system shall be designed to 

result in the same amount of aggregate expenditures for such services as would be made 

if there was no requirement for a revised payment system. The revised payment system 

shall be implemented no earlier than January 1, 2006, and no later than January 1, 2008. 

The statute provides that the Secretary may implement a reduction in any annual update 

for failure to report on quality measures as specified by the Secretary. The statute also 

requires that, for CY 2011 and each subsequent year, any annual update to the ASC 

payment system, after application of any reduction in the annual update for failure to 

report on quality measures as specified by the Secretary, be reduced by a productivity 

adjustment. There shall be no administrative or judicial review under section 1869 of the 

Act, section 1878 of the Act, or otherwise of the classification system, the relative 

weights, payment amounts, and the geographic adjustment factor, if any, of the revised 

payment system. 
CMS-1589-FC 1216 

* * * * * 

3. Section 416.171 is amended by-- 

a. Redesignating paragraph (a)(2)(iii) as paragraph (a)(2)(iv) and revising it. 

b. Adding new paragraph (a)(2)(iii). 

The revision and addition read as follows: 

§ 416.171 Determination of payment rates for ASC services.

(a) * * * 

(2) * * * 

(iii) For CY 2014 and subsequent calendar years, the Consumer Price Index for 

All Urban Consumers update determined under paragraph (a)(2)(ii) of this section is 

reduced by 2.0 percentage points for an ASC that fails to meet the standards for reporting 

of ASC quality measures as established by the Secretary for the corresponding calendar 

year. 

(iv) Productivity adjustment. (A) For calendar year 2011 and subsequent years, 

the Consumer Price Index for All Urban Consumers determined under paragraph 

(a)(2)(ii) of this section, after application of any reduction under paragraph (a)(2)(iii) of 

this section, is reduced by the productivity adjustment described in section 

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

(B) The application of the provisions of paragraph (a)(2)(iv)(A) of this section 

may result in the update being less than zero percent for a year, and may result in 

payment rates for a year being less than the payment rates for the preceding year. 

* * * * * 
CMS-1589-FC 1217 

4. Section 416.195 is amended by revising paragraphs (a)(2) and (a)(4) 

introductory text to read as follows: 

§ 416.195 Determination of membership in new classes of new technology IOLs. 

(a) * * *

(2) The IOL shall have a new lens characteristic in comparison to currently 

available IOLs. The labeling, which must be approved by FDA, shall contain a claim of 

a specific clinical benefit imparted by the new lens characteristic.

* * * * * 

(4) Any specific clinical benefit referred to in paragraph (a)(2) of this section 

must be supported by evidence that demonstrates that the IOL results in a measurable, 

clinically meaningful, improved outcome. Improved outcomes include: 

* * * * * 

PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL 

OUTPATIENT DEPARTMENT SERVICES 

5. The authority citation for Part 419 continues to read as follows: 

Authority: Secs. 1102, 1833(t), and 1871 of the Social Security Act (42 U.S.C. 

1302, 1395(t), and 1395hh). 

6. Section 419.2 is amended by revising paragraph (b) introductory text to read as 

follows: 

§ 419.2 Basis of payment.

* * * * * 
CMS-1589-FC 1218 

(b) Determination of hospital outpatient prospective payment rates: Packaged

costs. The prospective payment system establishes a national payment rate, standardized 

for geographic wage differences, that includes operating and capital-related costs that are 

directly related and integral to performing a procedure or furnishing a service on an 

outpatient basis. In general, these costs include, but are not limited to, the following 

items and services, the payments for which are packaged into the payments for the related 

procedures or services. 

* * * * * 

7. Section 419.31 is amended by revising paragraphs (a)(1), (b), and (c)(2) to 

read as follows: 

§ 419.31 Ambulatory payment classification (APC) system and payment weights.

(a) * * * 

(1) CMS classifies outpatient services and procedures that are comparable 

clinically and in terms of resource use into APC groups. Except as specified in paragraph 

(a)(2) of this section, items and services within a group are not comparable with respect 

to the use of resources if the highest geometric mean cost for an item or service within 

the group is more than 2 times greater than the lowest geometric mean cost for an item or 

service within the group. 

* * * * * 

(b) APC weighting factors. (1) Using hospital outpatient claims data from 

calendar year 1996 and data from the most recent available hospital cost reports, CMS 
CMS-1589-FC 1219 

determines the geometric mean costs for the services and procedures within each APC 

group. 

(2) CMS assigns to each APC group an appropriate weighting factor to reflect the 

relative geometric mean costs for the services within the APC group compared to the 

geometric mean costs for the services in all APC groups. 

(c) * * * 

(2) CMS standardizes the geometric mean costs determined in paragraph (b)(1) 

of this section by adjusting for variations in hospital labor costs across geographic areas. 

8. Section 419.32 is amended by revising paragraph (b)(1)(iv)(A) and adding 

paragraph (b)(1)(iv)(B)(4) to read as follows: 

§ 419.32 Calculation of prospective payment rates for hospital outpatient services. 

* * * * * 

(b) * * * 

(1) * * * 

(iv)(A) For calendar year 2003 and subsequent years, by the OPD fee schedule 

increase factor, which, subject to the adjustments specified in paragraph (b)(1)(iv)(B) of 

this section, is the hospital inpatient market basket percentage increase applicable under 

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

(B) * * * 

(4) For calendar year 2013, a multifactor productivity adjustment (as determined 

by CMS) and 0.1 percentage point. 

* * * * * 
CMS-1589-FC 1220 

9. Section 419.70 is amended by revising paragraph (d)(2) introductory text and 

adding paragraph (d)(7) to read as follows: 

§ 419.70 Transitional adjustments to limit decline in payments. 

* * * * * 

(d) * * * 

(2) Temporary treatment for small rural hospitals on or after January 1, 2006. 

For covered hospital outpatient services furnished in a calendar year from 

January 1, 2006 through December 31, 2012, for which the prospective payment system 

amount is less than the pre-BBA amount, the amount of payment under this part is 

increased by 95 percent of that difference for services furnished during CY 2006, 

90 percent of that difference for services furnished during CY 2007, and 85 percent of 

that difference for services furnished during CYs 2008, 2009, 2010, 2011, and 2012 if the 

hospital-- 

* * * * * 

(7) Temporary treatment of small sole community hospitals on or after 

January 1, 2012 through December 31, 2012. (i) For covered hospital outpatient services 

furnished on or after January 1, 2012 through December 31, 2012, for which the 

prospective payment system amount is less than the pre-BBA amount, the amount of 

payment under this part is increased by 85 percent of that difference if the hospital-- 

(A) Is a sole community hospital as defined in § 412.92 of this chapter or is an 

essential access community hospital as described under § 412.109 of this chapter; and 
CMS-1589-FC 1221 

(B) Has 100 or fewer beds as defined in § 412.105(b) of this chapter, except as 

provided in paragraph (d)(7)(ii) of this section. 

(ii) For covered hospital outpatient services furnished on or after January 1, 2012 

through February 29, 2012, the bed size limitation under paragraph (d)(7)(i)(B) of this 

section does not apply. 

* * * * * 

PART 476--UTILIZATION AND QUALITY CONTROL REVIEW 

10. The authority for Part 476 continues to read as follows: 

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

1395hh). 

11. Section 476.1 is amended by-- 

a. Removing the definition of “Active staff privileges”. 

b. Adding definitions of “Appointed representative”, “Authorized 

representative”, “Beneficiary complaint”, “Beneficiary complaint review”, “Beneficiary 

representative”, “General quality of care reviews”, “Gross and flagrant violation”, 

“Immediate advocacy”, “Quality improvement initiative”, “Quality of care concern”, 

“Quality of care review”, “Significant quality of care concern”, and “Substantial violation 

in a substantial number of cases”. 

c. Revising the definition of “Preadmission certification”. 

The additions and revisions read as follows: 

§ 476.1 Definitions. 

* * * * * 
CMS-1589-FC 1222 

Appointed representative means an individual appointed by a Medicare 

beneficiary to represent the beneficiary in the beneficiary complaint review process. 

Authorized representative means an individual authorized, under State or other 

applicable law, to act on behalf of a Medicare beneficiary. An authorized representative 

has all of the rights and responsibilities of a Medicare beneficiary throughout the 

processing of a beneficiary complaint. 

Beneficiary complaint means a complaint by a Medicare beneficiary or a 

Medicare beneficiary’s representative alleging that the quality of Medicare covered 

services received by the beneficiary did not meet professionally recognized standards of 

care. A complaint may consist of one or more quality of care concerns. 

Beneficiary complaint review means a review conducted by a QIO in response to 

the receipt of a written beneficiary complaint to determine whether the quality of 

Medicare covered services provided to the beneficiary was consistent with professionally 

recognized standards of health care. 

Beneficiary representative means an individual identified as an authorized or 

appointed representative of a Medicare beneficiary. 

* * * * * 

General quality of care review means a review conducted by a QIO to determine 

whether the quality of Medicare covered services provided to a Medicare beneficiary was 

consistent with professionally recognized standards of health care. A general quality of 

care review may be carried out as a result of a referral to the QIO or a QIO’s 
CMS-1589-FC 1223 

identification of a potential concern during the course of another review activity or 

through the analysis of data. 

Gross and flagrant violation means a violation of an obligation resulting from 

inappropriate or unnecessary services, services that do not meet recognized professional 

standards of care, or services that are not supported by evidence of medical necessity or 

quality as required by the QIO. The violation must have occurred in one or more 

instances that present an imminent danger to the health, safety, or well-being of a 

program patient or places the program patient unnecessarily in high-risk situations. 

* * * * * 

Immediate advocacy means an informal alternative dispute resolution process 

used to quickly resolve an oral complaint a Medicare beneficiary or his or her 

representation has regarding the quality of Medicare covered health care received. This 

process involves a QIO representative’s direct contact with the provider and/or 

practitioner. 

* * * * * 

Preadmission certification means a favorable determination, transmitted to the 

hospital and the fiscal intermediary or the Medicare administrative contractor, approving 

the patient’s admission for payment purposes. 

* * * * * 

Quality improvement initiative means any formal activity designed to serve as a 

catalyst and support for quality improvement that uses proven methodologies to achieve 
CMS-1589-FC 1224 

these improvements. The improvements may relate to safety, health care, health and 

value and involve providers, practitioners, beneficiaries, and/or communities. 

Quality of care concern means a concern that care provided did not meet a 

professionally recognized standard of health care. A general quality of care review or a 

beneficiary complaint review may cover a single or multiple concerns. 

Quality of care review means a review conducted by a QIO to determine whether 

the quality of Medicare covered services provided to beneficiaries was consistent with 

professionally recognized standards of health care. A quality of care review can either be 

a beneficiary complaint review or a general quality of care review. 

* * * * * 

Significant quality of care concern means a determination by the QIO that the 

quality of care provided to a Medicare beneficiary did not meet the standard of care and, 

while not a gross and flagrant or substantial violation of the standard, represents a 

noticeable departure from the standard that could reasonably be expected to have a 

negative impact on the health of a beneficiary. 

Substantial violation in a substantial number of cases means a pattern of providing 

care that is inappropriate, unnecessary, or does not meet recognized professional 

standards of care, or is not supported by the necessary documentation of care as required 

by the QIO. 

* * * * * 

12. Section 476.70 is revised to read as follows: 

§ 476.70 Statutory bases and applicability. 
CMS-1589-FC 1225 

(a) Statutory bases. Sections 1154, 1866(a)(1)(F), and 1886(f)(2) of the Act 

require that a QIO review those services furnished by physicians, other health care 

professionals, providers and suppliers as specified in its contract with the Secretary. 

(b) Applicability. The regulations in this subpart apply to review conducted by a 

QIO and its subcontractors. 

13. Section 476.71 is amended by-- 

a. Revising paragraph (a)(2). 

b. In paragraph (b) , removing the reference “§ 405.330(b)” and adding in its 

place the reference “§ 411.400(b) of this chapter”. 

c. Revising paragraph (c)(1). 

The revisions read as follows: 

§ 476.71 QIO review requirements. 

(a) * * * 

(2) Whether the quality of the services meets professionally recognized standards 

of health care, as determined through the resolution of oral beneficiary complaints as 

specified in § 476.110, written beneficiary complaints as specified in § 476.120, or the 

completion of general quality of care reviews as specified in § 476.160. 

* * * * * 

(c) * * * 

(1) The QIO must review at least a random sample of hospital discharges each 

quarter and submit new diagnostic and procedural information to the Medicare 
CMS-1589-FC 1226 

administrative contractor, fiscal intermediary, or carrier if it determines that the 

information submitted by the hospital was incorrect. 

* * * * * 

§ 476.72 [Removed] 

14. Section 476.72 is removed. 

§ 476.73 [Amended] 

15. In § 476.73-- 

a. In paragraph (a), first sentence, the phrase “and Medicare fiscal intermediaries 

and carriers.” is removed and the phrase “Medicare administrative contractors, fiscal 

intermediaries, and carriers.” is added in its place. 

b. In paragraph (b)(1), the reference “§ 466.78(b)(3)” is removed and the 

reference “§ 476.78(b)(3)” is added in its place. 

§ 476.74 [Amended] 

16. In § 476.74-- 

a. In paragraph (b), the phrase “appropriate Medicare fiscal intermediary or 

carrier” is removed and the phrase “appropriate Medicare administrative contractor, fiscal 

intermediary, or carrier” is added in its place. 

b. In paragraph (c)(1), the phrase “Medicare fiscal intermediaries and carriers” is 

removed, and the phrase “Medicare administrative contractors, fiscal intermediaries, and 

carriers” is added in its place. 

c. In paragraph (e), the reference “§ 405.332” is removed and the reference 

“§ 411.402” is added in its place. 
CMS-1589-FC 1227 

17. Section 476.78 is amended by— 

a. Revising the section heading. 

b. Revising paragraphs (b)(2)(i) and (ii). 

The revisions read as follows: 

§ 476.78 Responsibilities of providers and practitioners. 

* * * * * 

(b) * * * 

(2) * * * 

(i) Except as provided under §§ 476.130(b) and 476.160(b), relating to 

beneficiary complaint reviews and general quality of care reviews, photocopy and deliver 

to the QIO all required information within 14 calendar days of a request. A QIO is 

authorized to require the receipt of the medical information earlier than the 14-day 

timeframe if the QIO makes a preliminary determination that the review involves a 

potential gross and flagrant or substantial violation as specified in Part 1004 of this title 

and circumstances warrant earlier receipt of the medical information. A practitioner’s or 

provider’s failure to comply with the request for medical information within the 

established timeframe may result in the QIO taking action in accordance with § 476.90. 

(ii) Send secure transmission of an electronic version of medical information, if 

available, subject to the QIO’s ability to support receipt and transmission of the electronic 

version. Providers and practitioners must deliver electronic versions of medical 

information within 14 calendar days of the request. A QIO is authorized to require the 

receipt of the medical information earlier than the 14-day timeframe if the QIO makes a 
CMS-1589-FC 1228 

preliminary determination that the review involves a potential gross and flagrant or 

substantial violation as specified in Part 1004 of this title and circumstances warrant 

earlier receipt of the medical information. A practitioner’s or provider’s failure to 

comply with the request for medical information within the established timeframe may 

result in the QIO taking action in accordance with § 476.90. 

* * * * * 

§ 476.80 [Amended] 

18. In § 476.80-- 

a. In the section heading and paragraphs (b)(1) introductory text and (c)(1) (two 

places), the phrase “Medicare fiscal intermediaries and carriers” is removed and the 

phrase “Medicare administrative contractors, fiscal intermediaries, and carries” is added 

in its place. 

b. In paragraph (a) introductory text, the phrase “Medicare fiscal intermediary or 

carrier” is removed and the phrase “Medicare administrative contractor, fiscal 

intermediary, or carrier” is added in its place. 

c. In paragraphs (a)(1), (a)(2) introductory text (two places), (c)(3)(ii), (d)(1), and 

(d)(2), the phrase “fiscal intermediary or carrier” is removed and the phrase “Medicare 

administrative contractor, fiscal intermediary, or carrier” is added in its place. 

d. In paragraph (e), in the paragraph heading and in paragraphs (e)(1) and (e)(2), 

the phrase “fiscal intermediary” is removed and the phrase “Medicare administrative 

contractor or fiscal intermediary” is added in its place. 

§ 476.86 [Amended] 
CMS-1589-FC 1229 

19. In § 476.86-- 

a. In paragraph (a)(1)(iii), the reference “§ 405.310(g) or § 405.310(k)” is 

removed and the reference “§ 411.15(g) or § 411.15(k)” is added in its place. 

b. In paragraph (a)(2) and (d), the phrase “Medicare fiscal intermediaries and 

carriers” is removed and the phrase “Medicare administrative contractors, fiscal 

intermediaries, and carriers” is added in its place. 

c. In paragraph (c) introductory text, the phrase “Medicare fiscal intermediary or 

carrier” is removed and the phrase “Medicare administrative contractor, fiscal 

intermediary, or carrier” is added in its place. 

d. In paragraph (c)(1), the phrase “fiscal intermediary or carrier” is removed and 

the phrase “Medicare administrative contractor, fiscal intermediary, or carrier” is added 

in its place. 

e. In paragraph (e), the phrase “intermediaries and carriers” is removed and the 

phrase “Medicare administrative contractors, fiscal intermediaries, and carriers” is added 

in its place. 

f. In paragraph (f), the reference “part 473” is removed and the reference “part 

478” is added in its place. 

§ 476.94 [Amended] 

20. In § 476.94-- 

a. In paragraph (a)(1)(iv), the phrase “fiscal intermediary or carrier” is removed 

and the phrase “Medicare administrative contractor, fiscal intermediary, or carrier” is 

added in its place. 
CMS-1589-FC 1230 

b. In paragraph (d), the phrase “Medicare fiscal intermediary or carrier” is 

removed and the phrase “Medicare administrative contractor, fiscal intermediary, or 

carrier” is added in its place. 

c. In paragraph (c)(3), the reference “part 473” is removed and the reference “part 

478” is added in its place. 

§ 476.98 [Amended] 

21. In § 476.98, in paragraph (a)(1), the phrase “with active staff privileges in 

one or more hospitals” is removed. 

22. Section 476.104 is amended by revising paragraph (a) to read as follows: 

§ 476.104 Coordination of activities. 

* * * * * 

(a) Medicare administrative contractors, fiscal intermediaries, and carriers. 

* * * * * 

23. Sections 476.110, 476.120, 476.130, 476.140, 476.150, 476.160, 476.170 are 

added to subpart C to read as follows: 

Subpart C--Review Responsibilities of Utilization and Quality Control Quality 

Improvement Organizations (QIOs) 

Sec. 

* * * * * 

476.110 Use of immediate advocacy to resolve oral beneficiary complaints. 

476.120 Submission of written beneficiary complaints. 

476.130 Beneficiary complaint review procedures. 
CMS-1589-FC 1231 

476.140 Beneficiary complaint reconsideration procedures. 

476.150 Abandoned complaints and reopening rights. 

476.160 General quality of care review procedures. 

476.170 General quality of care reconsideration procedures. 

* * * * * 

§ 476.110 Use of immediate advocacy to resolve oral beneficiary complaints. 

(a) Immediate advocacy. A QIO may offer the option of resolving an oral 

complaint through the use of immediate advocacy if: 

(1) The complaint is received not later than 6 months from the date on which the 

care giving rise to the complaint occurred. 

(2) After initial screening of the complaint, the QIO makes a preliminary 

determination that-- 

(i) The complaint is unrelated to the clinical quality of health care itself but 

relates to items or services that accompany or are incidental to the medical care and are 

provided by a practitioner and/or provider; or 

(ii) The complaint, while related to the clinical quality of health care received by 

the beneficiary, does not rise to the level of being a gross and flagrant, substantial, or 

significant quality of care concern. 

(3) The beneficiary agrees to the disclosure of his or her name to the involved 

provider and/or practitioner. 

(4) All parties orally consent to the use of immediate advocacy. 
CMS-1589-FC 1232 

(5) All parties agree to the limitations on redisclosure set forth in § 480.107 of 

this subchapter. 

(b) Discontinuation of immediate advocacy. The QIO or either party may 

discontinue participation in immediate advocacy at any time. 

(1) The QIO must inform the parties that immediate advocacy will be 

discontinued; and 

(2) The beneficiary must be informed of his or her right to submit a written 

complaint in accordance with the procedures in § 476.120. 

(c) Confidentiality requirements. All communications, written and oral, 

exchanged during the immediate advocacy process must not be redisclosed without the 

written consent of all parties. 

(d) Abandoned complaints. If any party fails to participate or otherwise comply 

with the requirements of the immediate advocacy process, the QIO may determine that 

the complaint has been abandoned and-- 

(1) Inform the parties that immediate advocacy will be discontinued; and 

(2) Inform the Medicare beneficiary of his or her right to submit a written 

complaint in accordance with the procedures in § 476.120. 

§ 476.120 Submission of written beneficiary complaints. 

(a) Timeframe for submission of written complaints. A QIO shall be responsible 

for conducting a review of any written complaint received from a Medicare beneficiary 

or a Medicare beneficiary’s representative about the quality of health care if the 
CMS-1589-FC 1233 

complaint is received not later than 3 years from the date on which the care giving rise to 

the complaint occurred. 

(1) A written complaint includes a complaint submitted electronically to the QIO. 

(2) In those instances where a Medicare beneficiary contacts the QIO regarding a 

complaint but declines to submit the complaint in writing and immediate advocacy has 

not been offered, the QIO may complete a general quality of care review in accordance 

with § 476.160 if the QIO makes a preliminary determination that the complaint involves 

a potential gross and flagrant, substantial or significant quality of care concern. 

(b) New concerns raised by a Medicare beneficiary. If a Medicare beneficiary 

raises new concerns relating to the same complaint after the completion of the interim 

initial determination in § 476.130(c), the concerns will be processed as a new complaint. 

The QIO may process new concerns raised after the receipt of the written complaint as 

part of the same complaint, provided they are received prior to the completion of the 

interim initial determination. Even if a concern is received before the interim initial 

determination, the QIO can address it as a separate complaint if the QIO determines that 

this is warranted by the circumstances. 

§ 476.130 Beneficiary complaint review procedures. 

(a) Scope of the QIO review. In completing its review, the QIO shall consider 

any information and materials submitted by the Medicare beneficiary or his or her 

representative and any information submitted by the provider and/or practitioner. All 

information obtained by the QIO that fits within the definition of “confidential 

information” under § 480.101, will be held by the QIO as confidential. 
CMS-1589-FC 1234 

(1) The QIO’s review will focus on the episode of care from which the complaint 

arose and address the specific concerns identified by the beneficiary and any additional 

concerns identified by the QIO. The QIO may separate concerns into different 

complaints if the QIO determine that the concerns relate to different episodes of care. 

(2) The QIO will use evidence-based standards of care to the maximum extent 

practicable. If no standard of care exists, the QIO will use available norms, best practices 

and established guidelines to establish the standard that will be used in completing the 

review. The QIO’s determination regarding the standard used is not subject to appeal. 

(b) Medical information requests. (1) Upon request by the QIO, a provider or 

practitioner must deliver all medical information requested in response to a Medicare 

beneficiary complaint within 14 calendar days of the request. A QIO is authorized to 

require the receipt of the medical information sooner if the QIO make a preliminary 

determination that the complaint involves a potential gross and flagrant or substantial 

quality of care concern as specified in Part 1004 of this title and circumstances warrant 

earlier receipt of the medical information. A practitioner’s or provider’s failure to 

comply with the request for medical information within the established timeframe may 

result in the QIO taking action in accordance with § 476.90. 

(2) In requesting medical information in response to a Medicare beneficiary 

complaint, the QIO must notify the practitioner and/or provider that the medical record is 

being requested in response to a beneficiary complaint, explain the practitioner’s and/or 

provider’s right to discuss the QIO’s interim initial determination, and request the name 

of a contact person in order to ensure timely completion of the discussion. 
CMS-1589-FC 1235 

(c) Interim initial determination. The QIO peer reviewer will complete the 

review and the practitioner and/or provider will be notified of the interim initial 

determination within 10 calendar days of the receipt of all medical information. 

(1) A practitioner and provider will be notified by telephone of the opportunity to 

discuss the QIO’s interim initial determination with the QIO in those situations where the 

peer reviewer determines that the quality of services does not meet professionally 

recognized standards of care for any concern in the complaint. The discussion must be 

held no later than 7 calendar days from the date of the initial offer. 

(2) The interim initial determination becomes the final initial determination if the 

discussion is not completed timely as a result of the practitioner’s and/or provider’s 

failure to respond. 

(3) Written statements in lieu of a discussion must be received no later than 7 

calendar days from the date of the initial offer. 

(4) In rare circumstances, the QIO may grant additional time to complete the 

discussion or submission of a written statement in lieu of a discussion. 

(d) Final initial determination. The QIO must issue written notification of its 

final initial determination in those cases in which the QIO has determined that care met 

professionally recognized standards, as well as in those cases in which the QIO 

determined that standards were not met and the opportunity for discussion has been 

completed. 

(1) No later than 3 business days after completion of its review, or for cases in 

which the standard was not met, no later than 3 business days after the discussion or 
CMS-1589-FC 1236 

receipt of the provider’s and/or practitioner’s written statement, the QIO will notify (by 

telephone) the beneficiary and the provider/practitioner of its final initial determination 

and of the right to request a reconsideration of the QIO’s final initial determination. 

(2) Written notice of the QIO’s final initial determination will be forwarded to all 

parties within 5 calendar days after completion of its review, and must include: 

(i) A statement for each concern that care did or did not meet the standard of 

care; 

(ii) The standard identified by the QIO for each of the concerns; and 

(iii) A summary of the specific facts that the QIO determines are pertinent to its 

findings, including references to medical information and, if held, the discussion with the 

involved practitioner and/or provider. 

§ 476.140 Beneficiary complaint reconsideration procedures. 

(a) Right to request a reconsideration. Beginning with complaints filed after 

July 31, 2014, a Medicare beneficiary, a provider, or a practitioner who is dissatisfied 

with a QIO’s final initial determination may request a reconsideration by the QIO. 

(1) The reconsideration request must be received by the QIO, in writing or by 

telephone, no later than 3 calendar days following initial notification of the QIO’s 

determination. If the QIO is unable to accept a request, the request must be submitted by 

noon of the next day the QIO is available to accept a request. 

(2) The Medicare beneficiary, or his or her representative, and the practitioner 

and/or provider must be available to answer any questions or supply any information that 

the QIO requests in order to conduct its reconsideration. 
CMS-1589-FC 1237 

(3) The QIO must offer the Medicare beneficiary and the practitioner and/or 

provider an opportunity to provide further information. A Medicare beneficiary, a 

practitioner, and a provider may, but are not required to, submit evidence to be 

considered by the QIO in making its reconsideration decision. 

(b) Issuance of the QIO’s final decision. No later than 5 calendar days after 

receipt of the request for a reconsideration, or, if later, 5 calendar days after receiving any 

medical or other records needed for such reconsideration, the QIO must complete the 

review and notify the beneficiary and the practitioner/provider of its decision. 

(1) The QIO’s initial notification may be done by telephone, followed by the 

mailing of a written notice by noon of the next calendar day that includes-- 

(i) A statement for each concern that care did or did not meet the standard of 

care; 

(ii) The standard identified by the QIO for each of the concerns; 

(iii) A summary of the specific facts that the QIO determines are pertinent to its 

findings; and 

(iv) A statement that the letter represents the QIO’s final determination and that 

there is no right to further appeal. 

(2) The QIO may provide information to the beneficiary, practitioner, and 

provider regarding opportunities for improving the care given to patients based on the 

specific findings of its review and the development of quality improvement initiatives. 

§ 476.150 Abandoned complaints and reopening rights. 
CMS-1589-FC 1238 

(a) Abandoned complaints. If a Medicare beneficiary fails to participate or 

otherwise comply with the requirements of the beneficiary complaint review process and 

the QIO does not have sufficient information to complete its review, the QIO may 

determine that the complaint has been abandoned and-- 

(1) Inform the parties that its complaint review will be discontinued; and 

(2) Inform the beneficiary of his or her right to resubmit a written complaint in 

accordance with the procedures in § 476.120. 

(b) Reopening complaint reviews. A QIO may reopen a Medicare beneficiary 

complaint review using the same procedures that the QIO would use for reopening initial 

denial determinations and changes as a result of DRG validation, as described in 

§ 476.96. 

§ 476.160 General quality of care review procedures. 

(a) Scope of the QIO review. A QIO may conduct a general quality of care 

review in accordance with section 1154(a)(1)(B) of the Act. 

(1) A QIO may conduct general quality of care reviews based on-- 

(i) Concerns identified during the course of other QIO review activities; 

(ii) Referrals from other sources, including but not limited to individuals, 

contractors, other Federal or State agencies; or 

(iii) Analysis of data. 

(2) The QIO’s review will focus on all concerns identified by the QIO and/or 

identified by those who have referred or reported the concerns, with consideration being 

given to the episode of care related to the concerns. 
CMS-1589-FC 1239 

(3) The QIO will use evidence-based standards of care to the maximum extent 

practicable. If no standard of care exists, the QIO must use available norms, best 

practices, and established guidelines to establish the standard that will be used in 

completing the review. The QIO’s determination regarding the standard used is not 

subject to appeal. 

(b) Medical information requests. Upon request by the QIO, a provider or 

practitioner must deliver all medical information requested within 14 calendar days of the 

request. A QIO is authorized to require the receipt of the medical information sooner if 

the QIO makes a preliminary determination that the review involves a potential gross and 

flagrant or substantial quality of care concern and circumstances warrant earlier receipt of 

the medical information. A practitioner’s or provider’s failure to comply with the request 

for medical information within the established timeframe may result in the QIO taking 

action in accordance with § 476.90. 

(c) Initial determination. The QIO peer reviewer will complete the review and 

the practitioner and/or provider will be notified of the initial determination in writing 

within 10 calendar days of the receipt of all medical information. 

§ 476.170 General quality of care reconsideration procedures. 

(a) Right to request a reconsideration. Beginning with reviews initiated after 

July 31, 2014, a provider or practitioner who is dissatisfied with a QIO’s initial 

determination may request a reconsideration by the QIO. 

(1) The reconsideration request must be received by the QIO, in writing or by 

telephone, by no later than 3 calendar days following receipt of the QIO’s initial 
CMS-1589-FC 1240 

determination. If the QIO is unable to accept the request, the request must be submitted 

by noon of the next day the QIO is available to accept a request. 

(2) The practitioner or provider must be available to answer any questions or 

supply any information that the QIO requests in order to conduct its reconsideration. 

(3) The QIO must offer the practitioner or provider an opportunity to provide 

further information. A practitioner or provider may, but is not required to, submit 

evidence to be considered by the QIO in making its reconsideration decision. 

(b) Issuance of the QIO’s final decision. No later than 5 calendar days after 

receipt of the request for a reconsideration, or, if later, 5 calendar days after receiving any 

medical or other records needed for such reconsideration, the QIO must complete the 

review and notify the practitioner or provider of its decision. 

(1) The QIO’s initial notification may be done by telephone, followed by the 

mailing of a written notice by noon the next calendar day that includes: 

(i) A statement for each concern that care did or did not meet the standard of 

care; 

(ii) The standard identified by the QIO for each of the concerns; 

(iii) A summary of the specific facts that the QIO determines are pertinent to its 

findings; and 

(iv) A statement that the letter represents the QIO’s final determination and that 

there is no right to further appeal. 

(2) The QIO may provide information regarding opportunities for improving the 

care given to patients based on the specific findings of its review. 
CMS-1589-FC 1241 

PART 478--RECONSIDERATIONS AND APPEALS 

24. The authority citation for Part 478 continues to read as follows: 

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

1395hh). 

§ 478.15 [Amended] 

25. In § 478.15(b), the reference “§§ 473.18 through 473.36, and 473.48(a) and 

(c)” is removed and the reference “§§ 478.18 through 478.36 and 478.48(a) and (c)” is 

added in its place. 

§ 478.16 [Amended] 

26. In § 478.16, the reference “§ 473.14(a)” is removed and the reference 

“§ 478.14” is added in its place. 

§ 478.20 [Amended] 

27. In § 478.20— 

a. In paragraph (a)(1), the reference “§ 473.22” is removed and the reference 

“§ 478.22” is added in its place. 

b. In paragraph (b), the reference “§ 473.22” is removed and the reference 

“§ 478.22” is added in its place. 

c. In paragraph (c), the reference “§ 473.18(c)” is removed and the reference 

“§ 478.18(c)” is added in its place. 

§ 478.28 [Amended] 
CMS-1589-FC 1242 

28. In § 478.28 (a), the reference “§ 466.98” is removed and the reference 

“§ 476.98” is added in its place. 

§ 478.38 [Amended] 

29. In § 478.38-- 

a. In paragraph (a), the reference “§ 473.40” is removed and the reference 

“§ 478.40” is added in its place. 

b. In paragraph (b), the reference “§ 473.48” is removed and the reference 

“§ 478.48” is added in its place. 

§ 478.42 [Amended] 

30. In § 478.42-- 

a. In paragraph (a) introductory text, the reference “§ 473.40” is removed and the 

reference “§ 478.40” is added in its place. 

b. In paragraph (b), the reference “§ 473.22” is removed and the reference 

“§ 478.22” is added in its place. 

§ 478.48 [Amended] 

31. In § 478.48-- 

a. In paragraph (a)(1), the reference “§ 473.15” is removed and the reference 

“§ 478.15” is added in its place. 

b. In paragraph (a)(2) introductory text, the reference “§ 473.15” is removed and 

the reference “§ 478.15” is added in its place. 

PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE QUALITY 

IMPROVEMENT ORGANIZATION REVIEW INFORMATION 
CMS-1589-FC 1243 

32. The authority citation for Part 480 continues to read as follows: 

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

1395hh). 

§ 480.105 [Amended] 

33. In § 480.105(a), the phrase “Medicare fiscal intermediaries” is removed and 

the phrase “Medicare administrative contractors or fiscal intermediaries” is added in its 

place. 

34. Section 480.107 is amended by adding paragraph (l) to read as follows: 

§ 480.107 Limitations on redisclosure. 

* * * * * 

(l) Redisclosures of information that is confidential because it identifies the 

parties involved in immediate advocacy may occur if all parties have consented to the 

redisclosure, as provided for under § 476.110(c) of this chapter. 

35. Section 480.132 is amended by— 

a. Revising paragraphs (a) introductory text, (a)(1)(iii), and (a)(2). 

b. Revising paragraph (b)(1). 

c. Revising paragraph (c). 

d. Removing the undesignated text following paragraph (c)(3). 

The revisions read as follows. 

§ 480.132 Disclosure of information about patients. 

(a) General requirements for disclosure. Except as specified in §§ 476.130(d) 

and 476.140(b) of this chapter and paragraph (b) of this section, a QIO must— 
CMS-1589-FC 1244 

(1) * * * 

(iii) Except as provided under paragraph (b) of this section, all other patient and 

practitioner identifiers have been removed. 

(2) Make disclosure to the patient or the patient’s representative within 14 

calendar days of receipt of the request. 

(b) * * * 

(1) If a request for information is in connection with an initial denial 

determination under section 1154(a)(2) of the Act, the QIO must provide only the 

information used to support that determination in accordance with the procedures for 

disclosure of information related to determinations under § 478.24, including relevant 

practitioner identifiers. 

* * * * * 

(c) Manner of disclosure. (1) The QIO must disclose the patient information 

directly to the patient or the patient’s representative when the representative has been 

authorized or appointed to receive that information. 

(2) In identifying a representative, the QIO must follow pertinent State law 

requirements regarding the designation of health care representatives and agents. If the 

patient is unable to designate a representative and the identity of the representative is not 

already dictated by State law, the QIO must disclose the information to a person whom 

the QIO determines is responsible for the patient. 

* * * * * 

36. Section 480.133 is amended by-- 
CMS-1589-FC 1245 

a. Adding paragraph (a)(2)(iv). 

b. In paragraph (b)(1), removing the reference to “Part 466” and adding the 

reference “Part 476” in its place; and removing the reference “§ 473.24” and adding the 

reference “§ 478.24 of this subchapter” is its place. 

The addition reads as follows: 

§ 480.133 Disclosure of information about practitioners, reviewers, and institutions. 

(a) * * * 

(2) * * * 

(iv) A QIO is not required to obtain the consent of a practitioner or provider prior 

to the release of information to a beneficiary in connection with an initial denial 

determination or in providing a beneficiary with the QIO’s findings in response to a 

beneficiary complaint. Information that must be specified in a QIO’s final decision in a 

complaint review is specified in §§ 476.130(d) and 476.140(b) of this subchapter. 

* * * * * 

§ 480.139 [Amended] 

37. Section 480.139 is amended by redesignating the existing paragraph (1) as 

paragraph (a)(1). 

38. Section 480.145 is added to read as follows: 

§ 480.145 Beneficiary authorization of use of confidential information. 

(a) Except as otherwise provided under this Part, a QIO may not use or disclose a 

beneficiary’s confidential information without an authorization from the beneficiary. The 

QIO’s use or disclosure must be consistent with the authorization. 
CMS-1589-FC 1246 

(b) A valid authorization is a document that contains the following: 

(1) A description of the information to be used or disclosed that identifies the 

information in a specific and meaningful fashion. 

(2) The name or other specific identification of the QIO(s) and QIO point(s) of 

contact making the request to use or disclose the information. 

(3) The name or other specific identification of the person(s), or class of persons, 

to whom the QIO(s) may disclose the information or allow the requested use. 

(4) A description of each purpose of the requested use or disclosure. The 

statement “at the request of the individual” is a sufficient description of the purpose when 

an individual initiates the authorization and does not, or elects not to, provide a statement 

of purpose. 

(5) An expiration date or an expiration event that relates to the beneficiary or the 

purpose of the use or disclosure. The statement “end of the QIO research study,” “none,” 

or similar language is sufficient if the authorization is for a use or disclosure of 

confidential information for QIO research, including for the creation and maintenance of 

a research database or research repository. 

(6) Signature of the individual and date. If the authorization is signed by a 

beneficiary’s representative, a description of such representative's authority to act for the 

beneficiary must also be provided. 

(c) In addition to those items contained in paragraph (b) of this section, the 

authorization must contain statements adequate to place the individual on notice of all of 

the following: 
CMS-1589-FC 1247 

(1) The individual’s right to revoke the authorization in writing; and 

(2) Any exceptions to the right to revoke and a description of how the individual 

may revoke the authorization; 

(3) The ability or inability of the QIO to condition its review activities on the 

authorization, by stating either: 

(i) That the QIO may not condition the review of complaints, appeals, or payment 

determinations, or any other QIO reviews or other tasks within the QIO’s responsibility 

on whether the individual signs the authorization; 

(ii) The consequences to the individual of a refusal to sign the authorization when 

the refusal will render the QIO unable to carry out an activity. 

(4) The potential for information disclosed pursuant to the authorization to be 

subject to either appropriate or inappropriate redisclosure by a recipient, after which the 

information would no longer be protected by this subpart. 

(d) The authorization must be written in plain language. 

(e) If a QIO seeks an authorization from a beneficiary for a use or disclosure of 

confidential information, the QIO must provide the beneficiary with a copy of the signed 

authorization. 

(f) A beneficiary may revoke an authorization provided under this section at any 

time, provided the revocation is in writing, except to the extent that the QIO has taken 

action in reliance upon the authorization. 

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD 

TECHNOLOGY INCENTIVE PROGRAM 
CMS-1589-FC 1248 

45. The authority citation for Part 495 continues to read as follows: 

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

1395hh). 

46. Section 495.8 is amended by revising paragraph (b)(2)(vi) to read as follows: 

§ 495.8 Demonstration of meaningful use criteria. 

* * * * * 

(b) * * * 

(2) * * * 

(vi) Exception for Medicare eligible hospitals and CAHs for FY 2012 and 

2013—Participation in the Medicare EHR Incentive Program Electronic Reporting Pilot. 

In order to satisfy the clinical quality measure reporting requirements of meaningful use, 

aside from attestation, a Medicare eligible hospital or CAH may participate in the 

Medicare EHR Incentive Program Electronic Reporting Pilot. 

* * * * * 
(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare—Hospital 

Insurance; Program No. 93.774, Medicare—Supplementary Medical Insurance Program; 

and Program No. 93.778 (Medical Assistance) 

Dated: October 24, 2012

 ______________________________ 

 Marilyn Tavenner 

 Acting Administrator,

 Centers for Medicare & Medicaid 

 Services. 

Dated: October 30, 2012

 ___________________________ 

 Kathleen Sebelius,

 Secretary. 

BILLING CODE 4120-01-P 

[FR Doc. 2012-26902 Filed 11/01/2012 at 4:15 pm; Publication Date: 11/15/2012]